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Article Archive: 2018

The Stingy News Weekly: June 19, 2018
06/19/18   SNW
This week we have new grades, the Bill and Warren show, alpha vs taxes, 52-week highs, and more.

Theranos lessons
06/19/18   Books
"There are jerks, egomaniacs, and hucksters everywhere. Many of them are good at their craft. Plan accordingly."

Warren and Bill visit a candy store
06/19/18   Buffett
"So when we got together in Omaha during this year's Berkshire Hathaway shareholder meeting, we decided to check out a real candy store."

Does your alpha cover its taxes?
06/19/18   Index Investing
"Management fees, the investment industry's most visible cost, often get more attention than the less visible and typically larger costs associated with trading and taxes."

Sector vs country momentum
06/19/18   Momentum Investing
"This short research note shows that long-short Momentum portfolios of sectors or countries in European stock markets generated positive excess returns over the last two decades."

52 week high and the Q-factor
06/19/18   Momentum Investing
"Firms with high momentum (close to 52-week high) and low asset growth perform the best."

The Stingy News Weekly: June 12, 2018
06/12/18   SNW
This week we have risk, seasons, luck, work, and more

A season for sectors
06/12/18   Markets
"we find that seasonality has been economically significant and surprisingly robust to specification methods over the past 75 years."

Focus on risk
06/12/18   Behaviour
"Experience has shown again and again that, for example, higher returns have emanated from lower-volatility stocks, and higher quality bonds have tended to outperform those of lower credit quality. In both instances, - whether risk is defined by volatility (yes, volatility can be a risk), drawdowns, or total loss, - the more conservative option has generally performed better."

It can happen to anyone
06/12/18   Behaviour
"History is riddled with investor after investor who couldn't quit while they were ahead and eventually ended in ruin."

Lazy work
06/12/18   Behaviour
"Rockefeller's job wasn't to drill wells, load trains, or move barrels. It was to make good decisions. And making decisions requires, more than anything, quiet time alone in your own head to think a problem through. Rockefeller's product - his deliverable - wasn't what he did with this hands, or even his words. It was what he figured out inside his head. So that's where he spent most of his time and energy."

We are all created equal
06/12/18   Behaviour
"I didn't understand him or like him. But all it took to see his humanity - to be able to treat him - was to supply that tiny bit of openness and curiosity."

The missing table
06/04/18   Stingy Investing
"My Globe & Mail piece went out today with a missing table. The online article has been updated and the table itself is shown below."

The Stingy News Weekly: June 4, 2018
06/04/18   SNW
This week we have a great set of links. Be sure to check out Patrick O'Shaughnessy & Co.'s new research venture, Morgan Housel on psychology, Lou Simpson, factor timing, and more

The psychology of money
06/04/18   Behaviour
"In what other field does someone with no education, no relevant experience, no resources, and no connections vastly outperform someone with the best education, the most relevant experiences, the best resources and the best connections? There will never be a story of a Grace Groner performing heart surgery better than a Harvard-trained cardiologist. Or building a faster chip than Apple's engineers. Unthinkable. But these stories happen in investing"

Lou Simpson wisdom
06/04/18   Value Investing
"One thing a lot of investors do is they cut their flowers and water their weeds. They sell their winners and keep their losers, hoping the losers will come back even. Generally, it's more effective to cut your weeds and water your flowers."

Market timing with multiples
06/04/18   Momentum
"This short research note highlights that valuation multiples can be used for market timing, but result in an emotionally challenging strategy. Momentum or volatility-based strategies are attractive alternatives."

Low P/E in the TSX 60
06/04/18   Stingy Investing
"The low-P/E portfolio would have gained an average of 18.4-per-cent annually over the 16 years through to the end of 2017. It beat the index by a whopping 10.7 percentage points per year on average."

Scientists succumb to corruption
06/04/18   Behaviour
"It starts with a dash of temptation. Stir in some rationalization and deception. The final and key ingredient is: stupid systems with perverse incentives."

Revisiting the Marshmallow Test
06/04/18   Behaviour
"Associations between delay time and measures of behavioral outcomes at age 15 were much smaller and rarely statistically significant."

Factors from scratch
06/04/18   Value Investing
"The excess returns associated with Value and Momentum result from convergent and divergent processes, respectively. Value stocks are systematically underpriced and gradually converge on their fair value over time. Momentum stocks start out fairly valued or slightly overvalued, and go on to become more overvalued in the short-term, before reverting back. Both styles represent a market mistake that can be captured as alpha."

The Stingy News Weekly: May 28, 2018
05/28/18   SNW
This week we have unicorn, volatility, money, and more.

What happened at GE?
05/28/18   Management
"Few corporate meltdowns have been as swift and dramatic as General Electric's over the past 18 months - but the problems started long before that."

The reporter who took down a unicorn
05/28/18   Crime
"How John Carreyrou battled corporate surveillance and intimidation to expose a multibillion-dollar Silicon Valley start-up as a fraud."

