Estimating Future Stock Returns

There are many alternative models for attempting to estimate how undervalued or overvalued the stock market is.  Among them are: Price/Book P/Retained Earnings Q-ratio (Market Capitalization of the entire market / replacement cost) Market Capitalization of the entire market / GDP Shiller’s CAPE10 (and all modified versions) Typically these explain 60-70% of the variation in stock returns. […]

Think Half of a Cycle Ahead

  Financial markets are trendy and noisy in the short-run, sensible in the long-run, and perverse in the intermediate-term. What do I mean? Something like this: short-run movements are news-driven, and driven by people trying to catch up with the latest data.  Many people imitate the behavior of others, and over the intermediate-term, some stock prices get […]

If All Investments Were Private

This piece is another one of my experiments, please bear with me. “Measure Twice, Cut Once” — A very intelligent woman (I suspect) whose name never got recorded the first time it was uttered “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” — Warren Buffett […]

See You in Court, Uncle Sam!

Before I start tonight, I just wanted to mention that I was on South Korean radio a few days ago, on the main English-speaking station, talking about Helicopter Money.  If you want listen to it or download it as a podcast, you can get it here.  It’s a little less than 11 minutes long. -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= […]

On a Letter from an Expatriate

Photo Credit: Liz West A friend I haven’t heard from in many years since he left the USA wrote me. He closed the letter in an unusual way, saying: PS — USA has gone completely bonkers these days? or what the heck is going on over there? would love to pick your mind over a glass […]

Laws are Only as Good as Enforcement

  This should be short.  If you want more, you can read my old piece, “Who Dares Oppose a Boom?” Laws are only as good as those that enforce them.  There was no lack of power in the hands of regulators prior to the financial crisis.  There was a lack of willingness to use the power […]

Fly Away From Helicopter Money

Once I wrote a piece advocating helicopter money, and I called it 2300 Smackers.  For those who were not reading me back during the bailout, you should know that I vociferously opposed it, and wrote a lot to encourage everyone to oppose it. The 2300 Smackers piece was meant to advocate giving the bailout to the American people, […]

Redacted Version of the March 2016 FOMC Statement

January 2016 March 2016 Comments Information received since the Federal Open Market Committee met in December suggests that labor market conditions improved further even as economic growth slowed late last year. Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the […]

Is Value Coming Back?

While perusing Barron’s on Saturday, I wondered if I had picked up a publication entitled, “Hope for Broken-hearted Value Investors.”  Note the articles, most of which should be behind a paywall: Move Over, Facebook and Netflix: Value Investing Is Rebounding Taking Advantage of Underpriced Stocks The Best Value Mutual Funds An American Century Value Investor Goes […]

Financial Market Liquidity Isn’t That Important for the Economy as a Whole

Note to all of my readers before I start on my main topic: on the morning of 3/12 I give a talk to the American Association of Individual Investors in Baltimore.  If you want to see my slide deck, here it is. -==–=-=-==-=–=-=-=–==–==-=-=-=-=-=-=-=-=–=-=-=-==-=-=-=-=-=-=-=-=-=–= Okay, time for some secular economic and financial heresy, which is always somewhat […]

Picturing Pensions

I’ve seen a small group of pension articles in the recent past, none happy: Europe Faces Pension Predicament More Companies Freezing Corporate Pension Plans The Tragedy Of California’s Public Pensions Retirement Is Looking Even Worse for Americans A defined benefit pension is a stream of payments that continues until the beneficiaries die, mainly.  It is […]

Trying to Cure the Wrong Disease

Catch the caption from the WSJ for the above picture: Regulators don’t think it is the place of Congress to second guess how they size up securities. Fed Chairwoman Janet Yellen said recently that legislation would “interfere with our supervisory judgments.” Regulators are not required by the Constitution, but Congress, perverse as it is, is […]

They Can’t Help You

Before I start this evening, I want to add one follow-up to last night’s piece on Berkshire Hathaway.  My summary was that it wasn’t a great year, and the profit margins are likely to shrink in insurance, because BRK is being conservative there.  So why do I still own it for my clients and me? […]

Another Year in Buffett’s House

Last year, when BRK [Berkshire Hathaway] reported their annual earnings with the letter, report, and 10K, I concluded: From an earnings growth standpoint, there was nothing that amazing about the earnings in 2014.  A few new subsidiaries like NV Energy added earnings, but existing subsidiaries’ earnings were flattish.  Comprehensive income was considerably lower because of […]

A World Deep in Debt…

Debt, debt, debt… debt is kind of like a snowflakes.  A single snowflake is a pretty star, but one quintillion of them is a horrendous mess.  In the same way, most individual debts are reasonable and justifiable, but when debt becomes a pervasive part of the economic system, the second order effects kick in: As fixed […]

On Investment Charlatans

There are many ways to try to cheat people in the investment world.  You can promise them: No risk (an appeal to fear) High returns (greed) Secret knowledge (can appeal to either or both fear and greed) An easy life, free from the worries common to man. And more… For virtually every human weakness or […]

Thoughts on MetLife and AIG

In some ways, this is a boring time in insurance investing.  A lot of companies seem cheap on a book and/or earnings basis, but they have a lot of capital to deploy as a group, so there aren’t a lot of opportunities to underwrite or invest wisely, at least in the US. Look for a […]

Our Growing World

In general, I tend not to go in for macro themes.  Why?  I tend to get them wrong, and I think most investors also get them wrong, or at least, don’t get them right consistently. I do have one macro theme, and it has served me well for a long time, though not over the past […]