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Apple’s Moat Just Got a Lot Wider

in Analysis

I have to admit I was not able to get anything done on Tuesday when Apple released its new iPhone, Apple Pay and Apple Watch — absolutely nothing. Like millions of others, I was glued to my iPad watching Tim Cook do a two-hour Apple infomercial. (And unlike any other infomercial, I watched it twice.) The interest must have been greater than even Apple expected, as its website simply could...

Making Money by Agreeing to Disagree

in Process

"You can have comfort, or you can have value. You cannot have both." — Jim Grant, on CNBC It is very comfortable and enjoyable to own a company everyone loves. You can brag about it to your neighbor, bring it up at social gatherings. But there is usually a significant price to pay for that comfort — the stock is fully valued. This is why value (cheap) stocks have historically beaten...

To Infinity and Beyond? Don’t Be Surprised If the U.S. Stock Market Cracks

in Macro

In 1986 Jeremy Grantham — an investment legend and co-founder of Boston-based asset manager GMO — started to warn his firm’s clients about, and even created an investment product to protect them from what he believed would be, the eventual bursting of the Japanese stock bubble. We all know how that story ended: In 1990 the Japanese market crashed, stocks declined more than 70 percent from their peak, and the Japanese economy...

Economic & Market Comments: Third Quarter 2014

in Quarterly Comments

An economist’s guess is likely to be as good as anybody else’s ~ Will Rogers Economist’s projections have run into a bad patch, at least in the short-term.  Most had first quarter GDP declining one percent due to January’s frigid weather.  It came in with an annual rate of minus 2.9%.  The stock market paid little attention, and bond interest rates actually declined giving twenty year Treasury bond holders a better first...

The True Value of Macro Forecasting for Value Investors

in Process

While in Omaha for the Berkshire Hathaway annual meeting a couple of weeks ago, I participated in an investment panel hosted by a local chapter of the Young Presidents’ Organization. I had the privilege of sharing the stage with such industry giants as Tom Russo, a partner of Gardner Russo & Gardner (famous for knowing more about consumer stocks than the management that runs them), and Tom Gayner, president and...

The Modern Portfolio Theory Flat Earth Society

in Process

“I’d rather be vaguely right than precisely wrong.” That’s my favorite quote from British economist John Maynard Keynes; it took me a long time to truly appreciate its importance. Math and physics are rooted in equations that spit out precise answers; vagueness there is dangerous — for the right reasons. That is why they are called exact sciences. Investing, despite being taught as an almost exact science, is far from...

Crony Capitalism and the Oracle of Omaha

in Process

I am back from the Berkshire Hathaway annual meeting in Omaha, Nebraska, and my brain is still spinning from the dozens of meetings and stimulating conversations. In a series of articles over the next few weeks, I’ll try to download the thoughts that were triggered by this trip, a lot of them unrelated to the main event — the Warren Buffett & Charlie Munger show — but rather by-products of...

Behind the Red Door: Finding Value in an Overpriced Market

in Analysis

I am about to write a quarterly letter to clients, telling them that despite all the giddiness in the stock market, we are in Value Investor Second Hell. This is not the first hell; that one is reserved for value traps — stocks that look cheap based on past earnings but whose earnings are about to disappear, whereupon the stocks will permanently decline. The second hell is when you cannot find...

Economic & Market Comments: Second Quarter 2014

in Quarterly Comments

When facts change, I change my mind. What do you do? – John Maynard Keynes Perhaps a corollary of Keynes comment would be to not change your mind when the facts don’t change. The stock market certainly didn’t change much either way in the first quarter, and the economic outlook likewise showed little change. Severe weather in the first quarter obviously had some negative impact, but in most cases this will have...

An Investor’s Guide to Better Writing — Seriously

in Process

I never thought I’d be giving writing advice. I was always the worst student in my literature class in Russia. I never received a grade higher than a C on any Russian essay I ever wrote. I have a theory that my teachers got sick of reading and grading my horrible essays, so they stopped and automatically gave me a passing grade out of pity. I don’t blame them. When I...

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"Vitaliy Katsenelson is the new Benjamin Graham."
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