Monday, March 31, 2014
A pullback is almost definitely coming this week—Commentary
A pullback is almost definitely coming this week—Commentary: "An S&P 500 pullback to the 50-day moving average of 1834 is expected, while a move lower to the 200-day moving average is a possibility if earnings begin to really disappoint. This, I believe will be the extent of the repricing. I am not in the camp that thinks a 10-percent correction is in the cards. Ten percent from the highs would take us back to 1690. The only way the market would really start to break down is if geopolitical tensions heat up or the macro data weaken substantially.
To be clear, any increased tensions in Eastern Europe between Russia and its neighbors will cause global markets to go into "risk off" mode but I also would expect this to be temporary, providing yet another opportunity for the longer-term asset manager/investor."
'via Blog this'
To be clear, any increased tensions in Eastern Europe between Russia and its neighbors will cause global markets to go into "risk off" mode but I also would expect this to be temporary, providing yet another opportunity for the longer-term asset manager/investor."
'via Blog this'
Yellen: Fed’s ‘extraordinary’ aid to last for some time - The Fed - MarketWatch
Yellen: Fed’s ‘extraordinary’ aid to last for some time - The Fed - MarketWatch: "She noted there are 7 million people working part time but who would like a full-time job. “This number is much larger than we would expect at 6.7% unemployment, based on past experience, and the existence of such a large pool of ‘partly unemployed’ workers is a sign that labor conditions are worse than indicated by the unemployment rate.” Further, the number of people who voluntarily quit their jobs “is noticeably below levels before the recession.”"
'via Blog this'
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The U.S. stock market is rigged to hurt the average investor and benefit high frequency traders, stock exchanges and large Wall Street banks, according to the author of the new book “Flash Boys: A Wall Street Revolt.” - The Tell - MarketWatch
The U.S. stock market is rigged to hurt the average investor and benefit high frequency traders, stock exchanges and large Wall Street banks, according to the author of the new book “Flash Boys: A Wall Street Revolt.” - The Tell - MarketWatch: "“They’re able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price,” says Lewis. “The speed advantage that the faster traders have is milliseconds…fractions of milliseconds.”"
'via Blog this'
'via Blog this'
Michael Lewis, Flash Boys, and 60 Minutes
Michael Lewis, Flash Boys, and 60 Minutes: "He alleges that high frequency traders are able to front run orders, which means they are able to buy in front of you and sell them back to you when you want to buy.
The problem, he says, is in the plumbing of the stock market. In the most interesting part of the interview, they showed a moving diagram of an order that leaves downtown New York and goes to the BATS exchange servers in Weehawken, N.J. Because the exchanges all connect to each other, the order then goes to the servers of the New York Stock Exchange, which is a few miles away in Mahwah, N.J."
The problem, he says, is in the plumbing of the stock market. In the most interesting part of the interview, they showed a moving diagram of an order that leaves downtown New York and goes to the BATS exchange servers in Weehawken, N.J. Because the exchanges all connect to each other, the order then goes to the servers of the New York Stock Exchange, which is a few miles away in Mahwah, N.J."
According to Lewis, that's where the alleged front running occurs: in this example, they imply that the existence of high-priced fiber optic lines connecting the exchanges allow traders to get from Weehawken to Mahwah faster than the "public lines" that are provided to those who don't pay the higher fees for the faster lines, allowing these traders to profit from the knowledge of the prices in the slower feeds.
Should they be allowed to do this? When pressed, Mr. Lewis reluctantly admitted that this was perfectly legal, and so it wasn't front running, which was illegal. He then took to calling it "legal front running."
IEX has proposed that outgoing messages arrive at all exchanges at the same time and incoming messages go through a "speed box" that slows them down, so everything arrives everywhere at the same time. This is a simple solution to the problem.
'via Blog this'
YEOMAN: "We get richer by the day, no matter where the market goes"
YEOMAN: "We get richer by the day, no matter where the market goes":
Written by Leong Chan Teik
Saturday, 30 November 2013 12:02
And the fund is big on diversification -- not unlike Aggregate Asset Management which we highlighted recently in AGGREGATE ASSET MGT: 'Why we invest in more than 100 stocks'
The Yeoman fund invests in around 70 stocks and has S$117 million of assets under management as at end-Oct 2013.
Here's more:
Performance: In the current year to end-October, the Yeoman fund has gained 19.34 per cent, compared with the MSCI Far East ex Japan index return of 3.45 per cent.
Since its inception in October 1997, the fund has achieved cumulative returns of more than 638 per cent, compared with the index return of 110 per cent.
This translates to a compounded annual return of 13.3 per cent.
Every $100,000 invested at inception have transformed into more than $738,000!
BT quoted Yeo Seng Chong, Yeoman's founder and chief executive, saying undervaluation is the "prime and only motivation for investing''.
It adds: "We do not sell just because other people are selling (or buy just because others are doing so)."
Diversification is key: The maximum exposure to a single stock is about 1.4 per cent. And it has tremendous defensiveness.
As Mr Yeo told BT: "If something doesn't work out in one stock and we suffer permanent and total impairment, we would have lost 1.4 per cent. But if the remaining stocks work out, and typically we pay 50 cents on the dollar - that is, we assess that the stock is worth $1 and we pay 50 cents - ... the loss would be more than covered.
'via Blog this'
Written by Leong Chan Teik
Saturday, 30 November 2013 12:02
WARREN BUFFETT eschews diversification, seeking to buy lots of a stock only when prices are very attractive.What works for him could work for many lesser investors too. Similarly, a very diversified portfolio could make good sense, especially if one seeks lower volatility in one's portfolio.
Different strokes for different folks, as one might say.
The Yeoman 3-Rights Value Asia Fund has done well for its investors and an excellent article by Genevieve Cua in Business Times(Nov 27, right) highlighted that.
Different strokes for different folks, as one might say.
The Yeoman 3-Rights Value Asia Fund has done well for its investors and an excellent article by Genevieve Cua in Business Times(Nov 27, right) highlighted that.
And the fund is big on diversification -- not unlike Aggregate Asset Management which we highlighted recently in AGGREGATE ASSET MGT: 'Why we invest in more than 100 stocks'
The Yeoman fund invests in around 70 stocks and has S$117 million of assets under management as at end-Oct 2013.
Here's more:
Performance: In the current year to end-October, the Yeoman fund has gained 19.34 per cent, compared with the MSCI Far East ex Japan index return of 3.45 per cent.
Since its inception in October 1997, the fund has achieved cumulative returns of more than 638 per cent, compared with the index return of 110 per cent.
This translates to a compounded annual return of 13.3 per cent.
Every $100,000 invested at inception have transformed into more than $738,000!
Methodology: On Yeoman's website, the explanation is: "We call our investment process the "3-Rights" (Right Business, Right Price and Right Management). Subject to the 3-Rights criteria being met, we are usually fully invested holding little or no cash. For us, performance attribution is from securities selection and portfolio construction, not market timing."
BT quoted Yeo Seng Chong, Yeoman's founder and chief executive, saying undervaluation is the "prime and only motivation for investing''.
"If we can't get undervaluation, we don't participate. The undervaluation is measured in terms of PE (price earnings multiple), dividend yield, free cash flow and discount to balance sheet book value. We also look at return on equity to make sure our stocks have capital efficiency."
From Yeoman's website: "If we have the comfort of time on our side and the stocks that we own are backed by real businesses generating adequate earnings relative to our price at entry and the cost of the company's capital employed, then we are getting richer by the day, no matter where the market goes.
"If we get the '3-Rights' right, time is our friend. In the short term, price and value may not converge but over the longer term they surely must.''
It adds: "We do not sell just because other people are selling (or buy just because others are doing so)."
Diversification is key: The maximum exposure to a single stock is about 1.4 per cent. And it has tremendous defensiveness.
As Mr Yeo told BT: "If something doesn't work out in one stock and we suffer permanent and total impairment, we would have lost 1.4 per cent. But if the remaining stocks work out, and typically we pay 50 cents on the dollar - that is, we assess that the stock is worth $1 and we pay 50 cents - ... the loss would be more than covered.
"A lot of people spend time picking that one winner that makes a killing. We think that's best left to the person with a strong imagination. As stewards of other people's money, we can't take liberties. As we work on probabilities, this method of investing is very good. The reward is maximised through the '50 cents on the dollar' approach. Value will be realised at some point. Should something come up to hurt us, the loss is well contained.''
http://www.youtube.com/watch?v=err1lNGSQ94
http://www.youtube.com/watch?v=err1lNGSQ94
Written by Leong Chan Teik
Saturday, 30 November 2013 12:02
http://www.youtube.com/watch?v=err1lNGSQ94
Written by Leong Chan Teik
Saturday, 30 November 2013 12:02
Sunday, March 30, 2014
Shut up already! It’s not 1929 - Chuck Jaffe - MarketWatch
Shut up already! It’s not 1929 - Chuck Jaffe - MarketWatch: "As Benjamin Graham, the father of value investing, noted, the stock market in the short run is like a voting machine, registering which companies are popular or not popular; over the long haul, however, it’s a weighing machine, taking the full measure and assessment of the company in the form of its stock price.
“Long-term investors should think about the economy and the prospects of U.S. and foreign companies they invest in. They should not focus on the market,” said behavioral finance expert Terrance Odean, a professor at the Haas School of Business at the University of California-Berkeley. “In the long run, what matters if whether the economy prospers and firms earn profits."
'via Blog this'
“Long-term investors should think about the economy and the prospects of U.S. and foreign companies they invest in. They should not focus on the market,” said behavioral finance expert Terrance Odean, a professor at the Haas School of Business at the University of California-Berkeley. “In the long run, what matters if whether the economy prospers and firms earn profits."
