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The Stingy News Weekly (05/02/2010)


"Value stocks are about as exciting as watching grass grow. But have you ever noticed just how much your grass grows in a week?"
- Christopher Browne


Stingy Links

The disposition effect
"Benjamin Graham once said, "An investor's chief problem, even his worst enemy, is likely to be himself." This is nowhere more true than when it comes to deciding to buy or sell a stock. We have an uncanny ability to buy stocks that are poor investments and sell stocks that are good investments. In essence, we buy high and sell low. In general, investors tend to shoot themselves in the foot - because they follow their instincts."


Greek wealth and taxes
"In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools. So tax investigators studied satellite photos of the area - a sprawling collection of expensive villas tucked behind tall gates - and came back with a decidedly different number: 16,974 pools. "


Live Buffett Blog
"Part of the mystique of the meeting derives from the fact that Buffett doesn.t allow the event to be recorded, so the Wall Street Journal will blog the meeting in real time. It.s almost as good as being there."


Great moments in financial regulation
"We should be skeptical about expecting a regulator to make accurate, one-size-fits-all judgments about the merit of specific financial products. For example, before 1996, certain initial public offerings of stocks were subject to merit review in certain states, where the state decided if a security is a "bad" investment and thus not appropriate to be offered to its citizens. In fact, this is exactly what happened to Apple Computer when it first went public in 1980. Massachusetts prohibited the offering of Apple shares because they were "too risky," and Apple did not even bother to offer its shares in Illinois due to strict state laws on new issues. What if federal bureaucrats had had the power to impose their judgment on a "risky" financial product (such as an IPO) on a nationwide scale, or every state followed Massachusetts' lead? Would Apple have become the successful company that it is today?"


ETFs running off in all directions
"I sympathize with marketers, who need new features to differentiate themselves from competitors. My fear is that like many 20-year-olds who are out trying new things for the first time, they will make mistakes, maybe write off a few cars, maybe worse. In this case, though, this 20-year-old will be using your money."


Do your homework
"The average mutual fund investor pays about 2 per cent annually in management fees, operating expenses and taxes. The average investor in TSX-traded ETFs pays closer to 0.4 per cent a year. The average potential cost savings, then, are about 1.6 per cent per annum. But this is only available to do-it-yourself (DIY) investors. Otherwise, investors who need professional advice have to pay for it either through higher product fees or fees paid to an adviser in addition to ETF expenses. The 2 per cent average mutual fund fee generally includes compensation for advisers, whereas ETF fees do not include the cost of obtaining advice. So-called fee-based or fee-only advisers charge a fee equal to 1 per cent to 1.4 per cent of your portfolio value. Add that to ETF fees and taxes and you've got total annual fees of 1.5 per cent to 1.9 per cent annually. Wave goodbye to that fee advantage."


The arithmetic of bank solvency
"All banks more or less anywhere get their finances entwined with the finances of the sovereign. No sovereign will (or in my opinion should) allow a mass run on banks but they can only stop such a run if their own credit is good. But this link between sovereign solvency and bank-system solvency means that bank funding costs at a minimum are bounded at the lower end by sovereign borrowing costs."


The X PRIZE and Risk
"Diamandis is on a mission to open space for all humanity, and he embraces the risk inherent to such an undertaking. "A true breakthrough requires tremendous levels of risk," says Diamandis. "It's really in the entrepreneurial sector that people are willing to risk their lives, risk their fortunes, their reputations, to do something they fundamentally believe they can do.""


Levin vs. Wall Street
"No one on any side of this debate appreciates the casino analogy, but I think it's still the most useful way to think about this question: when you place a bet on the Super Bowl, the casino is taking the other side of that bet. In many cases, it'll balance the bets it makes on both sides of the trade, so that it's exposed to no risk and it collects the certain profit from the spread. Regardless, though, any individual bettor knows that if he wins, the casino loses, and vice versa. That is, he knows the casino is on the other side of the trade. Levin seems to be saying that this means there's a conflict of interest between the casino and the bettor, and that it's illegitimate for the casino to take the bet. But there's no conflict, because everyone knows what the deal is. And as long as the bet's honest, and as long as the price is fair, the casino is doing right by the customer, because the customer is getting exactly what he wants: a chance to speculate."


Winters lecture
"David J. Winters, the managing director of Wintergreen Advisers, LLC talks to UWO class"


Asymmetric information based on work?
"Using a novel dataset covering all individual investors' stock market transactions in Norway over a 10-year period, we analyze whether individual investors have a preference for professionally close stocks, and whether they make an excess return on such investments. After excluding own-company and previous employer stock, investors hold on average 11 % of their portfolio in stocks within their two-digit industry of employment. Given the poor hedging properties of professionally close stocks, one would expect such investments to be associated with asymmetric information and abnormally high returns. In contrast, all our estimates of abnormal returns are negative, in many cases statistically significant. Overconfidence seems the most likely explanation for why individuals excessively trade in professionally close stocks."


