Observations, Calculations, and Values
I’ve long felt that equity investors tend to overlook key aspects of leverage when evaluating companies. Investors look to P/E multiples, without adjusting those multiples for the amount of leverage used in the business. In this report, D.E. Shaw describes some good ideas about how to analyze leverage.
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Like Buffet’s Squandersville and Thriftsville, Charlie Munger’s recent piece in Slate will go down as a classic.
http://www.slate.com/id/2245328/
Basically, It’s Over
A parable about how one nation came to financial ruin.
By Charles Munger
Updated Sunday, Feb. 21, 2010, at 3:30 PM ET
In the early 1700s, Europeans discovered in the Pacific Ocean a large, unpopulated island with a [...]
The folks at Bespoke Investment Group, writing on Seeking Alpha, offer this tidbit of wisdom:
Before rushing to hit the sell button, however, investors should be aware that the currently stratospheric P/E ratio of the S&P 500 is skewed by the negative quarterly results in Q4 2008 ($-0.09). That number will be replaced by an estimate [...]
One of the principal reasons investors typically cite for not holding their money in gold, and instead saving their cash in a government sponsored currency like Dollars, Euros, or Yen, is that gold doesn’t pay interest.
I’ve struggled with this idea for a long time. Dollars don’t earn interest by themselves either. They only acquire their [...]
Paul Kedrosky’s chart shows the average P/E multiples of various exchanges around the world. He points out that for the price of one Chi-Next, you could buy seven Canadas (or by that logic even more Brazils).
Other observations:
* It makes me wonder if I were a CEO or a CFO pondering a [...]
James Grant is interviewed on Consuelo Mack’s show, predicting a surprisingly strong recovery next year. A bold prediction from the guy known for predicting eight of the last four recessions.
Obviously, with T-bills in the sub 1% range, it’s not mathematically impossible to earn double digit yields on cash balances in US dollars.
As I was reading a Financial Times article tonight about the Chinese economy, the following chart made me stop and wonder if maybe the Chinese Yuan wasn’t as fixed to the [...]
Right now, I’m earning, count it, 0.01% on US Treasury money market balances from Schwab.
Thanks Chuck!
This is particularly lousy considering that US Tbills currently pay 14 times as much. Still, thats only 14 basis points, so in absolute terms Chuck isn’t really all that greedy.
Funny thing is that Schwab offers savings [...]
You may not like Jim Cramer, but it’s hard to argue with his concept that there’s always a bull market somewhere. In 2009, the bull market is in US Treasury bonds. The chart below, which Paul Kedrosky pointed out, shows the yield on the 30 year treasury, according to Yahoo. It [...]
Simply put, CPI is measuring something, but it isn’t keeping up with the kinds of long term expenses for which people set aside their savings and expect it to grow. For that kind of growth, you need a more robust investment, like, um, equities.
Courtesy of the NYT.