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 02/20   The Stingy News Weekly: February 20, 2018 
 02/20   Private equity: overvalued and overrated 
 02/20   A better trend-following strategy 
 02/20   Scant evidence of power laws in real-world networks 
 02/20   Corrections come and go. It usually makes sense to do nothing 
 02/20   Charlie Munger: 2018 AGM transcript 
 02/20   Smart beta is sick 


Most Recent Stingy News

The Stingy News Weekly: February 20, 2018
02/20/18 7:01 PM ESTSNW
We have a lot on offer this week but be sure to check out the transcript from Charlie Munger's annual meeting.
More SNW: The Stingy News Weekly: February 12, 2018
The Stingy News Weekly: February 5, 2018

Private equity: overvalued and overrated
02/20/18 3:58 PM ESTMarkets
"The great postcrisis private equity gold rush is on, fueled by cheap debt and enthusiastic investors. A lawn care chain might get half a dozen calls and emails a week from business brokers and 'searchers.' A regional bank auctioning off a business with $15 million in profits might pitch two hundred prospects, receive fifty letters of intent, and take twelve separate private equity firms to management meetings, ending in a sale price which the majority of bidders considers crazy. And the greatest prize of all - a software company - could sell for many multiples of revenue, regardless of profitability."
More Markets: Smart beta is sick
Risk parity derangement syndrome

A better trend-following strategy
02/20/18 2:12 PM ESTStingy Investing
"The dual approach provides benefits, according to Philosophical Economics. It generated average annual returns of 12.7 per cent, from January, 1947, to November, 2015, with a volatility of 12.9 per cent. By way of comparison, the S&P 500 gained 11.2 per cent on average annually over the same period with a volatility of 14.5 per cent." [$]
More Stingy Investing: Corrections come and go. It usually makes sense to do nothing
A simple timing strategy

Scant evidence of power laws in real-world networks
02/20/18 2:10 PM ESTScience
"These results undermine the universality of scale-free networks and reveal that real-world networks exhibit a rich structural diversity that will likely require new ideas and mechanisms to explain."
More Science: Undead theories
No experts on the future

Corrections come and go. It usually makes sense to do nothing
02/20/18 2:08 PM ESTStingy Investing
"the vast majority of investors should avoid market timing and follow the lead of Warren Buffett and Charlie Munger instead. Broadly speaking, they buy companies at reasonable prices and hold them for very long periods. They're like collectors but instead of baseball cards they buy good businesses and rarely sell. It's a simple approach that has worked well for decades."
More Stingy Investing: A simple timing strategy
Asset Mixer Update

Charlie Munger: 2018 AGM transcript
02/20/18 2:05 PM ESTMunger
"Most newspapers by the way I think are going to perish. It's just a question of when. I mean they're all going to die. You know the New York Times will continue because people will pay $5 for it in an airport. So there will be a few survivors, but by and large the newspaper business is not doing well. Berkshire Hathaway owns a lot of them. And buying them we figured on a certain natural decline rate after which the profits would go to zero. We underestimated the rate of decline. It's going faster than we thought."
More Munger: A conversation with Charlie
Daily Journal Meeting 2015

Smart beta is sick
02/20/18 2:03 PM ESTMarkets
"Smart beta may be state-of-the-art, but it has also become the E. coli of institutional investing. There are at least 300 published factors, with roughly 40 newly discovered factors announced each year."
More Markets: Risk parity derangement syndrome
The bankruptcy of modern finance theory

The Stingy News Weekly: February 12, 2018
02/12/18 8:59 PM ESTSNW
This week we have waffles, rent, risk parity, and more.
More SNW: The Stingy News Weekly: February 5, 2018
The Stingy News Weekly: January 29, 2018

Lessons from Waffle House
02/12/18 8:48 PM ESTManagement
"You go in there and everyone's drunk. You know everyone's drunk in Waffle House because they have pictures of the food on the menu. How drunk do you have to be to not remember what a waffle looks like?"
More Management: Why competitive advantages die
Creative investing

Risk parity derangement syndrome
02/12/18 8:34 PM ESTMarkets
"You may have noticed the market turbulence lately. You may have also noticed the legion of commentators among the media, politicians, and famous investors, blaming this turbulence on 'risk parity,' 'trend-following strategies,' or my favorite, just 'the machines.' Poppycock. Yes, it's come to this; they've driven me to swear like Mrs. Doubtfire."
More Markets: The bankruptcy of modern finance theory
A letter from an old friend