'via Blog this'
Saturday, March 29, 2014
The Investment Of The Decade - yong888@gmail.com - Gmail
The Investment Of The Decade - yong888@gmail.com - Gmail: "When I invest, I am looking for stocks that will pay me for owning them. But I want more. I also want to make sure that they are undervalued, which should provide me with my margin of safety.
As far as I am concerned, investing is never about luck. It can be for some people, though, if their suite of investing tools comprise a dartboard, a copy of the Business Times and three steel-tipped tungsten darts.
Investing is about using techniques to identify stocks that are valued below what they are really worth.
Legendary investor Warren Buffett has developed a technique that works for him. So too has Peter Lynch. In fact, Lynch once said that if seven out of ten of his stock picks perform then he would be delighted. More of us should try to think like that when we invest."
'via Blog this'
As far as I am concerned, investing is never about luck. It can be for some people, though, if their suite of investing tools comprise a dartboard, a copy of the Business Times and three steel-tipped tungsten darts.
Investing is about using techniques to identify stocks that are valued below what they are really worth.
Legendary investor Warren Buffett has developed a technique that works for him. So too has Peter Lynch. In fact, Lynch once said that if seven out of ten of his stock picks perform then he would be delighted. More of us should try to think like that when we invest."
'via Blog this'
Friday, March 28, 2014
Wednesday, March 26, 2014
Tuesday, March 25, 2014
Stocks have become ‘absurd’: Bill Fleckenstein
Stocks have become ‘absurd’: Bill Fleckenstein: "Bill Fleckenstein says that stock valuations have risen to absurd levels on the back of low interest rates. But though he remains staunchly bearish on equities, he still believes that it's not yet time to get short.
Valuations on certain tech stocks are "ridiculous—it's just plain ridiculous," Fleckenstein said on Tuesday's episode of "Futures Now." "But that doesn't really matter. Overvaluation, no matter how gargantuan, does not make stocks go down.""
'via Blog this'
Valuations on certain tech stocks are "ridiculous—it's just plain ridiculous," Fleckenstein said on Tuesday's episode of "Futures Now." "But that doesn't really matter. Overvaluation, no matter how gargantuan, does not make stocks go down.""
'via Blog this'
Sunday, March 23, 2014
Wednesday, March 19, 2014
Fed tapers another $10 billion
Fed tapers another $10 billion: "Despite a seemingly dovish tone, markets recoiled at remarks from Yellen, who said interest rate increases likely would start six months after the monthly bond-buying program ends. If the program winds down in the fall, that would put a rate hike in the spring of 2015, earlier than market expectations for the second half of the year.
Stocks tumbled as Yellen spoke at her initial post-meeting news conference, with the Dow industrials at one point sliding more than 200 points before shaving those losses nearly in half. Short-term interest rates rose appreciably, with the five-year note moving up 0.135 percentage points. The seven-year note tumbled more than one point in price."
'via Blog this'
Stocks tumbled as Yellen spoke at her initial post-meeting news conference, with the Dow industrials at one point sliding more than 200 points before shaving those losses nearly in half. Short-term interest rates rose appreciably, with the five-year note moving up 0.135 percentage points. The seven-year note tumbled more than one point in price."
'via Blog this'
Yuan hits critical levels for FX product, could push currency lower
Yuan hits critical levels for FX product, could push currency lower: ""The offshore yuan may fall more as banks hedge their structured products exposure via the derivatives market which may exacerbate the selloff in the currency," said Geoffrey Kendrick, head of Asia FX and rates strategy at Morgan Stanley in Hong Kong."
'via Blog this'
'via Blog this'
Tuesday, March 18, 2014
Would Peter Lynch Buy SMRT? | The Motley Fool
Would Peter Lynch Buy SMRT? | The Motley Fool:
Recently, SMRT pointed to continuing efforts to drive higher productivity. There is room for improvement. Currently, its Asset Turnover, which measures the amount of sales generated for every dollar of asset employed in the business, is 0.6. By comparison, ComfortDelGro (SGX: C52) boasts an Asset Turnover of almost 0.8 and SBS Tr5ansit (SGX: S61) generates a whopping $0.90 for every $1 of asset employed. Admittedly we are not comparing like with like, but it provides a pointer to what could be achieved.
Another financial ratio that might interest Peter Lynch is net cash or in this case, net debt. SMRT has debts of S$628m and cash of S$128m, which leaves it with a net debt of S$500. I can almost see the frown of disapproval on Peter Lynch’s face.
SMRT has a lot of work ahead of it. But until it can charge passengers a realistic fare for using its services, I suspect even Peter Lynch might wait patiently on the platform for the next available train to come along.
'via Blog this'
Recently, SMRT pointed to continuing efforts to drive higher productivity. There is room for improvement. Currently, its Asset Turnover, which measures the amount of sales generated for every dollar of asset employed in the business, is 0.6. By comparison, ComfortDelGro (SGX: C52) boasts an Asset Turnover of almost 0.8 and SBS Tr5ansit (SGX: S61) generates a whopping $0.90 for every $1 of asset employed. Admittedly we are not comparing like with like, but it provides a pointer to what could be achieved.
Another financial ratio that might interest Peter Lynch is net cash or in this case, net debt. SMRT has debts of S$628m and cash of S$128m, which leaves it with a net debt of S$500. I can almost see the frown of disapproval on Peter Lynch’s face.
SMRT has a lot of work ahead of it. But until it can charge passengers a realistic fare for using its services, I suspect even Peter Lynch might wait patiently on the platform for the next available train to come along.
'via Blog this'
Shanghai Composite eyes potential rebound pattern
Shanghai Composite eyes potential rebound pattern:
The double-bottom pattern starts with the downtrend and a rebound from the low at 1984. The rally from 1984 reached a high of 2177 before collapsing into the current downtrend. The high at 2177 is the top of the middle peak of the 'W pattern'. This creates the potential for a W pattern trend reversal, also called a 'double-bottom trend reversal pattern.' This pattern would be confirmed if the index finds support near the 1980 area, thus investors and traders should wait for this downtrend to move towards 1980 has developed.
The double-bottom pattern sets two upside targets. The first target is near the peak of the middle of the W and suggests a rally rebound from 1980 with a target between 2150 to 2177. The distance between the bottom at 1980 and the peak of the middle of the W is measured and projected upwards above 2150 to give a second long-term target near 2310. This long-term target, which could take several months to achieve, is reasonable because it is a historical resistance level.
'via Blog this'
The double-bottom pattern starts with the downtrend and a rebound from the low at 1984. The rally from 1984 reached a high of 2177 before collapsing into the current downtrend. The high at 2177 is the top of the middle peak of the 'W pattern'. This creates the potential for a W pattern trend reversal, also called a 'double-bottom trend reversal pattern.' This pattern would be confirmed if the index finds support near the 1980 area, thus investors and traders should wait for this downtrend to move towards 1980 has developed.
The double-bottom pattern sets two upside targets. The first target is near the peak of the middle of the W and suggests a rally rebound from 1980 with a target between 2150 to 2177. The distance between the bottom at 1980 and the peak of the middle of the W is measured and projected upwards above 2150 to give a second long-term target near 2310. This long-term target, which could take several months to achieve, is reasonable because it is a historical resistance level.
'via Blog this'
Putin signs treaty to annex Crimea - The Wall Street Journal - MarketWatch
Putin signs treaty to annex Crimea - The Wall Street Journal - MarketWatch: "MOSCOW — Russian President Vladimir Putin signed a treaty on Tuesday to annex the breakaway Ukrainian region of Crimea, defying Western sanctions against senior officials and denunciations of the move as a violation of international law."
'via Blog this'
'via Blog this'
The mystery of the falling yuan- Nikkei Asian Review
The mystery of the falling yuan- Nikkei Asian Review:
There are two main plausible explanations for the yuan rate's recent developments. First, China’s leaders have promised to allow markets to do more to determine prices, including in the foreign exchange market. A widening of the trading band to plus-or-minus 2% had already been planned, although without a specific time frame. With the National People’s Congress, China's parliament, having gone into session March 5, it is conceivable that the central bank was simply preparing the ground for an announcement and trying to move the yuan a little lower.
Second, the bank may also have wanted to halt the “carry trade,” which is just another name for currency speculation. This is a practice in which state-owned enterprises and other Chinese entities, rather than hedge funds or professional speculators, have been especially active. It involves borrowing dollars from banks, mostly in Hong Kong but also in Singapore and elsewhere, and bringing them to China to lend at significantly higher interest rates, then taking advantage of a rising yuan to lower repayment costs when the loans mature.
'via Blog this'
Default risks trigger fresh fears over China property market
Default risks trigger fresh fears over China property market: ""As demand slows, more and more developers will feel financial strain. I'm concerned the default will trigger a string of similar distressed situations across weaker companies in the property sector," said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole."
'via Blog this'
'via Blog this'
Monday, March 17, 2014
New global debt crisis could be brewing: IIF
New global debt crisis could be brewing: IIF: "The global financial crisis was triggered in part by high debt, and hence deleveraging was needed to restore financial health, said the IIF. But while banks and other financial institutions have been deleveraging, corporates as well as governments have been piling up more debt rapidly.
The huge surge in public and corporate debt is occurring at a time of very low inflation, making the real burden of the debt much greater than it would be in an inflationary environment and some corporates could find it difficult in servicing their debt in future, the IIF warned."
'via Blog this'
The huge surge in public and corporate debt is occurring at a time of very low inflation, making the real burden of the debt much greater than it would be in an inflationary environment and some corporates could find it difficult in servicing their debt in future, the IIF warned."
