ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

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2014-03-14 A Matter of Odds: Not Everything That’s Supposed to Work, Works All the Time by Francois Sicart of Tocqueville Asset Management

In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, explores the worth of quantitative analysis versus fundamental, and examines forecasts, consensus, and valuation as three ways of looking at the market for investment.

2014-02-26 A CAPE Crusader by James Montier of GMO

In a new white paper today, James Montier of GMO's asset allocation team reviews a range of valuation measures to assess current U.S. equity market valuations. He concludes: "We continue to believe that the weight of valuation evidence suggests the S&P 500 is significantly overvalued at its current levels."

2014-02-07 Investment Principles and Habits: Contrarian Value Investing in a Liquidity-Driven Environment by Francois Sicart of Tocqueville Asset Management

In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, looks at how recent market performance, having been both driven down by and buoyed by liquidity, should cause asset managers to re-examine their investment principles. Though he cautions that the possibility exists that the recent market drivers might be an aberration, "stubborn aberrations are worth paying attention to."

2014-02-06 Divesting When Discomfited by Ben Inker of GMO

Ben Inker explains why, "for our asset allocation portfolios we generally try to trade slowly." He notes, "The slightly odd fact is that moving slowly on value-driven decisions has simply made more money historically than moving immediately would have."

2014-02-06 Year-End Odds and Ends by Jeremy Grantham of GMO

In a new quarterly letter to GMO’s institutional clients, chief investment strategist Jeremy Grantham offers "Year-End Odds and Ends": Fossil Fuels: Is Tesla a Tease or a Triumph?, Fracking and Yet More Technical Stuff on Fracking, Update on Metals, Fertilizers, and Food, Problems in Forecasting Short-term Prices for Resources, Another Look at U.S. GDP Growth, Investment Lessons Learned: Mistakes Made Over 47 Years

2014-01-23 Tacking Through the Banking Headwinds by John Loesch of Diamond Hill Investments

Pick up nearly any financial publication these days and it is bound to have one, if not several, stories about the headwinds facing the banking industry.

2014-01-07 The Big Transition: A Letter to an Entrepreneur Friend by Francois Sicart of Tocqueville Asset Management

In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, presents a letter he has written to friend, a senior executive at a successful public company in the internet sphere. The friend has realized that 90% of his personal worth is tied up in his company. He is considering diversifying. Mr. Sicart’s letter posits that for his entrepreneur friend, the decision to diversify is not "primarily an investment question" but rather "a patrimonial question, which must be considered in a much longer time frame."

2013-12-06 Going Against the Grain, Again by Cindy Sweeting of Franklin Templeton

Going against the grain is never easy, particularly when it comes to investing. But if you don’t take the risk of moving out of the crowd and taking a different path, you can’t really stand out. Templeton has focused on bottom-up value investing, which often puts it at odds with the broader market consensus. We go back in history to describe how the strategy has persevered through different market cycles, and why the Templeton team has been going against the grain by investing in Europe at a time when other investors had lost faith.

2013-12-05 No Silver Bullets in Investing by James Montier of GMO

In a new white paper today, James Montier of GMO’s asset allocation team reviews recent "innovation in our industry." He argues, "one of the myths perpetuated by our industry is that there are lots of ways to generate good long-run real returns, but we believe there is really only one: buying cheap assets."

2013-12-03 Turning Over Rocks by Herbert Abramson, Randall Abramson of Trapeze Asset Management

The S&P 500 is at a record high and we believe the markets generally are fully valued. Corporate revenue growth is anemic, profit margins are stretched, and the prospect of earnings rising meaningfully is not high. And, the outlook for the U.S. and global economy is still uncertain. Market psychology is at a level suggesting the market is overbought. Margin debt is at record levels and the current popularity of stocks by retail investors at market highs is in itself a red flag.

2013-11-25 Sir Isaac Newton by Jeffrey Saut of Raymond James

In 1711 the Earl of Oxford formed the South Sea Company, which was approved as a joint-stock company via an act by the British government. The company was designed to improve the British government’s finances. The earl granted the merchants associated with the company the sole rights to trade in the South Seas (the east coast of Latin America). From the start the new company was expected to achieve huge profits given the believed inexhaustible gold and silver mines of the region.

2013-11-21 Two Nobel Laureates...Two Tales of Value by Vitali Kalesnik of Research Affiliates

How can you build a better value stock portfolio? The key is discerning whether the value premium stems from mispricing or risk.

2013-11-07 Putting Macro Trends in Context: What do They Mean to a Bottom-Up Investor? by Will Nasgovitz of Heartland Advisors

For some time now, we’ve had a generally positive economic outlook. The occasional setback is assured, but on the whole we believe that the U.S. economy is still in the early stages of a multi-year recovery.

2013-10-30 Getting Back into Value Equities by Kevin Simms of AllianceBernstein

It finally feels like a great time to be a value investor again. After several challenging years, market conditions have become much more conducive to finding undervalued, controversial stocks with long-term payoff potential. Even after this year’s equity-market rally, we think the value rebound is just beginning.

2013-10-15 A Q3 client letter: Mike Tyson on Sticking to Your Plan by Dan Richards (Article)

Each quarter I post a template for a client letter, as a starting point for advisors who want to send clients an overview of the three months that just ended and the outlook for the period ahead.

2013-10-01 The Eight Principles of Value Investing by Scott Clemons and Michael Kim (Article)

In any environment, but especially one characterized by uncertainty, eight principles of investing are critical. These bedrock beliefs help guide our thinking at the levels of asset allocation, security selection and identification of the third-party managers we engage to help manage our clients’ assets.

2013-09-27 Like a Five-Year Game of Duck, Duck, Goose' by Will Nasgovitz of Heartland Advisors

As summer is trailing off here in Milwaukee, WI, my wife and I have been revisiting some classic children’s games with our young son and daughter. Most recently, the biggest hit has been “Duck, Duck, Goose.” And, it’s a real treat to watch the extreme anticipation in their faces as they wait for the goose to be called and the running to begin.

2013-09-25 How To Calculate The Intrinsic Value Of Your Common Stocks: Part 1 by Chuck Carnevale of F.A.S.T. Graphs

Every investor in common stocks is faced with the challenge of knowing when to buy, sell or hold. Additionally, this challenge will be approached differently by the true investor than it would by a speculator. But since I know very little about speculation (trading or market timing), this article will be focused on assisting true investors desirous of a sound and reliable method that they can trust and implement when attempting to make these important buy, sell or hold investing decisions.

2013-09-17 Charles de Vaulx: “We Have Never Been as Cautiously Positioned” by Robert Huebscher (Article)

Charles de Vaulx is the chief investment officer and a portfolio manager at International Value Advisers. In this interview, he discusses his outlook for the market and the economy, and why his fund has never been as cautiously positioned as it is today.

