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The Intelligent Investor: Part III

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“It is surprising how little attention has been paid by economists and by Wall Street to this development. The debt of corporations has expanded nearly fivefold while their profits before taxes a little more than doubled,” wrote Benjamin Graham in The Intelligent Investor. What Ben Graham was referring to was the expansion of Net Corporate Debt from $140.2 billion in 1950 to $692.9 billion in 1969—a fivefold increase—compared to the expansion of Before Income Tax Profits from $42.6 million to $91.2 million—only a little more than double. A fivefold increase in debt only to double profits … [Read more...]

The Biggest Buyer of Stocks

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"Stockholders as a class are king. Acting as a majority they can hire and fire managements and bend them completely to their will." - Benjamin Graham, The Intelligent Investor Corporations have been buying back shares at a record pace, buying mores stock than any other group of investors today including: Hedge funds, foreigners, insiders, pension funds, insurance companies, and individual investors. In the first quarter of this year corporations purchased $188 billion of stock—the highest quarterly amount since 2007, according to Birinyi Associates. We all know how stocks did after … [Read more...]

The Global Imperative

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Check out this chart on oil demand. The black line shows oil consumption of major developed markets. This is basically the U.S., Japan, and developed Europe. The grey line is oil consumption of the rest of the world, which is dominated by emerging markets. Up until about 15 years ago, if you were interested in the oil market, you focused on demand in the world’s largest economies. But in recent years, developed market demand has become a marginal influence on prices. The most important driver of global oil markets today is demand from the rest of the world. The U.S., Japan, and … [Read more...]

Mission Paris

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Last week I told you about The Best Table in Newport. After TSK, Chad Hoffer and Tyler Burnley felt Newport needed a good burger joint so they opened up Mission, which in no time created a cult like following. I had that confirmed on a recent trip to Paris, France. In May, Becky and I visited her parents Debbie and Dick Young who spent the month there. One of the many memorable dinners we had was on the Left Bank at L’Epi Dupin. It was a short walk from our Hotel de L’Abbaye and right near the famous Paris department store Le Bon Marche. I would have never expected such fine food except … [Read more...]

The Intelligent Investor: Part II

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“You Can Observe a Lot Just by Watching”—Yogi Berra You may recall the summer of 1963 when The Beach Boys’ Surfin U.S.A hit #3 on the charts and the stock market was riding the tail end of a 1949 to 1964 wave, where it averaged a 10% return per year. Stocks were hot and that was it. End of story. Much like today. In 1964, as Benjamin Graham points out in his the book The Intelligent Investor, “Few people were willing to consider seriously the possibility that the high rate of advance in the past means that stock prices are ‘now too high’, and hence that ‘the wonderful results since 1949 … [Read more...]

The Intelligent Investor: Part I

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“To me, Ben Graham was far more than an author or a teacher”, writes Warren Buffett in the preface to the 1973 edition of The Intelligent Investor, “More than any other man except my father, he influenced my life.” In a remembrance of Graham (1894-1976) published in the Financial Analysts Journal, Buffett wrote, “A remarkable aspect of Ben’s dominance of his professional field was that he achieved it without that narrowness of mental activity that concentrates all effort on a single end.” I received my copy of The Intelligent Investor as a Christmas gift back in 1997 from Dick and Debbie … [Read more...]

The Best Table in Newport

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You’re in for a culinary treat at Thames Street Kitchen (TSK), especially if you sit at our favorite table—a huge-raised farm table—the table in the “farm to table” movement. The farm table literally feels like the place where the evening’s bounty is thoughtfully separated earlier in the day by chefs Chad Hoffer and Tyler Burnley. And while they’re in the kitchen creating masterpieces for you, there’s plenty of room for 8 or even better, a party of 10. The table is up high where you can take in the scene in the room and check out the action in the kitchen through the huge white paned … [Read more...]

Vanguard GNMA Up 40.6%

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You’ve been rewarded for sticking with Vanguard GNMA. Over the last 52-weeks it has returned 5 percent and through the first half of this year it is up 4.5 percent. A lot of investors sold their GNMA last year when the Fed began its taper talk. And at the beginning of this year the so called experts said bonds were dead—making it even harder for you to hang in there. I’m glad you did. Aren’t you? Still all the chatter is about stocks. This week the Dow and S&P 500 both had record closings. Tech is way overbought and bonds are being left for dead, again. But the prudent investor would … [Read more...]

Skimming: 3 Steps for Preventing Identity Theft

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You've probably heard about credit card skimming at gas stations and ATMs. My client told me how it happened to him twice while wintering in Florida this year. It’s as easy as one, two, three. Here’s how it works. First, the use of universal keys make gas pumps easy to access and therefore easy targets. Second, the identity thief installs an illegal scanner. When you insert your credit card at the pump your data is stolen and saved. And third, he can collect the data via wireless Bluetooth technology a couple of weeks or months later without even getting out of his car. The same technique … [Read more...]

16-Year Bear Market Ahead

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A 16-year bear market was what Dick Young faced back in 1965 as he began his brokerage industry journey at Clayton Securities in Boston. It’s hard to imagine a better time then and now to make dividend payers the cornerstone of your stock portfolio. Dick writes: My chart on the Dow portrays the up again/down again Dow track through the 1960s, '70s and early '80s. The Dow ended 1965 at 969 and closed 1981—16 years later—at 875. For what was half a retirement for many Americans, the Dow actually lost 9% of its value. It was a brutal stinker for investors retiring in 1965. How much of an annual … [Read more...]