Rent control needs retirement
02/12/18 8:09 PM ESTGovernment
"If politicians actually want to make sure everyone who needs a place to rest their head has one, there's only one way to do it: Build more housing. Which means, in turn, loosening the legal restrictions and community veto points that make it so hard to add supply. Because there's no way to escape the fundamental math: Unless you build enough housing to shelter the people who want to live in your city, a whole lot of people will be left out in the cold."
More Government: Ontario making it easier to underfund pensions
Policy-based evidence making

Why competitive advantages die
02/12/18 8:05 PM ESTManagement
"The only thing harder than gaining a competitive edge is not losing that advantage when you have one. That's as true for careers and investment strategies as it is for business. And since people are naturally optimistic, there's a tendency to put more thought into finding an edge than not losing it once you find one."
More Management: Creative investing
Rose Blumkin interview

The Stingy News Weekly: February 5, 2018
02/05/18 9:18 PM ESTSNW
This week we have a question of timing, a new balanced ETF solution, and more.
More SNW: The Stingy News Weekly: January 29, 2018
The Stingy News Weekly: January 15, 2018

Vanguard's one-fund solution
02/05/18 8:53 PM ESTIndexing
"It was one of the great mysteries in the Canadian fund market: why had no one created an ETF version of the balanced index mutual fund?"
More Indexing: Direct indexes: cheaper than ETFs
Low vol in perspective

Second childhood
02/05/18 7:43 PM ESTRetirement
"I use the strategy I recommend to others: Occasionally, I will take my portfolio and assume the stock portion loses 35%, which is the typical decline during a bear market. I'll then look at the resulting hit to my overall portfolio's value and ask myself, 'Would you be okay with that?' As the market has climbed over the past year, I've found myself answering 'no' - and that's prompted me to ease up somewhat on stocks."
More Retirement: How Malcolm Hamilton prepared for his own retirement
Time to rethink the RRSP contribution limit

A simple timing strategy
02/05/18 7:31 PM ESTStingy Investing
"I've been eyeing escape pods - as an investor - for some time now. The U.S. market blasted through valuation levels seen at the 1929 market top in recent weeks. I outlined the dire situation using Prof. Robert Shiller's CAPE ratio (cyclically adjusted price-to-earnings ratio) in early January" [$]
More Stingy Investing: Asset Mixer Update
Periodic Table Update

The Stingy News Weekly: January 29, 2018
01/29/18 7:35 PM ESTSNW
This week we have the top dog contest, leveraged value, broken pensions, momentum, and more.
More SNW: The Stingy News Weekly: January 15, 2018
The Stingy News Weekly: January 8, 2018

A momentum signal
01/29/18 7:14 PM ESTMomentum Investing
"Historically, the S&P 500 has been followed by above-average returns over the next 6, 12, 24, and 36 months when this cyclical momentum measure is above 85."
More Momentum Investing: You can have your momentum factor and eat it too
A terrible strategy

The bankruptcy of modern finance theory
01/29/18 6:42 PM ESTMarkets
"The profession of finance as practiced today relies heavily on modern finance theory: the dividend discount model and the capital asset pricing model. These models are the centerpieces of most business school finance courses, and surveys suggest that they are used by over 70 percent of CFOs for capital budgeting. They are also used by almost every fundamental investor and most financial advisers. Yet these theories have been empirically invalidated time and again in well-publicized, peer-reviewed studies. Their continued usage represents another calibration error - between the claimed precision of the models and the actual unpredictability of mark"
More Markets: A letter from an old friend
U.S. equity returns: a best-case

High-debt value
01/29/18 6:40 PM ESTValue Investing
"Dan then delves into leverage and the value premium, telling us how important this interaction is. He gives us great details on the subject based on a study he was a part of while at Bain Consulting. The takeaway was that roughly 50% of deals done at multiples greater than 10x EBITDA posted 0% returns to investors, net of fees." [audio]
More Value Investing: Value and momentum portfolio construction
Fundamentals of value investing

Ontario making it easier to underfund pensions
01/29/18 6:35 PM ESTGovernment
"Pension defaults are rare, but the CCPA study found that of the 39 largest publicly traded companies that have defined-benefit pensions, only nine had plans that were fully funded last year. Rather than loosening restrictions, Ontario should amend the Ontario Pension Benefit Act to require businesses to fund 100% of their pensions. Those that can't shouldn't offer pensions in the first place."
More Government: Policy-based evidence making
Risky mortgage investments

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