Money really isn't everything
05/28/18   Behaviour
"Your mother was right: Money isn't everything. New research that examines levels of life satisfaction across more than 1,200 Canadian neighbourhoods shows that big pay cheques don't have much to say about the overall sense of happiness in a community. What matters more are factors such as affordable homes, short commuting times and - most important - a sense of community belonging. In general, rural residents are happier than their urban counterparts, despite lower incomes"

Attention and low volatility
05/28/18   Markets
"The bottom line is that investors do not need to invest in low-volatility stocks (which are now much more highly priced) to exploit the low-volatility anomaly. The reason is that it's mostly about the very poor performance of high-volatility stocks. And the poor performance of high-volatility stocks can be avoided simply by screening out stocks with the negative characteristics of high idiosyncratic volatility, high skewness and low prices."

The Stingy News Weekly: May 23, 2018
05/23/18   SNW
This week we have Montier, Griffin, replication, diapers, and more.

Replicating in Europe
05/23/18   Value Investing
"For context, the 4.5% premium of leveraged small value over small value is similar in magnitude to the 3.8% premium that we observed in our US research from 1965 to 2017. While the premium in the US includes in-sample data that was used to train the ranking algorithm, the observation of a 4.5% premium in Europe is completely out of sample."

Bezos went thermonuclear on Diapers.com
05/23/18   Management
"First, in 2009, Amazon sent a senior vice president to have lunch with the founders of the startup behind Diapers.com, called Quidsi. He warned them that Amazon was thinking about getting into the diaper business and suggested they think about selling. As Stone tells it, this was not a friendly suggestion. It was more like the kind of offer you can't refuse."

Meb talks to James Montier
05/23/18   Markets
"James starts from accounting identities. There are essentially four ways you get paid for owning an equity: a change in valuation, a change in profitability, some growth, and some yield. James fleshes out the details for us, discussing time-horizons of these identities. One of the takeaways is that we're looking at pretty miserable returns for U.S. equities." [audio]

Pulling the thread with Tren Griffin
05/22/18   Management
"Tren Griffin has been writing a weekly blog post that highlights things he has learned from various investors, businesspeople, musicians, comedians, and more. Lately, he has also been tackling individual businesses, and broad topics like scaling, competitive forces, and product market fit." [audio]

A megastar mega gain
05/22/18   Stingy Investing
"Of the current megastars, Canfor Pulp Products Inc. (CFX) caught my attention owing to its astonishing advance over the past few weeks. Its stock is up 30 per cent since March, when it returned to the megastar team for the second year in a row. The Vancouver-based pulp and paper company is up a whopping 85 per cent since it first became a megastar last year." [$]

Dematerialization
05/22/18   World
"Humans want more and more all the time, which seems like bad news. Aren't we going to use up all the natural resources and pollute the Earth as we keep growing? MIT scientist, Andrew McAfee, advocates that the answer is actually 'no.' Evidence from America shows that, amazingly enough, we are now dematerializing: using fewer resources year after year and treading more lightly on the planet." [video]

The Stingy News Weekly: May 14, 2018
05/14/18   SNW
This week we have GICs vs Bonds, wisdom from O'Shaughnessy, and more.

CEOs don't make 350x more than employees
05/14/18   Management
"Once we make a more statistically valid apples-to-apples comparison, the CEO-to-worker compensation ratio falls by 50 percent from the AFL-CIO.s expected 350-to-1 ratio to 177-to-1 once we consider total compensation for both CEOs and full-time (40 hours per week) rank-and-file workers employed by companies with 500 or more workers. If we assume a 60-hour work week for the average worker (to be comparable to the work week of an average CEO), the CEO-to-worker compensation ratio falls by two-thirds to only 118-to-1 for average CEO pay and 104-to-1 for median CEO pay. Further, even if we could confiscate 100 percent of the compensation of all S&P 500 CEOs, the typical rank-and-file worker would probably get about $1 per week in additional after-tax earnings."

O'Shaughnessy shares his secrets
05/14/18   Behaviour
"So don't expect the market won't tumble, O'Shaughnessy cautions. It always does. But even more important, and he targets passive index/ETF investors here, be careful to avoid one of the worst moves an investor can make, which is to sell when the market tumbles and get back in after it has already rebounded."

Canada's most boring investment ever
05/14/18   Bonds
"Enter the good old GIC. Not only does the Canada Deposit Insurance Corporation (CDIC) insure GICs within specified limits, many GICs have yields that rival those of your favourite bond ETFs, with a much lower average maturity. In fact, a 1.5 year GIC ladder at RBC Direct Investing currently boasts an identical average yield of 2.34%, with an average maturity of just 3 years"

The Stingy News Weekly: May 8, 2018
05/08/18   SNW
This week we have Buffett, Munger, Greenwald, thrift, and much more.

Berkshire Hathaway 2018 AGM
05/07/18   Buffett
"Investors and non-investors alike can witness history, live, as Chairman and CEO Warren Buffett and his right-hand man Charlie Munger share their unscripted views on the company, the markets, the economy, corporate governance, and a lot more." [video]

Looking past the package
05/07/18   Indexing
"ETFs have adopted all of the mutual fund industry's bad habits."

