Category Archives: Housekeeping


Hello All:

Saturday I will return to posting. Meanwhile, thanks for your patience.

One area that must improve on this blog with the increase in books, videos and material will be an index of folders and a better storage and downloading service.

Presently, I have about 20 gigs on   Many have complained of the slow downloading, the problems with key access, etc.

People who want access to the various folders have emailed me at requesting a key to the value vault. I, in turn, email them the link (key) to access the folder(s) and then the person can download.

I will research alternatives. If anyone thinks that they have a good suggestion for a storage and downloading service, I would love to hear from you either by email or post.   I am hesitant to put up more books and videos with all the glitches with  Remember that eventually there will be about 100 books, videos and thousands of case studies over the next 20 years, so we need a flexible service. Transferring all the material from one service to the next will not be fun, so let’s research this carefully.

Thanks for your patience and be patient in the market.

Best always,

John Chew


Distressed Debt Analysis, MBOs, Corporate Restructuring

A generous reader from India, Saran, has donated five books to the VALUE VAULT. On Monday, I will send out an email with the key to that folder (DISTRESSED) to all who have received keys before.  I will post an announcement when the keys have been emailed. Thanks again SARAN.

Hanging Threads

Part 3 in analyzing Mr. Yachtman–is it luck or skill will be forthcoming. I plan on not reading the many intelligent comments from readers on this subject until I post part 3 so I am not influenced. Then if readers have comments or questions, I will post replies.

Another post on ROIC is needed to complete the circle on that subject.

Then I will post the analysis of Fox Broadcasting Company for our ongoing study of Competition Demystified.

A folder is being built for a course on Mises’ Theory of Money and Credit. The folder in the Value Vault will contain Power Point slides and audio lectures on 8 weeks of key readings from the book. Also, there will be the book, a study guide, and quizzes to test your comprehension. The Theory of Money and Credit is the seminal work on the subject. It is a challenging read, but you will have a solid understanding of how the fractional reserve banking system creates the business cycle through its creation of fiduciary media. Understanding money can be like grasping Jello, but this work makes it possible.

Thanks for your patience.

Recommended Blog and Housekeeping

The most important single factor in shaping security markets is public psychology. – Gerald Loeb

Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes because human nature never changes. – Jesse Livermore

There is nothing more important than your emotional balance. – Jesse Livermore

There are styles in securities as there are in clothes. A security may be undervalued, but if it is also out of style it is of little interest to the speculator. He is, therefore, compelled to study the psychology of the stock market as well as the elements of real value. – Phil Carret

When events have thinking participants, the subject matter is no longer confined to facts but also includes the participants’ perceptions. The chain of causation does not lead directly from fact to fact but from fact to perception and from perception to fact. – George Soros

A Good Blog with free eBooks

I don’t know the writer nor have an affiliation, but beginning to intermediate investors may find many lessons and examples here.

There is a booklet called, 10 Ways to Improve Your Investment Process….and make more money that is worth a read–the link is on the left side of the page.

The author says:

  1. Define your outcome
  2. Define your process
  3. Don’t focus on the outcome
  4. Use checklists
  5. Improve your search strategy
  6. Improve your risk management
  7. Manage yourself (time management)
  8. Pay attention to the details
  9. Be patient
  10. Continuously improve.

Good advice, but how do you ACTUALLY IMPLEMENT the above?

Let’s take #1 Define your outcome.  If you want a 25% annual return, you will have to wait a long time, perhaps several years, to find opportunities sufficiently undervalued to reasonably expect such a return–like in 1932, 1974, and 2009.

Let me know your thoughts about the blog.


The value vault has issues with downloading if there are many people trying to download large files at once.  We (me, myself and I and un-named others) have split the material into folders which people can view and download the material inside.  Try again another time. If the problem persists, contact customer service and then let me know if you are still struggling. We will eventually prevail.

I will build an email list of all those who have requested keys. This list can be used to update you on new quality additions to the value vault folders. I promise to keep the list private and only send when there is new material. For example, if a small file is added to a folder, you will be emailed the material with an attachment. If the addition is a video or book, then you will be alerted to the folder.  This will save you from having to email again and again to request a key.  With providence, we will make our way forward. Thanks for your infinite patience.


A man does what he must - in spite of personal consequences,
in spite of obstacles and dangers and pressures - and
that is the basis of all human morality.  

A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty.
-- Winston Churchill

New Folder on Banks in the Value Vault

Several posts ago I discussed analyzing banks:

I said my expertise in banks was nil. But thanks to generous contributors too numerous to mention, I have received several books, research reports and readings on analyzing banks and the banking industry. If you would like the key to this folder you can email: just with the subject line: BANKS and by tomorrow morning, I will send you the key.

More to follow: Next, I will post the answers to the questions from Chapter 8 in Competition Demystified or The Games Companies Play. Then a post on ROIC. After that, I will have the Harvard Case Studies on the Cola Wars (Chapter 9 from Competition Demystified).  Of course, there will be some other posts as well.

A Reader’s Question: How to Build a Competitive Advantage?

What To Wear For An IRS Audit

A man was called in for an audit by the IRS. So, he asked his accountant for advice on what to wear. “Wear your worst clothing and an old pair of shoes. Let them think you are a pauper,” the accountant replied.

