Latest Thoughts
HRB on the Block?
H&R Block’s stock (ticker: HRB) reached a 52-week intraday low of $12.51 last Thursday in anticipation for expected losses in their quarterly report. It appears that investors were fearing the worst about HRB’s ability to deal with its mortgage loan repurchase obligations and mortgage loan portfolio, regulatory changes that would affect its refund anticipation loans, and also changes in the tax preparation industry in general. How much should a potential investor worry about the company’s ability to … read more
Reality Check
Yesterday, the National Association of Realtors said existing home sales fell 27% in July month over month to a seasonally adjusted annual rate of 3.83 million – the lowest level in at least 11 years. Granted, much of this can be attributed to sales being pushed from July into June because homebuyers were scurrying to take advantage of the $8,000 homebuyer tax credits that were going to expire (they ended up being extended to Sept. 30th). But still, this statistic should raise some eyebrows.
Seems… read more
Education stocks poised For-Profit
In the last few months, for-profit education stocks have flunked, in many cases dropping 50% or more from their highs. The negative headlines have been focusing on increased scrutiny over two main issues: recruitment procedures and gainful employment.
A couple weeks ago, the Government Accountability Office (GAO) released a very disturbing report detailing several deceptive recruiting practices. For example, undercover applicants were encouraged to falsify information on their financial government… read more
My, how quickly things change!
Only two months ago, the Fed said a recovery was proceeding and there was much talk of an exit strategy. Today, the Fed surprised many and shook the markets when it changed its tune seemingly overnight announcing the “pace of economic recovery is likely to be more modest in the near term than had been anticipated.” With interest rates already near zero, the Fed has already used up its most traditional ammo of stimulating the economy by lowering rates. As a result, it has decided to take an unc… read more
Deflation
I opened up the “Money & Investing” section of the WSJ today and read in big, bold letters “Big Investors Fear Deflation.” The risk of deflation seems to be the hot topic recently, so I thought I’d throw in our two cents.
We believe deflation is certainly a possibility in the short run, particularly when it is believed to be coming. Deflation can be a self-fulfilling prophecy when purchases are delayed in anticipation of lower prices, exacerbating the problem. In spite of this, should it… read more
Goldman Rebate
This past week Goldman Sachs ended up paying a big “fine” while admitting no guilt for being involved in the sub-prime meltdown. My read is that basically it is a rebate to the government for bailing out AIG and thus allowing AIG to pay Goldman for the terrible underpricing of insurance contracts (subprime mortage puts) AIG wrote and Goldman sold at a big markup to smart investors who figured out a way to profit from the meltdown in the housing industry.
An analogy: Someone comes to Goldman… read more
Becton, Dickinson & Co.
In the first quarter of the year, we sold out of our position in Covidien, a healthcare company known for their surgical instruments, as we believed it had reached our fair value estimate. This past quarter, we have essentially reinvested the proceeds from that sale into Becton, Dickinson & Co (ticker: BDX). Headquartered in New Jersey, BDX, like Covidien, is a medical company engaged in the manufacture and sale of a broad range of medical supplies, devices, laboratory equipment and diagnostic… read more
Emerging Market Exposure Through Multi-Nationals
Investing in emerging markets for growth seems to be quite alluring. Exchange Traded Funds (ETFs), mutual funds, and other investment vehicles have sprung up in recent years making investing in emerging countries extremely accessible. However, here at YCG, we often find we are best able to invest and take advantage of the growth in emerging markets by investing in the United States. How so?
Pat Dorsey, Director of Equity Research for Morningstar, conducted a study to see how much revenue… read more
The Wealth Effect
This morning, in a WSJ article titled “Consumer Mojo Lifts Profits,” we read:
“The broadest measure of U.S. consumer spending, the Commerce Department’s personal consumption expenditures, rose at a 1.6% inflation-adjusted annual rate in the fourth quarter. Based on all the latest data on retail sales and the like, forecasters at Macroeconomic Advisers, St. Louis, estimated personal consumption expenditures increased at a 3.6% rate in the first calendar quarter.”