'via Blog this'
Chinese property developer near bankruptcy with debt exceeding US$500m: report
Chinese property developer near bankruptcy with debt exceeding US$500m: report: "he company illegally raised most of the remaining funds from 98 individual investors, according to the report on Monday. Private fundraising is common but illegal in China. "As far as we know, this is the largest property developer in recent years that is at risk of bankruptcy," wrote Zhang Zhiwei of Nomura Securities in a research note. "We believe more property developers will face similar pressures as transaction volumes slow and cash flow conditions tighten." Bankruptcies and bank loan defaults in China are common, but the size of Zhejiang Xingrun's outstanding loans, and the fact that the near-bankruptcy troubles follow shortly after China's first public bond default on March 7, is likely to rattle investors."
'via Blog this'
'via Blog this'
New doomsday poll: 99.9% risk of 2014 crash - Paul B. Farrell - MarketWatch
New doomsday poll: 99.9% risk of 2014 crash - Paul B. Farrell - MarketWatch: "SAN LUIS OBISPO, Calif. (MarketWatch) — Global risks are accelerating. This is our fourth major poll update of industry leaders: A critical review of their warnings from early last year when we first predicted a 87% risk of a crash: Bernanke’s Fed saw an “unsustainable bubble” ... Gross: “credit supernova” ... Gundlach: “kaboom ahead” ... Ellis: “Don’t own bonds” ... Shilling: “shocker” ... Roubini: “Prepare for perfect storm” ... Shiller: “Irrational exuberance is back” ... Schiff: “Doubling down” on “doomsday” prediction ... InvestmentNews’ warning 90,000 advisers: “tick, tick ... boom!”"
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Sunday, March 16, 2014
Warren Buffett to heirs: Put my estate in index funds - MarketWatch
Warren Buffett to heirs: Put my estate in index funds - MarketWatch: "My advice to the trustee couldn't be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S & P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers."
'via Blog this'
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Friday, March 14, 2014
Thursday, March 13, 2014
Cashin: Watching for China's 'Bear Stearns moment'
Cashin: Watching for China's 'Bear Stearns moment': "Traders are monitoring whether China's first corporate bond default in 17 years could trigger a forced liquidation and cause a "Bear Stearns moment" there, UBS' Art Cashin told CNBC on Thursday.
"What happens is when you can't sell what you want to sell, you sell whatever you can to raise money, including your grandmother's necklace," Cashin said on "Squawk on the Street." "Those kinds of forced liquidations tend to spill over.""
'via Blog this'
"What happens is when you can't sell what you want to sell, you sell whatever you can to raise money, including your grandmother's necklace," Cashin said on "Squawk on the Street." "Those kinds of forced liquidations tend to spill over.""
'via Blog this'
5 habits of the very best investors - MarketWatch
5 habits of the very best investors - MarketWatch:
1: Setting goals
2: Create a plan — and stick to it
3: Save regularly
4: Live on less
5: Stay in the game
'via Blog this'
1: Setting goals
2: Create a plan — and stick to it
3: Save regularly
4: Live on less
5: Stay in the game
'via Blog this'
Are you ready for deflation? - Brett Arends's ROI - MarketWatch
Are you ready for deflation? - Brett Arends's ROI - MarketWatch: "Forget the consumer price index published by the U.S. Department of Labor. Forget the personal consumption expenditures price index published by the U.S. Department of Commerce. Look, instead, at the market-based PCE price index—the only one that is based solely on actual prices paid in the market.
It has been tumbling alarmingly, sinking in the fourth quarter of last year to an annual inflation rate of just 0.8%."
The market-based PCE, says the Commerce Department’s Bureau of Economic Analysis, is “based on market transactions for which there are corresponding price measures.” That means, the Bureau adds, that the market-based PCE “provides a measure of the prices paid by persons for domestic purchases of goods and services.”
'via Blog this'
It has been tumbling alarmingly, sinking in the fourth quarter of last year to an annual inflation rate of just 0.8%."
The market-based PCE, says the Commerce Department’s Bureau of Economic Analysis, is “based on market transactions for which there are corresponding price measures.” That means, the Bureau adds, that the market-based PCE “provides a measure of the prices paid by persons for domestic purchases of goods and services.”
'via Blog this'
3 Possible Indicators of a Company Facing Trouble Ahead | The Motley Fool
3 Possible Indicators of a Company Facing Trouble Ahead | The Motley Fool:
Burning cash and leveraging rapidly
"Trimming of dividend
Top management “abandons the ship”
Some of the points discussed above are certainly not perfect indicators of a company in trouble. We should always view the situation from many perspectives and form our own view. Before we invest in any company, it is important for us to run through all the possible risks a company might be facing. In this way, we are less likely to be caught off-guard when bad news arrives."
'via Blog this'
Burning cash and leveraging rapidly
"Trimming of dividend
Top management “abandons the ship”
Some of the points discussed above are certainly not perfect indicators of a company in trouble. We should always view the situation from many perspectives and form our own view. Before we invest in any company, it is important for us to run through all the possible risks a company might be facing. In this way, we are less likely to be caught off-guard when bad news arrives."
'via Blog this'
CORDLIFE makes a push into China with cord-tissue banking service
CORDLIFE makes a push into China with cord-tissue banking service:
In cord blood banking, stem cells from the cord blood are preserved for possible use in future to treat blood-related disorders such as leukaemia.
On the other hand, stem cells from cord tissue potentially can treat a different and wider set of afflictions, as explained in the section below:
What diseases can be cured?
As research is ever on-going and new discoveries are made ever so often, the renewable and replacement properties of stem cells hold the possibilities of treating a myriad of diseases, conditions, and disabilities including:
• Parkinson’s and Alzheimer’s diseases
• Spinal cord injury
• Stroke
• Burns
• Heart diseases
• Diabetes
• Osteo-arthritis
• Rheumatoid arthritis
• Cancers
What is the difference between cord blood and bone marrow stem cells versus cord lining stem cells?
Cord blood and bone marrow stem cells form hematopoietic stem cells which forms all the blood cells in the body.
These stem cells have the potential to treat blood-related disorders. Cord lining stem cells have the ability to obtain both mesenchymal and epithelial stem cells.
These cells have the potential to forms all cell types in the body, thus providing opportunities for treatment of many more disorders than hematopoietic stem cells.
Currently, cord lining stem cells can be expanded in number to form many more cells which is good for medical therapies while hematopoietic stem cells have limitations.
-- Source: Cordlabs Asia
'via Blog this'
In cord blood banking, stem cells from the cord blood are preserved for possible use in future to treat blood-related disorders such as leukaemia.
On the other hand, stem cells from cord tissue potentially can treat a different and wider set of afflictions, as explained in the section below:
What diseases can be cured?
As research is ever on-going and new discoveries are made ever so often, the renewable and replacement properties of stem cells hold the possibilities of treating a myriad of diseases, conditions, and disabilities including:
• Parkinson’s and Alzheimer’s diseases
• Spinal cord injury
• Stroke
• Burns
• Heart diseases
• Diabetes
• Osteo-arthritis
• Rheumatoid arthritis
• Cancers
What is the difference between cord blood and bone marrow stem cells versus cord lining stem cells?
Cord blood and bone marrow stem cells form hematopoietic stem cells which forms all the blood cells in the body.
These stem cells have the potential to treat blood-related disorders. Cord lining stem cells have the ability to obtain both mesenchymal and epithelial stem cells.
These cells have the potential to forms all cell types in the body, thus providing opportunities for treatment of many more disorders than hematopoietic stem cells.
Currently, cord lining stem cells can be expanded in number to form many more cells which is good for medical therapies while hematopoietic stem cells have limitations.
-- Source: Cordlabs Asia
'via Blog this'
"MIDAS, one of My Stock Picks, has delivered a good set of FY2013 results"
"MIDAS, one of My Stock Picks, has delivered a good set of FY2013 results":
"Outlook for the PRC rail transportation industry is expected to remain vibrant, notwithstanding the anticipated slow-down in the PRC’s economic growth to 7.4% in 2014.
"The Government’s continued support to grow China’s transportation network will see the China Railway Corporation (“CRC”) making approximately RMB630 billion in railway fixed-asset investment in 2014.
"The PRC metro sector is also expected to grow, as local bureaus of the National Development and Reform Commission have continued to fast-track approvals for new metro projects. Presently, a total of 36 Chinese cities have approved plans to build new subway lines and the total urban rail network is targeted to grow to 3,000 km by 2015, and 6,000 km by 2020.
"According to the country’s 12th 5-year plan for railway development, China will have around 123,000 km of railways in operation by 2015, including 18,000 km of high-speed railways and an express railway network totaling 40,000 km in length.
"In line with this target, the CRC plans to build more than 6,600 km of new railway lines in 2014. As at the end of 2013, the PRC rail network has exceeded 100,000 km, with the high-speed rail network exceeding 10,000 km."
'via Blog this'
"Outlook for the PRC rail transportation industry is expected to remain vibrant, notwithstanding the anticipated slow-down in the PRC’s economic growth to 7.4% in 2014.
"The Government’s continued support to grow China’s transportation network will see the China Railway Corporation (“CRC”) making approximately RMB630 billion in railway fixed-asset investment in 2014.
"The PRC metro sector is also expected to grow, as local bureaus of the National Development and Reform Commission have continued to fast-track approvals for new metro projects. Presently, a total of 36 Chinese cities have approved plans to build new subway lines and the total urban rail network is targeted to grow to 3,000 km by 2015, and 6,000 km by 2020.
