"Thousands of experts study overbought indicators, oversold
indicators, head-and-shoulder patterns, put-call ratios, the Fed's
policy on money supply, foreign investment, the movement of the
constellations through the heavens, and the moss on oak trees, and
they can't predict markets with any useful consistency, any more
than the gizzard squeezers could tell the Roman emperors when
the Huns would attack."  - Peter Lynch


New @ StingyInvestor


Active Fund Performance At A Passive Price
http://www.ndir.com/SI/articles/0608-Active-Fund-Performance-At-A-Passive-Price.shtml
"Frugal investors are often attracted to index and exchange
traded funds because they offer a simple way to buy a diversified
stock portfolio at a low cost. But there are other options for
thrifty individuals who want to take a more active approach. I
explored the money-saving possibilities of buying stocks held by
index funds instead of the index funds themselves in the May 2008
edition of the Canadian MoneySaver. This month, I'll investigate a
similar method for active funds where the potential savings can
be much higher."

How $10 trades change everything
http://network.nationalpost.com/np/blogs/wealthyboomer/archive/2008/06/24/how-10-trades-change-everything.aspx
"In the latest Wealthy Boomer video interview -- href='http://canwest.a.mms.mavenapps.net/mms/rt/1/site/canwest-nationalpost-pub01-live/current/launch.html?maven_playerId=_newwealthyboomer&maven_referralPlaylistId=5eb92d985fd7c091d2d67b563a5905ed66602cee&maven_referralObject=1718104'>which
went
up
today -- Norman
Rothery of The Rothery Report comes to an interesting
conclusion about online trading and $10 commissions (or $9.95, which
amounts to the same thing.) With a full-service brokerage,
exchange-traded funds (ETFs) are a convenient way to get access to
multiple stocks with a single trade. But once you move from
commissions in the multiple hundreds of dollars to $10 a trade, suddenly
it becomes cost-effective for individual investors to buy each
component stock in an index, or cherry-pick the better ones."


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

The internet is the new 'exchange'
http://www.thestar.com/Business/article/451259
"Robert Gibb has 30 stocks with dividend reinvestment plans and
share purchase plans in his portfolio. Only two of these stocks
he bought through a broker. Normally, he exchanges shares with
other people he finds on an online message board."

Equal weight indexing: five years later
http://www2.standardandpoors.com/spf/pdf/index/Equal_Weight_Indexing-5_Years_Later.pdf
"Often the most powerful investment ideas are simple. The simple
concept of equal weighted indexing has attracted billions of
dollars in assets in last five years. While the headline cause of
asset flows has been outperformance over market capitalization
indices, sophisticated investors have realized that equal
weighting creates a different set of risk factor exposures than market
capitalization weighting that seem to work over the long term.
Further, the concept randomizes factor mispricings in the market.
As trading costs shrink globally, and as investors realize that
turnover of equal weighted indexing is only about a fifth of
active managers, we expect the concept to gain ground. Equal
weighting has been used in fixed income indexes to a certain degree,
and given the results of it working in international markets, we
would not be surprised to see interest in equal weighted
international products."

Do-it-yourself ETF may not be worth your time
https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20080628/STMAIN28
"Is the war against money management fees going too far?
Investors - the more enlightened ones anyway - have battled high fees
for years, forcing the industry to parry with low-cost index
mutual funds and exchange-traded funds as well. Now, spurred by
ultra-low trading commissions, some investors and financial planning
pundits are aiming their guns at ETFs, arguing that you can
dispense with them and create your own index funds, under certain
circumstances, such as having a big enough portfolio. The
arguments make sense on paper, but they're not without their
shortcomings. The reality is that ETFs are pretty hard to beat if you want
to invest in an index." [Fabrice makes a couple of good points
and a few lousy ones. But here's his take on unbundling ETFs.]

