April - June 2014 articles archive home
From Andrew Wheatley-Hubbard
Edited extracts of a conversation with Andrew Wheatley-Hubbard, Co-Manager of BlackRock’s Global Equity Income Fund:
Monday, June 30, 2014 ... more
When you have to make a choice and don’t make it, that is in itself a choice. - William James
Friday, June 27, 2014 ... more
From Frank Martin
Prices are at levels from which downside surprises are far more likely than upsides ones. Overlaid on those risks is an environment characterized above as one of “fat tails.”
Thursday, June 26, 2014 ... more
How ...
... the giant sucker’s game works, or how buybacks distort expectations, valuations and mislead investors.
Wednesday, June 25, 2014 ... more
Over several decades...
…at Merrill Lynch & Co., Bob Farrell had a front-row seat to the go-go markets of the late 1960s, mid-1980s and late 1990s, the bear market of 1973-74, and October 1987’s crash.
Tuesday, June 24, 2014 ... more
Keep it simple
As decision makers, we simplify, misunderstand, lack ability, miscalculate, forget, and make evaluations of alternatives that depend on seemingly irrelevant details about how a problem is framed.
Monday, June 23, 2014 ... more
Need to adapt
Some people think hard work is the key to success. Others think it's determination. Some are convinced its education. Or genetics. Napoleon believed in luck.
Friday, June 20, 2014 ... more
Talking to management
"Unlike most investors, we steer clear of meeting with management," says James Montier, "for two essential reasons: to reduce the emotional aspects of investment decisions and to avoid the short-term outlook that often underscores earnings guidance."
Thursday, June 19, 2014 ... more
Wishful thinking
We often hold beliefs just because they're what we desire to be true, despite reality or evidence to the contrary. There's no doubt we have the power to make some desires come true, but the markets are more powerful than all of our desires and wishes.
Wednesday, June 18, 2014 ... more
Picture the world …
… through the eyes of the jerk. The line of people in the post office is a mass of unimportant fools; the flight attendant couldn’t possibly have her own cares and struggles; custodians and secretaries are lazy complainers; the person who disagrees with you at the staff meeting is an idiot.
Friday, June 13, 2014 ... more
In a rational world ...
... we would all go around gathering the evidence, and then evaluate it and weigh it before reaching a decision. However, real-world behaviour is a long way from the rational viewpoint.
Thursday, June 12, 2014 ... more
Simple suggestion
Investors generally overestimate their ability to see the future, and the worst of them act as if they know exactly what lies ahead.
Wednesday, June 11, 2014 ... more
From Benjamin Graham
The concept of earning power has a definite and important place in investment theory. It combines a statement of actual earnings, shown over a period of years, with a reasonable expectation that these will be approximated in the future, unless extraordinary conditions supervene.
Tuesday, June 10, 2014 ... more
Ruminations on the EMH
It seems to me that those who disavow the Efficient Markets hypothesis (EMH) misunderstand its significance: what they reject is not the hypothesis, but an extreme caricature, which is interpreted simplistically to mean that the current market price of anything is the ‘right’ price, always and everywhere.
Monday, June 9, 2014 ... more
Some men ...
... fail from knowing too little, but more fail from knowing too much, and still more from knowing it all.
Never ask a man what he knows, but what he can do.
Friday, June 6, 2014 ... more
How concentrated?
A large number of investors unquestioningly embrace concentration. Some are quite comfortable holding only 2 - 3 stocks in their portfolios with a 50-70% exposure to a single idea.
Thursday, June 5, 2014 ... more
You’ve …
… come up with a way to beat the markets. You found it after thirty straight hours of programming. You haven’t slept more than a couple of hours a night since you came up with the idea. ‘Cause you just can’t stop thinking about all the money you’re going to make.
Wednesday, June 4, 2014 ... more
Casually incompetent
In most serious undertakings, the barriers to entry rise and fall with the complexity of the task. No one becomes an airline pilot merely by pinning a pair of plastic wings to his lapel.
Tuesday, June 3, 2014 ... more
So, what you gonna do?
Given how long and how hard its run, if the market was your friend this would be a good time to suggest it take a breather. But the stock market is not your friend, and perhaps you should start planning for that inevitable moment when it stops running.
Monday, June 2, 2014 ... more
What Sherlock didn’t know
Clearly there are some explanations which are worse than no explanations at all. Yet we don’t seem comfortable living with the unaccountable.
Friday, May 30, 2014 ... more
Of course …
… stock options often go to talented, value-adding managers and sometimes deliver rewards that are perfectly appropriate. But when the result is equitable, it is accidental. Once granted, the option is blind to individual
Thursday, May 29, 2014 ... more
Passive is best
All of the arguments against the efficient market hypothesis, in my opinion, are bogus. They confuse efficient markets with rational markets. To show that the markets are inefficient, you have to show that you can exploit these anomalies on a persistent basis.
Wednesday, May 28, 2014 ... more
What works
Most investments in Tweedy Browne portfolios have had, and continue to have, at the time of purchase one or more of the following characteristics:
Tuesday, May 27, 2014 ... more
Why not get out now?
You won’t see it coming, so why not get out now?
Analysts on Thursday poured cold water on fears of a bubble forming in South Africa’s stock market … a short-term correction and more muted returns may be on the cards. But a crash, or even a return to a bear market, was ruled out.
Monday, May 26, 2014 ... more
Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty.
Friday, May 23, 2014 ... more
Extracts from two non-investment books that should get investors’ mind twirling.
Thursday, May 22, 2014 ... more
Business lessons...
...from Jeff Bezos that investors might want to keep in mind:

“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people.
Wednesday, May 21, 2014 ... more
A short introduction
A short introduction to Investing from AboveTheMarket.com:

“Investing successfully is really hard.” (Tadas Viskanta). # Manage risk first. # “In the shorter-term, markets are voting machines; in the longer-term, they are weighing machines.” (Warren Buffett).
Tuesday, May 20, 2014 ... more
Good news & warnings from San Diego
“The world is rapidly changing,” former Speaker of the House Newt Gingrich told a crowd of over 600 investors at the Altegris Strategic Investment Conference in San Diego last week, “and that’s going to drive innovation in ways we can’t currently understand.”
Monday, May 19, 2014 ... more
Success – what it takes
When young, we’re anxious – understandably – to find out if we’ve got what it takes. Can we succeed? Can we build a viable life for ourselves?
Friday, May 16, 2014 ... more
Losses close ...
... to retirement have a dramatically disproportionate impact on retirement income portfolios. As so often happens, the risks are greater than we tend to appreciate. This is pretty much the conventional wisdom.
Thursday, May 15, 2014 ... more
Market commentators
From Barry Ritholtz: market commentators’ incentives and biases:

Bulls and bears. Investment posture is usually determined by the most recent activity. Someone who just bought stocks is bullish on the markets; someone who just sold is bearish.
Wednesday, May 14, 2014 ... more
David Merkel …
… runs an asset management firm in the U.S. called Aleph Investments. He recently wrote a piece on The Aleph Blog in which he looks at the importance of learning to live with doubt - which he sees as the hallmark of a good investor.
Tuesday, May 13, 2014 ... more
Sell in May?
“Sell in May and go away” is a market adage that causes much chatter at this time of year. May supposedly marks the beginning of the sixth-month period that has historically underperformed.
Monday, May 12, 2014 ... more
From Kenneth Roman …
… adaptations of David Ogilvy’s views on leadership:

On corporate culture: "We abhor ruthlessness. We like people with gentle manners. We admire people who work hard. We despise and detest office politicians, toadies, bullies and pompous asses. The way up the ladder is open to everybody."
Friday, May 9, 2014 ... more
... to the Hyper-Meritocracy,” Tyler Cowen writes in his book Average is Over. On one hand many people are “seeing the erosion of their economic futures.” On the other hand, “the very top earners, who often have advanced post secondary degrees, are earning much more.”
Thursday, May 8, 2014 ... more
A moat is, for all intents and purposes, the same thing as having tangible assets on the balance sheet that could be liquidated.
Tuesday, May 6, 2014 ... more
Why you can't be great
In 2007, Mark Sellers the founder of Sellers Capital, before that Lead Equity Strategist for Morningstar, told a class of Harvard MBAs that there are at least seven traits shared by great investors “that are true sources of advantage because they can’t be learned once a person reaches adulthood.”
Monday, May 5, 2014 ... more
We all know …
… that if something sounds too good to be true, it usually is. So why when we come across those ‘infomercials’ that promise to reveal “the secret cures ‘they’ don’t want you to know / how to get out of debt/make a fortune” we can still get sucked in?
Friday, May 2, 2014 ... more
James Altucher …
… in Altucher Confidential shares some of the lessons he’s learnt running a hedge fund for 15 years – albeit with limited success.
Wednesday, April 30, 2014 ... more
And God said ...
... "Let Us make living creatures out of mud, so the mud can see what we have done." And God created every living creature, and one was man. Mud as man alone could speak. "What is the purpose of all this?" he asked politely.
Friday, April 25, 2014 ... more
The CEO letter…
… inside every annual report is an underutilized way to tap into management's thinking. When studied in sequence over a period of several years, these letters can reveal many clues into a company's strategy, values, and ability to meet stated goals.
Thursday, April 24, 2014 ... more
…you looked at buying a share but eventually decided against it. A short while later it doubled in price and not long after that turned into a multi-bagger. Would you regret not having bought?
Wednesday, April 23, 2014 ... more
We all love to know why ...
the reason that things happen. But market participants that are overly keen to find the why of an outcome run the risk of jamming square pegs into round holes. Markets are an insanely complicated machine prone to a range of common misunderstandings.
Tuesday, April 22, 2014 ... more
A collection...
...of one-liners - that may or may not be true.

The worst thing that can happen to a new investor is to make money on his first trade; he’ll think it’s easy.

The most important thing about a stock is that the price goes up.
Thursday, April 17, 2014 ... more
The swimmer's body illusion
If we knew we were predisposed to be good (or not) at certain things, we wouldn’t buy into ads that promise to improve our skills in areas where we’re unlikely to excel.
Wednesday, April 16, 2014 ... more
From Warren Buffett
You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well.
Tuesday, April 15, 2014 ... more
Why's not important
Our understanding of objective reality is at best tenuous. At its worst, our beliefs reflect a completely erroneous viewpoint, one that is as comforting as it is misleading.
Monday, April 14, 2014 ... more
You can't too soon make it a rule to invest only on your own know and never on somebody else's say so. You may lose some profits by this policy, but you're bound to miss a lot of losses.
Friday, April 11, 2014 ... more
…a term used by Peter Lynch to describe a stock that more than doubles in value. His explanation: "You want as many 'baggers' as you can get in your portfolio; that's all you need to know!"
Thursday, April 10, 2014 ... more
A sunk cost...
…refers to a cost that has been paid and cannot be recovered. A payment (of time or money) that has gone forever
Wednesday, April 9, 2014 ... more
When investors…
…are thinking about how much they’re paying for a company, they tend to think in terms of a multiple of earnings (profit) per share, the PE ratio.
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Tuesday, April 8, 2014 ... more
Only beliefs
Facts and beliefs rule the markets but produce different effects. A fact affects everyone in the same way, regardless of what they believe. Facts are things that are.
Monday, April 7, 2014 ... more
Cultural legacies…
…are powerful forces. They have deep roots and long lives. They persist, generation after generation, virtually intact, even as the economic and social and demographic conditions that spawned them have vanished
Friday, April 4, 2014 ... more
Casually incompetent
“Any normal person using the customary 3% of their brain can pick stocks just as well, if not better, than the average Wall Street expert,” Peter Lynch famously claimed.
Thursday, April 3, 2014 ... more
A Q&A...
...with Humphrey Neill (with answers from The Art of Contrary Thinking).
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Wednesday, April 2, 2014 ... more
What & where
When Charlie and I buy stocks we first have to decide whether we can sensibly estimate an earnings range for five years out, or more.
Tuesday, April 1, 2014 ... more
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