"According to the country’s 12th 5-year plan for railway development, China will have around 123,000 km of railways in operation by 2015, including 18,000 km of high-speed railways and an express railway network totaling 40,000 km in length.
"In line with this target, the CRC plans to build more than 6,600 km of new railway lines in 2014. As at the end of 2013, the PRC rail network has exceeded 100,000 km, with the high-speed rail network exceeding 10,000 km."
'via Blog this'
CNMC's profit shines brighter, OKP proposes 0.3 cent dividend
CNMC's profit shines brighter, OKP proposes 0.3 cent dividend:
CNMC Goldmine’s net profit increased by 239.7% from US$1.01 million in FY2012 to US$3.43 million in FY2013.
A big boost came in 4Q when its production of fine gold in Kelantan, Malaysia, surged 335.6% from 1,334.60 oz in 4Q2012 to 5,813.26 oz in 4Q2013.
With that, revenue from sales of fine gold increased by 230.8% from US$2.23 million in 4Q2012 to US$7.38 million in 4Q2013.
The shiny performance in 4Q derived from significant economies of scale which were first experienced in 3Q2013 when CNMC's second leach pad became operational, enabling the Group to register all-in costs of US$775 per oz then.
The Group achieved even lower all-in costs of US$761 per oz in 4Q2013.
The management expects further improvement in its cost structure through further economies of scale when the third leach pad goes into production this year.
CNMC is proposing a final dividend of 0.1 cent per share. Just last month (Jan), it had paid out a surprise interim dividend of 0.1 cent a share.
These are its first payouts since its listing in Oct 2011, and constitute a dividend yield of just 0.8% on its recent stock price of 25 cents.
'via Blog this'
CNMC Goldmine’s net profit increased by 239.7% from US$1.01 million in FY2012 to US$3.43 million in FY2013.
A big boost came in 4Q when its production of fine gold in Kelantan, Malaysia, surged 335.6% from 1,334.60 oz in 4Q2012 to 5,813.26 oz in 4Q2013.
With that, revenue from sales of fine gold increased by 230.8% from US$2.23 million in 4Q2012 to US$7.38 million in 4Q2013.
The shiny performance in 4Q derived from significant economies of scale which were first experienced in 3Q2013 when CNMC's second leach pad became operational, enabling the Group to register all-in costs of US$775 per oz then.
The Group achieved even lower all-in costs of US$761 per oz in 4Q2013.
The management expects further improvement in its cost structure through further economies of scale when the third leach pad goes into production this year.
CNMC is proposing a final dividend of 0.1 cent per share. Just last month (Jan), it had paid out a surprise interim dividend of 0.1 cent a share.
These are its first payouts since its listing in Oct 2011, and constitute a dividend yield of just 0.8% on its recent stock price of 25 cents.
'via Blog this'
CNMC in 2014: Higher economies of scale, gold production = higher profit
CNMC in 2014: Higher economies of scale, gold production = higher profit: "Voyage Research analyst Liu Jinshu, in a report dated 3 March, said he expected CNMC to grow its net profit by 240% in FY14, boosted by the start of operations of the third leach pad from 2Q or 3Q.
"We maintain our valuation of CNMC at S$0.800 per share," he said. In comparison, CNMC stock price currently trades at the 25-cent level."
'via Blog this'
"We maintain our valuation of CNMC at S$0.800 per share," he said. In comparison, CNMC stock price currently trades at the 25-cent level."
'via Blog this'
Tuesday, March 11, 2014
Monday, March 10, 2014
Friday, March 7, 2014
Dr. Ed's Blog: Valuation Multiples At Bull-Market Highs (excerpt)
Dr. Ed's Blog: Valuation Multiples At Bull-Market Highs (excerpt): "There are more hints of a melt-up in stock prices. That could be a more serious threat than any geopolitical blowup to my prediction that the secular bull market could run for another two years or longer. The forward valuation multiples of the S&P 500/400/600 are now at bull-market highs and slightly exceed the 2007 highs of the previous bull market. On Tuesday, the forward P/Es of the three S&P composites rose to 15.4, 17.7, and 19.1. "
'via Blog this'
'via Blog this'
The dangers of a stock market melt-up
The dangers of a stock market melt-up: ""We're in a bull market, and I think it can continue for the next few years," he said in an interview last week. But what's striking about his perspective is that while he remains a steadfast market bull, he finds himself increasingly preoccupied by a cloud on the horizon: the growing complacency of his fellow investors.
They keep bidding prices higher and higher, with a speed and consistency that troubles him. In a word, he is worried that we may hurtling into a trajectory that cannot be sustained—what he calls a market "melt-up.""
'via Blog this'
They keep bidding prices higher and higher, with a speed and consistency that troubles him. In a word, he is worried that we may hurtling into a trajectory that cannot be sustained—what he calls a market "melt-up.""
'via Blog this'
Parabolic gold, melt-up signs and goodbye year 5 of this bull market - Need to Know - MarketWatch
Parabolic gold, melt-up signs and goodbye year 5 of this bull market - Need to Know - MarketWatch: "“The time to buy a stock, whether its a resource stock or otherwise, is when they begin rising on negative news,” Wallace said. Look at the miners GDX -1.12% , in particular, he advised. “The bad news has been delivered, and now we are seeing prices rise,” he wrote. “This is likely a new trend forming, with the classic higher lows patterns developing in the individual equities.”"
'via Blog this'
'via Blog this'
7 signs we’re near a market top, and what to do now - Michael Sincere's Long-Term Trader - MarketWatch
7 signs we’re near a market top, and what to do now - Michael Sincere's Long-Term Trader - MarketWatch:
1. Retail investors have been pouring money into stock mutual funds. The fear of missing out on the sixth year of a bull market has created something close to a buying panic. Although not as maniacal as we saw in 1999, the stock cheerleaders are back and rooting for their stocks and mutual funds to go higher — just like they always do before a crash or bear market.
2. The Investor’s Intelligence survey is concerning. The closely watched II survey shows a low proportion of bears (less than 20%), which some have pointed out is the lowest proportion since just before the 1987 crash.
3. Sentiment indicators are pessimistic. The VIX, the put-call ratio and other major sentiment indicators suggest that investors and traders are getting complacent. Apparently, market participants believe that the Fed, or their fund manager, will protect them in a worst-case scenario.
4. Fundamentals are being ignored. Obscenely high P/E ratios are passed over, along with soft economic readings (i.e. GDP and ISM). When the fundamentals are weaker than expected, the weather is blamed.
5. The stock market crash of 2008 has been forgotten. Investors forget, but the market never does. Those who do not heed the lessons of the past will once again learn a painful lesson.
6. The Nasdaq is soaring. The three-year chart of the Nasdaq COMP -0.13% has gone nearly parabolic, hitting a 14-year high of 4,351 on March 4. It’s the Go-Go years all over again. (And that late 1960s bull market ended with the 1973-74 bear market.)
7. Fear and greed are taking over. When the market reaches the tipping point (and we’re getting closer), investors and traders buy “ATM” (anything that moves). The fear of missing out causes a buying panic.
'via Blog this'
1. Retail investors have been pouring money into stock mutual funds. The fear of missing out on the sixth year of a bull market has created something close to a buying panic. Although not as maniacal as we saw in 1999, the stock cheerleaders are back and rooting for their stocks and mutual funds to go higher — just like they always do before a crash or bear market.
2. The Investor’s Intelligence survey is concerning. The closely watched II survey shows a low proportion of bears (less than 20%), which some have pointed out is the lowest proportion since just before the 1987 crash.
3. Sentiment indicators are pessimistic. The VIX, the put-call ratio and other major sentiment indicators suggest that investors and traders are getting complacent. Apparently, market participants believe that the Fed, or their fund manager, will protect them in a worst-case scenario.
4. Fundamentals are being ignored. Obscenely high P/E ratios are passed over, along with soft economic readings (i.e. GDP and ISM). When the fundamentals are weaker than expected, the weather is blamed.
5. The stock market crash of 2008 has been forgotten. Investors forget, but the market never does. Those who do not heed the lessons of the past will once again learn a painful lesson.
6. The Nasdaq is soaring. The three-year chart of the Nasdaq COMP -0.13% has gone nearly parabolic, hitting a 14-year high of 4,351 on March 4. It’s the Go-Go years all over again. (And that late 1960s bull market ended with the 1973-74 bear market.)
7. Fear and greed are taking over. When the market reaches the tipping point (and we’re getting closer), investors and traders buy “ATM” (anything that moves). The fear of missing out causes a buying panic.
'via Blog this'
Chaori set to default in landmark precedent for Chinese debt
Chaori set to default in landmark precedent for Chinese debt: "China's first domestic bond default looked set to occur as expected on Friday as there was no sign of a last-minute bailout for solar equipment producer Chaori Solar, an event seen as a landmark for market discipline in the world's second-largest economy."
'via Blog this'
'via Blog this'
Thursday, March 6, 2014
Why the world should keep an eye on Ukraine
Why the world should keep an eye on Ukraine: "If you look at the strategies for most big multinationals, Russia is the key to the Central and Eastern Europe market. If Russia goes wrong here, it will have a global effect," Richard Martin, managing director, IMA Asia, told CNBC.
"You've also got a second big country in the region, Turkey, where things are going wrong politically. Russia is a big part of sales and it will have a negative impact if it goes wrong."
'via Blog this'
"You've also got a second big country in the region, Turkey, where things are going wrong politically. Russia is a big part of sales and it will have a negative impact if it goes wrong."
