The Strategic Investor

Democrats and Taxes

2009-03-11T21:55:00.002-04:00

This might be a bit behind the times, but still, I have to wonder: how can anyone take the Democrats seriously when they suggest that paying taxes is a civic duty, since it is clear that they do not believe that this duty applies to themselves?Perhaps they assume that most people are cheating and underpaying because they do: they just assume most people cheat at least as much. After all, leftist

Billionaires with Bad Advice (pt 1)

2009-03-11T21:35:00.003-04:00

When someone makes it on the Forbes Billionaires list, people tend to take his or her thoughts on business seriously. This is even more the case when that same person became rich by owning a money management firm. Indeed, Forbes takes Kenneth Fisher’s view of the markets so seriously that it has made him its longest running columnist and commentator in its history. Forbes and certainly its

Warren Buffett's Letter

2009-03-08T16:01:00.002-04:00

Warren Buffett had his worst year ever in 2008. This is not surprising, since it was the worst year for the stock market in Buffett's investing life. Personally, I found the letter thinner on content than usual. There were not pithy observations on accounting rules, nor a simple explanation of the credit markets nor the currency markets. Even his discussion of Berkshire's businesses seemed a

A Bad Year. A New Year. Where do we go from here?

2009-01-09T06:16:00.004-05:00

Well, I have continued to be relatively silent about the markets, because I believe that successful investing requires insight and I haven't had much until this past week.First off, let me start by saying that I hope everyone had a relaxing holiday period. I have been on a nearly forced vacation for the past three weeks, but return to my "normal" life as a management consultant on Monday. My

Blodget says bubbles are rational

2008-12-04T16:53:00.002-05:00

Henry Blodgett, a man whose greatest accomplishment was making a trend call on Amazon in 1998, has done it again. He substitutes narrative for analysis and now explains to us that the bubble was rational.After constructing a list of possible culprits for bubble-mania (a list which includes mortgage brokers, real estate agents, Wall Street bankers, the SEC, and Alan Greenspan), he then lays the

Eight Years of Agony

2008-07-09T04:48:00.003-04:00

Hard to believe that eight years after the highs of the markets in 2000, we are again below those levels on all three indices. True, the DOW remains near its 2000 peak of 11722, while the S&P500 is about 20% below that level and the NASDAQ, well, the less said the better. Eight years on the index remains at less than half of the 5000 level it achieved in March of 2000.How can this be? Earnings

The End of the Euro?

2008-04-09T04:25:00.003-04:00

Jim from The Depression of 2006 has started a very interesting conversation on the return of the Deutsche Mark. I have been arguing that the Euro is here to stay and that it has benefitted Europe in many ways, not least, through higher efficiency and by making cross border consolidation of industries easier, since currency arbitrage is no longer necessary, at least within Europe.But this article

Posting Delay

2008-04-09T04:23:00.002-04:00

Sorry all, I have been unable to post due to some technical difficulties.But I have found an interim solution, so I will return to normal posting now.

Housing Analysis: You read it here first

2008-04-01T13:23:00.004-04:00

I relgiously read two of John Mauldin's weekly newsletters, Thoughts from the Frontline and the Outside the Box E-Letter. Last Friday, in FrontLine, he mentioned two deep analyses of the housing market, both Powerpoint™ presentations. Based on his recommendation I read them both. One slide, from John Burns Real Estate Consulting made me particularly proud, because of this chart: A

End of Month Review

2008-03-31T16:44:00.003-04:00

It has been a week since I last posted, for which I apologize. I want to cover a few topics with this post, which is technically a violation of the rules of good blogging, but it just doesn’t make sense to have a bunch of really short posts. First, I would like to thank all of you who have been visiting. March 2008 is, by my standards, the most successful month in the history of this blog.

The Credit Crisis in Song

2008-03-23T03:55:00.002-04:00

This is hillarious and well done.I will start off by saying that I did not write this and am claiming no credit for it. A friend sent it to me (she didn't write it either).I have added a link to a YouTube version of the song, in case you want to get the various melodies and changes into your head... sing along to the tune of Bohemian Rhapsody Is this the real price?Is this just fantasy?

Did JPM get a good deal with Bear Stearns?