2013-09-13 Invest In Stocks With A Margin of Safety To Reduce Risk And Enhance Returns by Chuck Carnevale of F.A.S.T. Graphs

Of all of the many sound investing principles that legendary teacher and investor Ben Graham put forward, he believed that his concept of “margin of safety” was the most important of all. This investment lesson was so deeply ingrained into the mind of Ben Graham’s most famous student, Warren Buffett, that he created his two most important rules of sound investing. Rule number one: Never lose money. Rule number two: Never forget rule number one. Clearly, both of these renowned sages understood the importance of minimizing risk, especially when investing in equities.

2013-09-07 Unrealistic Expectations by John Mauldin of Millennium Wave Advisors

Two well-respected analysts of pension funds have produced reports this summer suggesting that pensions are now underfunded by more than $4 trillion and possibly more than $5 trillion. I would like to tell you that the underfunding is all the bad news, but when you probe deeper into the problems facing pension funds, it just gets worse.

2013-08-22 Hot Potato: Momentum As An Investment Strategy by Ryan Larson of Research Affiliates

Investors increasingly are attracted to momentum as a key ingredient in their portfolios. But how does momentum fare as a stand-alone strategy? In this issue of Fundamentals, we look at the pros and cons of this important risk factor.

2013-08-20 Who Are You Going to Believe-These Non-GAAP Numbers or Your Lying Eyes? by Jeffrey Bronchick of Cove Street Capital

Great performance in the short-run-either absolute or relative-is a mixed blessing. If an investor owns a portfolio of stocks that is embedding 30% undervaluation, and voila, finds himself up 30% (this is a hypothetical number for the purposes of this example but it’s not far from recent reality) in six months, without a concurrent upward improvement in underlying fundamentals, you have to be a regular on CNBC to expect another 30% return over the next six months.

2013-06-25 Letters to the Editor by Various (Article)

Adam Apt responds in the latest exchange of letters on the topic of socially responsible investing. A reader responds to Geoff Considine’s article, A Better Alternative to Cap-Weighted Bond Indices, which appeared June 11. A reader responds to Wade Pfau’s article, Retirement Income Designations – Which Should You Choose?, which appeared last week.

2013-06-06 A Longer Time Horizon Can Be an Advantage for Value Investors by Mark Cooper of PIMCO

We believe that given challenging prospects for attractive investment returns, the value premium could become even more important in the years ahead. Even in an uncertain environment like we are currently experiencing, we believe the merit in owning equities for the long term is unchanged: We want to participate as an owner in a growing, profitable business.

2013-05-30 Are We There Yet? by Vitaliy Katsenelson of Investment Management Associates

I started writing my first book, Active Value Investing: Making Money in Range-Bound Markets, in 2005; finished it in 2007; and published the second, an abridged version of the first (The Little Book of Sideways Markets), in 2010. In both books I made the case that there is a very high probability that we are in the midst of a secular sideways market a market that goes up and down, with a lot of cyclical volatility, but ends up going nowhere for a long time.

2013-05-24 Bifurcation Blues by Herbert and Randall Abramson of Trapeze Asset Management

Bifurcation. A very technical sounding word. It merely means “a division into two parts”, which is what we are witnessing in many areas related to investment, both macro and micro. And it is exhibiting to value investors those areas to avoid and the most attractive to embrace. And giving rise to a wide range of disparate opinions among economic and investment professionals as to what outcomes are likely. Needless to say, we have our own strong views.

2013-05-23 Does Behavioral Investing Make Sense Anymore? by Kevin Simms, Joseph Paul of AllianceBernstein

Value investing has faced a crisis of confidence after five tough years. Here’s why we think the behavioral investing principles that underpin the discipline are more relevant than ever.

2013-05-10 The Importance of Being Different by Francois Sicart of Tocqueville Asset Management

In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, writes about how superior investment managers outperform their market benchmarks -- by taking advantage of volatility, among other things -- as well as how to properly evaluate investment performance.

2013-05-09 Equity Market Distortions Create Big Payback Potential by Joseph Paul, Kevin Simms of AllianceBernstein

Even after this year’s equities rally, market imbalances created by the financial crisis in 2008 have not disappeared. When these distortions unwind, we expect deep value stocks to rapidly recover.

2013-04-25 Value Investing and the Philosopher's Stone by Kevin Simms, Joseph Paul of AllianceBernstein

When J.K. Rowling finished her first manuscript of Harry Potter and the Philosopher’s Stone in 1995, she submitted it to 12 publishers, who all rejected the book. In time, those publishers would regret missing the chance to back an unknown author who would later take the world by storm. Like the publishers who passed over Harry Potter, we believe that many investors today risk missing a historic opportunity to invest against the grain in attractively valued stocks across the globe.

2013-03-06 Combining the Best of Passive and Active Investing by Patrick O'Shaughnessy of O'Shaughnessy Asset Management

Should investors pay higher fees to active managers in an attempt to beat the market? Or should they instead buy cheap passive index funds or exchange-traded funds (ETFs) thereby surrendering to the compelling long-term evidence that successful money managers are few and far between and very difficult to identify. It is an important and ongoing debate because the choice between the passive or active approach to investing can have a huge impact on long-term results.

2013-02-20 Nervous Investors Approaching a Trap? by Jerry Wagner of Flexible Plan Investments

With the S&P 500 reaching new post-crash highs, it is interesting, to say the least, that most individual investors are not bullish on stocks. Rather, as the market has moved relentlessly higher this year, individual investors have turned more and more bearish.

2013-02-19 Tough Times for Classic Value Investors by Laurence B. Siegel (Article)

While the U.S. equity market has performed exceptionally well since its bottom in March 2009, Warren Buffett's Berkshire Hathaway has trailed the index by nearly 6%. Buffett is among a number of prominent classic-value investors who have fared poorly over this period. Over long time horizons, value investing has consistently outperformed growth strategies and the broad market index. So what is causing this recent phenomenon?

2013-02-15 Hyperinflations, Hysteria, and False Memories by James Montier of GMO

In the past, Ive admitted to macroeconomics being one of my dark, guilty pleasures. To some value investors this seems like heresy, as Marty Whitman1 once wrote, Graham and Dodd view macro factors...as crucial to the analysis of a corporate security. Value investors, however, believe that macro factors are irrelevant. I am clearly a Graham and Doddite on this measure (and most others as well).

2013-01-29 Letter to the Investment Committee by Emilio Vargas (Article)

The following is a thousand words on investing that will irritate most every investment professional. Most forms of active portfolio management incur fees, transaction costs and taxes. Whole industries exist due to these costs, and their proponents will argue that they are adding value. In aggregate they cannot; they are all costs. That I am proposing an investment that could take food from the mouths of the children of an army of accountants, brokers and investment professionals will, no doubt, cause them to find flaws in what follows.