'via Blog this'
Singapore police probe suspected suicide of digital currency exchange CEO
Singapore police probe suspected suicide of digital currency exchange CEO: ""This wasn't a bitcoin-related death. She had other things going on in her life. Collectively, there were a lot of small factors. ... It appears she picked a permanent solution to a lot of short term problems," he told Reuters."
'via Blog this'
'via Blog this'
Wednesday, March 5, 2014
Three Shares Near 52-Week Lows - What’s Next? | The Motley Fool
Three Shares Near 52-Week Lows - What’s Next? | The Motley Fool: "here are more than 700 publicly-listed companies in Singapore’s stock market and investors can expect many shares to be hitting new highs or lows every now and then. But, not every share that hits a 52-week low is considered a bargain, just as not every share that’s at a historic high is necessarily over-valued. At the end of the day, it’s the change in the share’s business fundamentals that matter, not its price.
Are the three shares above any bargains given how they’re so close to their 52-week lows? The answer would have to depend on the investor’s own take on whether the businesses of trio are healthy and could prosper over the next five, 10, or even 20 years."
'via Blog this'
Are the three shares above any bargains given how they’re so close to their 52-week lows? The answer would have to depend on the investor’s own take on whether the businesses of trio are healthy and could prosper over the next five, 10, or even 20 years."
'via Blog this'
Tuesday, March 4, 2014
Another bitcoin site bites the dust
Another bitcoin site bites the dust: "The bitcoin bank Flexcoin posted a note on its site stating: "On March 2, 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. ... As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.""
'via Blog this'
'via Blog this'
Corporate insider bearishness at pre-2008 crash levels - Mark Hulbert - MarketWatch
Corporate insider bearishness at pre-2008 crash levels - Mark Hulbert - MarketWatch: "Supporting their argument is the ratio of the number of shares insiders have recently sold to the number recently bought. Lower ratios mean that the insiders on balance are bullish, while higher ratios mean they are more bearish. The historical average for this ratio, according to the Vickers Weekly Insider Report, a publication of Argus Research, is between 2-to-1 and 2.5-to-1.
At the top of the bull market in October 2007, just before the Great Recession and the worst bear market since the 1930s, this sell-to-buy ratio stood at a bullish 1.98-to-1."
'via Blog this'
At the top of the bull market in October 2007, just before the Great Recession and the worst bear market since the 1930s, this sell-to-buy ratio stood at a bullish 1.98-to-1."
'via Blog this'
Monday, March 3, 2014
SMRT stuck in a dark tunnel The Independent Singapore News
SMRT stuck in a dark tunnel The Independent Singapore News:
Singapore’s land transport policy is stuck in a dark tunnel of bad planning, funding contradictions, regular breakdowns, late arrivals and a human crush that has reached unprecedented levels. And if the government response is any guide, no discernable light is evident at the end of that tunnel.
Once touted as a world-class system, the city-states transport system is now creaking, even cracking, as public pressure mounts for a comprehensive review of a business model that is reaching its run-out date.
At the heart of the debate is whether the country needs to go back to a nationalised, or even a semi-nationalised, system. The government is not convinced. It says a government-run system is not efficient and will only mean that more taxpayer’s money will have to be ploughed in to it to make it run smoothly. The counter argument is that the government is already subsidising the two publicly-listed companies, SMRT Corp. and Comfort Delgro, by paying for the rail network, trains and buses and providing fare subsidies for some groups of commuters.
When a fare hike of 3.2 per cent was announced last month, the government stepped in to say it would pay the transport companies about S$50 million a year to subsidise the fares of disabled people, low-wage workers and children below seven years old. And last year, it pumped in about S$1.1 billion to buy 550 new buses because the road transport system was becoming overcrowded and vehicles were reaching bus stops late. These are the kinds of funding contradictions that will continue to bedevil the system. Publicly-listed companies being paid government money to sustain their business model is coming under scrutiny, with some asking why shareholders of the two companies are being fattened with taxpayer’s money. And as long the government fails to overhaul the model, more critics will jump on the bandwagon.
But Singapore is not in a hopeless situation. The MTR in Hong Kong represents a gold standard that others can follow, says The Atlantic magazine. And it has the big bucks to prove its case, with the publicly-listed transport company boasting a profit of about HK$4.25 billion in the first half of 2013, up 5.1 per cent from the same period in 2012. The Hong Kong model works on a system that strikes a deal with shop owners in and around the stations. The company receives a cut of the shopkeepers’ profits since it transports customers to the malls.
SIM University Professor Park Byung Joon told The Independent Singapore there are many factors behind the profitability of the MTR. The rail lines run along very densely developed areas. “Even Singapore cannot match the density of Hong Kong’s business/commercial districts. Also, it is very expensive — and in some sense, inconvenient — to drive cars in Hong Kong.
“Another factor is the property-transport link. MTR Corp is also a big property developer. Some of the new stations are either part of shopping malls or right under big housing estates and these are developed by the MTR.”
Asked if Singapore could adopt such a model, Park said: “I am a bit sceptical that the same level of success can be repeated in Singapore. Singapore does not have the density of Hong Kong. Also, it can be quite controversial to implement the ‘integration of transport and build’ model in Singapore. It may mean giving too much development and planning power to the public transport companies.”
The questions before the government are obvious. For how long are you going to indirectly pump money into the two publicly-listed transport companies? Is this sustainable? Can a better system be found to cater to a population of 6.9 million by 2030? Why not cut to the chase and decide that a government-run system might be better than the present convoluted one?
A report by Maybank last month echoed the views of many people: “Without radical reforms, Singapore’s land transport business model is unsustainable.”
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'via Blog this'
Singapore’s land transport policy is stuck in a dark tunnel of bad planning, funding contradictions, regular breakdowns, late arrivals and a human crush that has reached unprecedented levels. And if the government response is any guide, no discernable light is evident at the end of that tunnel.
Once touted as a world-class system, the city-states transport system is now creaking, even cracking, as public pressure mounts for a comprehensive review of a business model that is reaching its run-out date.
At the heart of the debate is whether the country needs to go back to a nationalised, or even a semi-nationalised, system. The government is not convinced. It says a government-run system is not efficient and will only mean that more taxpayer’s money will have to be ploughed in to it to make it run smoothly. The counter argument is that the government is already subsidising the two publicly-listed companies, SMRT Corp. and Comfort Delgro, by paying for the rail network, trains and buses and providing fare subsidies for some groups of commuters.
When a fare hike of 3.2 per cent was announced last month, the government stepped in to say it would pay the transport companies about S$50 million a year to subsidise the fares of disabled people, low-wage workers and children below seven years old. And last year, it pumped in about S$1.1 billion to buy 550 new buses because the road transport system was becoming overcrowded and vehicles were reaching bus stops late. These are the kinds of funding contradictions that will continue to bedevil the system. Publicly-listed companies being paid government money to sustain their business model is coming under scrutiny, with some asking why shareholders of the two companies are being fattened with taxpayer’s money. And as long the government fails to overhaul the model, more critics will jump on the bandwagon.
But Singapore is not in a hopeless situation. The MTR in Hong Kong represents a gold standard that others can follow, says The Atlantic magazine. And it has the big bucks to prove its case, with the publicly-listed transport company boasting a profit of about HK$4.25 billion in the first half of 2013, up 5.1 per cent from the same period in 2012. The Hong Kong model works on a system that strikes a deal with shop owners in and around the stations. The company receives a cut of the shopkeepers’ profits since it transports customers to the malls.
SIM University Professor Park Byung Joon told The Independent Singapore there are many factors behind the profitability of the MTR. The rail lines run along very densely developed areas. “Even Singapore cannot match the density of Hong Kong’s business/commercial districts. Also, it is very expensive — and in some sense, inconvenient — to drive cars in Hong Kong.
“Another factor is the property-transport link. MTR Corp is also a big property developer. Some of the new stations are either part of shopping malls or right under big housing estates and these are developed by the MTR.”
Asked if Singapore could adopt such a model, Park said: “I am a bit sceptical that the same level of success can be repeated in Singapore. Singapore does not have the density of Hong Kong. Also, it can be quite controversial to implement the ‘integration of transport and build’ model in Singapore. It may mean giving too much development and planning power to the public transport companies.”
The questions before the government are obvious. For how long are you going to indirectly pump money into the two publicly-listed transport companies? Is this sustainable? Can a better system be found to cater to a population of 6.9 million by 2030? Why not cut to the chase and decide that a government-run system might be better than the present convoluted one?
A report by Maybank last month echoed the views of many people: “Without radical reforms, Singapore’s land transport business model is unsustainable.”
Tweet
Send in your stories to news@theindependent.sg
Warren Buffett: Stock market isn't rigged
Warren Buffett: Stock market isn't rigged: ""You're going to invest your money in something over time. The one thing you can be quite sure of, is if we went into some kind of very major war, the value of money would go down. That's happened in virtually every war I'm aware of. The last thing you'd want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War II the stock market advanced.""
'via Blog this'
'via Blog this'
Sunday, March 2, 2014
Crisis Gauge Rises to Record High as Swaps Avoided - Bloomberg
Crisis Gauge Rises to Record High as Swaps Avoided - Bloomberg: "China’s credit-market gauges are triggering alarm bells, as banks grow cautious in lending to each other while investors prefer the safest government bonds"
“What I do see are increasing parallels between China and the U.S. in the run-up to the global financial crisis,” said Patrick Perret-Green, a London-based strategist at Australia & New Zealand Banking Group Ltd. “Shibor-repo is similar to Libor-OIS. Shadow banking is subprime. Credit spreads are widening as they did in 2007. Money growth is softening as tightening bites.”