We must admit we have been shocked… read more
Happy Tax Day
Happy Tax Day! A few days ago, the WSJ referenced a study by the Tax Policy Center that "found that to reduce the federal budget deficit to a sustainable 3% of GDP, the government would have to find an average of about half a trillion dollars each year in new revenue (or spending cuts). To cover that amount through tax increases on the top two brackets—roughly, families with more than $209,000 in taxable income—top rates would have to go from the current 33% and 35% to 72.4% and 76.8%, the stu… read more
Tidal Wave Investing
The stock market has run ahead of underlying fundamentals and we believe this rally has very little upside remaining. When the S&P 500 reached its all time high in October 2007, it was an unusual time. The market was at peak profit margins and lofty P/E multiples – a scenario that is unlikely we will see anytime soon. Furthermore, with the exception of the financial sector, most stocks are beginning to trade near the same prices they were during that peak. This may not seem correct because t… read more
Mortgage Resets
Today’s front page of the WSJ has an article titled, “Mortgage Increases Blunted.” As you know, another oncoming wave of resets on adjustable rate mortgages (ARMs) has been a concern of ours. This article did bring up a good point, though:
“Lower-than-expected interest rates, coupled with efforts to aggressively modify loans, are likely to mute payment shocks for some borrowers.”
While this is very true, we’d also like to point out that mortgage resets will continue into the future, and there… read more
Banks hiding losses?
In Barron’s this week, Alan Abelson writes about a discussion with Stephanie Pomboy, the Founder and President of MacroMavens, a company which provides macroeconomic research to the institutional investment community: “[There was approximately] a $10 billion reduction in the banks’ loss provisioning last year [which] was a major contributor to their gain in fourth-quarter earnings…There’s the possibility that banks are forced to mark to market all the toxic securities they carry at cost. If the… read more
Western Union
Even though the broad market has rebounded sharply, it does not mean every stock has moved in concert. One such example is with Western Union, the world’s largest global money transfer business. Much of their business stems from immigrants who come from poorer nations to wealthier nations and send money back home to their family members. With a high proportion of their revenues coming from the Hispanic population, a major concern is the slowdown in manual labor (such as home construction) as w… read more
Keynesian Economics
After I wrote the last blog, I realized I may have left you wondering, “If the federal stimulus is helping GDP growth, if we do start to retrench, why not just do another one on the government’s tab?”
The problem can be seen on the cover of the WSJ this morning, “Deficit to Hit All-Time High.” The government is not planting seedlings that will grow and continually yield fruit, but instead simply handing out fruit, and eventually the stockpile (being supported by debt) is going to run out. … read more
Artificial Turf
According to preliminary numbers (these numbers frequently are adjusted months after the fact), the government reported fourth quarter gross domestic product (GDP) jumped 5.7%. Since real GDP increased 2.2% in the third quarter, I suppose that means with two quarters of growth we are considered to be officially out of the recession – time to celebrate?
You may recall a prior blog s… read more
Back to the good ol' days?
