Ari Weinberg
More Fine than Finance
Bailout!
Just caught this from March of last year.
This seems about right…even the kazoo.
Are Glatt Kosher Investments Next?
An article in the FT today highlights “kosher investments” - which sound similar to Islamic finance - and are just another trend of investing along ethical, not financial guidelines.
Unfortunately, the article doesn’t offer any return information and only says that a total of $263 million has been put toward Halakhah investments.
Like green, Christian, Islamic or any other investing theme, this too shall pass for being too narrow. If you want to take action or express a belief with your money, donate it.
Read the whole article here.
Don’t Weep for the Rally
Gross and Grantham quarterly letters, presented without comment.
Lessons from the Value Set
Originally published at FiLife.
Growth investors favor fast-growing, young companies which tend to be light on dividends and heavy on moon-shot products or disruptive technologies.
Value investors, introspective geeks of the investing world, are bargain hunters. They like to buy out-of-favor companies with consistent earnings.
Last week, value investors took center stage at the Value Investing Congress in New York. These are the disciples of famed investor and professor Benjamin Graham. His book, Security Analysis, is The Bible for the value set. It preaches that the best investing is done through solid research and understanding of company operations, not fly-by-night whims or momentum.
Current practitioners of Graham’s theory include Berkshire Hathaway CEO Warren Buffet and mutual fund managers Bill Miller and Mason Hawkins.
I spent a few days at the Congress to glean some value tips for the everyday investor. Here are my observations:
1. Have a World View: Though each manager at the conference came to present one or more individual investing ideas, most of the presenters prefaced their stock pick with a clearly delineated macro-economic thesis.
David Einhorn of Greenlight Capital, famous for recommending a short of Lehman Brothers in 2007, built his case for holding actual physical gold, given his worries about the safety of the banking system and concerns about inflation. Whitney Tilson of T2 Partners presented extensive research on continued trouble for the housing industry.
For most of us, without the time to drill down on individual stocks (remember, it’s their JOB), a world view – right or wrong – can offer a sound rationale for the manner in which we invest.
2. Be a Skeptic: No longer an active hedge fund manager, legendary investor Julian Robertson told the audience to temper their confidence.
“There’s always something that could come along and swat you over the head,” he told the crowd. Also, parting with some in the value crowd, Robertson says he sees value in strong, lasting franchises, even in technology. He cited Intel and Google as examples.
Eventually growth stocks, if they generate enough cash, can excite the value set.
3. Be Principled: Investing on a whim is a sure way to financial ruin. Kian Ghazi of Hawkshaw Capital says he approaches each investment with this question: What would cause a 30% decline in price and have us NOT want to buy more?
This perspective could have helped a lot of us when the markets were in the depths of March. What caused you to run for the doors? Was there a fundamental flaw in your risk tolerance? Was the world actually ending?
4. Have Discipline: As we’ve mentioned at FiLife several times, do not fall in love with your money or investments. Alexander Roepers of Atlantic Investment Management said his firm has clear “buy/sell” discipline.
He mentions this tactic both in terms of how his firm makes an investment – scaling in over time – as well as getting out at a set level.
For everyday investors, this discipline comes in having a plan and rebalancing/reallocating when assets shift. If you are set to own 75% stocks, if you get to 85% because of market improvements, take your gains and go back down.
Who Will Protect Us from the CFPA?
President Barack Obama spent Friday afternoon stumping for the Consumer Financial Protection Agency.
The new regulating body, first proposed in June, would stand up for consumers in a broken world of financial regulation largely built on ensuring the safety of institutions and products.
The agency is for those “who signed contracts they didn’t always understand offered by lenders who didn’t always tell the truth.” In remarks this afternoon, the president added, “They were lured in by promises of low payments, and never made aware of the fine print and hidden fees.”
The issue, however, is that massive protection for the unwitting or the unknowing will end up creating more expensive and rigid products for everyone.
So before the administration and Congress press too hard on the reform button, they should look to the recent credit card bill for evidence.
Reuters blogger Felix Salmon rightly pointed out in a recent column that credit card rates for people assessed interest hit a low of 11.96% in early 2003, hit a high of 15.24% in August 2007 and after a slight dip are back to 14.90%.
Card companies, en masse, have been raising rates before the new laws fully take effect. This is at a time where borrowing costs FOR EVERYTHING ELSE are at all-time lows. Go figure.
The catch with new (and old) financial products is that we don’t know the extent of damage they can cause until they are abused.
Subprime mortgages used to be a backwater of the home loan industry, until everyone and their mother became a lender and every hedge fund wanted to own the loans. A credit card was supposed to serve as a convenient line-of-credit for a large transaction, until people started depending on them. Overdraft protection was supposed to fulfill your payment in the rare case that you didn’t have enough in your account, until rare become everyday.
Now, in these days of online accounts and quick transaction, the burden of overspending, overborrowing and overdrafting falls directly on us.