2013-01-22 Sunglasses and Cockroaches – Six Rules for Surviving in a Bear Market by Michael Skocpol (Article)

After more than three decades investing in Japanese securities, Peter Tasker has little patience for other investors' self-pity – and he doesn't want to hear your horror stories from 2008. Overcoming the challenges posed by bear markets requires the adaptive instincts of a cockroach, and Tasker identified six lessons investors can take away from those lowly insects.

2013-01-22 Wally Weitz on Value Investing in the Post-Crisis Era by Robert Huebscher (Article)

As the president and founder of Weitz Funds, Wally Weitz has spent nearly three decades putting his instinct for opportunity to work for shareholders. Influenced by the value-investing model of Benjamin Graham and Warren Buffett, Wally manages the Partners III Opportunity Fund (WPOPX), which has had an annual return of 10.85%, versus 6.23% for the S&P 500. In this interview, he discusses his investment methodology and how it has evolved since the financial crisis.

2013-01-08 2012: Resumption of the Stock Market Recovery by Ronald Surz (Article)

Let's take a close look at the details of what occurred in 2012 so we can assess the opportunities and prepare for the surprises that 2013 will bring. I'll give you my opinions, and you should form your own.

2012-11-29 The 13th Labour of Hercules: Capital Preservation in the Age of Financial Repression by James Montier of GMO

James Montier, a member of GMO's asset allocation team, writes to institutional clients in a new white paper on the prospects for preserving and growing capital in a world of slowing growth. Defining financial repression loosely "as a policy that results in consistent negative real interest rates," Mr. Montier poses the question "how does a value investor respond to this? It certainly appears as if the assets one would normally associate with capital preservation are expensive. So can and/or should you substitute other assets such as equities into the role of safe-haven value store?"

2012-11-13 Europe: Opportunity of a Generation by David Marcus of Evermore Global Advisors

A difficult political and economic backdrop is masking exceptional opportunities in European markets for discerning, long-term oriented investors. Evermore believes that there is a generational opportunity to build significant wealth by selectively investing in catalyst-driven, deep value European securities, trading at depressed valuations.

2012-10-03 Monthly Letter to Our Clients and Friends by Kendall Anderson of Anderson Griggs

Warren Buffett, Ben Graham's most famous student has said, "[Ben Graham] also taught me to see a stock not as something with a ticker symbol that wiggles around but to think about it as part of a business. Dont get elated because something had gone up or depressed because it went down. If I knew the facts, and it went down, I bought more of it". Although these two forces of investment beliefs are in constant battle, there is one common belief; Both believe that any attempt to "time the market" is not an intelligent approach to investment management.

2012-09-25 Value Investing in a Macro-Driven Environment by Robert Huebscher (Article)

The GoodHaven Fund (GOODX) is managed by Larry Pitkowsky and Keith Trauner. For most of the previous decade, Larry and Keith held research, portfolio management, and executive positions with the Fairholme Fund. I spoke with them last week.

2012-09-15 The Direction of the Compromise by John Mauldin of Millennium Wave

I think this election has the potential to be one of those rare times, at least in terms of economic outcomes. In Thoughts from the Frontline we cover economics and investments, money and finance. We only rarely stray into the political world, and then only glancingly. Today, we cross that gray line, but at a somewhat different angle, as we look at the economic consequences of the political decision that will come with the choices we make in November in the US.

2012-09-08 Debt Be Not Proud by John Mauldin of Millennium Wave

The unemployment numbers came out yesterday, and the drums for more quantitative easing are beating ever louder. The numbers were not all that good, but certainly not disastrous. But any reason will do, if what you want is more stimulus to boost the markets ever higher. Today we will look first at the employment numbers, because deeper within the data is a real story. Then we look at how effective any monetary stimulus is likely to be.

2012-09-01 The Consequences of Easy Monetary Policy by John Mauldin of Millennium Wave Advisors

We heard from Bernanke today with his Jackson Hole speech. Not quite the fireworks of his speech ten years ago, but it does offer us a chance to contrast his thinking with that of another Federal Reserve official who just published a paper on the Dallas Federal Reserve website. Bernanke laid out the rationalization for his policy of ever more quantitative easing. But how effective is it?

2012-08-02 Two Inflection Points by Andrew Redleaf of Whitebox Advisors

I'm generally happiest, professionally, when I have at least one strong investment conviction. Currently I have two. I want to be long large-cap equities and short small-cap equities. And I want to be long cheap options on natural gas, mostly by owning E&P (exploration and production) firms that have become attractively cheap with the collapse of gas prices.

2012-07-18 Taking Short Cuts to Higher Returns with AQRs Capital Antti Ilmanen by Kendall Anderson of Anderson Griggs

On November 2-3 of 2011 the CFA Institute and CFA France sponsored the Fourth Annual European Investment Conference in Paris, France. Antti Ilmanen, Ph.D. was one of the presenters. The title of his Presentation was Understanding Expected Returns. This months letter is based on this presentation as it appeared in the June 2012 publication CFA Institute Conference Proceedings Quarterly.

2012-07-10 A Mid-Year Client Letter: Wisdom from Three Wall Street Veterans by Dan Richards (Article)

Here is a template for a letter to serve as a starting point for advisors looking to send clients an overview of the past 90 days and the outlook for the period ahead.

2012-05-10 I Question, Therefore I Am by Francois Sicart of Tocqueville Asset Management

Historically, the attraction of value investing has been that, by purchasing stocks whose price does not incorporate a large hope premium over intrinsic value, the downside would be muted. Conversely, the potential for the premium to increase should investors perceptions change would promise worthwhile returns even in the absence of spectacular growth by the company. These assumptions suffered a severe setback in 2007-2009, when practically all stocks were caught into the same panic-driven downward spiral. But it does not entirely negate their validity.

2012-05-04 Stocks Cheap? Not so Fast! by Mike Paciotti of Integrated Capital management

Markets seem to have forgotten that which ailed us just 4 months ago. Talk of another Lehman style meltdown by a major financial institution has given way to positive earnings results, record profit margins and a much publicized recovery in the US. Equities, have now taken center stage once again with many major asset management firms proclaiming their attractive nature. Over the course of the next few paragraphs, we will examine this argument in greater detail by deconstructing equity market returns into component pieces.

2012-05-01 Wind Shear Avoidance: Why There Is Value in Momentum by Vineer Bhansali of PIMCO

Explicit tail hedges that look expensive in a normal world may indeed turn out to be cheap if the unimodal morphs into the bimodal. When faced with bimodal outcomes, momentum as a risk factor becomes potent, and cost-efficient exposure to momentum becomes critical to proper portfolio construction. In this world of low, pegged interest rates, an investor who is going to take risk needs other means to make the portfolio more inured to unforeseen shocks and market storms. Investors should look at effective alternative beta strategies, such as momentum, that can be implemented efficiently.

