"there are all kinds of wonderful new inventions that give you
nothing as owners except the opportunity to spend a lot more money
in a business that's still going to be lousy. The money still
won't come to you. All of the advantages from great improvements
are going to flow through to the customers."  - Charlie Munger


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

The hidden costs of fuel subsidies
http://www.iht.com/articles/2008/06/04/business/rtrcol05.php
"Why should China keep domestic fuel prices at about half of the
global average? The usual answers are to keep inflation in check
and stave off social instability that could result if prices
were to rise too quickly. But by distorting fuel prices, China is
encouraging fuel consumption and discouraging the use of new
energy. Since the Chinese still live in an $80-a-barrel oil
environment, demand for anything from cars to chemical products will
spiral higher and raise the risks of economic overheating.
Increasing subsidies on fuel will crowd out more investment in other
areas, such as education or health care, to name two
possibilities."

Why oil prices will tank
http://money.cnn.com/2008/06/06/news/economy/tully_oil_bust.fortune/index.htm
"In a normal oil market, the cost of producing the last, most
expensive barrel of oil needed to satisfy worldwide demand sets the
price for every barrel the world over. Other auction commodity
markets work much the same way. So even if Saudi Arabia produces
at $4 a barrel, if the final, multi-millionth barrel required
to heat houses and run cars costs $50, and is produced, for
argument's sake, at a flagging field in West Texas, the world price
is $50. That's what economists call the equilibrium price: It's
where the price that customers are willing to pay meets the
production cost, including a cushion, naturally, for profit or "the
cost of capital." But today, the sudden surge in demand and the
production bottlenecks have thrown the market radically out of
balance."

About 1 in 11 mortgageholders face loan problems
http://www.nytimes.com/2008/06/06/business/06mortgage.html
"All told, about 8.8 percent of home loans were past due or in
foreclosure, or about 4.8 million loans. That is up from 7.9
percent at the end of December. (About a third of American homeowners
do not have mortgages.) Delinquency and foreclosure rates
started rising from historically low levels in late 2006 and have
picked up speed in nearly every quarter since. Analysts say at
first past due mortgages represented mostly high-risk loans made to
borrowers with blemished, or subprime, credit. Now, as the
economy has weakened and home prices have fallen in many parts of the
country, homeowners with better loans are also falling behind."

Lipstick On A pig
http://www.forbes.com/home/2008/06/06/credit-optimizer-expert-markets-bonds-cx_md_markets46.html
"Credit scores used by the mortgage industry are often supplied
by credit-reporting agencies that also offer borrowers assistance
in figuring out how to game the system. They use computer
programs that suggest tactics that can lift scores for a few days or
weeks. This credit gentrification occurs quietly at the
beggining of the loan process, and like a summer-before-college nose
job, nobody has to know."

Odd numbers
http://www.portfolio.com/views/blogs/odd-numbers/2008/06/05/evidence-of-front-running-on-wall-st
"Now in a new paper, M.I.T.'s Mozaffar Khan and Hai Lu of the
University of Toronto show some compelling evidence that
significant front-running does exist. Khan and Lu looked at the level of
short sales between 2005 and 2007 surrounding days when a chief
executive sold stock."

How to retire on $12,000 a year
http://articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/RetireOnTwelveThousandDollarsAYear.aspx
"The solution is social. It is called sharing, having enough
social skills to multiply your effective income to a level far
greater than it could be made with ordinary cash. The prosperity of
the past 50 years has raised our expectations. We want to own our
house, to have our own bedroom, our own bathroom, our own car,
our own phone (preferably mobile) and our own TV, and we want to
eat what we want for dinner, not what everyone else is having.
That makes life very expensive. The productive social
alternative is sharing. Economists call it "economies of shared living."
Most of us think about it in regard to marriage."

From communism to environmentalism
http://www.nationalpost.com/opinion/story.html?id=550864&p=1
"My deep frustration has been growing exponentially in recent
years due to the facts that almost everything has already been
said, that all rational arguments have been used and that global
warming alarmism is still marching on. The whole process is already
in the hands of those who are not interested in rational ideas
and arguments. It is in the hands of climatologists and other
related scientists who are highly motivated to look in one
direction only because a large number of academic careers has evolved
around the idea of man-made global warming. It is, further, in
the hands of politicians who maximize the number of votes they
receive from the electorate. It is also -- as a consequence of
political decisions -- in the hands of bureaucrats of national, and
more often of international, institutions who try to maximize
their budgets and careers regardless of the costs, truth and
rationality. It is in the hands of rent-seeking businesspeople who
are -- given the existing policies -- interested in the amount of
subsidies they receive and look for all possible ways to escape
the positive, general welfare enhancing functioning of free
markets. An entire industry has developed around the funds these
firms are getting from the government."