From the March lows, the S&P 500 has gained 68%, although it remains 25% below its all time high. It might seem reasonable and even stimulating to envision the S&P 500 returning to $1,565 where it sat in October 2007. However, some words of caution – keep three things in mind. First, operating margins were at an all time high, about 40 percent above average. Second, the price to earnings multiple on the overall market was above historic norms, which again, were being multiplied on inflated e… read more
#1 Rule to Investing
Over the weekend, the WSJ published a detailed article about all the investment opportunities that were brought to Warren Buffett during the debacle. The article begins with some sage advice:
“Warren Buffett believes his best deals during the economy’s biggest belly flop since the Crash of 1929 may well turn out to be the ones he didn’t do.” -Scott Patterson
Ever since I began investing, my father has repeatedly told me "The #1 rule in investing is don’t lose your client’s money. The second… read more
Amazon – Poised for Disappointment
As many of you know we manage separate accounts and implement a multi-strategy when it comes to managing our client portfolios. We have few constraints, allowing us to go long, short, or hedge our positions using options (you’ll find that we often sell cash secured or “naked” puts and/or covered calls). We recently took advantage of this flexible mandate by shorting Amazon (AMZN), with its’ lofty valuation we see tremendous downside in this stock and are happy to take the short side of this trade…. read more
Negative Equity does not equal Postive Economy
Last week, I visited a good friend of mine in Chicago. As we were driving back from the airport, he mentioned he had some friends in the area who were behind on a couple mortgage payments. He told me that they called their banker and were actually advised to NOT pay their mortgage so that they could qualify for government aid and get their loan balance reduced and thereby their monthly payments lowered. You know things are getting messy when there is the perverse, unintended consequence to purposely… read more
Unemployment – the LEADING indicator
Do you recall the Fed forecasting positive growth for 2008? When it comes to inaccurate forecasts, it looks like the Fed has some company. Earlier this year, the Obama administration had predicted the unemployment rate would peak at 8 percent before beginning to fall toward the end of 2009. The numbers are in. Drum roll please…the nation’s unemployment rate hit 10.2% for the first time since 1983, and only the second time since official recordkeeping began in 1948. Well, when it comes to forecasting, w… read more
Good time to buy Kraft?
Kraft is the second largest food maker in the world behind Nestle, with #1 market share in over two-thirds of its categories. They have a long list of popular brands that you would recognize – Kraft Macaroni & Cheese, Velveeta cheese, Oscar Mayer lunch meats, Oreo & Chips Ahoy cookies, Ritz crackers, Planters nuts, Kool-Aid, Cheez Wiz, A1 Sauce, DiGiorno pizza, Philadelphia Cream Cheese, Miracle Whip, and many other well known brands. However, their growth prospects are admittedly low.
By n… read more
Comcast in talks with NBC Universal
Successfully run by the Roberts family, Comcast enjoys great scale – the largest U.S. cable TV operator with about 24 million subscribers in 39 states. Through their cable infrastructure, they also offer high-speed internet and telephone services, with about 15.3 million and 7 million customers, respectively. This triple-play offer is very valuable in not only adding to customer loyalty, but there is little added variable cost to these upgrades. Additionally, they own some cable stations such a… read more
May Buy-and-Hold R.I.P.?
In the early part of the 20th century, the average mutual fund turnover was in the range of 20% to 10%, meaning the average holding period of a stock was 5 to 10 years. This turnover has increased to over 100% (meaning a completely different portfolio every year), and spiked even further last year. There are many reasons for this, but in large part, it’s because over the years, investors have increasingly become short-term oriented. In 2006, USA Today cited a survey conducted by Retirement Corp. o… read more
Car Makers Unsubstantiated Hope
The cover of today’s WSJ has a statement, “U.S. auto sales hit their highest monthly level in more than a year in August, bolstering hopes that the industry’s recovery will continue.” Hopeful for an auto sales recovery – are you kidding me?!? Can sentences be called an oxymoron? This “logic” makes no sense to me. The cash for clunkers program only increased the probability of a future slump – we have borrowed from future sales and shifted them to the pres… read more
Home Sales are Improving! Er…wait a minute…
Investors are cheering an increased rate of home sales. Let’s look at the data more closely.
We’ve recently learned that 1 in 8 households with mortgages are in foreclosure and/or behind on payments. In the beginning, it was subprime borrowers with mortgage resets that couldn’t refinance who were defaulting. Now, it’s the prime borrowers who are picking up the pace of foreclosures and delinquencies due to traditional reasons such as rising unemployment.
