Investing

Investing through the Looking Glass

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There are problems, and there are solutions. Problems first.

1. Banks.

That a bank as big as RBS could crash spectacularly, twice, says something about the immutability of human nature. This is not to single out the Scots. Citibank, one of North America’s largest banking organisations, has also gone bankrupt at least twice.

Picking out another example, in the early 1980s the major US banks went on a lending spree in Latin[...] Click here to continue reading

Trade-off

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[Editor’s note: This letter was written by Tim Price, frequent Sovereign Man contributor and manager of the Price Value International.]

After the fall of France in 1940, Great Britain, under Churchill, fought on against the Nazis, virtually alone. Although she would ultimately be joined by the overwhelming military and economic might of the United States, for a period she fought more or less friendless, with her back to the wall. In the process of[...] Click here to continue reading

Not your mate

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[Editor’s note: This letter was written by Tim Price, frequent Sovereign Man contributor and manager of the Price Value International.]

The consumption of financial media can be dangerous. Mixed with overpriced global brands, it can be deadly. In August 2000, Fortune Magazine published an article entitled ‘Ten stocks to last the decade’. As befits something written during the latter stages of the TMT boom, Fortune’s recommendations concentrated on Technology, Media and Telecoms stocks. Their[...] Click here to continue reading

Turn those machines back off!

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Back in the 1970s, the BBC started broadcasting a children’s show called ‘Why Don’t You?’ Its full title: ‘Why Don’t You Just Switch Off Your Television Set And Go Out And Do Something Less Boring Instead?’ Out of the mouths of babes. Rolf Dobelli, the best-selling author of ‘The Art of Thinking Clearly’ has gone one better. In his essay ‘Avoid News’ he advocates abandoning news across all forms of media altogether.

The psychologist[...] Click here to continue reading

Is Deutsche Bank insolvent?

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This is getting to be a habit.

Previous late summer holidays by this correspondent coincided with the run on Northern Rock, and subsequently with the failure of Lehman Brothers.

So the final crawl towards the probable nationalisation of Deutsche Bank came as no particular surprise this year, but it is tiresome to relate nevertheless.

The 2015 annual report for Deutsche Bank runs to some 448 pages, so one rather doubts[...] Click here to continue reading

Ease this

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[Editor’s note: This letter was written by Tim Price, frequent Sovereign Man contributor and manager of the Price Value International.]
“There is no simple, painless solution. The world has to reduce debt, shrink the financial part of the economy, and change the destructive incentive structures in finance. Individuals in developed countries have to save more and spend less. Companies have to go back to real engineering. Governments have to balance their books better. Banking must[...] Click here to continue reading

Here’s what really happened in Jackson Hole

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[Editor’s note: This letter was written by Tim Price, frequent Sovereign Man contributor and manager of the Price Value International.]

The scenic mountain resort of Jackson Hole in Wyoming played snowy host this weekend to the world’s major central bankers, meeting in conclave to discuss their latest victories over the world economy.

Thronged by adoring savers, the so-called Ja’ss Holes (the J is silent) were quick to point out that they were nowhere[...] Click here to continue reading

How I went broke from my own arrogance

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In 1999, as an arrogant 20-year old kid who thought he knew everything, I went flat broke.

Actually, I was worse than broke. On top of losing all of my money, I was also in debt more than $22,000… so I had a negative net worth.

That was an astronomical sum for me at the time, and I thought I’d never recover.

I wrote about this a few months ago, explaining how[...] Click here to continue reading

The ultimate breakdown likely to be surprising, sudden, intense, and large

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[Editor’s note: This letter was co-written with Tim Price, London-based wealth manager and co-manager of the VT Price Value Portfolio.]

On January 30, 2000, the 88+ million viewers of Superbowl XXXIV were treated to a commercial featuring a now infamous sock puppet.

The advertisement was from a company called Pets.com, founded just two years before in 1998 at the height of the dot-com bubble.

Pets.com went public on the NASDAQ just weeks[...] Click here to continue reading

A crisis of intervention

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

For those that already have, Mark Carney is the gift that keeps on giving. Borrowed imprudently and struggling to make those interest payments ? Worry not; the Bank of England has your back. For those that don’t have, the Bank of England is taking away your chance of ever realistically saving anything, now that interest rates[...] Click here to continue reading

Just who is the enemy?

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
“..I sat at my desk wringing my hands, transfixed by the tragic slapstick of British politics..

“We are in the biggest domestic political crisis of my life..

“This is only the second time I can remember when the normal, trivial business of office life has stopped — and stayed stopped..

