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Investment Research Since 1978

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The Three Most Important Words in Investing

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According to the man who taught Warren Buffet how to invest the three most important words in investing are: margin of safety. In his book, The Intelligent Investor, Benjamin Graham wrote: “The margin of safety is always dependent on the price paid. For any security, it will be large at one price, small at some higher price, nonexistent at some still higher price.” From The Telegraph’s “How to Invest Like…Benjamin Graham”: Graham brought this idea to life with his invention of a character called “Mr Market”. Imagine, he said, that you own a small share of a business in which one of the … [Read more...]

Flash Boys

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I downloaded my copy of bestselling author Michael Lewis’ new book Flash Boys today. Lewis appeared on 60 Minutes last night: … [Read more...]

It’s Never too Early to Retire

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Controlling what you spend has some benefits. Forbes talked to two extreme early retirees and developed a three step process that could work if you don't mind forgoing some of the finer things. Here’s the three-step process Fisker, Mr. Money Mustache and others recommend to pull it off: 1. Embrace a very frugal lifestyle. That means cutting back substantially on biggies like your home and car expenses as well as learning to cook (to save on dining out and prepared foods) and to do more things yourself rather than pay someone else to do them. 2. Save like crazy­ — ideally at least 75% of … [Read more...]

The Rich Man

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Your approach to this market needs to be like that of my favored prognosticator: the rich man. You see the rich man, as Dow theory legend Richard Russell says, doesn't need the markets. RULE 3: RICH MAN, POOR MAN: In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur and the neophyte trader. The advantage that the wealthy investor enjoys is that HE DOESN'T NEED THE MARKETS. I can't begin to tell you what a difference that makes, both in one's mental attitude and in the way one actually handles one's money. The wealthy investor … [Read more...]

Investing to Win the War

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In my close to 20 years working with investors I have found gauging one's risk tolerance is more art than science. There are models galore that will give you an "appropriate" allocation for your age, income needs etc. But often times that's thrown out the window when times get tough. And tough they have gotten, for example, in the 2000 tech bust and the recent crisis in 2008. It's amazing to me how quickly the rough times have been forgotten. In the good times, most investors feel they're thick skinned and can handle the volatility in the market. That is until they start losing some serious … [Read more...]

Thanks for the Investment and Good Luck!

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Some of the big dogs in private equity are selling. Good luck to those who stick around. The WSJ reports: Shares of private-equity firms are soaring, and buyout barons are selling. Top executives at three publicly traded private-equity firms have sold more than $500 million of their firms' stock over the past year, according to securities filings. The most recent sellers are Carlyle Group LP co-founders co-Chief Executive William Conway and Chairman Daniel D'Aniello, who have sold between $39.6 million and $48.9 million of stock apiece, according to a securities filing Thursday. The … [Read more...]

How to Make $175,000

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Making money and saving money is hard. But if you have some money and some time then you can do some amazing things like compounding your money or what Albert Einstein referred to as the 8th wonder of the world. But compounding can work both ways. Carrying credit card debt at predatory rates month after month is reverse compounding. Not knowing you've become that little mouse running on a wheel at Petco is painful. The average hedge fund, for example, charges 2% per year on your assets per year and then take 20% of your profits. The average mutual fund charges 1.33% on assets, according to … [Read more...]

Can Your Portfolio Take a 50% Loss?

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It's impossible to have it all ways. In order to craft an investment portfolio that can act as an all-weather armadillo, you must be willing to forgo potentially substantial upside rewards to balance against the horror of a downside wipeout. If you are retired or saving for retirement in the not-too-distant future, you can easily get a knot in your stomach when you look at the basic math of downside portfolio protection. By example, when you lose 50% on an investment, you must make 100% the next trip to the plate just to get back even. And that's without considering the negative drag of … [Read more...]

Did JP Morgan Know about Madoff?

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Accusations are flying and the lawyers have been called in at JP Morgan to defend current and former executives, including CEO Jamie Dimon from accusations they were aware of the Ponzi scheme being run by Bernie Madoff. Attorney David Rosenfeld is bringing a new lawsuit based on interviews with Madoff himself. If any of the JP Morgan executives are found guilty, it could have a major effect on the company and its customers’ faith in its reliability. Reuters reports on the allegations. "JPMorgan was uniquely positioned for 20 years to see Madoff's crimes and put a stop to them," the lawsuit … [Read more...]

The 8th Wonder of the World

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Saving money is hard. But the earlier it's started, the easier it gets. I was stacking quarters the other night to explain the concept to my kids. Saving money early helps to bring time into the equation. The result is compounding money–a phenomenon Albert Einstein referred to as the 8th wonder of the world. … [Read more...]