The Stingy News Weekly (09/04/2011)
The case against summer
"The logical argument contra summertime should be four words long: middle-age men in shorts. Q.E.D. Alas, shorts are being worn year-round by us graying porkers with legs as ugly as stump fences—if stump fences had hairy varicose veins. But there are plenty of other things wrong with summer, starting with the fact that it comes at the wrong time of year."
Asking the right and wrong questions
"From a behavioral economics point of view, the field of financial advice is quite strange and not very useful. For the most part, professional financial services rely on clients’ answers to two questions: How much of your current salary will you need in retirement? What is your risk attitude on a seven-point scale? From my perspective, these are remarkably useless questions"
The roots of the Sino-Forest mystery
"Part of what is so astonishing is that Sino-Forest and its business activities failed to arouse serious suspicions or concerns with most investors until June of this year when a short seller named Carson Block and his firm, Muddy Waters LLC, first levelled accusations of fraud against the company."
Get ready to pay billions for hydro pensions
"Defenders of these very generous pensions always claim that these employees contribute their fair share into the pension plans, and so deserve them. As taxpayers, we would normally think a 50-50 split of contributions would be fair, with employees contributing 50% and taxpayers matching it. But over the past five years alone, taxpayers have pumped $1.3-billion into the plan, while employees have contributed only $368-million. Not so fair and sure to create serious pension tensions when taxpayers find out what is really happening in these pension Ponzi schemes."
Risk management and sounding crazy
"All this leads me to wondering about Warren Buffett - the greatest fund manager of them all. He is an unusual individual with strange personal predilections. But he sounds so rational. And he is amazingly self-controlled. Indeed his ability to sit on billions of dollars excess cash for years and years at a time waiting for the time to pounce is legendary and extraordinarily hard to duplicate. Buffett says that temperament is more important than brains in investing and I think this is what he means. But it is often Buffett against the world. Buffett is thought of as a has-been by many people. It doesn't matter whether he was avoiding tech stocks in 1998, 1999 and 2000. It does not matter whether he was buying Bank of America now. He is - of course - just mad. The madness is an important part of how Buffett made all that money. But the self control is - I think - more important."
The halo effect
"As management professor Phil Rosenzweig points out in his book 'The Halo Effect,' a soaring stock price can lead investors to regard the company's managers as focused, disciplined and passionate—while, in the negative halo of a falling stock price, the same executives will now seem stubborn, unimaginative and resistant to change. Investors think, at either time, that they are evaluating the stock and the managers independently, but one opinion inevitably colors the other, often leading investors to be too bullish on the upside and too bearish on the downside. The managers haven't changed our perceptions of them have."
A value investor's best friend in China
"My experience with statistically cheap China-based investments has not always been positive. It dates back 20 years or more to the TSX-listed Noble China, which had the Chinese licence for Pabst Blue Ribbon, a particularly tasteless American beer. The whole episode ended in tears for the shareholders. So, I am not about to invest my life savings in American Lorain, but I think that Ben Graham would approve a modest exposure."
Great courses, great profits
"A teaching company gives the public what the academy no longer supplies: a curriculum in the monuments of human thought."
Betting against flimsy Chinese firms
"“Historically, stock scams are promoters promoting stories. The actual numbers will tell a more truthful story,” he said. “If it's a mining company and there is nothing in ground and the numbers don't lie. The people do. The trick here is that the numbers are made up.”"
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