2012-04-24 The Weight of AAPL and Mixed Data in the U.S. by John Buckingham of AFAM

Last week was quite an interesting week, with investor darling Apple Computer shedding another 5.3% of its value after losing 4.5% in the week prior, the latest economic numbers generally coming in a bit weaker than expected and first quarter earnings reporting season getting off to a solid start. Happily, though there was no shortage of daily volatility, the major market averages all ended in the green, which rebounded by 1.4%. While Apple is not a Dow component, it presence in the Russell 3000 and the S&P 500 did not help those indexes, each of which turned in returns of less than 0.7%.

2012-04-21 A Little Bull's Eye Investing by John Mauldin of Millennium Wave Advisors

Bull's Eye Investing was the book that really helped establish this letter. It dealt with a host of investing ideas, secular market cycles, value investing, alternative investing, and more. I have taken that material, updated it, and written a new book, part of the Little Book series done by Wiley, called The Little Book of Bull's Eye Investing Finding Value, Generating Absolute Returns, and Controlling Risk in Turbulent Markets. I have waited to announce this one until it is off the presses and being shipped. Here is the introduction and part of the first chapter of the book.

2012-04-12 Benjamin Graham's The Intelligent Investor: Chapter Eight by Kendall J. Anderson of Anderson Griggs

There are only five pages dedicated to bonds in Chapter Eight. But, these five pages had such major influence on my early years as an advisor. And once again, it is those pages that are sending me a reminder as to why I should not buy bonds today. Given the current interest rates, I would strongly suggest any and all bond investors read these pages. I can assure you that Mr. Buffett has.

2012-04-09 How high is up? by Scott Brown of du Pasquier Asset Management

Europe hopes the latest (bailout and reg) moves will help it get its act together. (Good luck with that.) China applies the brakes. Labor looks strong, but can it continue? The Fed debates the need for more stimulus (without any consensus). Facebook moves closer to IPO (and investors beg to participate). The world lectures Iran and finally takes harsh measures (stand by to help Saudi). Investors hope to keep the mo going for another quarter, while being tempted to take profits along the way. Can we finally start focusing on Obama vs. Romney?

2012-04-09 How high is up? by Scott Brown of du Pasquier Asset Management

Although performance in our portfolios was good during the first quarter, it is likely that my defensiveness might be costing us during the current rally. Right now, my allocations reflect a lack of conviction that the rally can sustain, so while cash is king is a handy catchphrase, in our case it is our best defense against the kind of draw-down that ruins portfolios. Our methodology is not to have one or more security rupture the probability of continued portfolio progress, point A to point B. In that sense, we successfully continued our steady climb in valuation appreciation.

2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)

Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.

2012-03-14 Systemic Risk, Multiple Equilibria and Market Dynamics What You Need to Know and Why by Mohamed A. El-Erian and A. Michael Spence of PIMCO

In assessing the possibility, duration and impact of systemic risk factors, we need to analyze the interaction of expectations with market (endogenous) and policy (exogenous) circuit breakers. In the current environment, the prevalence of some subjective bimodal expectation distributions (e.g. Europe related) speaks to the multiple equilibrium features of sovereign debt markets. Multiple equilibria give rise to a range of scenarios, each quite different and each with its own distribution of returns, risks, correlations, and market functioning.

2012-03-06 U.S. Covered Bonds: Reassessing Credit Risk and Relative Valuations by Marco van Akkeren and Ben Emons of PIMCO

We believe nominal spread analysis is insufficient, since investors must now consider recovery and default risk under various economic conditions. Our factor-based approach provides a means to quantify default probabilities across a range of outcomes instead of analyst-defined ad hoc assumptions. We also investigate historical CDS spreads as a means to quantify default risk relative to national home price appreciation. The potential for an emerging U.S. issuer market, combined with ongoing foreign issuance, leads us to believe the U.S. covered bond market has viability.

2012-02-29 The Difference Between Knowing and Doing by Stephen Dodson of Bretton Fund

Theres a significant disconnect between what investors say is the right approach and how they invest in reality. Many funds claim to be long-term, but the average holding period for the average stock mutual fund is only 10 months. Part of the reason for this dissonance is the incentive for fund managers to invest a particular way to attract institutions, who often want low variances to market movements, not necessarily maximum returns. The desire to collect assets can cause a divergence of interests between fund shareholders and fund managers.

2012-02-17 Assessing Performance Records A Case Study by Howard Marks of Oaktree Capital

What are the non-negotiable requirements for accurately assessing investment performance? Id say: a record spanning a significant number of years, a period that includes both good years, and a benchmark or peer universe that makes for a relevant comparison. The other day, at an event for alumni and other constituents of the University of Pennsylvania, president Amy Gutmann reviewed the performance of the university during the financial crisis. Thinking about it afterward, I realized that I should share with you the story of Penns endowment and its lessons.

2012-02-13 Bill Gross vs. Warren Buffett and Larry Fink by Charles Lieberman (Article)

While bonds seem frightfully overvalued, stocks are cheap because investors are so hell bent for safety. Investors continue to shift capital out of stock funds and into bond funds virtually every month. This behavior suggests that they are fixated on the zero risk of default and fail to appreciate how they will be hurt by the loss of buying power.

2012-01-31 Q4 2011 Market Commentary by John G. Prichard of Knightsbridge Asset Management

The proposed restructuring for private creditors of Greece has been called voluntary. Who voluntarily takes 30 cents on the dollar? The government authorities involved have insisted that any deal be deemed voluntary to avoid triggering credit default swaps (CDS) written on Greek debt. These CDS could accurately be called insurance contracts that are supposed to pay out if the Greek government defaults or changes the terms of its debt. The ISDA, the entity who decides these things, has more or less already said they wont consider the default a default.

2012-01-24 The Plain Facts by Herbert Abramson and Randall Abramson of Trapeze Asset Management

We believe that, while Europe will suffer a recession in 2012 on its painful path to recovery, with or without Greece, the U.S. and Canada will likely see accelerating growth this year, as will China, India and Latin America. In fact, global growth should be above 3%, supported by record high total household wealth in the world, which has doubled since 2000. China and India provide half of the worlds economic growth. And manufacturing in India and China grew in December and should continue to do so from renewed government stimulation.

2012-01-09 Stock Volatility: Not What You Might Think by Charles Lahr of PIMCO

Contrary to finance theory, lower risk appears to produce the potential for higher returns over the long term. Volatility tends to amplify stock returns so higher risk generally leads to higher returns in a positive market and greater losses in a negative market. Over the long run, lower volatility stocks can lead to higher returns because avoiding the downside can have powerful effects on compounding. Higher volatility stocks tend to fit the definition of speculative, while low volatility stocks can offer the potential for preservation of principal and a satisfactory risk-adjusted return.