The worst time to retire
05/07/18   Retirement
"Market performance in the first few years of retirement determines financial security throughout one's golden years. Here's why the outlook for people retiring today is concerning"

Graham & Doddsville: Spring 2018
05/07/18   Value Investing
"This is a bittersweet issue for us. Bruce Greenwald, the Academic Co-Director of the Heilbrunn Center, retires at the end of this academic year"

On yield curves
05/07/18   Markets
"Articles often use dramatic language like whenever the yield curve inverts, a recession has followed. They also bring up how the last time the yield curve inverted in the U.S., some well-known policy makers doubted its predictive power, only to be set straight by the worst recession since the Great Depression. It sounds scary. It also happens be true ... in the U.S. ... in recent times. Internationally, the yield curve's predictive power has been mixed."

In praise of short sellers
05/07/18   Markets
"A growing body of academic literature argues that short interest can identify stocks likely to underperform the market - and that this signal can complement better known market signals like value and momentum. This research suggest that if there is substantial short interest in a stock, long-only investors would do well to beware."

Secretary donates $8.2 Million
05/07/18   Charity
"Even by the dizzying standards of New York City philanthropy, a recent $6.24 million donation to the Henry Street Settlement on the Lower East Side was a whopper - the largest single gift from an individual to the social service group in its 125-year history. It was not donated by some billionaire benefactor, but by a frugal legal secretary from Brooklyn who toiled for the same law firm for 67 years until she retired at age 96 and died not long afterward in 2016."

Is loss aversion a myth?
05/07/18   Behaviour
"The idea of loss aversion - that losses 'loom' larger than gains - is one of the most established and prominent findings in behavioural economics, and could be considered a foundation stone for the entire discipline. Recent research, however, has questioned the validity and robustness of the supporting evidence, suggesting that it is at worse a false concept and at best overstated"

The Warren Buffett Archive
05/07/18   Buffett
"The Warren Buffett Archive is the world's largest collection of Buffett speaking about business, investing, money and life."

The process matters
05/07/18   Value Investing
"After doing more research, I realized how much process mattered when it came to selecting which value stocks to invest in."

Coal contest
05/07/18   Stingy Investing
"Westshore's interesting position was put under the microscope in the final round of the Ben Graham Centre's International Stock Picking Competition, which promotes value investing to MBA students." [$]

The Stingy News Weekly: April 30, 2018
04/30/18   SNW
This week we have Cleese, Gawande, megastars, and more.

Lessons from John Cleese
04/30/18   Behaviour
"It's absolutely no good just writing a straight script and then sticking half a dozen jokes in, because people would just remember the jokes and forget the teaching points"

Atul Gawande interview
04/30/18   Health
"Sure, medical progress has been astounding. But today the U.S. spends more on healthcare than any other country, with so-so outcomes. Atul Gawande - cancer surgeon, public-health researcher, and best-selling author - has some simple ideas for treating a painfully complex system."

Factor investing: art and science
04/30/18   Value Investing
"Having studied finance for a long time, I think I now know less about how the stock market works. In fact, I probably should have stopped studying finance after I read Ben Graham's Intelligent Investor, over 20 years ago. Life would be a lot easier, or at least less complicated. Adhering to Graham's straightforward value investing ethos certainly worked out for Warren Buffett"

The Top 1000
04/27/18   Stingy Investing
"Below are the 1,000 largest publicly traded Canadian corporations, as measured by assets. You can rank them by revenue, profit, assets or market cap using the drop down menu below. Tap a company name for more data, including a live stock price look-up." [$]

Meet the Top 1000 Megastars
04/26/18   Stingy Investing
"Not sure which Top 1000 companies to buy? We analyzed the data for you to arrive at a shortlist of 20 stocks. Last year's picks delivered a stunning 16.2% return" [$]

The Stingy News Weekly: April 22, 2018
04/22/18   SNW
This week we have Whitman, Greenblatt, Amazon, and more.

Chasing returns
04/22/18   Funds
"The authors illustrated how the probability that a talented manager's performance will exceed the best in a pool of untalented managers can be surprisingly small, even over long periods. It helps explain why performance-chasing has produced such poor results for individual and institutional investors alike."

Meb's Amazon accusation
04/22/18   Books
"You've probably heard much in the media recently about Facebook, fake news, and weaponizing content to influence opinions and elections. You may have seen Mark Zuckerberg dragged in front of Congress to testify about Facebook's mistakes. Well, what you haven't heard much of in the media (yet) is how Amazon is an equally bad actor. Whereas Facebook is plagued by fake news, Amazon is littered with fake products. And these fake products encourage fraud and play a role in global money laundering."

Joel Greenblatt talks to Barry Ritholtz
04/22/18   Value Investing
"Bloomberg View columnist Barry Ritholtz interviews Joel Greenblatt, co-founder of Formula Investing LLC and managing principal, co-chief investment officer and portfolio manager at Gotham Short Strategies and Gotham Asset Management LLC." [audio]

Be a little underemployed
04/22/18   Behaviour
"Since the constraints of physically exhausting jobs are visible, we took decisive action when things weren.t working, like the Adamson Act. But the limits of mentally exhausting jobs are nuanced and less visible, so we get trapped in a spot where most of us work a schedule that doesn.t maximize our productivity, yet we do nothing about it."