Record $2.1 Million for lunch with Warren Buffett
http://www.cnbc.com/id/25421418
"The big spender who won this year's "Power Lunch with Warren
Buffett" charity auction with a record high bid of $2,110,100 is
Zhao Danyang of the Hong-Kong based Pure Heart China Growth
Investment Fund, according to a spokesperson for San Francisco's Glide
Foundation."

How Canada stole the American Dream
http://www.macleans.ca/canada/national/article.jsp?content=20080625_50113_50113
"Believe it or not, we now have more wealth than Americans, even
though we work shorter hours. We drink more often, but we live
longer and have fewer diseases. We have more sex, more sex
partners and we're more adventurous in bed, but we have fewer teen
pregnancies and fewer sexually transmitted diseases. We spend more
time with family and friends, and more time exploring the
world."

The housing abyss
http://www.businessweek.com/magazine/content/08_27/b4091032364818.htm
"Steve Hawks, owner of RE/MAX Platinum real estate agency in
Henderson, Nev., says he has been flooded with calls from people
interested in "buying and bailing" - that is, buying an additional
house while their credit is still good, then walking away from
the old one unless they can cut a favorable deal with the lender.
So far the number of people who have done so appears to be
small. But Hawks says banks are receptive to lending for such
purchases because they figure the buyer will be able to afford the
new, cheaper place. Also, says Hawks, they know that, since the
buyer's credit will become damaged, he or she won't pull the same
trick on them, at least for a few years." [More madness from U.S.
lenders.]

Eveillard takes dim view of U.S. stocks
http://www.marketwatch.com/news/story/veteran-manager-eveillard-blames-greenspan/story.aspx?guid={537E3351-7E5E-4A6A-8D47-2D0B2E6D3D17}
"Fed policies under Greenspan, Eveillard says, precipitated "one
bubble after another" -- from the implosion of technology stocks
in the late 1990s to the recent real-estate price collapse and
the related financial-services industry meltdown. "In the last
two or three years, the financial acrobatics were extraordinary,"
Eveillard said. "You could get a mortgage without having to
document your income, your assets, or whether you had a job."When
financial history is written five or 10 years down the road," he
added, "Greenspan will be seen as the worst Fed chairman since
the Fed was created in 1913.""

Grim expectations
http://www.economist.com/finance/displaystory.cfm?story_id=11622353
"Mr Taylor described how the low and stable inflation of the
previous two decades emerged from a more disciplined monetary
policy, inspired in part by Friedman's analysis. 'In the United States
when the inflation rate approached 4% in 1968, the federal
funds rate was about 5%. When the inflation rate approached 4% in
1989, the federal funds rate was about 10%, clearly a much larger
response.' Once again, America's inflation rate is at 4% but the
fed funds rate is just 2%. With inflation high and interest
rates low, many are worried that the lessons set out by Mr Taylor
and by Mr Friedman before him are being ignored."

Is income volatility really rising? For whom?
http://freakonomics.blogs.nytimes.com/2008/06/25/is-income-volatility-really-rising-for-who/
"The key driver of rising average levels of income risk is that
life among the already risky has become even riskier. Indeed, you
really need to look to the riskiest 5 percent of the
distribution to find the rise in income risk. And this rise in risk among
the already risky is so great as to be responsible for nearly
all the rise in average income volatility. And who are these
riskiest 5 percent? Jensen and Shore find that they are particularly
likely to be self-employed."

Mohnish Pabrai interview
http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vY7.h9EuUJ8Y.asf&vCat=&RND=663315672
Mohnish talks markets, Buffett, and stocks. He is keen on
American Express and Berkshire Hathaway.

