Monday, March 9, 2015


The first time Buffett, Osborne and 18 others were mentioned in The World-Herald [H/T Linc] (LINK)

StarTalk Live! Podcast: Evolution with Richard Dawkins and Bill Nye (Part 2) (LINK) [Related books, with The Ancestor's Tale added from last time, HERE. I also have some other evolution-related books HERE.]

The Brooklyn Investor on the Alleghany Annual Report (LINK)

I posted this a few weeks ago, but the Kyle Bass video interview is making the rounds again, so in case you missed it... (LINK)

Hussman Weekly Market Comment: What Does That Difference Mean? (LINK)
The early weeks of 2015 are the first time in history that both 10-year Treasury yields and our estimates of prospective 10-year nominal total returns for the S&P 500 have both declined below 2% annually. Even at the 2000 peak, when our 10-year total return projections were negative, the 10-year Treasury yield was 6.8%, and small capitalization stocks showed reasonable value, particularly on a relative basis. Presently, long-term bonds provide nowhere to hide, and median equity valuations exceed those at the 2000 peak on price/earnings, price/revenue, and enterprise value/EBITDA. Because of yield-seeking speculation, stock and bond prices today are already where they are likely to be many years from today. Prices are likely to experience an interesting and volatile trip to nowhere in the interim. 
We saw a noteworthy piece from an analyst named Jonathan Selsick last week. Essentially, Selsick examined the Shiller P/E (the S&P 500 divided by the 10-year average of inflation-adjusted earnings), and showed that the multiple is even better correlated with actual subsequent S&P 500 total returns using 16-year smoothing and a 16-year investment horizon. 
At present, the Shiller-16 (along with a broad range of other historically reliable valuation measures having strong correlation with actual subsequent returns) projects negative total returns for stocks on a 6-year horizon, even assuming continued growth in GDP, revenues, earnings, and other fundamentals. Indeed, current valuations match the levels observed at the 1929 peak. That certainly doesn't imply that equally catastrophic losses are likely to follow (stocks lost 85% of their value from 1929 to 1932 as valuations collapsed from historic highs to historic lows, and keep in mind that even moving from a 70% loss to an 85% loss involves losing half of your money, which is why I insisted on stress-testing in 2009). Still, we believe that projecting a loss for the S&P 500, including dividends, on a 6-year horizon, is an evidence-based estimate, reflecting assumptions that are very much in the middle-of-the road. In other words, we see that expectation as just about right.