"The first principle is that you must not fool yourself - and you
are the easiest person to fool."  - Richard Feynman


Stingy Links
http://www.stingyinvestor.com/SI/articles/articlearchive.shtml

Immoral hazard
https://www.gmo.com/websitecontent/JGLetter_ALL_1Q08.pdf
"The idea that occasional economic setbacks might benefit the
system in the long run was one of the early ideas to disappear. Yet
if you prop up weak sisters who would otherwise fail and in
failing present their more efficient competitors with extra growth,
you must surely weaken the system. Desperation pricing from
weak firms who simply should not exist can weaken the profitability
of a whole industry, as it has for the airlines. The average
efficiency of most industries is reduced with at least some
effects on our global competitiveness. With a slightly lower average
return on equity, the ability to reinvest drops so that, in this
world of moral hazard where recessions are few and mild, GDP
growth is a little less than it might have been."

You can't pay them enough to leave
http://money.cnn.com/2008/04/15/real_estate/Youngstown_plan_roadblock/index.htm?postversion=2008042411
"When the city of Youngstown, Ohio, proposed incentives to move
people out of declining neighborhoods, it sounded like a good
idea - in theory. The city hoped to lure holdouts living on nearly
empty blocks and relocate them to more lively areas, as part of
its plan to remake itself in the wake of the steel industry's
departure and the foreclosure crisis. It's already cleared some
lots for things like playgrounds. Now Youngstown wants to close
entire streets and bulldoze abandoned properties so it can shut
down city services like street lighting, police patrols and
garbage pick-ups that it can no longer afford to maintain. To do this
on a large scale, the city needs to get about 100 residents to
relocate. Each is eligible for $50,000 in incentives - plenty, in
this town, to buy a new home and move. The hitch: Youngstowners
don't seem to want to leave their homes, no matter how blighted
or abandoned the neighborhood may be."

Doubling down in financials
http://www.forbes.com/finance/2008/04/23/pzena-citigroup-freddiemac-pf-guru-in_jl_0423adviserqa_inl.html
"Do clients ever get upset with you? They read the paper and then
see that their money manager is busy buying the financials. The
single most common question I get: .Don't you read the
newspaper? What is wrong with you?. So does the Pzena client need a
strong stomach? Of course. We try and educate the clients before
they open an account. We promise them that we will have these bad
periods. Every single client, before they sign up, knows how
badly we did in the last cycle. In the Internet bubble, the market
was going up 30% a year, and we were going down. We were 60
percentage points behind the market, underperforming it for 10
consecutive quarters in '98, '99 and the first couple months of 2000.
Now, that was extreme. The Internet bubble was extreme. We don't
have such an extreme bubble today. But this is what we do: We
buy bargains."

New-home sales in the U.S. plunge
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDyYp9o4DMGI&refer=home
"Purchases of new homes in the U.S. plunged more than forecast in
March to the lowest level in almost 17 years as stricter loan
rules and falling prices caused buyers to hold off. Sales dropped
8.5 percent to an annual pace of 526,000, the fewest since
October 1991, from a 575,000 rate the prior month, the Commerce
Department said today in Washington. The median sales price slumped
13.3 percent from the same time last year, the most in almost
four decades."

Fooling some of the people all of the time
http://online.wsj.com/article/SB120891268398036495.html?mod=googlenews_wsj
"Now Mr. Einhorn has written a book. But instead of packaging the
real or contrived "secrets" to his success - as cliche would
have it - he has tried to do something less triumphant and far
gutsier. In "Fooling Some of the People All of the Time," he turns
the spotlight on a single, stubborn investment play that never
made much money for him but created six years of headaches."

Sequoia fund to reopen
http://online.wsj.com/article/SB120900383081940539.html?mod=googlenews_wsj
"The Sequoia Fund, after experiencing selling by investors, is
reopening its doors May 1 to new investors for the first time
since 1982. The $3.5 billion value fund is celebrated for
outperforming the broader market during much of its 38-year history. For
years, it was run by legendary stock picker William Ruane, who
followed the same approach as Benjamin Graham and Warren Buffett."