2011-12-27 Vitaliy Katsenelson on Krugman’s Missed Call by Robert Huebscher (Article)

Vitaliy Katsenelson is the chief investment officer at Investment Management Associates, a Denver-based money management firm, and the author of two highly acclaimed books on value investing. In this interview, he identifies what Paul Krugman failed to see with regard to China, discusses the prospects for the European and domestic economies, and explains why Microsoft is a grossly undervalued stock.

2011-12-16 'Tis the Season I Doubt You Will Remember by Jeffrey Bronchick of Cove Street Capital

While deep value investors tend to perform well over reasonable time frames, adjusting reported performance for risk poses a substantial problem. Deep value portfolios contain lower-quality, fundamentally riskier assets. Returns ought to be higher to compensate for greater underlying risk. Under conditions of severe economic distress, higher risk levels in value portfolios lead to disastrous investment results.

2011-10-11 Improving on Morningstar Style Boxes by Stephen Dodson (Article)

No one would ever confuse a short man with dark hair and a tall one with light hair. But this is precisely what investors do when they categorize stocks as either growth or value. Those style definitions, championed by Morningstar and others, are flawed, and I have a way to fix them.

2011-10-06 A Treatise for Taylor by Michael Goodson of Wolf Group Capital Advisors

Last week my granddaughter, Taylor, was born. I began musing about what kind of life Taylor might expect to have. Despite all the negative talk I suspect that Taylor will be grateful to live in this country. The U.S. economy is still the worlds largest by a large margin, and per capita GDP is still envied by most of the world. During her lifetime, the expansion in innovation and technological gains is hard to imagine. The big picture issues we fret and fuss about now will likely have little impact on her ability to find happiness and contentment.

2011-10-04 Value Investing Lessons from Moneyball by Laurence B. Siegel (Article)

Is baseball a metaphor for life, as many literati have suggested, or for value investing? Michael Lewis' 2003 bestseller Moneyball argues the latter. More recently, the book has been adapted to make a thoughtful movie that will be of special interest to investors who believe in trying to find hidden bargains.

2011-09-20 Point & Counterpoint: Value vs. Growth by Kendall J. Anderson of Anderson Griggs

The debate over which investment philosophy is best will continue with winners promoting their own style and losers rationalizing their losses. Value vs. Growth. In 1996 the now defunct Mutual Funds Magazine invited me to contribute my thoughts in this ongoing debate in a featured article titled Speaking Out. The case for growth would be argued by John D. Gillespie. Since the debate between Value and Growth has continued to this day I am providing you, word for word, our Point and Counterpoint.

2011-09-06 Five Strategies for a Sideways Market by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)

If this slow growth environment coupled with asset price volatility continues for (to steal a quote from Fed Chairman Bernanke) 'an extended period,' what additional portfolio strategies might aid the overall risk/return profile of investor portfolios? More specifically, how do you manage investments in a sideways market?

2011-09-02 Dividend Growth: Volatile markets revive an old investing strategy by Kevin Feldman of iShares Blog

Lately I've been hearing a lot about the new dividend growth strategy: Simply buy the right blue chip stocks featuring rising dividends and youll be on the path to a more secure retirement. With regular headlines like Top 20 High Yielding Dividend Aristocrats and 10 Dividend-Paying Blue Chips for Your Parents, its no wonder Im hearing people at dinner parties buzzing about Coke (KO), J&J (JNJ) and P&G (PG) in a way that reminds me of my grandparents stacking up their stock certificates to keep up with dividend checks from these venerable value giants.

2011-07-28 Quarterly Commentary: 2nd Quarter by Steven Romick of First Pacific Advisors

We pay attention to the macro environment because it sometimes allows us to identify significant opportunities and, at other times, to avoid or limit catastrophic risk. We still find ourselves worrying today, particularly about unreasonable government budgets that have helped foster unmanageable burdens. Over the past three years we have witnessed a shift in financial obligations from the personal to the public (governments) that has done nothing to enhance the solvency of the overall system, although the optics appear favorable to some.

2011-07-23 Worried About the Future? by Kendall J. Anderson of Anderson Griggs

If you are worried about the current economic state of affairs you may be relieved by what research analysts are telling portfolio managers. First, they seem to be in agreement that businesses are doing fine, especially those that have a global market. Second, interest rates will be higher at some point in the future, and the majority of government debt is safe as far as the ability to pay interest on their borrowing. And most importantly, the earnings you should expect from your investments will be driven over time by the ability of companies to pay you with a little left over to reinvest.

2011-07-18 Matter over Mind by Herbert Abramson and Randall Abramson of Trapeze Asset Management

As the markets declined in the quarter, stocks became significantly oversold from the negative psychology resulting from the negative headlines. A mindset of fear. CNBC recently reported that investors were more concerned about the economy than at any other time during the past five years; a CBS poll found that 39% of Americans believe the economy is in a state of permanent decline. The mind can play tricks. But when perceived risk is so great it is typically reflected more than warranted in depressed share prices. The news doesn’t have to be good, just not as bad as everyone believes.

2011-07-12 Second Quarter Preserves First Quarter Market Gains: We're Still Above Water and Treading by Ron Surz (Article)

In his award-winning commentary, Ron Surz looks at how the US market performed and then how foreign markets fared. He concludes on a lighter note with a couple of videos that address key topics in the investment arena.

2011-07-05 The Chinese Black Swan by Vitaliy Katsenelson (Article)

Party rulers in China are trapped in a position that chess players deeply fear - zugzwang - where any move make puts you at disadvantage. In China, the cost of both action and inaction is potential economic collapse.

2011-06-14 What Fama and French’s Latest Research Doesn’t Tell Us by Michael Edesess (Article)

With the high name recognition and respect that the team of Eugene Fama and Kenneth French enjoys in the world of finance, anything they publish warrants attention. Their latest offering, Size, Value, and Momentum in International Stock Returns, offers some interesting data on global equity performance. But they fail to offer any insights that explain the reasons behind their findings.

2011-06-03 Can Less Deliver More? The Case for Concentrated Equity Strategies by Team of Emerald Asset Advisors

"Don't put all your eggs in one basket" is such a widely held notion within the financial services industry that it's almost blasphemous to suggest an investment strategy that questions this premise. But what if researching multiple baskets of stocks was too distracting and too much to manage? Could focusing your attention on a single, smaller basket of investment ideas produce better results? Some investment professionals-Warren Buffett among them-believe concentrated equity portfolios offer the opportunity for better risk-adjusted returns.

2011-05-11 Supreme Moment by Bill Smead of Smead Capital Management

Kairos - is an ancient Greek word meaning the right or opportune moment (the supreme moment). The world of value investing and portfolio management includes mean reversion and patience. Speculative episodes typically go on for much longer than expected. This fact forces us to take a stand by avoiding overvalued common stocks and owning undervalued shares. Everyone would love to make their adjustments at the “Kairos”. We believe that the greatest existing misallocation of capital in the world today is based on over-confidence in the uninterrupted growth of emerging markets.