'via Blog this'
“What I do see are increasing parallels between China and the U.S. in the run-up to the global financial crisis,” said Patrick Perret-Green, a London-based strategist at Australia & New Zealand Banking Group Ltd. “Shibor-repo is similar to Libor-OIS. Shadow banking is subprime. Credit spreads are widening as they did in 2007. Money growth is softening as tightening bites.”
'via Blog this'
Asian stocks may fall, dollar rise as Ukraine crisis deepens
Asian stocks may fall, dollar rise as Ukraine crisis deepens: ""We believe it will be a broad-based sell-off," Naeem Aslam, chief market analyst at Ava Trade, told CNBC on Sunday. "If there is a military action, there could be over 2 percent gap to the downside. Before the markets open, gold and U.S. bonds could rally higher on the back of this and the same goes for the greenback."
Ukraine mobilized on Sunday for war and called up its reserves, after Russian President Vladimir Putin threatened to invade in the biggest confrontation between Moscow and the West since the Cold War, Reuters reported on Sunday."
What will matter this week, Baig argues, is the outlook for monetary policy, particularly quantitative easing (QE), "specifically Chinese QE - and maybe European too, depending on what (Mario) Draghi does this week" when the European Central Bank meets to decide on monetary policy.
'via Blog this'
Ukraine mobilized on Sunday for war and called up its reserves, after Russian President Vladimir Putin threatened to invade in the biggest confrontation between Moscow and the West since the Cold War, Reuters reported on Sunday."
What will matter this week, Baig argues, is the outlook for monetary policy, particularly quantitative easing (QE), "specifically Chinese QE - and maybe European too, depending on what (Mario) Draghi does this week" when the European Central Bank meets to decide on monetary policy.
'via Blog this'
Chart illustrates Ukraine credit carnage, but you should really worry about China: Markit - The Tell - MarketWatch
Chart illustrates Ukraine credit carnage, but you should really worry about China: Markit - The Tell - MarketWatch: "But while investors may be rightly dismissing Ukraine as an “idiosyncratic event,” they shouldn’t get too complacent, Nolan warned, citing a rise in the outstanding net notional last week to $11.1 billion. “Leading indicators, such as the HSBC/Markit PMI, will continue to move markets, though the condition of China’s shadow banking system is arguably even more crucial,” he said."
'via Blog this'
'via Blog this'
Saturday, March 1, 2014
Strategists: Watch risk Monday amid Ukraine crisis
Strategists: Watch risk Monday amid Ukraine crisis: "Markets have thus far largely shrugged off the situation in Ukraine, notwithstanding a small dip in U.S. stocks late Friday afternoon. But amid that tension, BNY Mellon said Russian action had contributed to three "major bouts of risk aversion" in the last 35 years.
"Prudence therefore suggests that a risk averse stance might be appropriate as markets reopen for the new trading week," the BNY team wrote."
'via Blog this'
"Prudence therefore suggests that a risk averse stance might be appropriate as markets reopen for the new trading week," the BNY team wrote."
'via Blog this'
Death knell for Mt. Gox: Erosion of faith
Death knell for Mt. Gox: Erosion of faith: "On Friday, Mt. Gox filed for bankruptcy protection, five days after Mr. Karpeles resigned from the foundation and just days after its website suddenly went dark. The exchange said that most likely it had lost 750,000 of its customers' Bitcoin holdings and more than 100,000 of its own coins, or more than $450 million worth"
'via Blog this'
'via Blog this'
Warren Buffett admits to $873 million mistake
Warren Buffett admits to $873 million mistake:
Buffett said he decided to buy about $2 billion of EFH's debt when it was created in 2007 as part of a leveraged buyout of Texas electric utility assets.
He made that decision "without consulting with (business partner) Charlie (Munger). That was a big mistake."
Buffett wrote that unless there's a big increase in natural gas prices, the company will "almost certainly" file for bankruptcy protection this year.
Last year, Berkshire sold the bonds for $259 million. Adding back the $837 million received in cash interest, Buffett's decision produced a pre-tax loss of $873 million.
"Next time," Buffett promised, "I'll call Charlie."
'via Blog this'
Buffett said he decided to buy about $2 billion of EFH's debt when it was created in 2007 as part of a leveraged buyout of Texas electric utility assets.
He made that decision "without consulting with (business partner) Charlie (Munger). That was a big mistake."
Buffett wrote that unless there's a big increase in natural gas prices, the company will "almost certainly" file for bankruptcy protection this year.
Last year, Berkshire sold the bonds for $259 million. Adding back the $837 million received in cash interest, Buffett's decision produced a pre-tax loss of $873 million.
"Next time," Buffett promised, "I'll call Charlie."
'via Blog this'
Get ready for more China shadow-banking defaults
Get ready for more China shadow-banking defaults: China has just settled a high-profile failure of one shadow-banking product and already another has emerged, with analysts expecting a wave of potential defaults ahead.
"We definitely expect to see more trust-related products souring through 2014 and maybe next year as well," with the difficulties likely coming from stressed industries, such as coal, as the economy slows, said Ruta Cereskeviciute, senior economist at consultancy IHS.
""If borrowers of trust loans are unable to refinance their outstanding debt via another trust loan or via some other shadow banking product, the company may default on its trust loan, leading to a potential default in the underlying trust product," Bernstein said, noting that often there is a duration mismatch between the loans and the underlying projects receiving financing."
'via Blog this'
"We definitely expect to see more trust-related products souring through 2014 and maybe next year as well," with the difficulties likely coming from stressed industries, such as coal, as the economy slows, said Ruta Cereskeviciute, senior economist at consultancy IHS.
""If borrowers of trust loans are unable to refinance their outstanding debt via another trust loan or via some other shadow banking product, the company may default on its trust loan, leading to a potential default in the underlying trust product," Bernstein said, noting that often there is a duration mismatch between the loans and the underlying projects receiving financing."
'via Blog this'
China currency weakness shocks investors - Feb. 26, 2014
China currency weakness shocks investors - Feb. 26, 2014: "But markets have been shocked in recent days by a sudden change in direction -- the yuan has fallen 1% against the dollar over the past six days.
One dollar now buys 6.12 yuan, up from a low of 6.04 in late January.
That may seem like a small move, but it's significant for a currency that is tightly controlled and allowed to trade only within a narrow range."
Signs of economic weakness could be contributing to the currency's decline. Factory activity has stumbled in recent months, setting off alarm bells about the pace of growth. And investors remain worried about the risks building in the country's shadow banking system after a period of rapid credit expansion.
'via Blog this'
One dollar now buys 6.12 yuan, up from a low of 6.04 in late January.
That may seem like a small move, but it's significant for a currency that is tightly controlled and allowed to trade only within a narrow range."
Signs of economic weakness could be contributing to the currency's decline. Factory activity has stumbled in recent months, setting off alarm bells about the pace of growth. And investors remain worried about the risks building in the country's shadow banking system after a period of rapid credit expansion.
'via Blog this'
Buffett's annual letter: Learn from my real estate investments - The Term Sheet: Fortune's deals blogTerm Sheet
Buffett's annual letter: Learn from my real estate investments - The Term Sheet: Fortune's deals blogTerm Sheet:
Buffett's annual letter: What you can learn from my real estate investments
February 24, 2014: 5:00 AM ET
In an exclusive excerpt from his upcoming shareholder letter, Warren Buffett looks back at a pair of real estate purchases and the lessons they offer for equity investors.
By Warren Buffett
FORTUNE -- "Investment is most intelligent when it is most businesslike." --Benjamin Graham, The Intelligent Investor
It is fitting to have a Ben Graham quote open this essay because I owe so much of what I know about investing to him. I will talk more about Ben a bit later, and I will even sooner talk about common stocks. But let me first tell you about two small nonstock investments that I made long ago. Though neither changed my net worth by much, they are instructive.
This tale begins in Nebraska. From 1973 to 1981, the Midwest experienced an explosion in farm prices, caused by a widespread belief that runaway inflation was coming and fueled by the lending policies of small rural banks. Then the bubble burst, bringing price declines of 50% or more that devastated both leveraged farmers and their lenders. Five times as many Iowa and Nebraska banks failed in that bubble's aftermath as in our recent Great Recession.
In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier. I knew nothing about operating a farm. But I have a son who loves farming, and I learned from him both how many bushels of corn and soybeans the farm would produce and what the operating expenses would be. From these estimates, I calculated the normalized return from the farm to then be about 10%. I also thought it was likely that productivity would improve over time and that crop prices would move higher as well. Both expectations proved out.
MORE: Buffett widens lead in $1 million hedge fund bet
I needed no unusual knowledge or intelligence to conclude that the investment had no downside and potentially had substantial upside. There would, of course, be the occasional bad crop, and prices would sometimes disappoint. But so what? There would be some unusually good years as well, and I would never be under any pressure to sell the property. Now, 28 years later, the farm has tripled its earnings and is worth five times or more what I paid. I still know nothing about farming and recently made just my second visit to the farm.
In 1993, I made another small investment. Larry Silverstein, Salomon's landlord when I was the company's CEO, told me about a New York retail property adjacent to New York University that the Resolution Trust Corp. was selling. Again, a bubble had popped -- this one involving commercial real estate -- and the RTC had been created to dispose of the assets of failed savings institutions whose optimistic lending practices had fueled the folly.
