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The Rothery Report

2017
  11: 06 12 20
  10: 01 07 16 23 30
  09: 04 11 17 23
  08: 07 16 20 28
  07: 02 09 16 23 30
  06: 04 11 18 26
  05: 07 14 21 28
  04: 02 09 16 23 30
  03: 05 12 19 26
  02: 05 12 19 26
  01: 02 07 15 22 29
2016
  12: 04 11 18 26
  11: 06 13 20 27
  10: 02 09 16 23 29
  09: 04 11 18 25
  08: 07 14 21 28
  07: 03 10 17 24 31
  06: 05 11 19 26
  05: 01 08 15 22
  04: 03 10 17 24
  03: 06 13 20 27
  02: 07 14 21 28
  01: 03 10 17 24 31
2015
  12: 06 13 20 27
  11: 01 08 15 22 29
  10: 04 10 18 25
  09: 05 13 20 27
  08: 17 23 30
  07: 05 12 19 26 31
  06: 06 14 21 28
  05: 03 09 17 23 31
  04: 04 12 19 26
  03: 01 07 15 22 28
  02: 07 14 21
  01: 04 12 18 25 31
2014
  12: 06 14 21 28
  11: 02 08 16 23 30
  10: 04 11 19 26
  09: 06 14 19 28
  08: 10 16 24 29
  07: 05 12 19 25
  06: 08 15 20 29
  05: 04 11 18 25 30
  04: 06 12 20 27
  03: 02 09 16 23 30
  02: 01 09 16 23
  01: 05 12 18 26
2013
  12: 02 09 16 30
  11: 03 11 17 24
  10: 06 14 20 27
  09: 09 16 23 30
  08: 04 10 25
  07: 07 15 21 28
  06: 03 09 16 23 30
  05: 05 12 19 26
  04: 07 14 21 28
  03: 03 11 17 24 31
  02: 04 10 17 24
  01: 06 13 20 27
2012
  12: 02 09 16 23 30
  11: 04 11 18 25
  10: 07 14 21 28
  09: 02 09 16 23 30
  08: 05 12 19 26
  07: 01 08 15 22 29
  06: 03 10 17 24
  05: 07 13 20 27
  04: 01 08 15 22 29
  03: 04 11 18 25
  02: 05 12 19 26
  01: 01 08 15 22 29
2011
  12: 04 11 18 25
  11: 06 13 20 27
  10: 02 09 16 23 30
  09: 04 11 18 25
  08: 07 14 21 28
  07: 03 10 17 24
  06: 05 12 19 26
  05: 01 08 15 22 29
  04: 04 10 17 24
  03: 06 13 20 27
  02: 06 13 20 27
  01: 02 09 16 23 30
2010
  12: 05 12 19 26
  11: 07 14 21 28
  10: 03 10 17 24 31
  09: 05 12 19 26
  08: 01 08 15 22 29
  07: 04 11 16 25
  06: 06 13 20 27
  05: 02 09 16 23 30
  04: 04 11 18 25
  03: 07 14 21 28
  02: 07 14 21 28
  01: 03 10 17 24 31

Archive

Stingy News Quarterly
2014: Q1 Discontinued
2013: Q1 Q2 Q3 Q4
2012: Q1 Q2 Q3 Q4
2011: Q1 Q2 Q3 Q4
2010: Q1 Q2 Q3 Q4
2009: Q1 Q2 Q3 Q4
2008: Q1 Q2 Q3 Q4
2007: Q1 Q2 Q3 Q4
2006: Q1 Q2 Q3 Q4
2005: Q1 Q2 Q3 Q4
2004: Q1 Q2 Q3 Q4
2003: Q1 Q2 Q3 Q4
2002: Q1 Q2 Q3 Q4
2001: Q1 Q2 Q3 Q4

Dan's Reports
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The Stingy News Quarterly (Q2/2013)


New @ StingyInvestor

The Top 200 for 2013
"Short term results are one thing but the All-Stars really shine over the long-term. If you had bought equal amounts of the All-Stars and rolled your gains into the new stocks each year, you'd have enjoyed 15.2% average annual returns over the last eight years. By way of comparison, the S&P/TSX Composite (XIC) only climbed 4.5% a year over the same period. The All-Stars outperformed by an average of 10.7 percentage points a year."