Then he asked his lawyer the same question, but got the opposite advice:”Don’t let them intimidate you. Wear your best suit and an expensive tie.”

Confused, the man went to his Minister, told him of the conflicting advice, and asked him what he should do.

“Let me tell you a story,” replied the Minister. “A woman, about to be married, asked her mother what to wear on her wedding night. ‘Wear a heavy, long, flannel nightgown that goes right up to your neck and wool socks.’ But when she asked her best friend, she got conflicting advice: ‘ Wear your most sexy negligee, with a V neck right down to your navel.'”

The man protested: “But Reverend, what does all this have to do with my problem with the IRS?”

“It doesn’t matter what you wear; you’re going to get screwed.

A Reader’S Question: How to start a business that will develop a moat?

From Arden—his question:

Regarding “real life” businesses- a lot of time when I drive by a vacant shop, I think a lot about what kind of business I would start there, usually the results I reach seem too risky for me. What are some businesses can a guy start, that will have even the most basic moat? Is it even possible? As a businessman, I would love to know your view.

Dear Arden:

Most likely, you would need to start a low-capital-intensive service business, so your chances of creating a competitive advantage would come through either regional economies of scale or niche product economies of scale with customer captivity. The odds are against you, but you must at least operate in a focused and operationally efficient way. Also, don’t confuse an arbitrage profit with a competitive advantage like I did when I started a tariff-switching business in Brazil. Fast growth with high profits don’t indicate a competitive advantage.

I would read all about competitive advantages by reading:

Competition Demystified:

Strategic Logic:

Then review this post and the video (link in the post) here:

Economics of Strategy:

Good Strategy, Bad Strategy:

I humbly suggest reading about the Pampered Chef by Doris Christopher. The company, The Pampered Chef, was purchased in 2004 for about $900 million by Buffett. Mrs. Christopher at the age of 35 started the company with a $3,000 loan—the only money ever put into the company! The company uses a multi-level sales organization to put on kitchen shows with proprietary cooking utensils (similar to a Tupperware Party). She built a business from scratch into a world-class organization. (Warren Buffett in the preface).

Additional readings:  

Billion dollar Lessons:

Competitive Strategy (Porter):


Modern Competitive Analysis:

Little Book that Builds Wealth (on Moats):

Morningstar’s Five Rules for Successful Stock Picking:

Essays of Warren Buffett

Joe Mansueto of Morningstar Discusses Moats

Here is what Joe Mansueto, the founder of Morningstar, said about building a business with a moat: “When I started Morningstar in 1984, my goal was to help individuals invest in mutual funds. Back then a few financial publications carried performance data, and that was about it. By providing institutional-quality information at affordable prices, I thought we could meet a growing need.

But I also had another goal. I wanted to build a business with an “economic moat.” Warren Buffett coined this term, which refers to the sustainable advantages that protect a company against competitors—the way a moat protects a castle. I discovered Buffett in the early 1980s and studied Berkshire Hathaway’s annual reports. There Buffett explains the moat concept, and I thought I could this insight to help build a business. Economic moats made so much sense to me that the concept is the foundation for our company and for our stock analysis.

…Why spend time, money and energy only to watch competitors take away our customers?

I wanted Morningstar’s economic moat to include a trusted brand, large financial database, proprietary analytics, a sizable and knowledgeable analyst staff, and a large and loyal customer vase.

Let me know if you start a business.  You will, at least, have a head start on building an advantage.


Housekeeping: Answering Readers’ Questions

Upon completion of finishing Part 3 of our case study on Cisco and Philips–Chapter 7 in Competition Demystified, I will try to answer several questions from readers.

  1. What is the definition of inflation?
  2. How to calculate ROIC?
  3. How to develop a competitive advantage?

Thanks for your patience.


I am on the road and will post this Sunday.


The goal of this blog is to help self-directed, motivated investors to learn to think strategically and independently–to be the best you can be.

To that end, if you have any digital books, case studies, lectures, and/or links that you believe will further our educational goals, please don’t hesitate to email me at with your ideas.

Have a good weekend.


I will post my answers at the end of this week to the Philips Electronics case study mentioned here: Readers feel free to post your analysis.



This blog is slowly being reorganized. This weekend I will post the answers to the questions posed for Chapter 6 in Competition Demystified. Readers have already posted excellent analysis. The readers here far surpass the “professor.”

I will write-up study questions for the funeral case studies. If you don’t have those cases simply email: with FUNERAL HOMES in the subject line.

And finally, I will have new cases for Chapter 7 and 8 in Competition Demystified next week.  We must move forward.

WHY we study Strategic Logic

Valuation formula:  Earnings next year/(Cost of Capital – Perpetual Growth Rate) = Intrinsic Value.   Or $1 in earnings/(10% – 5%) = $20.00

It takes two minutes to learn how to use the formula but a lifetime to know what to plug into the formula.

Blog Update


We are working over the next few weeks on improving the organization of this blog. Subjects will be posted individually rather than clumped together as in previous posts. We will have a category section for easier searching.

Posts will be sporadic for the next two weeks because of a death in my family.