Here, too, the analysis was simple. As had been the case with the farm, the unleveraged current yield from the property was about 10%. But the property had been undermanaged by the RTC, and its income would increase when several vacant stores were leased. Even more important, the largest tenant -- who occupied around 20% of the project's space -- was paying rent of about $5 per foot, whereas other tenants averaged $70. The expiration of this bargain lease in nine years was certain to provide a major boost to earnings. The property's location was also superb: NYU wasn't going anywhere.
buffett-graph
I joined a small group -- including Larry and my friend Fred Rose -- in purchasing the building. Fred was an experienced, high-grade real estate investor who, with his family, would manage the property. And manage it they did. As old leases expired, earnings tripled. Annual distributions now exceed 35% of our initial equity investment. Moreover, our original mortgage was refinanced in 1996 and again in 1999, moves that allowed several special distributions totaling more than 150% of what we had invested. I've yet to view the property.
Income from both the farm and the NYU real estate will probably increase in decades to come. Though the gains won't be dramatic, the two investments will be solid and satisfactory holdings for my lifetime and, subsequently, for my children and grandchildren.
I tell these tales to illustrate certain fundamentals of investing:
You don't need to be an expert in order to achieve satisfactory investment returns. But if you aren't, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don't swing for the fences. When promised quick profits, respond with a quick "no."
Focus on the future productivity of the asset you are considering. If you don't feel comfortable making a rough estimate of the asset's future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn't necessary; you only need to understand the actions you undertake.
If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.
With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.
Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle's scathing comment: "You don't know how easy this game is until you get into that broadcasting booth.")
My two purchases were made in 1986 and 1993. What the economy, interest rates, or the stock market might do in the years immediately following -- 1987 and 1994 -- was of no importance to me in determining the success of those investments. I can't remember what the headlines or pundits were saying at the time. Whatever the chatter, corn would keep growing in Nebraska and students would flock to NYU.
There is one major difference between my two small investments and an investment in stocks. Stocks provide you minute-to-minute valuations for your holdings, whereas I have yet to see a quotation for either my farm or the New York real estate.
MORE: Buffett looking to exit Washington Post's former owner
It should be an enormous advantage for investors in stocks to have those wildly fluctuating valuations placed on their holdings -- and for some investors, it is. After all, if a moody fellow with a farm bordering my property yelled out a price every day to me at which he would either buy my farm or sell me his -- and those prices varied widely over short periods of time depending on his mental state -- how in the world could I be other than benefited by his erratic behavior? If his daily shout-out was ridiculously low, and I had some spare cash, I would buy his farm. If the number he yelled was absurdly high, I could either sell to him or just go on farming.
Owners of stocks, however, too often let the capricious and irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits -- and, worse yet, important to consider acting upon their comments.
Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations and accompanying commentators delivering an implied message of "Don't just sit there -- do something." For these investors, liquidity is transformed from the unqualified benefit it should be to a curse.
MORE: Yahoo sued over Buffett's billion-dollar basketball bet
A "flash crash" or some other extreme market fluctuation can't hurt an investor any more than an erratic and mouthy neighbor can hurt my farm investment. Indeed, tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy.
During the extraordinary financial panic that occurred late in 2008, I never gave a thought to selling my farm or New York real estate, even though a severe recession was clearly brewing. And if I had owned 100% of a solid business with good long-term prospects, it would have been foolish for me to even consider dumping it. So why would I have sold my stocks that were small participations in wonderful businesses? True, any one of them might eventually disappoint, but as a group they were certain to do well. Could anyone really believe the earth was going to swallow up the incredible productive assets and unlimited human ingenuity existing in America?
When Charlie Munger and I buy stocks -- which we think of as small portions of businesses -- our analysis is very similar to that which we use in buying entire businesses. We first have to decide whether we can sensibly estimate an earnings range for five years out or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate. If, however, we lack the ability to estimate future earnings -- which is usually the case -- we simply move on to other prospects. In the 54 years we have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.
MORE: Buffett does Detroit
It's vital, however, that we recognize the perimeter of our "circle of competence" and stay well inside of it. Even then, we will make some mistakes, both with stocks and businesses. But they will not be the disasters that occur, for example, when a long-rising market induces purchases that are based on anticipated price behavior and a desire to be where the action is.
Most investors, of course, have not made the study of business prospects a priority in their lives. If wise, they will conclude that they do not know enough about specific businesses to predict their future earning power.
I have good news for these nonprofessionals: The typical investor doesn't need this skill. In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th century, the Dow Jones industrial index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st century will witness further gains, almost certain to be substantial. The goal of the nonprofessional should not be to pick winners -- neither he nor his "helpers" can do that -- but should rather be to own a cross section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.
MORE: Buffett 'major mistake' leads to Berkshire acquisition
That's the "what" of investing for the nonprofessional. The "when" is also important. The main danger is that the timid or beginning investor will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur. (Remember the late Barton Biggs's observation: "A bull market is like sex. It feels best just before it ends.") The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never sell when the news is bad and stocks are well off their highs. Following those rules, the "know-nothing" investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better long-term results than the knowledgeable professional who is blind to even a single weakness.
If "investors" frenetically bought and sold farmland to one another, neither the yields nor the prices of their crops would be increased. The only consequence of such behavior would be decreases in the overall earnings realized by the farm-owning population because of the substantial costs it would incur as it sought advice and switched properties.
Nevertheless, both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.
MORE: For investors, diamonds might be the new gold
My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway (BRKA) shares will be fully distributed to certain philanthropic organizations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's. (VFINX)) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers.
And now back to Ben Graham. I learned most of the thoughts in this investment discussion from Ben's book The Intelligent Investor, which I bought in 1949. My financial life changed with that purchase.
Before reading Ben's book, I had wandered around the investing landscape, devouring everything written on the subject. Much of what I read fascinated me: I tried my hand at charting and at using market indicia to predict stock movements. I sat in brokerage offices watching the tape roll by, and I listened to commentators. All of this was fun, but I couldn't shake the feeling that I wasn't getting anywhere.
MORE: A popular 401(k) choice is still badly broken
In contrast, Ben's ideas were explained logically in elegant, easy-to-understand prose (without Greek letters or complicated formulas). For me, the key points were laid out in what later editions labeled Chapters 8 and 20. These points guide my investing decisions today.
A couple of interesting sidelights about the book: Later editions included a postscript describing an unnamed investment that was a bonanza for Ben. Ben made the purchase in 1948 when he was writing the first edition and -- brace yourself -- the mystery company was Geico. If Ben had not recognized the special qualities of Geico when it was still in its infancy, my future and Berkshire's would have been far different.
The 1949 edition of the book also recommended a railroad stock that was then selling for $17 and earning about $10 per share. (One of the reasons I admired Ben was that he had the guts to use current examples, leaving himself open to sneers if he stumbled.) In part, that low valuation resulted from an accounting rule of the time that required the railroad to exclude from its reported earnings the substantial retained earnings of affiliates.
MORE: myRA is not the way to save for retirement
The recommended stock was Northern Pacific, and its most important affiliate was Chicago, Burlington & Quincy. These railroads are now important parts of BNSF (Burlington Northern Santa Fe), which is today fully owned by Berkshire. When I read the book, Northern Pacific had a market value of about $40 million. Now its successor (having added a great many properties, to be sure) earns that amount every four days.
I can't remember what I paid for that first copy of The Intelligent Investor. Whatever the cost, it would underscore the truth of Ben's adage: Price is what you pay; value is what you get. Of all the investments I ever made, buying Ben's book was the best (except for my purchase of two marriage licenses).
Warren Buffett is the CEO of Berkshire Hathaway. This essay is an edited excerpt from his annual letter to shareholders.
This story is from the March 17, 2014 issue of Fortune
'via Blog this'
Buffett's annual letter: What you can learn from my real estate investments
February 24, 2014: 5:00 AM ET
In an exclusive excerpt from his upcoming shareholder letter, Warren Buffett looks back at a pair of real estate purchases and the lessons they offer for equity investors.
By Warren Buffett
FORTUNE -- "Investment is most intelligent when it is most businesslike." --Benjamin Graham, The Intelligent Investor
It is fitting to have a Ben Graham quote open this essay because I owe so much of what I know about investing to him. I will talk more about Ben a bit later, and I will even sooner talk about common stocks. But let me first tell you about two small nonstock investments that I made long ago. Though neither changed my net worth by much, they are instructive.
This tale begins in Nebraska. From 1973 to 1981, the Midwest experienced an explosion in farm prices, caused by a widespread belief that runaway inflation was coming and fueled by the lending policies of small rural banks. Then the bubble burst, bringing price declines of 50% or more that devastated both leveraged farmers and their lenders. Five times as many Iowa and Nebraska banks failed in that bubble's aftermath as in our recent Great Recession.
In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier. I knew nothing about operating a farm. But I have a son who loves farming, and I learned from him both how many bushels of corn and soybeans the farm would produce and what the operating expenses would be. From these estimates, I calculated the normalized return from the farm to then be about 10%. I also thought it was likely that productivity would improve over time and that crop prices would move higher as well. Both expectations proved out.
MORE: Buffett widens lead in $1 million hedge fund bet
I needed no unusual knowledge or intelligence to conclude that the investment had no downside and potentially had substantial upside. There would, of course, be the occasional bad crop, and prices would sometimes disappoint. But so what? There would be some unusually good years as well, and I would never be under any pressure to sell the property. Now, 28 years later, the farm has tripled its earnings and is worth five times or more what I paid. I still know nothing about farming and recently made just my second visit to the farm.
In 1993, I made another small investment. Larry Silverstein, Salomon's landlord when I was the company's CEO, told me about a New York retail property adjacent to New York University that the Resolution Trust Corp. was selling. Again, a bubble had popped -- this one involving commercial real estate -- and the RTC had been created to dispose of the assets of failed savings institutions whose optimistic lending practices had fueled the folly.