On the front cover of the “Money & Inves… read more-
Trading Up
As we’ve already discussed in recent blogs (in particular, visit Fed says: Recession Near End), retail sales appear to be up, but when you strip out the boost of auto sales from the cash for clunkers program, spending is actually weaker. The more frugal consumer as of recent hasn’t disappeared after all. During this rally, investors seem to believe that consumers who were trading down are now going to be trading up. However, unemployment is still ris… read more
A Shift to Quality
Since the March lows we’ve watched the S&P 500 index rally over 50%. The rally has been fueled primarily by cyclical, lower quality stocks found in the financial, material, and retail sectors to name a few.
Investors have rushed into economically sensitive stocks as their appetite for risk has increased. One can’t help but think there’s an element of investors putting cash to work in fear of missing out on a further rally. Whether the rally continues to run up or if we’re ready for another… read more
Fed says: Recession Near End
Yesterday, I was eating at Which-Wich, a sandwich shop around the corner. As I walked in, posted against a tack board was the front cover of a local newspaper. In big, bold letters it read, “Fed says: Recession Near End.” I don’t mean to be cynical, but I had to chuckle a little. Wasn’t it this same Fed that, in November 2007, forecasted positive growth for 2008? I’m not sure how much weight that statement carries.
Even if stats come out over the next few quarters, or even a year, that we’r… read more
Raising Prices
The front cover of the WSJ had an article discussing the current sugar shortage (“Food Firms Warn of Sugar Shortage”). It stated that large food companies such as Kraft and General Mills are petitioning the Agriculture Department to ease import restrictions (the government imposes restrictions on how much tariff-free sugar they can import). The food companies warned that the alternative would be consumers paying higher prices. Notice, they didn’t warn that their own profit margins would be cr… read more
A Clunker of a Policy
I keep hearing so much about the “success” of this “Cash for Clunkers” program and I’m getting more frustrated the more I hear about it. So, I decided to Google it (or Bing it) to learn more about this nonsense. I typed in “Cash for Clunkers Nonsense” and came across a well written article that summed up all my thoughts in a nutshell. Rather than reinvent the wheel, I thought I’d share the article. I don’t know anything about the author, other than the fact that I agree with what he says about… read more
The National Debt Road Trip
Federal debt is out of control. We’re all well aware that unemployment is rising and capital gains are becoming capital losses as the stock market falls. What’s this translate to? Plunging tax revenue – it dropped 34 % over the past year to $138 billion – the biggest decline in 28 years. At the same time, following Keynesian economics, the government is becoming the spender of last resort through a huge $787 billion stimulus package (and I would bet there will be more stimulus packages on the … read more
China’s Infatuation with Commodity Asset Markets
We came across a fascinating article this morning written by Andy Xie from the website Caijing.com.cn. The piece is titled Fear the Dark Side of China’s Lending Surge
In short Mr. Xie’s commentary highlights how the Chinese bank’s lax lending practices are giving rise to an increased amount of investment, not into private companies, but rather into asset speculation causing commodity prices to rise. What’s so surprising to us is that… read more
Microsoft...A Comeback Kid?
From the market bottom, the S&P 500 is up about 34% whereas MSFT is up over 55%. Why is this blue chip behemoth getting a lot more attention on Wall Street?
Well three things…1. There is much talk about Windows 7, Microsoft has maneuvered this product effectively through the various preparatory stages and appears to be set for distribution in the fall of this year. 2. “Bing” is now the new buzz word and is gaining traction very quickly in the world of search. Instead of friends telling me to… read more
Viva Pfizer!
Although a manufacturer of consumer products, hospital products, and animal health products, Pfizer is known for being the largest producer of pharmaceuticals in the world boasting annual sales of over $46 billion, 58% of which comes from overseas. Some of their well-known patented blockbuster drugs include: Lipitor, Viagra, Zoloft, Celebrex, Zyrtec, Zithromax, and Diflucan. Before the end of the year, pending shareholder approval, Pfizer has agreed to purchase rival Wyeth for $68… read more
Revisiting the Case for Used Autos
In a previous blog, we discussed the case for used cars and our small investment in CarMax (KMX). We have additional exposure to the used car market through a much larger investment in AmeriCredit (ACF).
