The Stingy News Weekly (03/31/2013)
New @ StingyInvestor
The power of investor checklists
"Developing a good checklist is well worth the effort and it can save you from running aground when using stock screens. Both work well together and they allow investors to follow a consistent, well reasoned, and systematic approach. If checklists can improve the results of pilots and surgeons, they should also be able to help you become a better investor."
Deposit insurance may increase bank risk
"The argument for deposit insurance is that banks are inherently unstable, by virtue of their economic function they borrow money in the form of deposits (which can be instantly withdrawn) and lend to businesses on a longer-term basis. They are thus vulnerable to destabilising and self-fulfilling bank runs. But the counter-argument is that of moral hazard depositors have no incentive to choose between banks on grounds of riskiness, and bank executives can take risks knowing that they are underwritten by the insurance scheme."
Regulators should ban this leveraging strategy
"A while ago, I was asked by a regulator to speak to its enforcement staff about T-series mutual funds, which pay investors generous monthly cash distributions. The regulator wanted an independent view on product mechanics, common uses and risks, and was particularly interested in my thoughts on leveraging. I happily obliged, ending my talk with a firm recommendation: If I were the chief compliance officer of a dealer, I would not allow any T-series fund sales that involved: borrowing to invest in funds that have a policy to pay distributions exceeding pure yield taking the mostly 'return of capital' (RoC) distribution in cash and using that cash to pay down the loan. Here's my reasoning"
Chou's 2012 letter
"In general, we are not that bullish on the stock market. Aside from a couple of industries like the financial institutions in the U.S. and companies in the retail sector, we are not that comfortable with the prices of many stocks."
Fishing for value
"There are generally three scenarios under which they buy into a company - it's ignored by Wall Street, is misunderstood by investors, or has suffered from panic selling."
The best stock-picker
"By buying companies with safe, high dividend yields, Norman assured himself of getting only companies that had solid financial characteristics (after all, they couldn't have been paying dividends for many years without a good underlying business model and strong cash flow), at prices that were usually - in hindsight - ridiculously cheap, because Norman generally bought them during a hysteria that was causing Mr. Market to offer that particular stock at a particularly attractive price."
Buffett and Hussman on the market
"My point is that there are a variety of highly predictive, methodologically distinct measures of market-level valuation (I used the Shiller PE and Tobin's q, but GNP or GDP-to-total market capitalization below work equally as well) that point to overvaluation."
Cyprus details heavy losses for bank customers
"Major depositors in Cyprus's biggest bank will lose around 60 percent of savings over 100,000 euros, its central bank confirmed on Saturday, sharpening the terms of a bailout that has shaken European banks"
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