Martin J. Whitman dies at 93
04/22/18   Value Investing
"Martin J. Whitman, who made .safe and cheap. a value-investing mantra during more than two decades managing the Third Avenue Value Fund, has died. He was 93."

The Stingy News Weekly: April 16, 2018
04/16/18   SNW
This week we have Peter Kaufman, value, ideas, and more.

Things I'm pretty sure about
04/16/18   Behaviour
"Some of the richest people are the worst money managers I've seen. When money loses the power of scarcity you stop caring about leaks that are meaningful when you're poorer. And when your life gets complicated you're more likely to outsource decisions to middlemen who may not have your best interest at heart. It's an overlooked irony. 'Enough money to care but not enough to not care' is the sweet spot for management."

Peter Kaufman talks about thinking
04/16/18   Behaviour
"I tried to learn what Munger calls, 'the big ideas' from all the different disciplines. Right up front I want to tell you my trick was, because if you try to do it the way he did it you don't have enough time in your life to do it. It's impossible. Because the fields are too big and the books are too thick."

Value stocks during a soft patch
04/16/18   Stingy Investing
"Buying into a strategy like value investing, or a fund like that offered by Mr. Chou, is easy to do after a strong run. It's much harder after a weak period. But buying during a soft patch may lead to generous returns." [$]

The Stingy News Weekly: April 10, 2018
04/10/18   SNW
This week we have momentum, marketing, deep value, and more.

Where have the public companies gone?
04/10/18   Markets
"The people who supervise the U.S. stock market are grappling with what they see as a troubling trend: One of the great innovations of Western capitalism - the public company - appears to be losing ground."

Art leveraging science
04/10/18   Media
"Communicating and allocating capital are miles apart. Completely different topics. But look around, and the two are constantly paired."

Explanations for momentum
04/10/18   Momentum Investing
"Our findings show that at least a substantial part of U.S. and international momentum profits represents a risk premium for the exposure of the strategy to systematic crash risk"

Common misconceptions about momentum
04/10/18   Momentum Investing
"With so much information available, it is not be surprising that many analysts have missed seeing some of the research. Based on the way momentum is generally used, it is clear to me that there are some serious misconceptions about it. Here is my discussion of some of the more serious ones."

Smart marketing
04/10/18   Markets
"More recently, long-only factor futures have been launched for European and US stock markets. Such derivatives can be used efficiently to create long-short factor exposure by combining them with a short position in the index future. In the US, investors can even purchase long-short factor ETFs, even though these have relatively low assets under management."

Chou's annual letter
04/10/18   Chou
"Similar to the current index mania, these 50 well-established growth stocks were considered buys at any price, sending them to levels that were unjustified on the basis of intrinsic value. The delusion was short - lived as they collapsed shortly after in the 1970s. As one Forbes columnist described it, 'the Nifty Fifty were taken out and shot one by one.'"

The Stingy News Weekly: April 2, 2018
04/02/18   SNW
This week we have Fairfax Lollapalooza 2018, Buffett, CPP, and more.

Deferring CPP
04/02/18   Retirement
"I believe deferring CPP is so unpopular because it forces people to withdraw more money from their savings early on to make up for the shortfall in income. The balance in their RRIF drops a lot faster as a result. I recognize that this phenomenon is hard for us to accept since so much of our self-worth and our sense of financial security are tied to the amount of wealth that we have accumulated. Even though it goes against the grain, you just need to have faith that this deferral strategy will pay off in the long run."

A back test checklist
04/02/18   Markets
"The checklist's objective is to help users determine how much confidence to place in a back test or a set of statistical results. No back test is perfect. Every back test suffers from limitations and the possibility of errors and biases affecting results. While these problems can't be avoided, they can be minimised and managed. Our task as users of back tests is to find a back test whose limitations we can live with. In other words, the back test's limitations, degree of bias or chance of error are not so bad that they completely invalidate the results."

Warren Buffett speech
04/02/18   Buffett
"One day, Warren Buffet came to campus to speak to the College of Business. I didn't think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for." [video]

How to talk to people about money
04/02/18   Behaviour
"we rarely recognize that most investment debates - debates that literally make markets - are just a reflection of people making different decisions not because they disagree with each other, but because they view investing with a different set of priorities."

The Stingy News Weekly: March 27, 2018
03/27/18   SNW
This week we have Fairfax Lollapalooza 2018, Combs, hacking the lotto, and more.

What's cheap?
03/27/18   Markets
"Stocks with high conviction buyback programs are as cheap as they've been since the tech bubble, and trending cheaper."

Momentum in Imperial Russia
03/27/18   Momentum Investing
"Some of the leading theories of momentum have different empirical predictions that depend on market composition and structure. The institutional theory predicts lower momentum profits in markets with less agency. Behavioral theories predict lower momentum profits in markets with more sophisticated investors. One risk-based theory predicts occasional momentum crashes. In this paper, we use a dataset from a major 19th century equity market to test these predictions. We find no evidence to support the institutional theory due to the lack of delegated management. We exploit a regulatory change in the middle of our sample period to test behavior theories. We find evidence consistent with overreaction theories of momentum. We find no evidence to support a rare disaster theory."