AmeriCredit is a sub-prime auto loan business (primarily used cars) based in Fort Worth, TX. In today’s market, the term “sub-prime” doesn’t draw many fans, but in large part, this is what helped create the opportunity. Missing home payment… read more
Shareholders on Target
Today, Target shareholders shot down Bill Ackman’s proposal to nominate 5 candidates to the board, including himself. We believe they were right on target.
Target has been one of the few to succeed in battling Wal-Mart in the discount retailing space by striving to create a different shopping experience. They target a more affluent, female customer base (an estimated 75% are female) and get about 40% of sales from fashionable home decor and more stylish apparel. This is one reason they have… read more
Times are tough – can’t afford that stent
Yeah, right! Yes, you can. I don’t know anybody in a life or death matter who would say, “Doc, I’m strapped for cash, can’t afford that stent.” The numbers Medtronic reported today support that. In an economy needing a defibrillator, last year Medtronic seemed immune to the downturn. Revenues were very robust, up 8% despite a strong dollar (more than 1/3 of their revenues are overseas in 120+ countries). In fact, all of their 7 businesses grew year over year, with five of them growing in double… read more
The Case for Used Autos
The other day I came across a statistic that there are about 250 million vehicles in the US and approximately 5% (or 12.5 million) are junked every year. Current auto sales show we are only producing a little above 9 million a year. Assuming the demand for vehicles remains the same, this 3-3.5 million shortfall means consumers are going to be relying more and more on used cars. Of course, Americans could decide to use more public transportation or rid of their 2nd car, but this gap is so large,… read more
The new drug of choice - Cheerios
We couldn’t help but laugh when we opened the WSJ this morning. For years, we’ve probably all noticed Cheerios cereal boxes claiming that the cereal has cholesterol-lowering heart benefits. There is evidently a strong clinical study supporting this, but apparently, the FDA says if General Mills states “clinically proven to help lower cholesterol” then that makes the product a drug.
“The FDA…suggested that if General Mills wants to keep the box labeling as is, it should file a new-drug application… read more
GM Offers U.S. a Majority Stake
What’s wrong this title? This was on the front page of the WSJ today…unbelievable!
Disclaimer: _The specific securities identified and discussed should not be considered a recommendation to purchase or sell any particular security. Rather, this commentary is presented solely for the purpose of illustrating YCG’s investment approach. These commentaries contain our views and opinions at the time such commentaries were written and are subject to change thereafter. The securities discussed d… read more
UnitedHealth Posts Solid Results
UnitedHealth provides health insurance to more than 70 million individuals. Last Tuesday, as we expected, they posted strong results. One source of concern has been that with unemployment rising, membership from business health insurance plans will shrink. While there has been a reduction here, revenues from Medicare have more than offset this decline by continuing to grow at a healthy pace.
At $23/share, we believe UnitedHealth is significantly undervalued. Thus, we were excited to see they… read more
Are we out of this mess?
Today’s cover of the WSJ has an article titled “Companies Spy an End to Declines in Earnings.” This title caused us to reflect upon our last quarterly letter where we stated:
Unfortunately, we believe this hope for recovery is premature. This is not to say we will not see a further advance in stock market prices. Prices are simply a function of supply and demand, and in the short run, all sorts of factors can come into play affecting emotions. We may see little blips of economic indicators showi… read more
Selling Growth Away
In our March 25, 2009 blog, we mentioned Gap Inc. as an example of overpaying and thereby selling away future growth. We discussed the “Greater Fool Theory” where investors (or rather, speculators) adhere to the belief that there will always be someone stupider than them by paying an even higher price. We felt that today, an appropriate “April Fools” discussion would be to revisit this greater fool concept by taking a look at Wal-Mart. Despite high earnings per share… read more
Early Lessons
Back in 1997, all my friends were constantly shopping at The Gap. This was during my early days of learning about the basics of investing. It was clear to me that Gap Inc. (GPS) was going to be a fast growing company. As most people do, I assumed this high growth meant it would turn out to be a fabulous stock investment. So, I told my father he should consider buying the stock for The Yacktman Funds. That day, my father wanted to teach me three lessons.