8 Stingy Stocks for 2013
"I started the Stingy method in 2001 in an effort to beat the S&P500 by picking value stocks within the index itself. So far the results have been highly satisfactory."

Is saving for suckers?
"From time to time, opting for a touch of spendthrift indolence might be the right move"

Cisco provides a lesson in patience
"We're fast approaching that special time of year when we celebrate the silly things our government spends money on by donating to the cause. Yes, it's tax time again."

Too much liquidity can drain returns
"Liquidity sounds like something an investor might need after a bad day in the market. But when it comes to stocks, a highly liquid approach is not the way to go. Instead, teetotallers are more likely to outperform."

Buffett and the long view
"As Warren Buffett takes the stage this weekend, it's time to ask if his flagship company is still worth investing in."

Stocks with a bounty
"I have a soft spot for old Westerns, the type where it's easy to tell the villains and heroes apart - largely because the bad guys are framed in posters proclaiming they're wanted either dead or alive. When it comes to stocks, is it possible to want them dead or alive? It might be, provided they have enough assets that can be liquidated at a profit. In such cases, investors stand to make money if a firm goes bankrupt, but can also do very well should it turn around and thrive."

Value with a touch of quality
"I believe that value comes first. Despite their apparent ugliness, bargain stocks do quite well, as a group, due to their low prices. But some of them deserve to trade for even less. That's why many value investors look at business quality in an effort to find stocks that are both cheap and relatively safe."

You cheeky monkey
"Some index investors have suggested that expensive portfolio managers could easily be replaced by monkeys willing to work for bananas. Now a recent study goes even further. It suggests that a chimp can outperform not just the typical money manager but the traditional index fund as well."

Prem Watsa counsels cash
"Investors are often advised to buy low and sell high. But such advice has an under-appreciated corollary: They also have to be prepared to weather the bad times. All too many people crumble in the face of adversity and simply don't have any money left to buy when prices are low."

Jolt from the blue
"When you're enjoying your cup of coffee this weekend, download a copy of Francis Chou's annual report. It'll help you to become a better investor."

Trying to catch a falling stock
"Perusing the list of stocks hitting their 52-week lows inspires a little ditty called Down, Down, To Goblin Town to play in my head. It's the victory song of a horde of goblins in the 1977 animated version of The Hobbit, and they sing it while dragging the heroes down into the bowels of their dark lair. It neatly captures the dangers investors face when buying falling stocks."

A new Graham defensive stock
"It's rare to find ancient structures that have stood the test of time. But those that survive hold lessons for the modern world. One of those lessons was recently learned by researchers at the Lawrence Berkeley National Laboratory who cracked the puzzle behind Roman concrete. When used to build ports, the ancient stuff significantly outlasts the common version, which can handle only a few decades in the waves."


The Best of Stingy Links

Stingy Links: Academia

The mystery of the missing experiments
"Francis makes the argument that when sample size, effect size and power are low, datasets that are replicated repeatedly without occasional, or even relatively frequent null findings should be treated as suspect. This is because in experiments where it is reported in the data that certainty is low, it should be expected that we'll see null effects with frequency due to the rules of probability." [Watch Gregory Francis' talk]

Economic experts vs. average Americans
"The topics most covered in the economic literature, where economists agree among themselves the most, are also the topics in which their opinions are most distant from those of average Americans. This difference does not seem to be driven by knowledge, since informing people of the expert opinions does not have much impact on the responses of ordinary Americans. The explanation most consistent with our limited evidence is that people do not trust many of the implicit assumptions embedded into the economists' answers and that economists give them for granted."

Stingy Links: Behaviour

Pathological Altruism
"Oakley defines pathological altruism as "altruism in which attempts to promote the welfare of others instead result in unanticipated harm." A crucial qualification is that while the altruistic actor fails to anticipate the harm"

News is bad for you
"News is bad for your health. It leads to fear and aggression, and hinders your creativity and ability to think deeply. The solution? Stop consuming it altogether"

Stingy Links: Buffett

Investors earn handsome paychecks
"Warren Buffett's decision to hire two investment lieutenants is paying off for Berkshire Hathaway, and it's paying off for the two younger money managers, too."