“I’ve witnessed a few surprising general[...] Click here to continue reading

The entire financial system is exposed to this junk bond market

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

Japan got there first. 15 years ago, we met a Japanese equity manager who made an astonishing prediction:

“Japan was the dress rehearsal. The rest of the world will be the main event.”

That seemed an extraordinary suggestion 15 years ago. Today, not so much.

In the aftermath of the late 1980s real[...] Click here to continue reading

These six former Goldman Sachs bankers want to destroy your savings

Back view of businessman in suit standing in front of panoramic window and looking at illuminated New York city at night. Double exposure
[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

Rule #1 in central banking: Never go full Draghi.

Mario Draghi, of course, is the President of the European Central Bank (ECB) who pledged to do “whatever it takes” to save the euro. Or was it save the world? We forget.

Anyhow, Mark Carney, the head of the Bank of England, just went full[...] Click here to continue reading

Opportunity: the most disastrous event since World War II

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

So the British people have finally spoken. The Establishment, however, chose not to hear them, turning its perpetual tin ear to criticism from below.

As the flag-bearer for an unaccountable, hypocritical and increasingly bewildered elite, Martin Wolf for the Financial Times showed precisely why Remain lost:
"The fear-mongering and outright lies of Boris Johnson, Michael[...] Click here to continue reading

Safety in (the right) numbers

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
“Gross: Global yields lowest in 500 years of recorded history. $10 trillion of neg. rate bonds. This is a supernova that will explode one day.” - Tweet from Janus Capital.
Bill Gross’ warning is, of course, tautological. A supernova is an exploding star. What he probably meant to say is that the bond market is a star[...] Click here to continue reading

Why portfolio theory is wrong

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
“Suffice it to say that volatility and risk are not the same thing, but that for reasons which remain obscure most of the investment world chooses to treat them as if they are. The only one that makes any sense at all is that the mathematicians who came to dominate the financial world from the 1950s onwards[...] Click here to continue reading

What a carve-up, as economists fake panic over Brexit

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
JW: “..Someone like Neil Woodford, star investor, who set up his own fund; he says the fundamentals of the economy will be unmoved [by Brexit] either way..
RA: “Well I’m afraid that every, every serious economic forecaster would not agree with that..”
JW: “Are you saying he’s not serious?”
RA: “Not for economic forecasts, clearly.”
JW: “He’s[...] Click here to continue reading

How to turn $10,000 into $22 million

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[Editor’s note: Tim Price, London-based wealth manager and frequent Sovereign Man contributor, is filling in while Simon is en route to Europe.]

As human beings it's in our nature to seek out a great deal.

Whether we bag a steep discount on a new car, or stumble across that hidden gem of extraordinarily cheap airfare, we love the feeling that we're getting a lot for our money.

If you’ve ever found a[...] Click here to continue reading

This surprise asset outperformed stocks and bonds for 27 years

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Out here in Eastern Washington’s Yakima Valley are beautiful, seemingly endless fields of abundance and wealth.

But not ‘wealth’ in the conventional sense. I’m not talking about paper money that’s conjured out of thin air by central bankers.

I’m talking about real wealth. Real assets.

Growing up in a lower middle class household where my parents had to work three jobs each just to pay the rent, I never understood what any[...] Click here to continue reading

Warren Buffett: “It’s a huge advantage NOT to have a lot of money…”

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Warren Buffet has famously said many times that the vast majority of investors shouldn’t bother picking stocks.

Instead, he’s advised everyone from Lebron James to his own children to simply buy an S&P index fund and hold it ‘for the next 50 years.’

He’s probably right; most people probably should just buy an S&P index fund. But not because it’s a superior investment.

It’s because most people simply aren’t educated about business,[...] Click here to continue reading

The game has changed. Time to learn the new rules.

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

In their efforts to jam the square peg of financial theory into the round hole of human nature, economists have perpetrated some pretty stupid things.

But few of them are dumber than the efficient market hypothesis (EMH).