2011-05-10 Howard Marks on the Human Side of Investing by Robert Huebscher (Article)

Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week.

2011-05-10 Howard Marks on the Human Side of Investing-Q & A by Robert Huebscher (Article)

Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week. Here are excerpts from the Q&A.

2011-04-29 FPA Crescent Fund Q1 2011 by Steven Romick of First Pacific Advisors

The optimists held sway in the first quarter of 2011 and ended the quarter on a good note, with the stock market having returned 5.9%. Crescent returned 4.7%, capturing 80% of the market’s return with risk exposure at just 58% of capital during the period. Two investments – Aon and Covidien – accounted for more than 10% of the Fund’s return in the period. No investment detracted from the return to that degree. The greatest negative impact in the quarter came from Microsoft (down 19 bps), a holding we have increased to take advantage of price weakness, given the current low expectations.

2011-04-26 Cerulli Survey Results: Advisor Use of Tactical Allocation by Tyler Cloherty (Article)

Advisors have increasingly turned to tactical allocation to manage client risk. While there has been abundant discussion on how this approach should be executed in theory, our survey results show what advisors are doing today in their practices.

2011-04-12 A Top Value Manager Looks Outside the US by Robert Huebscher (Article)

David Winters, manager of the Wintergreen Fund, began his career working for Max Heine, where Seth Klarman and Michael Price also worked. In this interview, Winter discusses the why he believes many of today's best opportunities are outside the US and how he is hedging against the threat of inflation.

2011-03-22 No Shortcuts to Greatness by Vitaliy Katsenelson (Article)

Nothing defined Alan Greenspan's tenure as chairman of the Federal Reserve Bank more than his wholehearted embrace of capitalism. According to a current Fed governor, however, both Greenspan's Fed and the Fed today have not been the stalwarts of capitalism that the Maestro believed them to be.

2011-03-15 Mason Hawkins and Staley Cates on Today’s Opportunities for Value Investors by Robert Huebscher (Article)

Southeastern Asset Management's Mason Hawkins and Staley Cates, two of today's most respected value investors, discuss their portfolio and the principles behind their Graham and Dodd methodology. They explain why they like certain commodity-based companies and why they disagree with Bruce Berkowitz on the opportunities in the financial sector.

2011-03-15 Running on Empty by Michael Lewitt (Article)

Despite the increasing undercurrent of negative news creeping into the financial markets, the stock market remains strong. HCM expects equities to continue to perform well for the foreseeable future (i.e. through the end of June) although most of this letter will discuss the reasons why it shouldn't. In some ways, this market is a lot like Charlie Sheen. It pretends to have tiger blood and the powers of a warlock, but deep inside it is suffering from an addiction to a substance (i.e. debt) that will ultimately kill it.

2011-03-15 Margin Shrinkage - It Can Happen to You by Vitaliy Katsenelson (Article)

Profit margins are a tick away from all-time highs and are creating the impression of cheap equity valuations. But that impression is a mirage, because today's generous margins are destined to shrink.

2011-02-23 Right Brains and the Dismal Science by Herbert Abramson and Randall Abramson of Trapeze Asset Management

It has been said that successful investors need to employ not only the left side of their brains which is the analytical or scientific part but also the right side which is the centre for creative thinking. Thats because much of investing has to do with the unpredictable, the down cards, variables about future demand, growth, political policy changes, psychological responses, weather, oil spills, and so forth. Value investors dont want to pay for the down cards, but want to buy so cheaply in the here, that there is little or no risk of losing, and the hereafter can take care of itself.

2011-02-23 Right Brains and the Dismal Science by Herbert Abramson and Randall Abramson of Trapeze Asset Management

It has been said that successful investors need to employ not only the left side of their brains which is the analytical or scientific part but also the right side which is the centre for creative thinking. Thats because much of investing has to do with the unpredictable, the down cards, variables about future demand, growth, political policy changes, psychological responses, weather, oil spills, and so forth. Value investors dont want to pay for the down cards, but want to buy so cheaply in the here, that there is little or no risk of losing, and the hereafter can take care of itself.

2011-02-09 Testing the Wisdom of Ben Graham’s Formula (part one) by Chuck Carnevale of EDMP

Ben Graham’s formula for valuing a company V* = EPS x (8.5 + 2g) established a solid foundation for future value investors to build upon. The small “g” in the formula represents your reasonably expected 7 to 10 year growth rate. Consequently, Ben Graham’s formula was forward-looking. In this article we looked at modern historical performance in order to test the validity of this famous value formula. Remarkably, the formula proves itself to being very precise when applied in the real world to businesses that grow earnings between zero and 5% per annum.

2011-01-02 Hangovers by Isbitts of Emerald Asset Advisors

The overhang of US unemployment, long-term inflation, and risks of temporary overheating in the Commodity and Emerging markets is a wicked one, so the best posture for 2011, and most years for that matter, is to be invested, but with a net to catch you when you fall. However, the longer out one looks, and the wider the breadth of investment themes one is permitted to consider, the more the truly dynamic secular investment opportunities become visible. The ability and willingness to see the "forest" over the ever-present "trees" is the best advice I can give you.

2010-11-30 QE2: Beware the Perils of its Success by Vitaliy Katsenelson (Article)

QE2 is like a drug prescription that comes with a list of side effects that are often worse than the disease it was supposed to cure. It is difficult to know the unintended consequences of QE2, but it may result in a substantial decline in the dollar, stagflation, lower economic growth and much higher interest rates.

2010-11-16 A Reading List for 2010: Part 2 by Vitaliy Katsenelson (Article)

Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections were presented last week and the remaining four are presented here.

2010-11-09 A Reading List for 2010 by Vitaliy Katsenelson (Article)

Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections are presented below and the remaining four will be presented next week.

2010-11-09 Keynesian Confusion by Michael Lewitt (Article)

Keynesian policies are inflicting untold damage on the U.S. and global economies today. Keynes did not have to be misread. The reason that the current recovery is below par is that the economy is experiencing a massive paradox of thrift. We doubt that reducing already low rates is going to stimulate much of anything other than more frustration on the part of savers. Sooner or later, everything being earned on the upside of this liquidity-induced rally will be given back in spades - the only question is when.

2010-10-05 Charles Brandes on Investing Lessons from Benjamin Graham by Dan Richards (Article)

In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the transcript of the interview.

2010-10-05 Charles Brandes on Investing Lessons from Benjamin Graham – Video by Dan Richards (Article)

In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the video of the interview.

2010-09-22 The Rule of 72 by Jeffrey Bronchick of Reed, Conner & Birdwell

The 'rule of 72' allows the lay investor to determine how long it will take for him to double the value of his investment. It is calculated by dividing the number 72 by the annual yield of an investment. For example, if one divides 72 by the current 10-year Treasury bond rate of 2.7 percent, the formula generates an output of 26.6 years to double one's money. Under almost any definition of an intelligent investment plan, that seems like a very long time. If you cannot earn a rate of return above the 3 percent after-tax cost of debt for 10 years, then you should quit.