Berkshire Hathaway meeting notes
"MoneyBeat was live in Omaha's CenturyLink Center where more than 35,000 Buffett lovers crowded for some six hours while Buffett and sidekick Charlie Munger's dished out investment wisdom and wit. Read our recap"

A rising star at Berkshire
"When Tracy Britt arrived in Omaha, Neb., in 2009 to meet with Warren Buffett, she brought a Harvard M.B.A., a glittering resume and a boatload of ambition. But she also brought the famed investor a gift to highlight their shared Midwestern roots: a bushel of corn and a batch of tomatoes."

Doubt yourself
"There was no big news at Berkshire Hathaway Inc.'s annual meeting this past weekend, but there was one great lesson for investors: Perhaps the most important thing you can do when everything seems to be going right in your portfolio is to listen to somebody who insists you are wrong."

Stingy Links: Dividends

The high dividend yield return advantage
"In the pages that follow, we set forth a number of studies, largely from academia, analyzing the importance of dividends, and the association of high dividend yields with attractive investment returns over long measurement periods. You may be familiar with our prior booklet, What Has Worked In Investing, where we provided an anthology of studies which empirically identified a return advantage for value-oriented investment characteristics. In the same spirit, we attempt to examine what some in our industry have referred to as the "yield effect"; i.e., the correlation of high dividend yields to attractive rates of return over long measurement periods. Much has been written about dividends, and what is contained herein is not meant to be an exhaustive analysis, but rather a sampling of studies examining the impact of dividends on investment returns. We hope it will provide you with added insight and confidence, as it did us, in pursuing a yield-oriented investment strategy."

A value tilt in disguise?
"The yield factor associated with high-dividend-yielding stocks actually detracted from performance."

Stingy Links: Economics

What if they're wrong?
"Our debates, however, are based on a simple assumption that the set of numbers we use to measure the economy are accurate, or at least close enough. But what if they aren't? What if we are making powerful assumptions about the economy based on statistics that are at best half-right?"

Meet the student who shook Austerians
"Herndon became instantly famous in nerdy economics circles this week as the lead author of a recent paper, 'Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,' that took aim at a massively influential study by two Harvard professors named Carmen Reinhart and Kenneth Rogoff. Herndon found some hidden errors in Reinhart and Rogoff's data set, then calmly took the entire study out back and slaughtered it."

Stingy Links: Economy

The underground recovery
"Ordinary Americans have gone underground, and, as the recovery continues to limp along, they seem to be doing it more and more."

Stingy Links: Fun

A fresh perspective
"Economics Lecturer Number 14,000,006"

Stingy Links: Funds

The lure of hedge funds
"Investors often buy what they think is exciting, sophisticated, and complex with the embedded assumption that all of these attributes will lead to greater returns. We see this today where we witness the continued explosive growth of hedge funds. But, a careful examination of the data reveals that these fancy lures fail to hook as much in excess, after-fee returns as more time tested strategies."

Stingy Links: Graham

How Benjamin Graham revolutionized activism
"Like much of Graham's investment wisdom, his writings regarding shareholder activism remain relevant in our time. They are especially pertinent, given recent high-profile disputes between activist shareholders and well-known public companies."

Stingy Links: Hallett

This fund is likely to chop its payout
"I continue to be amazed by some of these products that pay out fat monthly cash amounts. I know of this fund but have not followed it closely. When I first looked it up in response to Derek's note, the sub-$4 unit price prompted me to double check to make sure I had the right fund. But such is the (negative) power of overdistributing - particularly in a volatile fund. IA Clarington Canadian Dividend is entirely invested in stocks (unlike the many others I have reviewed and analyzed, which were balanced funds with stocks and bonds)."

Making sense of small cap returns
"Depending on the particular fund or product under examination, you could draw very different conclusions on otherwise similar portfolios and performance levels. When looking at retail mutual funds, for instance, old income trust funds are now in one of three categories - i.e. Canadian Dividend and Income Equity, Canadian Small/Mid Cap Equity or Canadian-Focused Small/Mid Cap Equity. (It's interesting to note that some institutional databases continue to track a Canadian Income Trust class of products.) For those looking at returns over the past five years, all of this background is relevant because two factors are skewing the performance comparison today."

