The Stingy News Weekly (02/12/2012)
New @ StingyInvestor
Be careful when delving too deep
"Value investors should be careful when delving too deep for outsized returns. It turns out that the cheapest stocks by one widely used measure are not always the best. This will come as a surprise to investors who like to rely upon price to book value as a key yardstick when making decisions."
A guide to private placement due diligence
"Because I'm in the business of helping people, I thought I'd offer up my own 3-step guide for stockbrokers when conducting due diligence on private placements: Step 1: Make sure you have a copy of the Private Placement Memorandum (also referred to as the PPM). You're going to want to light this PPM on fire and drop it into a Hazmat dumpster at least five miles from your office. Step 2: Tell the banker/firm owner/branch manager or whoever brought it to you to go f' himself. Step 3: Head over to Dunkin Donuts, get yourself a Coffee Coolatta. Yes, I know they've got hundreds of calories - but you're worth it. You've done some good this day."
Look past emerging markets debt sales pitch
"The sales pitch for emerging markets debt – like this one from RBC – might have us think that debt levels alone can be used to assess sovereign default risk. But judging by the ‘spreads’ of emerging markets bond yields above developed world sovereign debt, the global bond market is saying that other important factors determine default risk. Otherwise, emerging markets bonds would yield less than developed country debt. In This Time is Different – Eight Centuries of Financial Folly, Carmen Reinhart and Kenneth Rogoff examined – among other things – a history of default among developing countries. While high debt levels were universally linked to default episodes, the authors found that emerging markets defaults have generally occurred at debt levels that are generally considered ‘safe’ for more mature economies. They found that nearly half of the three-dozen emerging country defaults between 1970 and 2008 occurred at debt-to-GNP ratios below 35 percent."
Why stocks beat gold and bonds
"Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date."
Warren Buffett Interview
"Ted Williams described in his book, 'The Science of Hitting,' that the most important thing -- for a hitter -- is to wait for the right pitch. And that's -- exactly the philosophy I have about investing...Wait for the right pitch, yeah, and... wait for the right deal. And it will come... It's the key to investing."
Credit Suisse 2012 Yearbook
"112 years of market data for 19 countries."
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