2010-08-17 Letters to the Editor: Harold Evensky, et. al. by Various (Article)

Our letters to the Editor include three responses to articles in last week's issue from Harold Evensky of Florida-based Evensky & Katz.

2010-07-30 Core|Satellite Investing with First Eagle Funds by Team of First Eagle Funds

Many practitioners of core/satellite investing use the core of their clients’ portfolios to generate market-like returns with market-level risk exposure, or beta, and use satellite investments to produce excess returns, or alpha. Within this framework, passive investment vehicles — index funds and ETFs — have become standard core investments. First Eagle questions this approach, and believes an actively managed global portfolio should be the core.

2010-07-26 The Style Roulette and RAFI Strategy by Rob Arnott of Research Affiliates

The style merry-go-round (where value and growth are alternatively in favor) provides ample opportunity for investors to be their own worst enemy, even within the supposedly balanced broad market indexes. Make no mistake - cap-weighted index funds are stealthy returns chasers loading up on past winners. A simple periodic realignment back to financial size remarkably captures over 100 percent of a perfect style timing strategy in three major non-U.S. equity asset classes.

2010-07-22 Musings on Asia by Vitaliy Katsenelson of Investment Management Associates

The popping of both the Chinese and Japanese bubble economies will lead to higher interest rates. The Japanese government will probably not be able to intervene in the economy for much longer, and so rates in that country will rise and there will be little they can do about it. China's government, meanwhile, seems to be mulling another multi-hundred-billion-dollar stimulus over the next few months. The Chinese government's actions are thus the wild card that will determine the duration and the magnitude of the bubble's pop - the longer they intervene, the direr the consequences will be.

2010-07-06 Template for a Mid-Year Letter – Navigating through this Calamitous Decade by Dan Richards (Article)

It's always important for clients to feel they're being kept informed of what's happening in markets - but never more so than in markets like we've seen in the past few months. Dan Richards provides a template for a mid-year market commentary to clients, adaptable to your own opinions and circumstances, based on a recently rediscovered speech by Benjamin Graham.

2010-07-02 The Art of Outperformance by Niels C. Jensen of Absolute Return Partners

This month's letter is different. Our usual ramblings about the dire outlook for the global economy have been put aside for a while. Instead we focus on a couple of ideas for equity investors who have grown frustrated trying to beat the market - which is very difficult indeed. We do make some rather unflattering comments about active managers, but please note that these are specific to the equity space. In other, less efficient, asset classes, active managers often do much better than is the case in the equity world.

2010-06-10 April 2010 Commentary by Bill Middleton of Sound Portfolio Advisors

Perhaps the most encouraging signs in markets today are general pessimism and lowered expectations. Mass expectations tend to be dead wrong, and are therefore excellent contra-indicators. The first- and second-best performing asset classes of the past 10 years, gold and real estate, were so ill-regarded prior to 2000 they weren't even included in the data provided by the Wall Street Journal in January of that year. The best performing asset class for the 1995-1999 period, science and technology, was by far the worst performing for the following 10 years.

2010-06-01 Equity Income Targets Utilities by Philip Sundell, CFA (Article)

Natural gas local distribution companies are appealing utility business models to conservative equity investors. They tend to have stable earnings and stronger balance sheets. Philip Sundell of American Century Investments discusses his overall outlook for utilities in this interview. We thank American Century for their sponsorship.

2010-05-27 pricing glamour by tom brakke of the research puzzle

As investors, we must constantly monitor how much we are paying for glamour versus intrinsic value. You'll often hear debates about the relative merits of growth investing versus value investing; the lingo typically found in academic studies uses the terms 'glamour' and 'value' instead. Performance evaluations inevitably favor the latter strategy, because much of the glamour is really faux growth that is misidentified for a time. As prices vary for individual stocks and sectors, the rubber band of valuation is stretched here and there as the price of glamour fluctuates.

2010-04-25 Playing With Fire (A Possible Race to the Old Highs) by Jeremy Grantham of GMO

Is there a new bubble on the horizon in the US? Having shot through GMO’s fair value estimate of 875, Jeremy Grantham's first quarter letter asks whether current policies and conditions are pushing the S&P to approach its old highs. Included in the letter is a link to a video of an interview about investment bubbles, done with Jeremy by the Financial Times on April 19. The Letters to the Investment Committee XVI is part one of a speech given by Jeremy discussing the Potential Disadvantages of Graham & Dodd-type Investing.

2010-04-13 Investment Review by John K. Schneider of JS Asset Management

The great recession has ended and the recovery appears more robust than generally forecasted. The U.S. gross domestic product grew 5.6 percent in the fourth quarter, the fastest quarterly pace since 2003. The economic consensus forecast for 2010 of less than 3 percent growth is likely too low and we believe could be closer to 4 percent. While productivity generally improves after the end of a recession, the surge over the last three quarters of 7.4 percent was the highest in more than 30 years. This is yet another sign that corporate earnings leverage will be great.

2010-02-24 What is 'Growth' Investing? by Alexander M.V. Motola of Thornburg Investment Management

Growth investing focuses on stock purchases in companies that are growing either in excess of GDP growth or fast-er than the "average." Some growth investors feel that valuation matters little or not at all, and that the rapid growth and success of the company insures good investment return. Growth investing, however, is joined at the hip with value investing, and must be combined with valuation, intensive research, modeling, company visits and common sense.

2010-02-12 The Forgotten Benjamin Graham by Kendall J. Anderson of Anderson Griggs

Kendall J. Anderson of Anderson Griggs says in his monthly letter that the lessons of security analyst Benjamin Graham still apply today: Judge the risk of holdings independently of market volatility, and balance portfolios evenly between stocks and bonds.

2010-02-12 Insights from CM Analyst Conference Part II by Tom Wu of Franklin Templeton

Tom Wu of Templeton Asset Management says the emerging markets of Turkey and Hungary may offer opportunities for rapid growth. Turkey has built its foreign exchange reserves to $70 billion, while the MCSI Hungary Index posted 78 percent returns in 2009. Wu notes, however, that these opportunities for growth come with higher risks.

2010-02-09 China’s Quest for a Shortcut to Greatness by Vitaliy Katsenelson (Article)

The Chinese economy must be getting out of control, because the Chinese government is doing the unthinkable: It is desperately trying to put the brakes on its economy. Author and fund manager Vitaliy Katsenelson looks back at how China got into this trouble and looks forward to China's prospects.