“This is not intended to take accountability away from consumers,” said Austan Goolsbee, a member of Obama’s Council of Economic Advisors. He and many others contend that the mish-mash of federal and state regulators allowed financial operators to “wiggle their way in between regulatory cracks.”
In this way, the Consumer Financial Protection Agency would be concerned about innovations that pose risks. But, as with any innovation, you never know the risk is there until it HITS.
If you truly want a Consumer Financial Protection Agency, start with yourself, your own financial education and then start working on your friends and family. Sure, the government should be there for you, but you need to be there first.
“Caveat emptor” is the longest standing consumer warning for a good reason.
Sirius XM and Loose Options
Sirius XM, for its troubles and debt load, is supposedly working itself out of a ditch.
The stock, long a favorite of daytraders, has gone from an all-time low of $.05 to $.55 in just 8 months. That’s an 1100% return for the most meticulous timers. But just because the market likes to fling the company’s stock around doesn’t mean the company should do so.
A story in today’s Wall Street Journal notes that five executives sold nearly $3.2 million in stock over the past few weeks.
“The executives collectively received almost 10 million restricted shares of Sirius XM on May 19, with the shares to vest gradually over about 40 weeks.”
The author spoke to the company spokesman who stated that the shares were granted as short-term incentive pay.
Clearly!
I can understand a company in dire financial straits offering key executives options or restricted shares to stick around/meet goals, but 40 week vesting?
Either Sirius XM, at the time of the grant, didn’t think its trading stock would actually make it that long or the financial incentives there are quite perverse.
As a subscriber (and therefore a stakeholder), I’m thrilled to see Sirius XM stay healthy. As a proponent of shareholder value, I can’t see how you can match short-term incentives with stock grants.
The Wisdom of Twits
Always be wary of financial advice given for free.
Take this lesson to heart and then dig in to StockTwits, a start-up stock-talk site built on Twitter streams.
The site filters Twitter messages using stock ticker symbols (annotated: $IBM or $MCD) or general market commentary including a “$$.” In order for your posts to show up on the site, you must follow @stocktwits on Twitter.
To the unfamiliar, the StockTwits stream is full of stock touts often associated with Yahoo Message Boards or faded sites like Raging Bull or Silicon Investor (all three shadows of their tech-bubble selves.) But the beauty of StockTwits, for a trader, investor or even casual browser, lies in the ability to find new voices and information on macro-economic trends, sector news and individual stocks all in one place.
True, a quick glance at StockTwits will feature a fair share of rooting – “Go $AIG Go” – when a large stock is running, but as with any new product you have to take some time to learn to use it.
“You have to have a filter,” said Howard Lindzon, the Internet entrepreneur behind StockTwits and, formerly, WallStrip. Lindzon stresses that StockTwits is first and foremost a community and not a stock-tip platform. “It offers social leverage, but also requires collaboration and tolerance.”
And while StockTwits is open for everyone to read, what messages make it through to the official site is discriminated. “There’s no such thing as a truly open community,” says Lindzon.
To keep out spammers and marketers, Lindzon and his team filter what the StockTwits audience sees. (Want the unfiltered version? Just do a Twitter search for your favorite stock and compare the results to the StockTwits search.)
StockTwits is definitely populated with its share of day traders, both momentum folks and technical geeks. There are even options pros. There are few actual professional money managers due to regulatory restrictions and disclosure rules, so you’re not going to get a big stock tip from Fidelity here.
At StockTwits, a casual investor, even someone like myself who generally holds mutual funds, can find macro and sector opinions from informed stock bloggers. They may not (and should not) turn you to the risky side of stock trading, but they can give you quick, real time, insight into business and financial moves that could impact your own work, purchasing or well being.
Chasing stocks is often a rube’s game. The pros have much more money and risk tolerance and will take the casual trader for a ride.
And, increasingly, the pros aren’t even people. The stock markets are being overtaken by Matrix-like supercomputers. So, if you are even considering taking your chances, you need any edge you can get. One blogger and frequent StockTwit poster Todd Sullivan – who runs ValuePlays.net – keeps a running commentary on a book of “value” stocks.
Berkshire Hathaway’s Warren Buffett, the most famous living value investor, likes to buy beaten up companies and coax them back to health over a longer period of time. This is his “value play,” in direct contrast to the profit-yesterday mentality of stock trading.
“Computers don’t make value assessments,” says Jim Gobetz, a Philadelphia-based money manager. Given the number of computers simply trading this market by rote, eventually they are going to get some wrong.
Wouldn’t it be nice to know when? Perhaps you could read about it on StockTwits.
You can also download the company’s StockTwits Desktop application for an integrated experience. Below are a few active (and wise) posters to StockTwits:
@abnormalreturns: Private investor Tadas Viskanta offers his take on financial news.
@GregorMacdonald: An energy investor who offers a macroeconomic perspective.
@marketfolly: A long/short hedge fund analyst’s take.
@toddsullivan: One of the more active value investors on the network.
@aiki14: Money manager Jim Gobetz on U.S. economic news.
Originally published at FiLife.
