The Stingy News Weekly (04/29/2012)
Cutting back on bonds
"The strongest consensus I could find relates to interest rates. There are few managers who aren’t running light on bonds and/or keeping their maturities short (including holding cash) to protect against rising rates. Carl Hoyt at Seymour Investment Management used Warren Buffett’s words to make the point. “Current rates … do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label.”"
"In Fairfax Financial’s Annual Letter to Shareholders, Prem Watsa observes, “there are more condos in construction in Toronto than in the 12 major cities in the U.S. combined, including New York and Los Angeles.” According to the Toronto Real Estate Board, the average condominium in the City of Toronto went for $361,488 in the fourth quarter of 2011, up 7% year-over-year. Condo sales were up 10.5% year-over-year. The average sales price to list price registered 98%, which is well above the historical long-term average. The Toronto condo market is hot. Looking at the situation from a national perspective, the Canadian Real Estate Association reported that the average house price in Canada was $372,763 in February 2012. This compares to the $203,100 average price reported by the National Association of Realtors in the United States. Our question is simple: why should the average house in Canada sell for 84% more than the average house in the United States over the long run?"
Real house prices
"The Shiller graph has suggested to many observers that house prices track inflation (i.e. that house prices adjusted for inflation are stable - except for bubbles). Last year I pointed out the slope depends on the data series used, and that if Professor Shiller had used either Corelogic or the Freddie Mac house prices series, before Case-Shiller was available, there would a greater upward slope to his graph."
"Increasingly, the FCPA has become a tool for American prosecutors to police the world's large multinationals. Corporations whose shares trade on American exchanges are considered fair targets. So are corrupt transactions that pass through American banks. Using that theory, the Justice Department brought a case against against Japan's JPC, a company that, as the Shearman and Sterling report put it, had 'no apparent commercial connection with the United States whatsoever.' Rather than test the government's arguments in court, and risk criminal convictions for their executives, most companies have chosen to settle using deferred prosecution agreements."
McGuinty's high-income tax
"The new, higher marginal tax rate proposed comes dangerously close to the psychological threshold of 50 per cent where individuals become extremely frustrated with the prospect of paying more to the government than they keep for themselves. Mr. McGuinty is only fooling himself if he thinks that wealthy Ontarians will do nothing about it."
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