Yesterday, the stock market tanked as Treasury Secretary Geithner outlined his financial stability plan. Blogger Felix Salmon noticed the mirror image:

“I like the symmetry here. On November 21, when Barack Obama announced that he was nominating Tim Geithner to be his Treasury secretary, the Dow rose 494 points and broke through the 8,000 barrier. On February 10, when Geithner gave his first major speech as Treasury secretary, the Dow fell 273 points and broke through the 8,000 barrier.”

President Obama spoke about the economy last night. I am not a political commentator, so I may not be able to correctly score the politics of the fight.

The President began by painting gloomy word pictures of a Depression – without actually using the “D” word:

Janet Tavakoli’s Dear Mr. Buffett is an unusual amalgam of a simple, personal story and a complex, public one.

A listener asks...

1. Mohnish Pabrai is about as close to mimicking the Buffett partnership as there is out there right now. What are your thoughts on his recent change in approach to diversification? I understand that he's still remaining concentrated, but he has made a fairly drastic change from just a year or two ago.

Warren Buffett is getting a lot of criticism for a big blunder. He sold put options on four stock indexes – including the S&P 500.

Buffett described these derivatives in his 2007 letter to shareholders:

Warren Buffett is best known for his work at Berkshire Hathaway (BRK.A) where he grew book value per share 21.1% a year over the last 42 years.

But Buffett was a money manager long before he was a CEO. He earned his super-investor stripes by running an investment partnership. Buffett Partnership Ltd. beat the Dow every year from 1957 to 1969, never had a down year, and posted annual returns of 29.5% a year. The Dow managed just 7.4%.

John Maynard Keynes was a genius. We can all learn from his example. And the first thing we should learn is to end our foolish love affair with his ideas.

Keynes would not have spent his days warming up some dead man’s leftovers. Keynes would have understood the importance of all we have learned in once disparate fields and what this means for macro-economics.

Go to 24/7 Wall St. and read great coverage of the Microsoft (MSFT) earnings call.

Here is what I wrote about Microsoft in May of 2006:

I haven’t posted in a while and thought I might begin with some random thoughts.

Rick Konrad of Value Discipline has posted after a (similarly) long absence. Value Discipline is one of the best investing blogs. If you’ve never read it - start now.

It might not feel like it, but yesterday marked the Dow’s return to normal.

Normal valuations that is.

I wrote a response to Jason Zweig’s column on Ben Graham and bank stocks. Now, Tom Brown of Bankstocks.com has done the same. I have to admit, Tom’s article is better than mine. Both take Zweig to task for his explanation of why Ben Graham wouldn’t be a buyer of bank stocks today. However, Tom’s post does a better job of presenting the opportunities and challenges in analyzing bank stocks:

Zweig’s premise seems to be that no one inside or outside a financial services company can ever reasonably value the institution’s assets--particularly if the assets are secured by real estate at a time when real estate values are declining on average. The stock’s valuation? Irrelevant. Investor sentiment? Beside the point. Rather, Zweig sees the companies as no more than black boxes. By his logic, Graham-style investors (as opposed to speculators) would never own these companies. But we know as a matter of fact that that is not true.

The introduction to Security Analysis is a treasure trove of Grahamian thought. It is impossible to fully plumb the depths of this Grahamian gold mine in a single post. Therefore, I have separated my comments into two posts. This post explores the opening paragraph of the introduction with special attention to Graham’s style.

We should begin with the most general point made in Graham’s introduction: It is impossible to completely separate analysis and action, theory and practice. Therefore, while the title of Graham’s book is Security Analysis, the scope is necessarily wider:

Geoff Gannon

Yesterday, I scampered off (virtually) to Amazon.com, found Don Keough's new book, and clicked the “Buy Now” button.

There are two recent pieces on morality and credit worth reading. One is written by David Brooks; the other by Jim Grant.

Brook's piece is good; Grant’s is better. Brooks takes the matter as far as he can. He sees the importance of the everyday examples that constitute a culture; but fails to see the overwhelming importance of incentives – incentives that have been both perverse and pervasive throughout the third millennium.

Jeff Annello, author of Circle of Competence, is a young and learning investor not yet out of college. He derives his investing framework from Superinvestors ranging from Ben Graham and John Maynard Keynes to Joel Greenblatt and Eddie Lampert. Jeff believes the most effective approach to investing is that of a business owner and entrepreneur looking for misunderstood businesses selling very cheaply with little risk of capital impairment.

• Visit Circle of Competence

1. Are you a value investor?

Note: My continuing weekly commentary on Benjamin Graham’s 'Security Analysis' is being bumped for this roundtable; the commentary will appear here tomorrow morning. Sorry for the inconvenience.

This is a new format for Gannon On Investing – a pseudo-roundtable, where the same questions were posed to different bloggers simultaneously (via email). In this first post, we have answers from the authors of four of my favorite blogs: Fat Pitch Financials (George), Cheap Stocks (Jon), Bill Rempel (Bill), and Controlled Greed (John). 

This book is intended for all those who have a serious interest in security values. It is not addressed to the complete novice, however, for it presupposes some acquaintance with the terminology and the simpler concepts of finance. The scope of the work is wider than its title may suggest. It deals not only with the methods of analyzing individual issues, but also with the establishment of general principles of selection and protection of security holdings. Hence much emphasis has been laid upon distinguishing the investment from the speculative approach, upon setting up sound and workable tests of safety, and upon an understanding of the rights and true interests of investors in senior securities and owners of common stocks.

(Preface to the First Edition)

According to this post at Seeking Alpha, Whitney Tilson is short Hanesbrands (HBI). I mentioned Hanes (which was then my favorite stock) during a "roundtable" discussion on October 20, 2006:

However, there are many situations (and here is usually where you find some bargains) where the EV/EBIT measure is not the most useful. When I can predict a high free cash flow margin with confidence, I use a very long-term discounted cash flows calculation. For instance, this is what I would do with HanesBrands (HBI), which was recently spun-off from Sara Lee (SLE). On an EV/EBIT basis, it may not look cheap. But, looking truly long-term, I'm convinced the intrinsic value of each share is much closer to the $45 - $65 range than the roughly $23.00 a share at which it now trades. But, that's a special case – Hanes is a special business.