Eight centuries of financial crises
http://www.publicpolicy.umd.edu/news/This_Time_Is_Different_04_16_2008%20REISSUE.pdf
"This paper offers a 'panoramic' analysis of the history of
financial crises dating from England's fourteenth-century default to
the current United States sub-prime financial crisis. Our study
is based on a new dataset that spans all regions. It
incorporates a number of important credit episodes seldom covered in the
literature, including for example, defaults and restructurings in
India and China. As the first paper employing this data, our aim
is to illustrate some of the broad insights that can be gleaned
from such a sweeping historical database. We find that serial
default is a nearly universal phenomenon as countries struggle to
transform themselves from emerging markets to advanced
economies. Major default episodes are typically spaced some years (or
decades) apart, creating an illusion that 'this time is different'
among policymakers and investors. A recent example of the 'this
time is different' syndrome is the false belief that domestic
debt is a novel feature of the modern financial landscape. We
also confirm that crises frequently emanate from the financial
centers with transmission through interest rate shocks and commodity
price collapses. Thus, the recent US sub-prime financial crisis
is hardly unique. Our data also documents other crises that
often accompany default: including inflation, exchange rate
crashes, banking crises, and currency debasements."

Warren Buffett says sell to me, not 'porn shop'
http://www.bloomberg.com/apps/news?pid=20601109&sid=aeFpqxqAMwwo&refer=home
"Warren Buffett is in Toronto, fielding questions from a crowd of
300 executives. One asks what makes people want to sell their
companies to him. The Berkshire Hathaway Inc. chief executive
officer replies that he tells a prospective seller to think of the
company as a work of art. ``You can sell it to Berkshire, and
we'll put it in the Metropolitan Museum; it'll have a wing all by
itself; it'll be there forever,'' he says at the February
meeting. ``Or you can sell it to some porn shop operator, and he'll
take the painting and he'll make the boobs a little bigger and
he'll stick it up in the window, and some other guy will come along
in a raincoat, and he'll buy it.''"

DRIPs a cheap way to invest
http://www.thestar.com/Business/article/447317
"There's no free lunch, even when investing on your own without
an adviser. You still pay commissions to buy company shares,
exchange-traded funds and income trust units. But you can get a free
dessert (so to speak) if you reinvest the dividends to buy more
shares, ETFs and trust units."

Portfolio dilution excessive in Canada
http://www.ndir.com/SI/funds/06242008.shtml
"Drilling down more deeply reveals that the worst dilution occurs
in our own tiny stock market. Look at virtually any wrap
program and find out where most of the funds or managers are focused.
I'll bet it's on Canadian stocks."

SP/Case-Shiller home prices fell 15.3% in April
http://www.bloomberg.com/apps/news?pid=20601087&sid=aa8XB1YgGRoE
"Home prices decreased 1.4 percent in April from a month earlier
after a 2.2 percent decline in March, the report showed. The
figures aren't adjusted for seasonal effects, so economists prefer
to focus on year-over-year changes instead of month to month."

Mistaking consumption for investment
http://www.iht.com/articles/2008/06/24/business/col25.php
"During the housing bubble a lot of people confused consumption
with investment, a fact now becoming painfully obvious in Britain
as prices fall and businesses suffer. As in the United States,
home owners helped inflate a wider bubble by plowing money into
housing-related consumption, from granite kitchen countertops to
living room furniture to under floor heating. The illusion, or
justification, was that this consumption, often financed via
mortgage debt, was actually investment in a can't-miss real asset.
It wasn't, it's stopping and the impact on the economy will be
considerable."

Bank failures to surge in coming years
http://www.marketwatch.com/news/story/bank-failures-surge-credit-crunch/story.aspx?guid=%7B2FCA4A0C-227D-48FE-B42C-8DDF75D838DA%7D&dist=TNMostRead
"Only three banks have failed so far in 2008. But that number is
set to surge as the credit crunch slows economic growth and
hammers some lenders that grew too fast during the recent
real-estate boom, experts say. The roots of today's banking crisis grew
out of the boom and bust in the real estate market."