EMH states that it is impossible to beat the market because the efficiency of the market means[...] Click here to continue reading

Surviving Mission Creep

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
“So there is another reason why Europe isn’t growing and it’s one the central bank can do nothing about. Namely, the 19 governments of the Eurozone and the super-state in Brussels have essentially outlawed it. If you want to know why growth is so tepid just examine the Eurozone’s massive barriers to enterprise and work in the[...] Click here to continue reading

Raging bull

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
“The nonsense and frustrations we all witness in this industry every day is a red hot ember that drives us, a prime motivator to push back against the endless firehose of bullshit that the Wall Street machinery manufactures. The single biggest and most profitable product that the Finance Factory cranks out every day is bullshit, and each[...] Click here to continue reading

Time to be bullish

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
“We don’t see a recession coming in the United States.”
- Abby Joseph Cohen in a recent Bloomberg interview.
US corporate profits are experiencing a “gut wrenching slump”, according to SocGen’s Albert Edwards, in a research note published last Thursday (‘US whole economy profit slump makes a recession now virtually inevitable’).
“And with the US corporate sector[...] Click here to continue reading

The original ‘too big to fail’ from 2,500 years ago

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[Editor’s note: Tim Price, London-based wealth manager and frequent Sovereign Man contributor is filling in while Simon is en route to Colombia.]

Successful investing requires having an edge. If you do not know what your edge is, you do not have one.

One doesn’t need to be a rocket scientist, or even a die-hard contrarian to have an edge. But given the competition from vast numbers of rival investors, it pays to go[...] Click here to continue reading

The triumph of the invisible hand

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“By virtue of exchange, one man’s prosperity is beneficial to all others.” - Frédéric Bastiat.
It remains one of the most powerful metaphors in economics. In 1850 Frédéric Bastiat gave the world the story of the broken window. The son of a shopkeeper accidentally breaks a pane of glass in the shop. A crowd gathers at[...] Click here to continue reading

Our survey said

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]
“It is because the public are a mass – inert, obtuse and passive – that they need to be shaken up from time to time so that we can tell from their bear-like grunts where they are – and also where they stand. They are pretty harmless, in spite of their numbers, because they are fighting against[...] Click here to continue reading

Kings of the wild frontier

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“Simple but not easy”
- The title of Richard Oldfield’s book about value investing.
It has a young, highly educated population. 60% of its people are under the age of 35. It has a literacy rate of over 85%. Almost a quarter of a million new engineers graduate from its universities every year. And its stock[...] Click here to continue reading

50 years of data prove Value Investing to be the most profitable investment strategy

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]


In his book What works on Wall Street, James O’Shaughnessy analysed a variety of strategies that delivered market-beating returns in the US stock market.

Value investing proved to be one of the most outstanding.

O’Shaughnessy took a variety of metrics – the price/sales ratio (PSR), price/cashflow, price/book and price/earnings – and then collated[...] Click here to continue reading

Where the puck will be

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“My interest is in the future because I am going to spend the rest of my life there.” - Charles Kettering.
Perhaps the most extraordinary and important presentation you will ever see can be found on YouTube, here. Dr Albert A Bartlett, Professor Emeritus at the Department of Physics at the University of Colorado at Boulder,[...] Click here to continue reading

Everything changes at zero

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]


For the benefit of non-subscribers, there are two versions of the Financial Times newspaper. One of them is the hard copy edition, still printed on pink paper, an exact digital replica of which is available on the paper’s website to subscribers. The second is the website itself, at www.ft.com. The difference between the two is[...] Click here to continue reading

Your do-it-yourself front page financial Armageddon story

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“The media select, they interpret, they emotionalize and they create facts.. The media not only reduce reality by lowering information density. They focus reality by accumulating information where “actually” none exists.. A typical stock market report looks like this: Stock X increased because.. Index Y crashed due to.. Prices Z continue to[...] Click here to continue reading

Inside the battle for control of the Federal Reserve

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]


A Shandong 5000 electroglide flatbed currency printing machine named ‘Ted’ has edged ahead in a fiercely competitive fight for the chairmanship of the US Federal Reserve, narrowly in front of its major rival, the Heidelberger Druckmaschinen high speed sheet fed rotary offset press, christened ‘Heidi’.

In an ominous sign for supporters of the Heidelberger[...] Click here to continue reading

Sage investment advice from Mike Tyson

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and editor of Price Value International.]

In a crisis, it helps to have good counsel. Consider the following sage advice from investment strategist Mike Tyson:

“Everyone has a plan ‘til they get punched in the mouth.”

Or as German military strategist Helmuth von Moltke the Elder put it, somewhat more formally:

“No battle plan ever survives contact with the[...] Click here to continue reading

What’s the last dollar they can print before financial crisis?

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[Editor’s note: Tim Price, London-based wealth manager and editor of Price Value International, is filling in for Simon today.]

In the field of mathematics, chaos theory studies the behavior of systems that are highly sensitive to initial conditions.

The idea in chaos is that, like life itself, where you start today has tremendous influence on what happens next.

In chaos, even very tiny changes to initial conditions can lead to wildly divergent[...] Click here to continue reading