Here, too, the analysis was simple. As had been the case with the farm, the unleveraged current yield from the property was about 10%. But the property had been undermanaged by the RTC, and its income would increase when several vacant stores were leased. Even more important, the largest tenant -- who occupied around 20% of the project's space -- was paying rent of about $5 per foot, whereas other tenants averaged $70. The expiration of this bargain lease in nine years was certain to provide a major boost to earnings. The property's location was also superb: NYU wasn't going anywhere.
buffett-graph
I joined a small group -- including Larry and my friend Fred Rose -- in purchasing the building. Fred was an experienced, high-grade real estate investor who, with his family, would manage the property. And manage it they did. As old leases expired, earnings tripled. Annual distributions now exceed 35% of our initial equity investment. Moreover, our original mortgage was refinanced in 1996 and again in 1999, moves that allowed several special distributions totaling more than 150% of what we had invested. I've yet to view the property.
Income from both the farm and the NYU real estate will probably increase in decades to come. Though the gains won't be dramatic, the two investments will be solid and satisfactory holdings for my lifetime and, subsequently, for my children and grandchildren.
I tell these tales to illustrate certain fundamentals of investing:
You don't need to be an expert in order to achieve satisfactory investment returns. But if you aren't, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don't swing for the fences. When promised quick profits, respond with a quick "no."
Focus on the future productivity of the asset you are considering. If you don't feel comfortable making a rough estimate of the asset's future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn't necessary; you only need to understand the actions you undertake.
If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.
With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.
Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle's scathing comment: "You don't know how easy this game is until you get into that broadcasting booth.")
My two purchases were made in 1986 and 1993. What the economy, interest rates, or the stock market might do in the years immediately following -- 1987 and 1994 -- was of no importance to me in determining the success of those investments. I can't remember what the headlines or pundits were saying at the time. Whatever the chatter, corn would keep growing in Nebraska and students would flock to NYU.
There is one major difference between my two small investments and an investment in stocks. Stocks provide you minute-to-minute valuations for your holdings, whereas I have yet to see a quotation for either my farm or the New York real estate.
MORE: Buffett looking to exit Washington Post's former owner
It should be an enormous advantage for investors in stocks to have those wildly fluctuating valuations placed on their holdings -- and for some investors, it is. After all, if a moody fellow with a farm bordering my property yelled out a price every day to me at which he would either buy my farm or sell me his -- and those prices varied widely over short periods of time depending on his mental state -- how in the world could I be other than benefited by his erratic behavior? If his daily shout-out was ridiculously low, and I had some spare cash, I would buy his farm. If the number he yelled was absurdly high, I could either sell to him or just go on farming.
Owners of stocks, however, too often let the capricious and irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits -- and, worse yet, important to consider acting upon their comments.
Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations and accompanying commentators delivering an implied message of "Don't just sit there -- do something." For these investors, liquidity is transformed from the unqualified benefit it should be to a curse.
MORE: Yahoo sued over Buffett's billion-dollar basketball bet
A "flash crash" or some other extreme market fluctuation can't hurt an investor any more than an erratic and mouthy neighbor can hurt my farm investment. Indeed, tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy.
During the extraordinary financial panic that occurred late in 2008, I never gave a thought to selling my farm or New York real estate, even though a severe recession was clearly brewing. And if I had owned 100% of a solid business with good long-term prospects, it would have been foolish for me to even consider dumping it. So why would I have sold my stocks that were small participations in wonderful businesses? True, any one of them might eventually disappoint, but as a group they were certain to do well. Could anyone really believe the earth was going to swallow up the incredible productive assets and unlimited human ingenuity existing in America?
When Charlie Munger and I buy stocks -- which we think of as small portions of businesses -- our analysis is very similar to that which we use in buying entire businesses. We first have to decide whether we can sensibly estimate an earnings range for five years out or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate. If, however, we lack the ability to estimate future earnings -- which is usually the case -- we simply move on to other prospects. In the 54 years we have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.
MORE: Buffett does Detroit
It's vital, however, that we recognize the perimeter of our "circle of competence" and stay well inside of it. Even then, we will make some mistakes, both with stocks and businesses. But they will not be the disasters that occur, for example, when a long-rising market induces purchases that are based on anticipated price behavior and a desire to be where the action is.
Most investors, of course, have not made the study of business prospects a priority in their lives. If wise, they will conclude that they do not know enough about specific businesses to predict their future earning power.
I have good news for these nonprofessionals: The typical investor doesn't need this skill. In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th century, the Dow Jones industrial index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st century will witness further gains, almost certain to be substantial. The goal of the nonprofessional should not be to pick winners -- neither he nor his "helpers" can do that -- but should rather be to own a cross section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.
MORE: Buffett 'major mistake' leads to Berkshire acquisition
That's the "what" of investing for the nonprofessional. The "when" is also important. The main danger is that the timid or beginning investor will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur. (Remember the late Barton Biggs's observation: "A bull market is like sex. It feels best just before it ends.") The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never sell when the news is bad and stocks are well off their highs. Following those rules, the "know-nothing" investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better long-term results than the knowledgeable professional who is blind to even a single weakness.
If "investors" frenetically bought and sold farmland to one another, neither the yields nor the prices of their crops would be increased. The only consequence of such behavior would be decreases in the overall earnings realized by the farm-owning population because of the substantial costs it would incur as it sought advice and switched properties.
Nevertheless, both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.
MORE: For investors, diamonds might be the new gold
My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway (BRKA) shares will be fully distributed to certain philanthropic organizations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's. (VFINX)) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers.
And now back to Ben Graham. I learned most of the thoughts in this investment discussion from Ben's book The Intelligent Investor, which I bought in 1949. My financial life changed with that purchase.
Before reading Ben's book, I had wandered around the investing landscape, devouring everything written on the subject. Much of what I read fascinated me: I tried my hand at charting and at using market indicia to predict stock movements. I sat in brokerage offices watching the tape roll by, and I listened to commentators. All of this was fun, but I couldn't shake the feeling that I wasn't getting anywhere.
MORE: A popular 401(k) choice is still badly broken
In contrast, Ben's ideas were explained logically in elegant, easy-to-understand prose (without Greek letters or complicated formulas). For me, the key points were laid out in what later editions labeled Chapters 8 and 20. These points guide my investing decisions today.
A couple of interesting sidelights about the book: Later editions included a postscript describing an unnamed investment that was a bonanza for Ben. Ben made the purchase in 1948 when he was writing the first edition and -- brace yourself -- the mystery company was Geico. If Ben had not recognized the special qualities of Geico when it was still in its infancy, my future and Berkshire's would have been far different.
The 1949 edition of the book also recommended a railroad stock that was then selling for $17 and earning about $10 per share. (One of the reasons I admired Ben was that he had the guts to use current examples, leaving himself open to sneers if he stumbled.) In part, that low valuation resulted from an accounting rule of the time that required the railroad to exclude from its reported earnings the substantial retained earnings of affiliates.
MORE: myRA is not the way to save for retirement
The recommended stock was Northern Pacific, and its most important affiliate was Chicago, Burlington & Quincy. These railroads are now important parts of BNSF (Burlington Northern Santa Fe), which is today fully owned by Berkshire. When I read the book, Northern Pacific had a market value of about $40 million. Now its successor (having added a great many properties, to be sure) earns that amount every four days.
I can't remember what I paid for that first copy of The Intelligent Investor. Whatever the cost, it would underscore the truth of Ben's adage: Price is what you pay; value is what you get. Of all the investments I ever made, buying Ben's book was the best (except for my purchase of two marriage licenses).
Warren Buffett is the CEO of Berkshire Hathaway. This essay is an edited excerpt from his annual letter to shareholders.
This story is from the March 17, 2014 issue of Fortune
'via Blog this'
Buffett's Berkshire slammed by S&P in 2013
Buffett's Berkshire slammed by S&P in 2013: "He uses two of his own successful real estate deals to support a point he's made many times before: investors should buy stock as if they were buying a company and a share of its future profits, not betting on its price. They should, as a result, ignore the daily ups and downs of a stock's movements and keep their focus on the long run"
"Owners of stocks ... too often let the capricious and often irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits — and worse yet, important to consider acting upon their comments."
'via Blog this'
"Owners of stocks ... too often let the capricious and often irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits — and worse yet, important to consider acting upon their comments."
'via Blog this'
What the short interest surge may really signal
What the short interest surge may really signal:
EVERYTHING is bullish. Bad economic reports= due to weather= BULLISH. Good economic reports = bullish. Stocks trading at 1000 PE Ratio = Bullish. Stocks with no earnings but lots of potential = Bullish. Short interest up = Bullish. I think that people should add a "t" to the word Bullish and move the i after the h.
'via Blog this'
EVERYTHING is bullish. Bad economic reports= due to weather= BULLISH. Good economic reports = bullish. Stocks trading at 1000 PE Ratio = Bullish. Stocks with no earnings but lots of potential = Bullish. Short interest up = Bullish. I think that people should add a "t" to the word Bullish and move the i after the h.
'via Blog this'
What the short interest surge may really signal
What the short interest surge may really signal: ""Over the last several months, each time the market fell, short sellers have stepped in hoping to finally catch a meaningful decline" says Hickey. "Like Wile E. Coyote in his pursuit of the Roadrunner, every time they think they have a chance, the market turns around."
In just February alone, the most heavily shorted stocks rallied an average of 6.67 percent, which is more than 200 basis points greater than the 4.61 percent increase for the S&P 1500. "
'via Blog this'
In just February alone, the most heavily shorted stocks rallied an average of 6.67 percent, which is more than 200 basis points greater than the 4.61 percent increase for the S&P 1500. "
'via Blog this'
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