The billionaire whisperer
03/27/18   Buffett
"For Bezos, Dimon, and Buffett, it was another splashy headline in careers that have pushed boundaries. Behind the scenes, though, Combs largely spearheaded the effort, according to a person familiar with the matter. For months, Combs shuttled among the CEOs to get them to commit to doing something about a problem they.d discussed informally for years, the person says."

The lottery hackers
03/27/18   Markets
"After stopping in one morning at a convenience store he knew well, he picked up a brochure for a brand-new state lottery game. Studying the flyer later at his kitchen table, Jerry saw that it listed the odds of winning certain amounts of money by picking certain combinations of numbers. That's when it hit him. Right there, in the numbers on the page, he noticed a flaw - a strange and surprising pattern, like the cereal-box code, written into the fundamental machinery of the game. A loophole that would eventually make Jerry and Marge millionaires, spark an investigation by a Boston Globe Spotlight reporter, unleash a statewide political scandal and expose more than a few hypocrisies at the heart of America's favorite form of legalized gambling."

The devil in the low-P/E details
03/27/18   Stingy Investing
"Value investors love to pick stocks with low price-to-earnings ratios and a wealth of studies back them up. But recent research indicates there might be a devil hiding in the details." [$]

The Stingy News Weekly: March 19, 2018
03/19/18   SNW
This week we have simple value, buybacks, bad planning, and more.

Why projects are late
03/19/18   Behaviour
"Whether it's a giant infrastructure plan or a humble kitchen renovation, it'll inevitably take way too long and cost way too much. That's because you suffer from 'the planning fallacy.' (You also have an 'optimism bias' and a bad case of overconfidence.) But don't worry: we've got the solution." [audio]

High conviction buybacks
03/19/18   Value Investing
"Buybacks may not be well timed in aggregate, but they have been timed well (at least, timed at cheaper relative prices) by firms with high conviction buyback programs. These firms can get lost in the shuffle because, on average, the cash spent on buybacks by these high conviction firms represent a minority of the total cash being spent on buybacks."

Simple value strategies win
03/19/18   Value Investing
"While relative-value strategies do seem to add value over a passive index, it appears investors would be generally better off if they relied on simple P/E-based investing."

Capex darlings and the myth of long-termism
03/19/18   Value Investing
"part of the allure of buybacks is the signal to shareholders that management will not fritter away precious capital on dubious projects"

The Stingy News Weekly: March 12, 2018
03/12/18   SNW
This week we have retirement, FAANGs, farming, and more.

Andrew Tobias interview
03/12/18   Markets
"Andrew is a Harvard grad who went on to write for New York Magazine, covering the world of finance. For several years he had a column in Time and frequently appeared in Parade. His work has also appeared in such places as The New York Times Sunday Magazine and on the cover of Harvard Magazine. His twelve books include three New York Times best-sellers, one of which is The Only Investment Guide You.ll Ever Need, with more than one million copies in print." [audio]

Unraveling retirement strategies
03/12/18   Retirement
"The idea that we can spend an amount calculated at the beginning of retirement and continue spending it regardless of what happens to our financial situation over perhaps 30 years is not only risky but irrational."

About your almond farm
03/12/18   Markets
"I've grown weary hearing investors and consultants cackle about how niche investments like almond farms and small-market private credit deals in India could provide the returns they so desperately seek."

All FAANGed up
03/12/18   Stingy Investing
"Drew Barrymore reprises her role as real estate agent turned bloodthirsty zombie in the second season of Netflix Inc.'s Santa Clarita Diet. New episodes of the dark comedy promise toothsome fare for fans of the show this month. While waiting, investors can think about sinking their teeth into Netflix and the other FAANG stocks." [$]

The Stingy News Weekly: March 5, 2018
03/05/18   SNW
This week we have small value, the death of print, depression, Buffett, and more.

Sequential models
03/05/18   Value Investing
"The sequential model allows investors to prioritise factors and has the advantage of resulting in a concentrated portfolio of stocks. However, the prioritisation requires investors to have a strong preference for specific factors, which can be a difficult choice given that factors tend be highly cyclical."

New ways of treating depression
03/05/18   Health
"His research concluded that chemical antidepressants give you a boost, above the placebo effect, of 1.8 points on average on the Hamilton scale. This is less than a third of the boost that you get, by some estimates, from improving your sleep patterns."