Stingy Links: Health

Vitamins seen delaying dementia
"Now, in the latest of a steady drumbeat of research that suggests diet, exercise and socializing remain patients' best hope, a study published today in the Proceedings of the National Academy of Sciences shows that vitamins B6 and B12 combined with folic acid slowed atrophy of gray matter in brain areas affected by Alzheimer's disease."

Stingy Links: Indexing

The active passive investor
"Today, the more affluent investor's default strategy is - increasingly - indexing, inspired by the likes of John Bogle, Charles Ellis and William Sharpe. But I have often found that indexing advocates implement strategies that are quite a departure from the underlying theory they use to support their choices."

Vanguard total int'l bond fund
"The latest filing provides additional details on the fund that.s designed to track the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (dollar hedged), and will tap into a universe of 7,000 high-quality corporate and government bonds from 52 countries."

Stingy Links: Markets

On stock splits
"This brings me to my conclusion: stock splits are a momentum effect, but it is larger when companies are still have a cheap valuation. Perhaps splits have no effect on stock performance - it is all momentum and valuation."

Boring stocks can bring exciting returns
"In the stock market, boring is often beautiful. That is because 'boring' stocks - those that have exhibited the least historical volatility - on average outperform the most 'exciting' issues - those that have been the most volatile. And not by just a small margin, either."

The next financial crisis
"The 2007-2008 financial crisis, you might think, was an unpredictable one-time crash. But Didier Sornette and his Financial Crisis Observatory have plotted a set of early warning signs for unstable, growing systems, tracking the moment when any bubble is about to pop."

Stock buybacks beat the market
"Still, numerous studies over periods extending back more than three decades have found that the average buyback stock proceeds to outperform the market."

How predictive is the Fed model?
"Are stocks cheap on the basis of the Fed model? It seems so. Should we care? No."

What's your outlook on the markets
"No one is happy with these answers. They are not what they want to hear, but often what they need to hear."

Stingy Links: Momentum Investing

Absolute momentum
"There is a considerable body of research on relative strength price momentum but relatively little on absolute, time series momentum. In this paper, we explore the practical side of absolute momentum. We first explore its sole parameter - the formation, or look back, period. We then examine the reward, risk, and correlation characteristics of absolute momentum applied to stocks, bonds, and real assets. We finally apply absolute momentum to a 60-40 stock/bond portfolio and a simple risk parity portfolio. We show that absolute momentum can effectively identify regime change and add significant value as an easy to implement, rule-based approach with many potential uses as both a stand- alone program and trend following overlay."

Stingy Links: Munger

Colorful Charlie Munger
"One of Munger's biggest zingers today had him saying the European Union's decision to allow Greece to join was as stupid as someone using rat poison as whipping cream."

Stingy Links: Real Estate

Why home prices change
"In an ideal world, steady and uniform inflation would have no effect on rational decision-making because it affects incomes as well as prices. But in the real world, inflation does affect our psychology. People feel more optimistic when their nominal pay rises or when a neighbor's house sold for more than they paid for theirs. But in thinking about investments for the long term, we should focus on fundamentals - on real, inflation-corrected values and on the economics behind them."

Canada's mixed blessing
"This is a mixed blessing to say the least, since there was already plenty of concern that the Canadian job market had been artificially pumped up in recent years by the building boom - well, double down on those concerns, as construction payrolls now account for a record high of overall jobs at 7.6%."

Stingy Links: Retirement

The hidden DB in DC plans
"The greatest attraction of a DB pension plan is the appearance of certainty in the levels of retirement income it promises to its members, which contrasts with the uncertainty of retirement income levels that a DC pension plan can provide to its members. Readers may be interested to discover, though, that their DC pension plan (or other retirement savings plan such as a group RRSP or deferred profit sharing plan) may have a minimum level of DB hidden within it; in fact, it.s highly likely to be the case for any Canadian DC arrangement."

