Monday, March 2, 2015


The 1982 article on Jimmy Ling recommended by Warren Buffett in his shareholder letter (LINK)

Carol Loomis: Grading Berkshire after 50 years under Buffett: How does a 1,826,163% stock rise sound? (LINK)

A Dozen Things Taught by Warren Buffett in his 50th Anniversary Letter that will Benefit Ordinary Investors (LINK)

18 Lessons for Investors and Managers from Warren Buffett’s 2014 Letter to Shareholders (LINK)

"60 Minutes" found that Lumber Liquidators' Chinese-made laminate flooring contains amounts of toxic formaldehyde that may not meet health and safety standards (LINK)

Value Investing Podcast: Paul Lountzis on Value Investing (LINK)

Regression to the Mean and Value Investing [H/T csinvesting] (LINK)

Quick Thoughts on Portfolio Strategy - by Chris Pavese (LINK)

Mutual Fund Observer, March 2015 (LINK)
So I say again, focus upon your time horizons and risk tolerance. If your investment pool represents the accumulation of your life’s work and retirement savings, your focus should be not on how much you can make but rather how much you can afford to lose. As the U.S. equity market has continued to hit one record high after another,  recognize that it is getting close to trading at nearly thirty times long-term, inflation-adjusted earnings. In 2014, the S&P 500 did not fall for more than three consecutive days. 
We are in la-la land, and there is little margin for error in most investment opportunities. On January 15, 2015, when the Swiss National Bank eliminated its currency’s Euro-peg, the value of that currency moved 30% in minutes, wiping out many currency traders in what were thought to be low-risk arbitrage-like investments. 
What should this mean for readers of this publication? We at MFO have been looking for absolute value investors. I can tell you that they are in short supply. Charlie Munger had some good advice recently, which others have quoted and I will paraphrase. Focus on doing the easy things. Investment decisions or choices that are complex, and by that I mean things that include shorting stocks, futures, and the like – leave that to others. One of the more brilliant value investors and a contemporary of Benjamin Graham, Irving Kahn, passed away last week. He did very well with 50% of his assets in cash and 50% of his assets in equities. For most of us, the cash serves as a buffer and as a reserve for when the real, once in a lifetime, opportunities arise. I will close now, as is my wont, with a quote from a book, The Last Supper, by one of the great, under-appreciated American authors, Charles McCarry. “Do you know what makes a man a genius? The ability to see the obvious. Practically nobody can do that.”
Hussman Weekly Market Comment: Plan to Exit Stocks Within the Next 8 Years? Exit Now (LINK)
Last week, the cyclically-adjusted P/E of the S&P 500 Index surpassed 27, versus a historical norm of just 15 prior to the late-1990’s market bubble. The S&P 500 price/revenue ratio surpassed 1.8, versus a pre-bubble norm of just 0.8. On a wide range of historically reliable measures (having a nearly 90% correlation with actual subsequent S&P 500 total returns), we estimate current valuations to be fully 118% above levels associated with historically normal subsequent returns in stocks. Advisory bullishness (Investors Intelligence) shot to 59.5%, compared with only 14.1% bears – one of the most lopsided sentiment extremes on record. The S&P 500 registered a record high after an advancing half-cycle since 2009 that is historically long-in-the-tooth and already exceeds the valuation peaks set at every cyclical extreme in history but 2000 on the S&P 500 (across all stocks, current median price/earnings, price/revenue and enterprise value/EBITDA multiples already exceed the 2000 extreme). Equally important, our measures of market internals and credit spreads, despite moderate improvement in recent weeks, continue to suggest a shift toward risk-aversion among investors. An environment of compressed risk premiums coupled with increasing risk-aversion is without question the most hostile set of features one can identify in the historical record.
Amazon’s Twitch Site Bets on Poker (LINK)

Meet the man who could own Aviva France (LINK)
When he was seven years old, Max-HervĂ© George was given a magic ticket by his father. It lets him turn back the clock, to invest with perfect hindsight week after week, steadily accumulating a fortune. 
The ticket is a life insurance contract and Mr George, now 25, has fought for years in the French courts to preserve its magic. He could be a billionaire by the end of this decade and, by the end of the next, his contract would be worth more than the insurance company which stands behind it, Aviva France. 
There is no mystery to the financial magic, however. Instead it is a story of grand stupidity, of how a French insurer wrote the worst contract in the world and sold it to thousands of clients.
How To Deal With Email After A Long Vacation (LINK)

Book of the day, which was recommended by Nick Gogerty in his interview with Jake Taylor: The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else