First and foremost, he taught me a… read more
How noble - $1 annual compensation
We’ve been keeping our eye on Copart, Inc. (CPRT) as a potential investment for quite some time. It’s a fantastic business – very profitable with high cash flow and low capital needs, no debt, very high margins, great management, the list goes on. Their main business is to be the liaison for insurance companies to sell salvage vehicles to auction buyers (used vehicle dealers, junk yards, rebuilders, etc.).
Last Thursday, the Board decided to consider a proposal to have senior management foreg… read more
Gold - an investment or speculation?
A good friend of mine sent me an email today about a very respectable hedge fund manager, David Einhorn of Greenlight Capital, and how he is making bets on gold. In a letter to his investors, Einhorn wrote, "The size of the Fed’s balance sheet is exploding and the currency is being debased. Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed…Our instinct is that gold will do well either way: deflation will lead to further steps to debase the currency,… read more
Citigroup: "Do as we say, not as we do"
Yesterday, Citigroup broke below a buck! Yep, that same behemoth of a bank that was once trading above $55 dropped below $1/share.
It reminds me of an article I read somewhere about a year ago. It was titled something like “Citigroup: Do as we say, not as we do.” I recall that it pointed out the irony of Citi analysts urging investors to avoid leveraged businesses. They were essentially issuing a very strong sell recommendation on their very own stock!
I’d like to take you back to something… read more-
Are credit cards disappearing?
After American Express shares began to tumble we made a small stake and have added little by little as it’s shares have declined, and we’ve been eyeing it much more lately – especially at $11/share. AmEx is much more transparent than some of the larger banks such as Citigroup, Bank of America, and JPM. It’s a much more straightforward financial company – their financial assets are much easier to analyze.
It’s also very different than the other credit card companies in three major ways. First … read more
The Financial Crisis Explained in Simple Terms...
Saw this on the U.K.’s Telegraph online newspaper…a little bit of Internet humor. Enjoy!
Heidi is the proprietor of a bar in Berlin. In order to increase sales,
she decides to allow her loyal customers – most of whom are unemployed
alcoholics – to drink now but pay later. She keeps track of the drinks
consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Heidi’s bar.
Taking advantage of her customers’ freedom… read more
"You can't...turn on the faucet and have chips come out"
In WSJ’s weekend journal, there was a quote from Pepsi’s finance chief “You can’t…turn on the faucet and have chips come out.”
He was referring to how beverage sales are slowing as consumers choose tap water, but that snack sales are actually increasing. They attributed some of this increase to their ability to raise prices (which comes from owning strong brand names, especially among small price-tag items).
The company name “PepsiCo” is certainly misleading, as the company actually makes… read more-
Expanding Empires During Tough Times
On the front page of the WSJ there is an article about Coke betting on sales in Russia.
Another advantage of owning businesses with strong brand names, strong balance sheets, and ample cash flow beyond their capital needs, is their ability to expand their empire when the going gets tough.
Coke, among many of the other businesses we own, continues to expand across the globe and also acquire other businesses at bargain prices as valuations drop. They continue to steal market share through… read more
Real Answers to Stimulate Our Economy
With President-elect Obama proposing that our economy is in diar need of a $700+ billion stimulus package. Our thoughts turn back to what we discussed in our year-end client letter. The thought of combatting this deepening recession that came as a result of having too much debt by borrowing even more…in our opinion, to get ourselves out of this slump by doing more of the same seems ludicrous! I once heard the definition of insanity is doing the same thing over and over expecting different results.
Over… read more
The Ugly November Jobs Report
The jobs report is in, and unemployment doesn’t look so good coming in at 6.7%. But we need to realize that this is actually about in line with historic norms of an unemployment rate around 7%. The current unemployment rate would need to double to reach the 81-82 recession levels, and is still nothing compared to the 25% levels seen during the Great Depression. We wouldn’t be surprised to see this number continue to hike up. “Experts” see this number reaching 9% by the end of 2009, we wouldn’t… read more
Auto Bail-Out...Investing in Change or Maintaining the Status Quo?