Meet the man who retired at 30
"But I didn't start saving and investing particularly early, I just maintained this desire not to waste anything. So I got through my engineering degree debt-free - by working a lot and not owning a car - and worked pretty hard early on to move up a bit in the career, relocating from Canada to the United States, attracted by the higher salaries and lower cost of living. Then my future wife and I moved in together and DIY-renovated a junky house into a nice one, kept old cars while our friends drove fancy ones, biked to work instead of driving, cooked at home and went out to restaurants less, and it all just added up to saving more than half of what we earned. We invested this surplus as we went, never inflating our already-luxurious lives, and eventually the passive income from stock dividends and a rental house was more than enough to pay for our needs"

The retirement gamble
"Retirement is big business in America, but is the system costing workers and retirees more than what they're getting in return?"

Stingy Links: Schloss

Making money out of junk
A 1973 interview with Walter Schloss

Stingy Links: Stocks

Markel thrives on buy and hold
"Piece by tiny piece, Thomas Gayner is building the next Berkshire Hathaway."

Stingy Links: Taxes

IRS: not good at math
"About a half-hour into a conference call with reporters Friday afternoon, senior Internal Revenue Service official Lois Lerner said something she will regret. 'I'm not good at math,' she confessed as she tried to summon a statistic."

Stingy Links: Tech

Why did baby catalogs arrive at our house?
"Marketing Genetics is a data company based in Nebraska. They gather up data that companies share with each other about purchasing behavior and sell it to other companies that are looking for certain types of customers. They've got a database of 100 million people and more than a billion transactions (most of those from the last couple of years). As they show in a sample report on their site, Marketing Genetics takes a company's data and creates a statistical profile of their best customers. Then they look for similar people within their own databases, so those companies can send these people catalogs or other direct mail. They call this Data Navigation Analysis (DNA)."

Ancient Roman concrete
"After 2,000 years, a long-lost secret behind the creation of one of the world's most durable man-made creations ever - Roman concrete - has finally been discovered by an international team of scientists, and it may have a significant impact on how we build cities of the future."

Stingy Links: Thrift

Extreme saving
"Today, the 31-year-old father of three saves more than 70% of his net income with the goal of retiring in a few years."

Stingy Links: Value Investing

Value around the world
"Over the last decades the value premium has well been documented for various time spans and countries. It is proven to be a consistent asset pricing anomaly. This study presents the largest international study on portfolio returns formed according to the book-to-market ratio and examines how cultural differences affect the magnitude of value returns. The cultural differences are measured in two dimensions: patience and risk aversion based on the data collected by the International Test on Risk Attitudes (INTRA). In accordance with a consumption based Gordon model we find that risk aversion is positively and patience negatively related to the magnitude of value profits. Similar results hold for the average stock volatility. Although patience is positively related with the degree of economic development, its relation to value returns does not disappear after controlling for general economic and financial development measures. Furthermore, we find that the value premiums are a! lso positively associated with the country price earnings ratio and negatively related to firm size."

Last Leucadia letter
"Forty-three years ago, the two of us met at Harvard Business School and thirty-five years ago was the beginning of a remarkable partnership - the results of which are tabulated on the opposite page. The end of 2012 marks the end of this partnership and the last letter from the two of us."

The importance of expectations
"I've come to appreciate that investments always take much longer than I expected to work out. This is why investors seek out catalysts, it's an effort to reduce patience. I'd rather work on my patience skills, because there are a lot more investments without catalysts out there, than with them."

Stingy Links: Watsa

Fairfax meeting slides
A few of their reasons for hedging...

Stingy Links: World

Why Canada can avoid banking crises
"Since 1790, the United States has suffered 16 banking crises. Canada has experienced zero - not even during the Great Depression."

Will Portugal be the first one out?
"Portugal's leading elder statesman has called on the country to copy Argentina and default on its debt to avert economic collapse, a move that would lead to near certain ejection from the euro."

Housing and the never-ending recession
"They argue that the recession is far from over and that the lingering effects of the collapsed housing market will be felt for years to come."

The toilet paper revolution
One of the most hilarious things I've read recently ... "'The revolution will bring the country the equivalent of 50 million rolls of toilet paper,' he was quoted as saying Tuesday by state news agency AVN. 'We are going to saturate the market so that our people calm down.'" Viva la revolucion!



 
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