The Texas ratio and Canada's big banks
https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20080606/RKOZA06
"Back in the recession of the 1980s, when the oil market was in
the tank and banks in Houston and Dallas were dropping like rain
in April, Gerard Cassidy and his team of bank analysts at RBC
Dominion Securities came up with a way to predict the likelihood
of any given bank failing. They took the total of a lender's
non-performing loans and divided it by the sum of its tangible
equity capital plus its loan-loss reserves, yielding the Texas ratio.
It's a nifty idea. What Mr. Cassidy and his team discovered was
that when a bank's Texas ratio got to 100 per cent, or one to
one, it was likely to become toast. The ratio was an accurate
predictor of Texas bank failures and also worked a treat with
troubled New England banks in the next recession in the early 1990s.
Applying it to today's U.S. banking scene, MarketWatch says Mr.
Cassidy and his colleagues predict that at least 150 U.S. banks
will go bust in the next two or three years, and if the current
economic slump morphs into a recession as deep as the ones in
the 1980s and 1990s, that number may get as high as 300."

Value investors: Beware the value trap
https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20080623/RVALUETRAPS23
"Norm Rothery, chief investment strategist at Windsor, Ont.-based
investment research and counselling firm Dan Hallett &
Associates Inc., recommends investors avoid value traps by using a
nine-point system developed by Joseph Piotroski, professor of
accounting at Stanford University. According to his system, returns on
assets and cash flow from operations should be positive. Also,
there should be momentum in fundamentals: For example, gross
margins and debt should be changing for the better. Still, it's
inevitable even the best of the value practitioners will stumble
into value traps on occasion."


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   5   5   1   5    5
CIBC (CM)                                   0   4   5   5   5    5
National Bank of Canada (NA)                3   4   4   4   5    5
Royal Bank (RY)                             4   3   4   5   5    5
Telus (T)                                   4   4   4   5   5    5
Bank of Nova Scotia (BNS)                   3   3   3   1   5    5
BCE (BCE)                                   5   3   3   5   5    5
TransCanada (TRP)                           3   4   3   4   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
Bank of Montreal (BMO)                      4   5   5   1   5   1.6
Thomson (TOC)                               5   4   2   2   4   1.9
BCE (BCE)                                   5   3   3   5   5   2.0
Telus (T)                                   4   4   4   5   5   2.4
Royal Bank (RY)                             4   3   4   5   5   2.8
Bank of Nova Scotia (BNS)                   3   3   3   1   5   3.0
Sun Life (SLF)                              4   5   5   1   4   3.0
Toronto Dominion Bank (TD)                  4   4   3   2   4   3.1
Nova (NCX)                                  5   4   5   4   3   3.3
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   84.87 423.57
Magna Cl.A (MG.A)                           5   5   3   99.97  60.47
Thomson (TOC)                               5   4   4   55.77  48.79
Nova (NCX)                                  5   4   3   35.99  48.03
Biovail (BVF)                               5   5   5   14.12  40.50
Canadian Tire (CTC.A)                       5   5   3   67.13  25.02
Sun Life (SLF)                              4   5   4   49.81  18.28
Bank of Montreal (BMO)                      4   5   5   50.01  16.76
Weston George (WN)                          4   4   4   52.82  12.73
Inmet Mining (IMN)                          5   3   1   75.40   9.95
Petro Canada (PCA)                          5   4   2   60.46   9.44
BCE (BCE)                                   5   3   5   40.05   8.96
Telus (T)                                   4   4   5   44.43   5.09
Canadian Pacific Rail (CP)                  4   4   2   68.82   1.56
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

Mean Markets and Lizard Brains
by Terry Burnham

Learn how markets and ancient wiring in the brain conspire to
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You'll also discover how to profit from other investor's
mistakes. Burnham's book provides a fun romp through the new world of
behavioural economics and it is very easy to digest - even for
new investors.
Amazon Link: http://www.amazon.ca/exec/obidos/ASIN/0471602450/


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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

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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
losses that may occur.  No compensation for suggesting particular
securities or financial advisors is solicited or accepted.  The
information in this newsletter, and in its related website, is not
intended to be, nor does it constitute, financial advice or
recommendations.  Investing in stocks can be risky and may result in
substantial losses.  A Dan Hallett and Associates Inc.(DH&A)
publication.  DH&A is registered as Investment Counsel in the province
of Ontario. DH&A, or related-parties may have an interest in the
securities mentioned.