Value investing and behavioral finance
http://www.tweedy.com/library_docs/papers/columbiaspeech2000.pdf
"My partners and I at Tweedy, Browne have in the past been
skeptical of academic studies relating to the field of investment
management primarily because such studies usually resulted in the
birth of financial paradigms which we believe have no relevance to
either what we do or to the real world. A whole body of
academic work formed the foundation upon which generations of students
at the country's major business schools were taught about Modern
Portfolio Theory, Efficient Market Theory and Beta. In our
humble opinion, this was a classic example of garbage in/garbage
out. One could have just as easily manipulated the data to show
that corporations with blue covers on their annual reports
performed better than corporations with green covers on their annual
reports. Although none of the three of us was fortunate enough to
have studied under the late Dr. Benjamin Graham when he taught at
Columbia Business School, we were fortunate enough to have
observed some of his best students who either worked at or were
customers of Tweedy, Browne from the late 1950s through the present.
Tom Knapp, who was a partner at Tweedy, Browne from 1958 until
the early 1980s, both studied under Ben Graham and worked for
Ben's investment firm, The Graham-Newman Corporation. Walter
Schloss, another alumnus of Graham-Newman, has made his office at
Tweedy, Browne since he set up his private investment partnership
in 1955. Still going strong at 84 and still housed at Tweedy,
Browne, Walter has what we believe is the longest continual
investment record of any individual in our field. Among others, Warren
Buffett was a frequent visitor to Tweedy, Browne in the 1960s
and early 1970s. My father was the primary broker for Warren in
his purchase of stock in Berkshire Hathaway, and I can remember
posting trades in Berky at $25 per share when I started working in
1969. Our exposure to these legendary investors whose
investment principles were based on the teachings of Ben Graham, was the
reason for our skeptical view of more modern investment
theories."

Want to be rich? Don't get too happy
http://money.cnn.com/2008/05/30/pf/chatzky_happiness.moneymag/index.htm
"University of Illinois psychology professor Ed Diener and others
have established that while money won't buy happiness, happy
people tend to earn more than sad people. A few years ago,
however, investing legend John Templeton wrote Diener a letter that had
the professor scratching his head. "Is life satisfaction always
great?" Templeton asked. "Maybe a little bit of dissatisfaction
is okay." "I started wondering," Diener recalls, "do you have
to be happier and happier? How happy is happy enough?" Thus, a
new study was born. Diener and his colleagues used data from the
World Values Survey, which measures the happiness of respondents
on a scale of 1 to 10 (with 10 the happiest). They found that
income did indeed increase along with happiness but not at the
very top."

Seth A. Klarman's 2007 MIT remarks
http://1-2knockout.typepad.com/12_knockout/files/Seth_Klarman_MIT_Speech.pdf
"Institutional constraints and market inefficiencies are the
primary reasons that bargains develop. Investors prefer businesses
and securities that are simple over those that are complex. They
fancy growth. They enjoy an exciting story. They avoid
situations that involve the stigma of financial distress or the taint of
litigation. They hate uncertain timing. They prefer liquidity to
illiquidity. They prefer the illusion of perfect information
that comes with large, successful companies to the limited
information from companies embroiled in scandal, fraud, unexpected
losses or management turmoil. Institutional selling of a low-priced
small-capitalization spinoff, for example, can cause a temporary
supply-demand imbalance. If a company fails to declare an
expected dividend, institutions restricted to owning dividend-paying
stocks may unload shares. Bond funds allowed to own only
investment-grade debt would dump their holdings of an issue immediately
after it was downgraded below BBB by the rating agencies.
Market inefficiencies, like tax selling and window dressing, also
create mindless selling, as can the deletion of a stock from an
index. These causes of mispricing are deep-rooted in human behavior
and market structure, unlikely to be extinguished anytime
soon."

Taleb: the prophet of boom and doom
http://business.timesonline.co.uk/tol/business/economics/article4022091.ece
"For the non-mathematician, probability is an indecipherably
complex field. But Taleb makes it easy by proving all the
mathematics wrong. Let me introduce you to Brooklyn-born Fat Tony and
academically inclined Dr John, two of Taleb.s creations. You toss a
coin 40 times and it comes up heads every time. What is the
chance of it coming up heads the 41st time? Dr John gives the answer
drummed into the heads of every statistic student: 50/50. Fat
Tony shakes his head and says the chances are no more than 1%.
'You are either full of crap,' he says, 'or a pure sucker to buy
that 50% business. The coin gotta be loaded.' The chances of a
coin coming up heads 41 times are so small as to be effectively
impossible in this universe. It is far, far more likely that
somebody is cheating. Fat Tony wins. Dr John is the sucker. And the
one thing that drives Taleb more than anything else is the
determination not to be a sucker. Dr John is the economist or banker
who thinks he can manage risk through mathematics. Fat Tony
relies only on what happens in the real world."