2008-03-17T12:15:00.004-04:00

On the surface, it seems like JPM walked off with a great deal. As of the last reported period, ended November 30, 2007, Bear had $11.4bn in Equity and an asset base of $395bn. With 113mn shares outstanding (184 issued less 71 mn treasury shares) the company had almost exactly $100 book value per share and $349 in assets per share.If we throw in an extra billion for the actual value of the

What I was trying to say

2008-03-17T07:19:00.003-04:00

In my last post was that the meltdown of Bear Stearns threatens the entire financial system. This was the reason that the Fed had to intervene to arrange the sale of Bear.The reason that any element can bring down the system now is the interdependence of the players. The rise of structured finance, which enables risk to be sliced into various pieces and traded between banks, funds, insurance

Has anyone else noticed

2008-03-17T03:04:00.005-04:00

That the Nikkei has lost 1/3rd of its value since July?I was checking market response to the news about Bear and I saw that the Nikkei had not only shed 450 points, but that it was trading below the Dow's Friday close. That got me thinking - hadn't the Nikkei been above the Dow recently. So I checked the chart and courtesy of Yahoo! Finance, I saw this.I guess there is a great deal of concern

Why the Fed had to intervene to prop-up Bear Sterns

2008-03-17T02:37:00.002-04:00

I wrote the article below yesterday afternoon and then decided to leave it for awhile so I could edit it. I didn't get a chance to get back online yesterday, and after waking up this morning discovered that the Fed had taken further action and that JPM had agreed to purchase BSC for $2 per share.I have decided to post the unedited article - you will see that it takes something of a detour in

Bear Stearns Bankruptcy?

2008-03-14T12:30:00.004-04:00

Bear Stearns announced today that it would receive temporary (28 days) secured financing on an as needed basis for JP Morgan Chase and (indirectly) from the Federal Reserve.The plan was announced as a response to a major liquidity crisis that has been ongoing since two hedge funds imploded in August. Bear remarked thatBear Stearns has been the subject of a multitude of market rumors regarding

Economists agree: US is in a Recession

2008-03-13T23:25:00.003-04:00

The Wall Street Journal is reporting that several prominent economists now agree that the US is in recession. In a recent survey the vote was 70% / 30% that the US has entered a recession. The turning point was apparently the payrolls decline from last week.This is an interview with the WSJ's Phil Izzo, who wrote the story.So far as I know, there is still no official word from the National

Eliot Spitzer's Demise: Some good news in Mortgage Insurance

2008-03-12T13:16:00.004-04:00

There was some reason to rejoice on Wall Street and in the bond insurance business as well. First, AMBAC was able to raise an additional $1.5bn last week and together with MBIA, they have now recapitalized to the tune of $4bn. This is a drop in the bucket compared with the face value of the outstanding guarantees, but the companies need only pay the defaulted interest until the bonds principal

Sub-Prime Humor

2008-03-11T08:28:00.002-04:00

Well, it's not exactly true - many of these mortgages were made to less dodgy buyers than they suggest in this clip, but the basic response of the markets is the same.The bailout is coming because there are simply too many people who are going to suffer large losses. The sad thing is, the people who didn't get caught up in the frenzy will wind up paying the taxes to those who did.And that is no

Can you feel the recession coming on?

2008-03-07T10:11:00.003-05:00

Together with a dismal housing report came further news that the Federal Reserve's study of household wealth saw American households becoming poorer in the final quarter of 2007, for the first time since the 2002 bear market.Now, household wealth recovered from that first bear market, in part because of strong gains in housing and then a recovery of stock prices from post-bubble lows. But this

Stop waiting for the Housing Recovery

2008-03-07T09:38:00.004-05:00

I wrote a post not long ago that housing prices have to overshoot to the downside before the fall in prices can stop. Today, Reuters caught on.Quoting Mark Zandi of Economy.com, Reuters said:Home buyers are not going to catch that falling knife and that's going to weigh very heavily on the housing market through this year and next.Homebuyers have no incentive to purchase a home right now, as by

Take Our Poll !

2008-03-05T14:18:00.003-05:00

I'm introducing a new feature here: The Strategic Investor poll.Our first question asks - who among the notable people on the right is THE strategic investor sought by Berkshire Hathaway to succeed Warren E. Buffett as portfolio manager?They are all young (under 60), successful, investors in their own right, and rich.A brief review of the candidates:Stanley Druckenmiller is the former partner of

Warren Buffett’s Letter To Shareholders Berkshire Hathaway Annual Report,

2008-03-05T11:02:00.007-05:00

One of the financial world’s most anticipated events is the Berkshire Hathaway Annual Report full of commentary from Warren Buffett, Chairman of the Board and the world’s most famous investor. What I liked about this report – There were many things to like about this years’ letter from the Oracle of Omaha. He turned his attention once again to a few basic themes of great importance to

Why I'm Focused on Capital Preservation

2008-02-29T05:53:00.003-05:00

Almost exactly one year ago, I wrote an article predicting that the CDOs on many banks balance sheets (and off of them in SIVs and other conduits) were about to implode and this was going to make for some very tough time for financial companies. Essentially, I argued that banks would find that their balance sheets were overleveraged and be forced to liquidate assets (in many cases at bargain

Lowest existing home sales in years

2008-02-25T13:15:00.010-05:00

Yahoo! Finance is reporting that existing home sales have fallen to a nine year low. This means that sales have returned to the level of 1999. Seasonally adjusted sales remained below 5 million for the first time this decade. You can get the data from the National Association of realtors as a PDF here and as an MS Excel sheet here. One way to look at this is that, after now reaching multi-year