Value Investing

They came, they complained about the breadsticks and water temperature, and they won.

I think this is a time where people will look back on us and see it as a period of practically central bank worship. The central bankers – Draghi, Yellen, Bernanke – have become almost celebrities in America. People have invested unreasonable hopes in what these central banks can know, and what they can do. I think that, sooner or later, the investing public will become disillusioned of these ideas.... I dare say that stock prices will not continue to rise uninterrupted at the same pace. That’s not a very interesting prediction, but the stock market is certainly a cyclical thing. I think it’s fair to observe that today’s ultra-low interest rates flatter stock market valuations. Stock prices are partly valued based on a discounted flow of dividend income. To the extent that the discount rate you use to value that stream of dividend income, which depends on interest rates, is artificially low, stock prices are artificially high. I think that the burden of proof is on anyone who would assert that we are in a new age of persistently and steadily rising stock prices.

On September 9th, 1965, US Navy pilot James Stockdale was shot down over North Vietnam and seized by a mob. He would spend the next seven years in Hoa Lo Prison, the infamous “Hanoi Hilton”. When asked who didn't make it out? "Oh, that’s easy...The optimists." The lesson, he explains, is a valuable one for investors today: "you must never confuse faith that you will prevail in the end - which you can never afford to lose - with the discipline to confront the most brutal facts of your current reality, whatever they might be."

As part of Bernanke's and now Yellen's experiment in market central-planning, in which newsflow no longer matters to a market that has lost all ability to discount anything except how big a central bank's balance sheet will be and where HFT momentum is far more important than fundamentals, one of the greatest investing perversions to emerge has been our finding from two years ago since confirmed on a monthly basis, that the best performing asset classes happens to also be the most hated one, as the most shorted stocks have outperformed the market better than twofold just since 2012.

We were surprised to find out about this deep value opportunity in France, bastion of European bureaucratic policies and socialism.

We have forty Centuries of Wage and Price Controls’ and their inevitable failure to draw upon. We know how this game ends, we just don’t know precisely when. As Orwell wrote, "in a time of universal deceit, telling the truth is a revolutionary act.” The reality bears restating: as the good folk of Incrementum rightly point out, "...the monetary experiments currently underway will have numerous unintended consequences, the extent of which is difficult to gauge today. Gold, as the antagonist of unbacked paper currencies, remains an excellent hedge against rising price inflation and worst case scenarios."

probability that Apple will introduce a brand new product category in the near future is incredibly high

In investing you have opportunities that open up because dogmatic investors say “I don’t do ... ”

I vividly remember how low interest rates and the Fed Model were used as propaganda tool in the late ’90s to justify the stock market’s “this time is different” sky-high valuation

It's just not Whitney Tilson's year/decade... the "money-manager" and co-founder of the invaluable Value Investor Insight newsletter has decided, with the exit of yet another partner - John Heins - that it is time to sell. In an email from the ex-financial-media-darling, Tilson explains "the business is a beautiful, high-margin cash cow," is looking for a partner to buy the business.

It’s almost never openly admitted in public, but the reality is that few if any investors actually beat the market in the long-term. The reason for this is that most of the investment strategies employed by investors (professional or amateur) simply do not make money.

The market has only been this expensive a handful of times in the last 100+ years. Every time we’ve been closer to a market top than a new bull market run.

With the debt ceiling debate/government shutdown now behind us, at least until the end of the year, we can now return to normal programming.  Next week will be a rash of economic data that was pent up by the government shutdown from employment to inflation data.  However, in the meantime, here are four things to ponder over this weekend...

As a value investor I used to spend a great deal of time in Microsoft hell. No More!

There are lot of similarities between the 1920s and today.  In fact Livermore’s quote says it all: “There is never anything new on Wall Street, because speculation is as old as the hills.”   1924-1929 bull market was rigged by stock manipulators.   Ninety-some years later the market is still (or at least is perceived to be) rigged by ...