All together now?
http://www.newyorker.com/talk/financial/2008/06/09/080609ta_talk_surowiecki
"In fact, corporate marriages only rarely end in bliss - many
studies have found that most mergers and acquisitions do little for
the acquiring company's bottom line. A KPMG study of seven
hundred mergers found that only seventeen per cent created real
value, and that more than half destroyed it. And a McKinsey study of
mergers that took place in the nineteen-nineties found that
less than a quarter generated excess returns on investment."

The happiness ... gap
http://www.theglobeandmail.com/servlet/story/RTGAM.20080530.cowent31/BNStory/specialComment/home
"Here's a bit of bad news for all my latte-loving,
liberal-leaning friends who believe that jobs in retail stink, traditional
religion is for morons, and income inequality has made society a
lot worse off. You're a miserable bunch. I don't mean miserable,
as in contemptible. I mean that as a group, you are not
particularly happy people. In fact, you're far less likely to be happy
with your lives than, say, a gun-owning truck driver who goes to
church, shops at Wal-Mart, and makes half the money you do."

Value strategies reward patience
http://lfpress.ca/newsstand/Business/BusinessMonday/2008/06/02/5742141-sun.html
"The academic community has generally come to the conclusion that
value investment strategies, on average, outperform growth
strategies. Where the agreement ends is on the reasons behind the
outperformance."

Wall Street says -2 + -2 = 4
http://www.bloomberg.com/apps/news?pid=20601109&sid=a2ppBYA0ELaU
"Here's how it works, according to Richard Bove, an analyst at
New York-based Ladenburg Thalmann & Co. A company decides to
designate $100 million of its subordinated bonds as subject to
mark-to-market accounting. The price of the bonds drops to 80 cents on
the dollar from 100 cents. So the firm books $20 million on the
'presumed savings that you have on your liabilities,' Bove
said. 'In the real world you didn't save a dime,' he said. 'You
still owe the $100 million. It's another one of these accounting
rules that basically takes you further and further away from
reality.'"

Conventional wisdom, foiled again
http://www.nytimes.com/2008/06/01/business/01stra.html
"It is widely assumed that a stock.s price will rise when it is
added to a major stock market index. As is often the case with
conventional wisdom about the stock market, however, the truth is
more complicated. In fact, a new study has found that over the
long term, stocks that are dropped from an index generally
outperform those that are added."


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)                               4   5   4   5   5    5
Bank of Montreal (BMO)                      4   5   5   1   5    5
CIBC (CM)                                   0   4   5   5   5    5
National Bank of Canada (NA)                3   4   4   5   5    5
BCE (BCE)                                   5   4   4   5   5    5
Royal Bank (RY)                             3   3   4   5   5    5
Telus (T)                                   5   4   4   5   5    5
Bank of Nova Scotia (BNS)                   3   3   3   1   5    5
TransCanada (TRP)                           3   4   3   4   5    5
Shaw Comm Cl.B (SJR.B)                      3   2   2   3   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)                               4   5   4   5   5   0.9
BCE (BCE)                                   5   4   4   5   5   1.8
Thomson (TOC)                               5   4   2   2   4   1.9
Bank of Montreal (BMO)                      4   5   5   1   5   2.0
Telus (T)                                   5   4   4   5   5   2.8
Royal Bank (RY)                             3   3   4   5   5   3.2
Sun Life (SLF)                              5   5   5   1   4   3.5
Bank of Nova Scotia (BNS)                   3   3   3   1   5   3.5
Toronto Dominion Bank (TD)                  4   4   3   2   4   3.6
National Bank of Canada (NA)                3   4   4   5   5   3.9
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   84.76 288.10
MDS Inc. (MDS)                              5   5   0   47.13 175.16
Thomson (TOC)                               5   4   4   55.77  48.79
Magna Cl.A (MG.A)                           4   5   3  100.00  42.08
Nova (NCX)                                  5   4   3   35.98  29.89
Biovail (BVF)                               4   5   5   14.14  18.17
BCE (BCE)                                   5   4   5   40.00  14.96
Canadian Tire (CTC.A)                       4   5   2   67.06  12.42
Sun Life (SLF)                              5   5   4   49.83  10.96
Inmet Mining (IMN)                          5   3   1   75.46   7.58
Bank of Montreal (BMO)                      4   5   5   50.02   4.95
Weston George (WN)                          4   5   4   52.85   4.04
Petro Canada (PCA)                          5   3   2   60.49   2.58
More Info: http://www.stingyinvestor.com/SI/strategy/graham.shtml 

*Notes: http://www.stingyinvestor.com/SI/strategy/notes.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
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information in this newsletter, and in its related website, is not
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