At Yacktman Capital Group, when we buy common stock of a company we are not just buying stock, but more, we view ourselves and our clients as becoming part-owners of the business. You can read more about our investment philosophy on our website, but essentially we are attracted to businesses that are non-cyclical, have low capital requirements, and as such, have a high and consistent return on tangible assets. The complete anithesis of such a business would be the autos.
This morning GM reached… read more
Is there anybody that doesn't shop at Wal-Mart?
In today’s WSJ, in an article titled “Wal-Mart Flourishes as Economy Turns Sour”, this morning I read the following statement:
“For every $1 spent in the last year on goods other than cars in the U.S., 8.2 cents went to a cashier at a Wal-Mart store or a Sam’s Club.”
Wow! That’s pretty amazing. Is there anybody that doesn’t shop at Wal-Mart?
With all the doom and gloom, especially in the midst of very dismal retail earnings reports, you’d think perhaps we’re purchasing Wal-Mart shares…. read more
Market Direction...Will There Be a Rally or Further Declines?
Yesterday, the S&P 500 index closed at 911.29. We hear so many people ask the question, will the market keep going down or are we going to see a rally in the stock market? Now we have no crystal ball here at YCG (although we do have a rather large “magic 8 ball” on our desk – perhaps we should give that a shake?), but we shall go ahead an illustrate a few findings we’ve found interesting to note.
In our Q2 2008 client letter (and you can find this by clicking on “Literature —> Client Letters”)… read more
Changing the Rules When the Game has Already Begun
We read in the Wall Street Journal today the fact that Treasury Secretary, Henry Paulson, officially backed away from the original plan to buy up troubled mortgage assets from distressed financial institutions. We are still proponents of some form of this plan and are dissapointed that Secretary Paulson and his team have decided to walk away from such a notion. It’s almost as if the Fed is brewing a completely new recipe for a stew, and they randomly add a little salt here, a little pepper there,… read more
Warren Buffett Speaks Out
One week ago we wrote a blog titled “Mosquito in a Nudist Colony.” Well, it appears we’re not the only ones getting excited about investment opportunities. Today, Warren Buffett wrote an article that was posted in the NY times. For your reading pleasure, we have pasted it here:
October 17, 2008
OP-ED CONTRIBUTOR
Buy American. I Am.
By WARREN E. BUFFETT
Omaha
THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general… read more
Does anybody drink during a recession?
Yesterday, as I would have expected, Coke posted strong results despite a feeble U.S. economy. In large part, this was because 80% of their profits come from overseas, and global unit case volume grew 5%, offsetting a slight decline in the U.S. market of 2%. The irony is that during intraday trading, Coke shares were being sold off like everything else, down 4.7% at one point.
Based on the way the market is pricing Coke, you’d think nobody drinks during a recession. This goes to show *the v… read more
Mosquito in a Nudist Colony
Wow – what a rocky week in the markets! Over the course of a week, the S&P 500 dropped from $1,100 to $900!
An investor friend of mine was joking with me today and said, “I feel like a mosquito in a nudist colony!”
We would concur. We’re starting to see valuations us value-starved investors haven’t seen for a LONG time.
Having said that, we need to keep in mind that today the S&P 500 closed at about $900 – which we would say is approximately fair value. Markets do tend to overshoot to … read more
A $600 billion spending bill for the auto industry that no one's talking about
We opened the WSJ this morning and read the “What’s News” section as we always do. We here at YCG found an interesting headline that no one seems to be talking about.
We have heard so much about the $700 billion bailout plan and indeed it is a lot of money, however, we found it very surprising and quite puzzling when we read in the first column more details regarding the bail-out plan and then only to read in the next column over that:
“The House approved a $600 billion spending bill that… read more