Before I finish up with a longer post I’ll get to tomorrow, I thought I’d relay a few good articles on the financial crises:
$700 Billion Bailout Celebrated With Lavish $800 Billion Executive Party
The Onion’s 2008 In Review: The Economy
And this: (not too far from the truth)
http://www.theonion.com/content/themes/common/assets/videoplayer2/flvplayer.swf
In The Know: Should The Government Stop Dumping Money Into A Giant Hole?
A few good articles on the Freakonomics blog:
Phil Gordon Answers Your Poker Questions / Great interview with poker pro Phil Gordon where he talks about randomness, psychology and the future of card playing.
Not-So-Free Ride: The trouble with negative externalities / On creating better-aligned incentives to deal with the effects of cars and the environment/costs to society. Perhaps some good suggestions for Buffett’s GEICO subsidiary.
This article by Sanjay Bakshi courtesy of Reflections on Value Investing explores the sunk-cost fallacy and the endowment effect. Both good heuristics to be aware of when making decisions.
Death, Taxes, and Reversion to the Mean / Michael Mauboussin’s latest paper on reversion to the mean – why high return on capital can’t stay high forever – incorporating reversion to the mean in DCF valuations – “Good to great” and “Great to good”.
I came across Shahin Khezri’s blog a few days ago, and really enjoyed his post “Lessons From Ted Williams“. Shahin talks about Buffett’s comparison of the stock market to baseball. The market throws thousands of pitches a day, but you must decide which to swing at and which to let fly by. The difference between an investor and a baseball player is that the investor never has to swing. Great investors like Buffett don’t swing very often, even if the ball is in the strike zone. They wait for the obvious ones—the fat pitches—that can be hit out of the ballpark almost every time.
Reflections on Value Investing points readers to Authors@Google – a series of talks with respected authors hosted by Google. I’ve only watched the talk with George Soros (which was very good), but many of the other talks look interesting. See also my post on the TED Talk Videos.
Some interesting reading material for the holidays:
Rough Rider / This New Yorker article is a month old, but if you haven’t read it yet I strongly recommend it. Connie Bruck profiles Sam Zell and his history of contrarianism and buying assets on the cheap. Zell has quite a personality, and I think that any investor, businessman or entrepreneur can learn a lot from him.
Be Prepared for A Lot of Bumps / An interview in Fortune with John Bogle. Bogle talks about current market conditions, his favorite CEOs, “Nobody knows nuthin’,” and his biggest mistake.
Valuing Western Sizzlin / George of Fat Pitch Financials goes over a detailed valuation of Western Sizzlin (::yahoo(“WSZL.ob”,”WSZL”)::). He concludes that buyers of WSZL are getting the investing skills of Sardar Biglari (a great value-oriented fund manager) for a very cheap price. I would also add to George’s analysis that WSZL also has a new fund management business, that although hard to quantify now, should be very lucrative in the future.
There’s No Money In The Long Tail of the Blogosphere / An interesting article on The Long Tail of blogs – why individual sites have trouble making money – and why companies like Google (::yahoo(“GOOG”)::) are reaping all the gains. Especially interesting for other blog owners.
Why Penney Will Perk Up (requires Barron’s subscription) / Retail in general looks very cheap at the moment, and JCPenney (::yahoo(“JCP”)::) is one of my favorites. This Barron’s article argues that JCP could be trading at $60-70 a year from now, and currently trades at a 15-year low multiple. Penney’s has great management that knows retail very well and has gone through a successful turnaround over the past 7 years.
Gannon to Barron’s: Berkshire Fairly Valued…As a Buffettless Empire! / A response to Barron’s article “Sorry Warren, Your Stock’s Too Pricey“. Geoff hits the nail on the head, as I had those exact thoughts after reading the Barron’s piece. Basically, based on the value of the operating business and investments, Berkshire Hathaway (::yahoo(“BRK-A”)::) is about fairly valued. But that doesn’t take into account Buffett’s capital allocation skills and his ability (and his future successor’s ability) to compound equity at above average rates. I would also add that it was unfair for Barron’s to compare Berkshire’s multiples to that of AIG, Allstate, and Travelers.
Disclosure: I may be long one or more stocks mentioned in this post. This is not a recommendation to buy or sell any securities.
Some interesting reading material for the holiday week:
On incentives, biases, and lollapalooza effects / Todd Kenyon discusses Charlie Munger’s Mental Models and their application to the recent meltdown in the Financial markets.
Malone’s Playbook / Goes over a brief history of John Malone’s media companies. Also discusses his latest strategies and what he may be planing in the future. As with anything to do with John Malone, it’s an interesting read. Here’s a quote from Liberty’s CEO regarding the split up of IAC: “[the break-up] will allow us to begin a dialogue with IAC about how we are going to work together in the next phase of our relationship.”
The Evolution of an Investor / A great (and long) story on Blaine Lourd, written by Michael Lewis (author of ::amazon(“0393324818″,”Moneyball”):: and ::amazon(“0140143459″,”Liars Poker”)::). A good quote from the article: “As a group, professional money managers control more than 90 percent of the U.S. stock market. By definition, the money they invest yields returns equal to those of the market as a whole, minus whatever fees investors pay them for their services. This simple math, you might think, would lead investors to pay professional money managers less and less. Instead, they pay them more and more.”
Think Disruptive / Another article in Portfolio – this time by Andy Grove (former CEO of Intel). Grove talks about innovation, electric cars, and the benefits of being a big company.
FutureBlind 