Private equity returns in public markets
03/05/18   Markets
"It has been a while since we discussed private equity on the show, so I was excited for this week's conversation. My guest is Dan Rasmussen, the founder of Verdad advisers. Dan worked in private equity and has spent years studying the entire field. Dan identified several key drivers of private equity's outsized returns: size, value, and leverage. His firm uses these factors as a starting point to build a portfolio of public equities that behave like their private brethren." [audio]

How to kill your economy
03/05/18   Management
"80 percent of CEOs surveyed in one study said they'd pass up making an investment that would fuel a decade's worth of innovation if it meant they'd miss a quarter of earnings results"

Warren Buffett: Advice for entrepreneurs
03/05/18   Buffett
"Warren Buffett, Berkshire Hathaway CEO , talked about his personal experience in business and gave advice to small business owners." [video]

Most newspapers are going to perish
03/05/18   Stingy Investing
"Most newspapers are going to perish. It's just a question of when. That's the dour view of one of the smartest investors in the world and it bodes poorly for the purveyors of print." [$]

The Stingy News Weekly: February 26, 2018
02/26/18   SNW
This week we have a Buffett bonanza, Russo, and more.

Buffett talks to Becky Quick
02/26/18   Buffett
"Ajit has bought every share of that, come on, you know, in the open market and he buys it just like anybody else. If it goes down, he suffers. I mean, we do not have one way things. We don't grant the directors restricted shares or anything of the sort. We want our directors to stand in the shoes of the shareholders. We don't have directors and officers insurance liability. I think maybe one other company on the New York Stock Exchange does it. If we do something really dumb and they lose - a company loses a lot of money, they lose money and it's real money to them. It isn't just something that was given to them."

Tulip mania: the classic story is mostly wrong
02/26/18   History
"Prices could be high, but mostly they weren't. Although it's true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house), I was able to identify only 37 people who spent more than 300 guilders on bulbs, around the yearly wage of a master craftsman. Many tulips were far cheaper. With one or two exceptions, these top buyers came from the wealthy merchant class and were well able to afford the bulbs."

My quest for loose change
02/26/18   Behaviour
"This change quest, as I've come to call it, has at times been an obsession, and at other times a hobby. But whatever you call it, it has taught me a number of lessons - about saving and spending, about patience, and even about life."

Thomas Russo talks at Google
02/26/18   Value Investing
"Thomas Russo describes the important ingredients of his tax-efficient, long-term buy-and-hold approach to global value equity investments." [video]

Buffett's annual letter
02/24/18   Buffett
"The bet illuminated another important investment lesson: Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period - or even to look foolish - is also essential."

The Stingy News Weekly: February 20, 2018
02/20/18   SNW
We have a lot on offer this week but be sure to check out the transcript from Charlie Munger's annual meeting.

Private equity: overvalued and overrated
02/20/18   Markets
"The great postcrisis private equity gold rush is on, fueled by cheap debt and enthusiastic investors. A lawn care chain might get half a dozen calls and emails a week from business brokers and 'searchers.' A regional bank auctioning off a business with $15 million in profits might pitch two hundred prospects, receive fifty letters of intent, and take twelve separate private equity firms to management meetings, ending in a sale price which the majority of bidders considers crazy. And the greatest prize of all - a software company - could sell for many multiples of revenue, regardless of profitability."

A better trend-following strategy
02/20/18   Stingy Investing
"The dual approach provides benefits, according to Philosophical Economics. It generated average annual returns of 12.7 per cent, from January, 1947, to November, 2015, with a volatility of 12.9 per cent. By way of comparison, the S&P 500 gained 11.2 per cent on average annually over the same period with a volatility of 14.5 per cent." [$]

Scant evidence of power laws in real-world networks
02/20/18   Science
"These results undermine the universality of scale-free networks and reveal that real-world networks exhibit a rich structural diversity that will likely require new ideas and mechanisms to explain."

Corrections come and go. It usually makes sense to do nothing
02/20/18   Stingy Investing
"the vast majority of investors should avoid market timing and follow the lead of Warren Buffett and Charlie Munger instead. Broadly speaking, they buy companies at reasonable prices and hold them for very long periods. They're like collectors but instead of baseball cards they buy good businesses and rarely sell. It's a simple approach that has worked well for decades."

Charlie Munger: 2018 AGM transcript
02/20/18   Munger
"Most newspapers by the way I think are going to perish. It's just a question of when. I mean they're all going to die. You know the New York Times will continue because people will pay $5 for it in an airport. So there will be a few survivors, but by and large the newspaper business is not doing well. Berkshire Hathaway owns a lot of them. And buying them we figured on a certain natural decline rate after which the profits would go to zero. We underestimated the rate of decline. It's going faster than we thought."

Smart beta is sick
02/20/18   Markets
"Smart beta may be state-of-the-art, but it has also become the E. coli of institutional investing. There are at least 300 published factors, with roughly 40 newly discovered factors announced each year."

The Stingy News Weekly: February 12, 2018
02/12/18   SNW
This week we have waffles, rent, risk parity, and more.

Lessons from Waffle House
02/12/18   Management
"You go in there and everyone's drunk. You know everyone's drunk in Waffle House because they have pictures of the food on the menu. How drunk do you have to be to not remember what a waffle looks like?"

Risk parity derangement syndrome
02/12/18   Markets
"You may have noticed the market turbulence lately. You may have also noticed the legion of commentators among the media, politicians, and famous investors, blaming this turbulence on 'risk parity,' 'trend-following strategies,' or my favorite, just 'the machines.' Poppycock. Yes, it's come to this; they've driven me to swear like Mrs. Doubtfire."

