The_Value_Investor

What the Really Smart Money Is Buying

Yes, those guys are great investors, but remember Swenson is managing an endowment fund, he isn't trying to jump through 1,000 tax loops/problems like the rest of us, and his investment horizon is much longer than ours b/c people aren't pulling money from the endowment. I'm a value investor through and through, truth is when I look at forward earnings, there aren't many great opportunities from a value perspective. Value occurs when something is beaten down without reason or from fear. If companies/economies are truly not going to earn what was consensus, they aren't necessarily "cheap". That being said, I'm very short treasuries, b/c yields can only move in one direction. I'm also a big fan of non investment grade bonds and credit in generally which i think is priced for a complete fallout.

Is America on a Downward Slope?

Great article. However, remember Clinton balanced his budgets by drawing down on Social Security. If you don't believe me, look at the congressional library. I don't personally have a political affiliation. My views are shaped by what is said and done. I find the congressional library and senate minutes are the best place to form views. Completely un-skewed by the media.

How Times Have Changed: S&P 500 Includes Smallcaps and Microcaps

Good point. This actually doesn't surprise me much at all. Publishing, retail and financials are dominating this list, 3 sectors that have been hit upside the head again and again and again for the past 14 months.

5 Keys to Value Investing Profits

Great write-up! Both comments above have nothing to do with value investing!

Patience really is a virtue in investing, often times when you have people such as investors to answer to you can't hold things as long as you want due to many investors and managers short-term focus. I bought Walter Industries(WLT) in June of 2007 for $32/sh. Despite managements near term shaky outlook I held it as shares plummeted to $23 as Pirate Capital sold out of it. By exercising patience I was able to enjoy the upward ride when Cerberus bought in along with many other investors. I sold it in May of 2008 around $80, before the peak but still more than double my money in less than a year b/c of patience.

Rebalancing is a tricky question. I prefer bottom up analysis so I don't tend to rebalance as often as others by letting good buys determine my mix rather than the broader markets views.

I also am a huge believe in consistency. Throughout the 90's everyone hated value guys. They weren't getting the #'s that growth and tech guys were, but in the long run, value wins out, and managers that tried to let the markets dictate their style lose out. Stick to what you know, don't back down.

And do make sure you know what cheap is.

Easing Inflation Gives Fed More Room to Cut Rates

More room to cut? Do you want a liquidity trap? or hyper inflation from the need to excessively print money?

This Recession Should End in June

I think everyone is missing a key point here. Because of self-fulfilling prophecies the Fed, Govt, NBER et al. are not able to state "We might be in a recession" if they are not 100% sure! This would completely spook the public and with a 100% chance lead to a prolonged recession. The bottom line is that all of the aforementioned groups are a great place to gather information, do your own analysis and postulate your own opinions. Personally, my guess is that the recession started in December of 2007, housing will bottom and experience a U rebound sometime in late 2009. If we are lucky we will see growth in 2H 2009.

Valuing Stocks During a Recession

Nice POV, I think ANF is a fairly bold call though, huge fashion risk, cyclical sector, expensive retailer. I too think stocks are cheap, but I tend to stay away from the retailers that have fashion risk, one name I have always liked in retail is TJX with the off price retailing and same seasons buy/sell they are always selling "fashionable" clothing, buying it on the cheap and keeping a bare bones storefront which keeps costs low. Not to mention, TJX carries ANF & Gap et al, which in these generally tough economic times can lead to shoppers "shopping down" at TJX, Marshalls etc. They are seeing a value proposition for their hard earned dollars. I will also disclose that I have been long TJX since April 2007. I think the comment above about the charts while a valid one, might not apply here, technical analysis and value investing couldn't be more polar opposites. As a value investor I can honestly say I hardly ever look at price charts.

Labor Markets Face Slow Recovery

These last 2 recessions have bucked the previous trend for one reason; technology. Particularly after the last recession where computers were on virtually everyone's desk. Peak unemployment actually occurred after the bottom of the economy. As technology has improved workers productivity it has simultaneously reduced the need to quickly hire coming out of an economic downturn.

Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor?

We changed our economy to a war economy during WW2 and we've pretty much had once since!!!! and Yes this problems did start under Clinton...I am not defending the Bush admin, but Clinton wanted everyone to have a home and his congresses w/ Dodd began to encourage more lending with less standards...go educate yourself with some time in the congressional library...it's a great site to sift through nonobjective reporting.

11 Stocks Selling Below Cash

There is no short cut. As noted above, this is a good place to start. You need to make adjustments for receivables, inventory, debt, off b-s agreements et al. and a note about excel junkies. I agree, don't trust quants but I feel it's more programmers and mathematical "geniuses" that you don't want to trust. An excel junkie can build a great model and still use human judgment. Remember that no matter how great or dynamic your model is, and how many macros you write to make it "think" it cant be as qualitative as a human. Investors with sound track records analyzing the fundamentals of firms and assets will prevail as they always have. Where is Ben Graham when we need him?

Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor?

The Democrats MUST bailout the Big 3 or they will lose MI, KY, NC & VA votes for many years to come. They will lose blue collar Dems and they can't afford that. At the same time the nation can't afford to bail them out either. The BIG 3 sealed their own fate when they were given subsidies in the 70's and instead of innovating created the SUV. There are 2 fundamental problems with the Big 3 in my mind. and they could be saved if one of them were changed. 1.) underfunded pensions due to strong labor unions 2.) vehicles with less curb appeal and reliability than competition. Innovation take time, so that fix is out of the question. So that leave these huge pensions and labor unions...well, President-elect Obama along with Biden co-authored a bill to strengthen labor unions so we know that can't happen. That leaves us with a bailout, a big bailout. On the other hand, if we don't save them and all the jobs are lost, we make the recession worse. It's almost if we are damned if we do, damned if we don't.

When Did the Recession Begin?

I like that we are seeing more and more people state the popular definition of a recession is the wrong definition. I feel the recession began last December. Holiday sales were weak, housing (20% give or take of GDP) was free-falling and confidence was low. Almost every bank had admitted there would be losses and the economic conditions would weaken. I don't think that those Q1 & 2 numbers matter as much b/c there is an economic stimulus built into that. I think the reason that everything has gotten so bad is not the bets people made (which were stupid) but people's lack of ability to see the tidal wave coming until it was 100ft high. David Rosenberg was one of the first people to talk about a slowdown that would start with housing and spread to credit markets as peoples home began to accumulate negative equity. I don't have it in front of me but I believe that was Q2ish if 2007.

Paul Krugman + Al Gore = The Way Forward

Give me a break, Al Gore and Krugman. If you want to talk about revisionist history you should look back not to the right-wing but the left wing and the education or lack there of in American schools; not to mention the obviously left leaning publication which you pulled these pieces from. By the way your prized environmental savior Gore has a carbon footprint much larger than that of the average American; I see he is doing his part. As noted above, capitalism will fully embrace the most efficient method for solving these problems. If you still aren't concerned, remember what happened last time we gave academics a huge amount of money back in 1994, oh yeah, LTCM & their hubris almost blew up every major bank!