Looking up to Warren Buffett
http://www.smartmoney.com/mag/index.cfm?story=may2008-warren-buffett
"Our brains are in sync with the speed at which the market is
moving and totally out of sync with the speed at which a business
is moving. It seems obvious: The market is repricing a company's
stock very quickly. I can process very quickly; therefore, I
make decisions based on that. You have to learn to dramatically
slow your brain, which is very hard for most people. The reality is
that you should make decisions based on how that business is
changing, and that's a very slow process."

Hoisington letter
http://www.hoisingtonmgt.com/HIM2008Q1NP.pdf
"Growth recessions, like full scale recessions, produce falling
inflation, a margin squeeze on corporate profits, eroding stock
prices, and declining interest rates. Thus, the difference is
really one of semantics. The point for investors is not what type
of recession we are experiencing, but rather how long the
downturn will last. Our conclusion is that our present economic
difficulties will persist for at least two years."

Triple-A failure
http://www.nytimes.com/2008/04/27/magazine/27Credit-t.html
"Structured finance, of which this deal is typical, is both
clever and useful; in the housing industry it has greatly expanded
the pool of credit. But in extreme conditions, it can fail. The
old-fashioned corner banker used his instincts, as well as his
pencil, to apportion credit; modern finance is formulaic. However
elegant its models, forecasting the behavior of 2,393 mortgage
holders is an uncertain business. 'Everyone assumed the credit
agencies knew what they were doing,' says Joseph Mason, a credit
expert at Drexel University. 'A structural engineer can predict
what load a steel support will bear; in financial engineering we
can't predict as well.'"

Leucadia's 2007 letter
http://www.leucadia.com/C&P%20Letters/C&P2007.pdf
"One of us has been mumbling about Credit Armageddon for years
and it seemed earlier this year that his fears were to be
realized. At least for the time being, this nightmare has been avoided
by strong government intervention. Unfortunately, we suspect that
the wizards of Wall Street have not only made mischief in the
mortgage market, but in all other loan markets as well and that
the full effect of this is not yet visible. It seems that almost
all financial institutions and investors have mispriced risk,
and many financial institutions have found themselves carrying
assets on their balance sheets at amounts considerably higher than
market or their intrinsic worth. Recently, and often at the
behest of regulators, financial institutions have been forced to
sell these assets or to recognize the mark to market losses, all of
which erodes net worth, forcing them to raise new equity
capital and/or to reduce leverage, a process that has come to be known
as deleveraging. It may take quite a while for the scrubbing of
balance sheets and the unwinding of leverage to come to an end,
and we suspect that not all will survive."

Older and heavier need not apply
http://junkfoodscience.blogspot.com/2008/04/older-and-heavier-need-not-apply.html
"General Mills has a model employer wellness program, according
to the article. It issued a wellness mission statement that was
distributed to all employees, saying: 'We would like every
General Mills employee to have an active lifestyle, a healthy weight,
a normal cholesterol level, normal blood pressure and to be a
nonsmoker.' These are mostly euphemisms for thin and young.
Evidence-based research to date has shown these health indices are
primarily measures of genetics, aging and social stresses, and
'normal' levels have been redefined so low as to exclude most older,
heavier or genetically predisposed people. The only way for
most of these workers to meet these arbitrary benchmarks are to
take controversial prescription drugs or engage in equally
controversial and ineffective weight loss measures. It is exactly these
discriminatory aspects of employer wellness programs, which
reward and penalize workers based on arbitrary health indices, that
caught the attention of the Department of Labor and lawyers
earlier this year."

The wonder fish
http://money.cnn.com/2008/04/15/technology/wonder_fish.fortune/index.htm?postversion=2008042108
"Our oceans are being drained of food. Doctors tell us to eat
more fish; it's good for the brain and good for the heart. We yearn
for our weekly sushi fix. And increasingly so do our friends in
China, India, and elsewhere in the developing world. To meet
this growing appetite, commercial fishermen are scooping up
everything that's edible (and a lot of what's not). Couple that trend
with the effects of global warming, and the situation has become
so dire that some scientists think seafood stocks will totally
collapse by 2048."