The return of housing
"That brought a dramatic change in the first quarter of 2010. "All of a sudden," says Castleman, "demand stabilized at around 60,000 units a quarter, and stayed there." To be sure, that's an extremely low number. Castleman estimates that in a normal economy, around twice that many units should be selling. But housing starts, by the end of 2009, had dropped to an astounding 30,000 a quarter, an extraordinary one-fourth of what the market normally requires. "Now builders are seeing, for the first time in years, that they don't have enough houses either finished or under construction to meet demand," says Castleman. Result: In Metrostudy's markets, housing starts spiked by 44% in the first quarter of 2010, versus the same period last year."


The city that got swapped
"A decade ago, the mayor of Saint-Etienne, France, hit on a novel way to help pay for urban renewal: currency and interest rate swaps. He was a hero for a while. Then came the crash. Now he's the ex-mayor of a town facing financial disaster "


GM's phony bailout payback
"In short, GM is using government money to pay back government money to get more government money. And at a 2 percent lower interest rate at that."


Its worst ideas
"People, pundits and politicians looking for financial-crisis culprits should turn their sights to the professors who bear so much responsibility for it. To borrow a phrase from professor Burton Malkiel, a random walk down Wall Street reveals that some of its biggest disasters have come from ideas hatched in the ivory tower."


No money for you
"Entrepreneurs who want to put principles before profits - even after their companies go public - may soon have the legal cover to do just that. On Apr. 13, Maryland Governor Martin O'Malley signed a law creating legal entities known as "benefit corporations" and giving them greater protection from shareholder lawsuits. California and Vermont have similar bills in the works and legislators in at least three other states, including New York, are considering them. While many entrepreneurs applaud the measures, corporate governance experts worry about the rights of shareholders."



DOW 30 Value Screens

High Dividend Yield StocksP/EP/BP/SP/DYield
Verizon (VZ)14555
AT&T (T)55455
Pfizer (PFE)45255
Merck (MRK)54155
EI DuPont (DD)42455
Kraft (KFT)44444
Chevron (CVX)34444
Johnson & Johnson (JNJ)52244
Coca-Cola (KO)21144
Procter & Gamble (PG)43344
Notes | More Info...


Value Ratio StocksP/EP/BP/SP/DVR
Merck (MRK)54151.46
AT&T (T)55452.03
Travelers (TRV)55533.00
Pfizer (PFE)45253.17
EI DuPont (DD)42453.71
Kraft (KFT)44443.73
Johnson & Johnson (JNJ)52243.97
Chevron (CVX)34444.44
Procter & Gamble (PG)43344.78
Verizon (VZ)14555.15
Notes | More Info...


Graham-Lite StocksP/EP/BP/DG$dG$(%)
Travelers (TRV)55388.0173.44
Merck (MRK)54548.6838.94
JP Morgan Chase (JPM)35147.1210.67
AT&T (T)55527.927.15
Pfizer (PFE)45517.484.53
Notes | More Info...


Top US StocksYieldV.R.Graham
AT&T (T)YYY
Merck (MRK)YYY
Pfizer (PFE)YYY
Chevron (CVX)YY
EI DuPont (DD)YY
Johnson & Johnson (JNJ)YY
Kraft (KFT)YY
Procter & Gamble (PG)YY
Travelers (TRV)YY
Verizon (VZ)YY
Coca-Cola (KO)Y
JP Morgan Chase (JPM)Y
Notes...



S&P/TSX60 Value Screens

High Dividend Yield StocksP/EP/BP/SP/DYield
BCE (BCE)44455
Transalta (TA)24455
Telus (T)54455
Sun Life (SLF)25555
CIBC (CM)32355
Shaw Comm Cl.B (SJR.B)31355
TransCanada (TRP)34255
Bank of Montreal (BMO)33355
Husky Energy (HSE)34455
Power Corp (POW)35544
Notes | More Info...


Value Ratio StocksP/EP/BP/SP/DVR
Telus (T)54452.37
BCE (BCE)44452.54
National Bank (NA)53342.68
Enbridge (ENB)52443.37
Manulife (MFC)55543.41
Shaw Comm Cl.B (SJR.B)31353.51
Bank of Montreal (BMO)33353.69
TransCanada (TRP)34253.75
Bank of Nova Scotia (BNS)42344.00
CIBC (CM)32354.06
Notes | More Info...


Graham-Lite StocksP/EP/BP/DG$dG$(%)
Manulife (MFC)55425.7040.28
Weston George (WN)55396.1131.83
Inmet Mining (IMN)55167.8328.64
Canadian Tire (CTC.A)45264.5015.34
Cameco (CCO)53227.9811.72
Teck Cominco (TCK.B)54044.3611.11
Telus (T)54540.999.07
National Bank (NA)53467.288.34
Encana (ECA)45336.177.65
Notes | More Info...


Top Canadian StocksYieldV.R.Graham
Telus (T)YYY
BCE (BCE)YY
Bank of Montreal (BMO)YY
CIBC (CM)YY
Manulife (MFC)YY
National Bank (NA)YY
Shaw Comm Cl.B (SJR.B)YY
TransCanada (TRP)YY
Bank of Nova Scotia (BNS)Y
Cameco (CCO)Y
Canadian Tire (CTC.A)Y
Enbridge (ENB)Y
Encana (ECA)Y
Husky Energy (HSE)Y
Inmet Mining (IMN)Y
Power Corp (POW)Y
Sun Life (SLF)Y
Teck Cominco (TCK.B)Y
Transalta (TA)Y
Weston George (WN)Y
Notes...



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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...