Rent control needs retirement
02/12/18   Government
"If politicians actually want to make sure everyone who needs a place to rest their head has one, there's only one way to do it: Build more housing. Which means, in turn, loosening the legal restrictions and community veto points that make it so hard to add supply. Because there's no way to escape the fundamental math: Unless you build enough housing to shelter the people who want to live in your city, a whole lot of people will be left out in the cold."

Why competitive advantages die
02/12/18   Management
"The only thing harder than gaining a competitive edge is not losing that advantage when you have one. That's as true for careers and investment strategies as it is for business. And since people are naturally optimistic, there's a tendency to put more thought into finding an edge than not losing it once you find one."

The Stingy News Weekly: February 5, 2018
02/05/18   SNW
This week we have a question of timing, a new balanced ETF solution, and more.

Vanguard's one-fund solution
02/05/18   Indexing
"It was one of the great mysteries in the Canadian fund market: why had no one created an ETF version of the balanced index mutual fund?"

Second childhood
02/05/18   Retirement
"I use the strategy I recommend to others: Occasionally, I will take my portfolio and assume the stock portion loses 35%, which is the typical decline during a bear market. I'll then look at the resulting hit to my overall portfolio's value and ask myself, 'Would you be okay with that?' As the market has climbed over the past year, I've found myself answering 'no' - and that's prompted me to ease up somewhat on stocks."

A simple timing strategy
02/05/18   Stingy Investing
"I've been eyeing escape pods - as an investor - for some time now. The U.S. market blasted through valuation levels seen at the 1929 market top in recent weeks. I outlined the dire situation using Prof. Robert Shiller's CAPE ratio (cyclically adjusted price-to-earnings ratio) in early January" [$]

The Stingy News Weekly: January 29, 2018
01/29/18   SNW
This week we have the top dog contest, leveraged value, broken pensions, momentum, and more.

A momentum signal
01/29/18   Momentum Investing
"Historically, the S&P 500 has been followed by above-average returns over the next 6, 12, 24, and 36 months when this cyclical momentum measure is above 85."

The bankruptcy of modern finance theory
01/29/18   Markets
"The profession of finance as practiced today relies heavily on modern finance theory: the dividend discount model and the capital asset pricing model. These models are the centerpieces of most business school finance courses, and surveys suggest that they are used by over 70 percent of CFOs for capital budgeting. They are also used by almost every fundamental investor and most financial advisers. Yet these theories have been empirically invalidated time and again in well-publicized, peer-reviewed studies. Their continued usage represents another calibration error - between the claimed precision of the models and the actual unpredictability of mark"

High-debt value
01/29/18   Value Investing
"Dan then delves into leverage and the value premium, telling us how important this interaction is. He gives us great details on the subject based on a study he was a part of while at Bain Consulting. The takeaway was that roughly 50% of deals done at multiples greater than 10x EBITDA posted 0% returns to investors, net of fees." [audio]

Ontario making it easier to underfund pensions
01/29/18   Government
"Pension defaults are rare, but the CCPA study found that of the 39 largest publicly traded companies that have defined-benefit pensions, only nine had plans that were fully funded last year. Rather than loosening restrictions, Ontario should amend the Ontario Pension Benefit Act to require businesses to fund 100% of their pensions. Those that can't shouldn't offer pensions in the first place."

Policy-based evidence making
01/29/18   Government
"Social scientists, meanwhile, are discovering that they cannot replicate many of their own findings. The incentives of the profession weigh heavily toward designing experiments that will produce a positive result, analyzing and reanalyzing data until one appears, and then interpreting it as broadly as possible. That kind of research produces headlines, but not knowledge - a fact that social scientists are beginning to acknowledge. With their enthusiasm for EBP, policymakers are running headlong into a collapsing structure, pushing past inhabitants fleeing in the other direction."

Asset Mixer Update
01/29/18   Stingy Investing
We've updated our Asset Mixer to include real data for 2017.

Periodic Table Update
01/29/18   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include real data for 2017.

Dogs Contest
01/29/18   Stingy Investing
"Each January, I like to create a little challenge that adds a bit of flavour to the Safer Canadian Dogs strategy. All it takes is to pick the best and the worst of Canadian dividend stocks."

Creative investing
01/22/18   Management
"Ali views the world with a fresh set of eyes, and has already become an expert at identifying new investment opportunities where others have not. As the second prodigy 26 year old in as many weeks on the podcast, these young guns are making me feel like an ancient 32 year old." [audio]

A letter from an old friend
01/22/18   Markets
"I'm at my lowest equity allocation in 17 years. I am at 65% in equities. If the market goes up another 4-5%, I am planning on peeling of 25% of that to go into high quality bonds. Another 20% will go if the market rises 10% from here. At present, the S&P 500 offers returns of just 3.4%/year for the next ten years unadjusted for inflation. That's at the 95th percentile, and reflects valuations of the dot-com bubble, should we rise that far."