2010-02-08 Tweedy Browne: Cautious in the Short Term, Optimistic in the Long Term by Team of Tweedy Browne

Robert Huebscher recaps a recent webinar by investment firm Tweedy Browne. The company's four managing partners explained their focus on downside risk, expressed a preference for high-quality dividend-payer stocks and noted their emphasis on developed markets rather than emerging markets. The partners said they were optimistic about recovery in the long term, but cautious about the short term.

2010-02-02 Bonds for the Long Run by Jeffrey Bronchick of Reed, Conner & Birdwell

RCB is a classic value-based investor. They note that the 2009 rally has left them with fewer buying alternatives. However, they state, "equities as an asset class will outperform investment grade bonds of almost any stripe over the intermediate and longer term using January 2010 as our starting point…” They believe equities are valued “to do okay,” since 2009 and 2010 earnings do not represent a “normalized” environment. “Moving forward, the real fun in 2010 will be how investors react to the possibility of higher interest rates driven by a stronger than expected economy.”

2010-02-02 Who will Pay for the Burlington Acquisition? by Vitaliy Katsenelson (Article)

According to investment manager Vitaliy Katsenelson, Warren Buffett overpaid in Berkshire's acquisition of Burlington Northern. He states, "Though I agree with Buffett's assessment of the Kraft-Cadbury deal, I fear that investors and media are completely ignoring Berkshire's own, $30-billion-plus acquisition of a very cyclical, capital-intensive, not terrifically high-return-on-capital business - Burlington Northern."

2010-02-02 More Government in the Financial Sector to Save Capitalism by Vitaliy Katsenelson (Article)

In this article, Vitaliy Katsenelson argues that, despite his free market bias, the "too big to fail" banks will benefit from tighter regulation.

2010-01-29 Quarterly Letter by Jeffrey Erber of Grey Owl Capital Management

Jeff Erber says the S&P is now 20-30% overvalued, but “with a no-end-in-sight loose monetary policy this rally could continue for quite some time. “ He discusses his firm’s investment process and add

2010-01-19 John Cochrane on the Dangers of Current Economic Policies by Dan Richards (Article)

John Cochrane is a professor of finance at the University of Chicago and the incoming president of the American Finance Association. Cochrane is also author of the widely-circulated article, How did Paul Krugman get it so Wrong?. In this interview, Cochrane identifies the shortcomings and dangers of current economic policies.

2010-01-05 Perspectives on 2009 and Beyond by Ron Surz (Article)

We are again privileged to provide Ron Surz' award-winning market commentary. Surz examines global performance in Q4, 2009 and the prior decade.

2009-12-29 The Top 10 Articles You Didn’t Read (But Should Have) by Robert Huebscher (Article)

We closely monitor which articles draw the most readership. This allows us to fine-tune our content to the preferences of our audience. Reflecting on those articles that were most popular over the last year, however, we believe other articles also deserved your attention. We provide the "Top 10" articles you didn't read - but should have.

2009-12-15 Investing in Range-bound Markets by Vitaliy Katsenelson (Article)

Vitaliy Katsenelson, a frequent contributor to these pages, reviews his thesis for secular market cycles, why the US markets remain locked in a range-bound state, and what it will take for them to exit from that state.

2009-12-08 Dubai’s Moon Shot by Vitaliy Katsenelson (Article)

Dubai is like NASA; both have proven that anything is possible when you ignore economic costs. As Vitaliy Katsenelson writes, many technological discoveries were made in the process of putting a man on the moon; but the project did have, and was expected to have, a negative return on capital.

2009-11-17 Bruce Greenwald on Positioning First Eagle’s Funds by Robert Huebscher (Article)

Bruce Greenwald is a professor of finance at Columbia, the Director of Research at First Eagle Funds, and a leading expert on value investing. Last week we published part one of our interview, where he discussed the structural problems in the economy and his forecast for higher unemployment. This week he discusses the positioning of First Eagle's investments, and why Warren Buffett's purchase of Burlington Northern was a mistake.

2009-11-17 Our Steroidally Challenged Economy by Vitaliy Katsenelson (Article)

Vitaliy Katsenelson writes that the US economy is like a marathon runner who, after suffering an injury, takes steroids in order to return to racing. His performance is fine, but what don't see are the risks, just as our economy is now "steroidally challenged."

2009-11-10 Bruce Greenwald on Structural Problems in the Economy and Unemployment by Robert Huebscher (Article)

Bruce Greenwald is a professor of finance at Columbia University, the Director of Research at First Eagle Funds, and perhaps the foremost expert on value investing. In part one of our two-part interview, he discusses the structural problems facing the economy, the parallels to the Great Depression, and the implications for the unemployment rate.

2009-11-03 The Best Books on Investing by Vitaliy Katsenelson (Article)

Author and fund manager Vitaliy Katsenelson provides us with his list of the best books on investing. It contains six sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, and Books for the Soul.

2009-10-13 Michael Moore – Take This! by Vitaliy Katsenelson (Article)

Vitaliy Katsenelson doesn't do movie reviews, and he hasn't watched Michael Moore's previous movies. But when a Denver Post reporter invited him to a private showing of Moore's latest flick, "Capitalism: a Love Story," its subject matter enticed the Russian-born author to check it out, and he has a few choice words for Moore and his anti-capitalistic views.

2009-09-15 Five Reasons to Avoid the Gold Rush (Updated) by Vitaliy Katsenelson (Article)

The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known. However, in this guest contribution, Vitaliy Katsenelson offers arguments why one should think twice before jumping in bed with the gold bugs, or at least remain sober while determining gold's weight in the portfolio.

2009-08-25 Beating a Dead Dragon by Vitaliy Katsenelson (Article)

The last thing you may want to read is another article about China - how many ink cartridges have been exhausted writing about its phenomenal growth numbers in the past decade? - but what Vitaliy Katsenelson has to say may surprise you: China's economy is hardly as vibrant as everyone thinks it is.

2009-07-14 Billie Jean, YOU are the One by Mariko Gordon (Article)

Michael Jackson's Billie Jean wasn't the first to make headlines. Back in 1973, Billie Jean King moved the sports world a big step forward ... a step that the financial services industry is still waiting to take. Guest contributor Mariko Gordon of Daruma Asset Management explains why our overwhelming male-oriented industry necessarily leaves investment returns on the table.

2009-06-16 Peter L. Bernstein Remembered by Robert Huebscher (Article)

The investment industry lost one of its leaders last week, when Peter L. Bernstein passed away at the age of 90. As an author, Bernstein provided clarity and insight to our understanding of risk and the way markets operate, through his books and his newsletter, Economics and Portfolio Strategy. We are republishing our interview with him last January, when he foresaw many of the elements of the current crisis.

2009-02-10 How to Think about Investment Returns by Adam Jared Apt (Article)

Adam Apt provides the third article in his series intended for the educated layman, addressing the question of how to think about investment returns. What matters for the investor is the total package, the entire portfolio. A change in one component of the package, considered in isolation, often matters very little, unless it is indicative of something systematic.


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