S&P/TSX60 Value Screens
http://www.stingyinvestor.com/SI/strategy.shtml 

High Dividend Yield Stocks                 P/E P/B P/S P/C P/D Yield*
========================================== === === === === === ======
Biovail (BVF)                               5   5   4   5   5    5
Bank of Montreal (BMO)                      4   4   4   1   5    5
CIBC (CM)                                   2   4   5   4   5    5
National Bank of Canada (NA)                3   4   5   5   5    5
Royal Bank (RY)                             4   3   4   5   5    5
TransCanada (TRP)                           3   4   3   4   5    5
Telus (T)                                   4   4   4   5   5    5
BCE (BCE)                                   5   3   4   5   5    5
Bank of Nova Scotia (BNS)                   3   3   3   1   5    5
Toronto Dominion Bank (TD)                  4   4   3   2   4    4
More Info: http://www.stingyinvestor.com/SI/strategy/dogs.shtml 

Value Ratio Stocks                         P/E P/B P/S P/C P/D  VR
========================================== === === === === === =====
Biovail (BVF)                               5   5   4   5   5   0.6
Thomson (TOC)                               5   4   2   2   4   1.9
BCE (BCE)                                   5   3   4   5   5   1.9
Bank of Montreal (BMO)                      4   4   4   1   5   2.2
Royal Bank (RY)                             4   3   4   5   5   2.8
Telus (T)                                   4   4   4   5   5   3.1
National Bank of Canada (NA)                3   4   5   5   5   3.1
Bank of Nova Scotia (BNS)                   3   3   3   1   5   3.2
Husky Energy (HSE)                          4   2   3   3   4   3.2
Toronto Dominion Bank (TD)                  4   4   3   2   4   3.2
More Info: http://www.stingyinvestor.com/SI/strategy/valueratio.shtml 

Graham Stocks                              P/E P/B P/D   G$   dG$(%)
========================================== === === === ====== ======
ACE Aviation (ACE.B)                        5   5   0   92.84 381.03
MDS Inc. (MDS)                              5   5   0   47.21 131.52
Thomson (TOC)                               5   4   4   55.77  48.79
Biovail (BVF)                               5   5   5   16.13  42.59
Magna Cl.A (MG.A)                           4   5   3  104.61  37.64
Nova (NCX)                                  5   4   3   36.06  31.45
Petro Canada (PCA)                          5   4   2   55.56  12.66
BCE (BCE)                                   5   3   5   41.29  10.40
Weston George (WN)                          4   5   4   51.54   9.68
Sun Life (SLF)                              4   5   4   49.31   3.42
Canadian Tire (CTC.A)                       3   5   2   66.21   1.75
Bank of Montreal (BMO)                      4   4   5   50.26   1.21
More Info: http://www.stingyinvestor.com/SI/strategy/graham.shtml 

*Notes: http://www.stingyinvestor.com/SI/strategy/notes.shtml 

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Books for Stingy Investors

Buffett: The Making of an American Capitalist
by Roger Lowenstein

The Making of an American Capitalist is the best biography of
Warren Buffett that I've read. By reading this book, you'll find
out how a young Buffett made money selling Coca-Cola to his
friends and how an older Buffett cashed in with Coke's stock. You'll
also discover why Warren started buying Berkshire Hathaway's
stock below $8 per share and how he boosted its value to lofty
heights (currently near $80,000 per share). The Making of an American
Capitalist is a must have for Buffett fans.
Amazon Link: http://www.amazon.ca/exec/obidos/ASIN/0385484917/


Stock Research From Dan Hallett & Associates

The Rothery Report
http://www.rotheryreport.com/ 

The Rothery Report provides research on select deep-value stocks in
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  Average Capital Gain    Average Holding Period
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http://www.rotheryreport.com/store/store.shtml

Subscribe Today
http://www.rotheryreport.com/store/order.shtml 



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ISSN 1499-2795 Copyright Dan Hallett and Associates Inc., 2008.
All rights reserved. The securities mentioned in this report are not
appropriate for all investors. Consult your professional investment
advisor before making any investment decision.  While all reasonable
effort is made to ensure the accuracy of information and data
contained herein, accuracy can not be guaranteed. Past performance is
not a good predictor of future performance.  Results are not
guaranteed and we assume no liability whatsoever for any material
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information in this newsletter, and in its related website, is not
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