Hottest links for Wednesday, 18th December, the late edition (see Tuesday’s edition of hottest links). Get our free daily newsletter (which HAS BEEN RECENTLY UPDATED) and never miss a single linkfest. Also, now if you sign up you will get our new e-book on value investing.
Top stories for today are included below. Some enthralling Hump Day reading today, including a great little piece about the correlation between the Fed's monetary policies and alcohol prices. We've also got Charlie Munger on useful phrases from German mathematicians, a highly useful piece on how your work environment affects your productivity, and you'll want to read to the end to see the one about the woman who was so mesmerized by her Facebook app that she walked off a pier.
Hottest Links: Stories
Updating Warren Buffett’s Favorite Valuation Metric
Here’s some perspective on the potential value of the US equity market using total stock market capitalization relative to GNP. This is an indicator that Warren Buffett has previously referred to as his favorite valuation metric. [Cullen Roche, Pragmatic Capitalism]
The Milken Rule and Wide/Sustainable Moats
Michael Milken was the driving force behind the success and profitability of my original firm. What happened to Drexel and Mike Milken in the late 1980s is a study in how to have a brilliant vision and how to handle a business with a very wide moat. [Smead Capital]
“Invert, always invert”
The variables are many and the problems challenging. Charlie Munger borrowed a highly useful idea from the great 19th Century German mathematician Carl Jacobi that provides a helpful way to deal with the myriad problems investors face in trying to establish a good investment process. [Bob Seawright, Above the Market]
Fast dividend growers – How to find them
In recent posts I’ve covered some simple steps that you can use to find companies with long histories of profitable dividend payments and consistent growth. [John Kingham. UK Value Investor]
Is The Fed Driving You To Drink?
While this morning we were re-assured by the government's statistics that there is no inflation (or deflation); implicitly enabling the Fed's extreme monetary policy to continue with no immediate consequence, it would appear there is an oddly synchronized rise in the price of something critical to day-to-day 'coping' for many - alcohol prices. [Tyler Durden, Zero Hedge]
Bill Miller 2.0: Legg Mason Manager Readies New Fund
Legg Mason Inc (NYSE:LM) stock picker Bill Miller is back, with his son in tow. Miles Weiss of Bloomberg News has details on the Legg Mason Opportunity Trust Class C (MUTF:LMOPX): The fund, to be run by Miller and his son, will seek to produce a high level of income from a “wide array of sources” by identifying “mispriced” investment opportunities, according to the Dec. 13 filing. [Brendan Conway, Focus on Funds]
Your Environment Matters If You Want To Make Better Decisions
Most of us make decisions in an environment where it is very hard for us to behave rationally. I’m hard pressed to imagine an environment less conducive to rational decisions than that of the modern office worker. [Shane Parrish, Farnam Street]
Ex-Deutsche Banker Used Tiger Charity To Hide Assets
Stuart Bray and his wife, Li Quan, are fighting over about 50 million pounds ($81 million) of assets held by Save China’s Tigers, which they founded in 2000, in their divorce case in London. The former banker used a trust connected to the charity as “shelter” for their personal wealth, Li said at a hearing in the case this morning. [Bess Levin, DealBreaker]
Joho Capital Discloses 58.com (WUBA) Stake
Robert Karr's hedge fund firm Joho Capital has filed a 13G with the SEC and disclosed a new position in 58.com Inc (NYSE:WUBA). Per the filing, Joho owns 7.7% of the company with 920,000 shares. [Market Folly]
Weighing the Odds of a Crash in Farmland Prices
Any land bought with a mortgage over the last few years would be underwater and at risk of not being able to service the debt. Default, foreclosure. But someone will own the land. Maybe BlackRock, Inc. (NYSE:BLK) swoops into farm country, buys up acreage and offers to let the former owners become sharecroppers. Problem solved, right? [Climateer Investing]
What was unnecessary (and annoying) was for Herbalife Ltd. (NYSE:HLF) to describe the results incompletely in its news release. Rather than saying there were “no material changes,” it would have been better to say what the changes were and that the company considered them to be minor. [Francine McKenna, re: The Auditors]
Still Want That Bitcoin ETF?
Bitcoin’s gyrations alone are worth noting — a plunge of 20% this morning — which is roughly double the already rocky daily average swing of 10%. Most investors can’t stomach those kind of moves, which is one reason it’s so premature to talk about building a Bitcoin exchange-traded fund. It’s also part of the rationale for keeping investment in Bitcoin, for now, in the realm of hedge fund managers. [Brendan Conway, Focus on Funds]
US hedge funds threaten EU boycott
As the AIFMD deadline approaches, US firms claim European disclosure rules will expose their top talent to poachers while depository and private placement rules are too restrictive. [Kris Devasabai, Risk.net]
Japanese Madoff Jailed in $240M Fraud Case
The case, which echoed US-based manager Bernie Madoff’s audacious fraud by creating his pyramid scheme in 2008, was brought after Kazuhiko Asakawa lied about his firm's investment performance and the size of assets under its management in order to solicit more investments from pension funds. [Charlie Thomas, aiCIO]
Should You be Worried about a Low Volatility Bubble?
Investors in low volatility strategies are unlikely to suffer from a bubble effect due to the low volume of cash invested, according to research from Ossiam. [Charlie Thomas, aiCIO]
Doubling down my position in Gravity Ltd.
Gravity Co., LTD. (ADR) (NASDAQ:GRVY) has had its difficulties over the past couple of years. I originally took a position in Gravity in 2010, built it over 2011 and sold out in February/March of 2012 when the ADSs hit a high of almost $3.50. [Long Term Value]
SEC Brings Fewer Enforcement Actions, Slows Early-Stage Probes
A possible new motto for the Securities and Exchange Commission: Less is more. As the agency pushes into a new era of enforcement not dominated by the financial crisis, it is bringing fewer cases, according to figures released by the SEC Tuesday. [Jean Eaglesham, The Wall Street Journal]
Cantab Pummeled In Early December
The Cambridge, U.K.-based quantitative fund had cut its year-to-date losses—which stood at 27.7% at the end of August—to 22.74% by the end of November. But over the past