Value and momentum portfolio construction
01/22/18   Value Investing
"Being a Value investor is difficult, given that the stocks of a Value portfolios tend to have inherent issues, otherwise, these stocks would not be cheap. Being a B/M-focused value investor over the past decade has been especially hard, as the factor returns were effectively zero - plenty of pain, but no gain. Experiencing this factor cyclicality often leads investors to contemplate adding other factors in the hope of improving performance. An obvious candidate would be Momentum, as cheap and rising stocks are more appealing than cheap stocks. However, it is not quite straightforward for investors to add Momentum to a Value portfolio as there are several options available. In this short research note, we will analyze Value & Momentum portfolios created by three common multi-factor model approaches - the combination, the intersectional and the sequential models."

Fundamentals of value investing
01/22/18   Value Investing
"An interview with Value Investor, Joel Greenblatt. In this interview Joel discusses his approach to Value Investing and its core elements. Joel also discusses his career including examples of investments and why they were successful or not." [video]

Appalling problem for small businesses
01/22/18   Taxes
"The income the 'passive-income' proposal would hit may be far from passive and the rate on taxable capital gains will often exceed 100 per cent"

Rose Blumkin interview
01/22/18   Management
"A little gem of a 1980s NBC News story about Rose Blumkin" [video]

The Stingy News Weekly: January 15, 2018
01/15/18   SNW
This week we have best case returns, sloth, bitcoin, bankruptcy, and more.

U.S. equity returns: a best-case
01/15/18   Markets
"Adding in 2% for inflation, we get a 5.95% nominal upper limit total return estimate for U.S. equities."

Making history by doing nothing
01/15/18   Behaviour
"The pull toward constant action implicitly assumes the best opportunities are constantly presenting themselves to you at every moment. It's hard to think of living in bigger bubble. Doing nothing gives you options to do something different in the future. And options can be one of the most valuable assets in world that's constantly changing and breaking down old rules."

The FT paywall
01/15/18   Media
"The pink financial paper has used online subscriptions since 2002. After decades of diminishing ad returns, fellow digital publishers are finally catching on."

One-year performance is a terrible metric
01/15/18   Markets
"So ignore one year returns (unless you're taking the average from lots of them) and instead focus on five year returns and ten year returns."

Bitcoin 101
01/15/18   Markets
"Seth takes a moment to share a commercial he recently saw that explains what Bitcoin is and how it works." [video]

Staggering share of Canadians fear bankruptcy
01/15/18   Debt
"One-third of Canadians say they're now unable to cover their monthly bills while keeping up with their debt repayments, up eight points on the index since September."

The Stingy News Weekly: January 8, 2018
01/08/18   SNW
This week we have flying CAPEs, hot potatoes, dogs, cats, and more.

CAPE Fear
01/08/18   Markets
"The CAPE (cyclically adjusted PE) ratio is not a useful timing signal for market turning points, but is a powerful predictor of long-term market returns."

How Malcolm Hamilton prepared for his own retirement
01/08/18   Retirement
"I believe that Canadian governments are not well prepared for the retirement of the baby boom generation. They appear to have no coherent plan to address rising medical and custodial care costs in the 2030s and 2040s. Our governments have large debts. Their revenue may erode as heavily taxed working people retire and become lightly taxed pensioners. Most of their policy responses - raising the age at which government pensions start, income testing government benefits, holding interest rates down, encouraging inflation - will make it harder for people to retire comfortably at a reasonable age."

Market puts investors under the gun
01/08/18   Stingy Investing
"The U.S. stock market is trading at sky-high levels. So, you've gotta ask yourself one question. Do you feel lucky? Well, do ya? I'll be exploring that question after I briefly apologize for appropriating Clint Eastwood's lines from his 1971 movie Dirty Harry." [$]

Three strategies for 2018
01/08/18   Stingy Investing
"Three ways to make money, updated for the coming year: The climbing cats, the safer dogs and the hot potato"

Asset Mixer Update
01/04/18   Stingy Investing
We've updated our Asset Mixer to include nominal data for 2017.

Periodic Table Update
01/04/18   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include nominal data for 2017.

The Stingy News Weekly: January 1, 2018
01/01/18   SNW
Happy New Year!

The full reset
01/01/18   Behaviour
"Anything that evolves - markets, technology, careers, etc - has to be approached with the mindset that once-great ideas can expire, and when they expire you're better off walking away rather than attempting to repair them."

The strong base
01/01/18   Behaviour
"The greatest shortcoming of the human race is our inability to understand the exponential function."

Investment writing of 2017
01/01/18   Media
"Reading the work of others is the most helpful way to learn about investing and it can also improve your writing. So, where credit is due, my favorite investment pieces of 2017"

The rate of return on everything
01/01/18   Real Estate
"This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century. What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run? Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset covering total returns for all important assets classes - equity, housing, bonds, and bills - across 16 advanced economies from 1870 to 2015"

Top opinion of 2017
01/01/18   Markets
"Not all great reporting requires hushed conversations in back allies or on burner phones. Sometimes - like what columnist Angelo Calvello did with A Crime Foretold - all it takes is an old magazine, Google, and a relentless curiosity about the inner workings of institutional finance. In case you missed it, here's Institutional Investor's top column of 2017 and the rest of the year's best"

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Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...