Hottest Links: CAPE Fear, The Paradox Of Wealth, And 2013 In Charts


Hottest links for Thursday, 19th December, the late edition (see Wednesday’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.  We’ve got several great stories to distract you from the bitter chill of winter, including a curveball of an ETF pitch, a discussion of banks as black boxes, and investment banks popping champagne like it’s 2007.

Hottest Links: Stories

Value Investing

How To Value Invest Epilogue Excerpt

Investing in the Next Generation of Emerging and Frontier Markets with Maurits Pot

Yarra Square Investing Greenhaven Road CapitalValueWalk's Raul Panganiban with Maurits Pot, Founder and CEO of Dawn Global. Before this he was Partner at Kingsway Capital, a frontier market specialist with over 2 billion AUM. In the interview, we discuss his approach to investing and why investors should look into frontier and emerging markets. Q2 2021 hedge fund letters, conferences and Read More

I hope you have been able to see the progress that can be made in a short period of time because you can make the same progress if you follow the lessons of this book, “How to Value Invest.” [Jason Rivera, Value Investing Journey]

Review: How To Make A Million – Slowly, by John Lee

I suspect investors of the John Lee variety are becoming a vanishing breed. Now 71-years old, Lee grew up seeing his father sprawled on the drawing room floor, pipe in hand and fortune on the horizon, scouring defunct publications like the Stock Exchange Gazette for bargains. [Monevator]


An investor needs to be aware of the benefits, as well as the drawbacks of using any investment model.  Too many people follow their models and opinions with religious like zeal, much to the detriment of their portfolios.  Below we examine a few of the criticisms commonly heard when discussing the CAPE ratio. [Mebane Faber] Related; The vaunted cyclically adjusted price/earnings ratio, or CAPE, developed by Nobel Laureate Robert Shiller, is busted. [John Rekenthaler, Morningstar]

Blind Spots

As I have written before, the sociology of investment organizations is fascinating.  However,  it seems that academics, practitioners, and lay investors often overlook the “family” dynamics at work. [Tom Brakke, Research Puzzle Pieces]

Waiting For The Next Train

Following up our recent article on selectivity standards in an upward moving market, below are some comforting words (and/or coping advice) from Mariko Gordon of Daruma Capital derived from her. [Portfolio Management Jar]

The Paradox of Wealth: Economic Growth Lowers Security Returns (Podcast)

In his 2012 Financial Analysts Journal article, “Fewer, Richer, Greener: The End of the Population Explosion and the Future for Investors,” Laurence B. Siegel shares his optimistic view on the continued growth of the world economy. But according to William J. Bernstein, such optimism should not be applied to security returns. [Abby Farson Pratt, Enterprising Investor]


The most important charts of the year

We asked our favorite portfolio managers, strategists, analysts, and economists across the Street for the charts that they deem the most important right now, and this is what they sent us. [Matthew Boesler, Business Insider]

Hottest Links

Bitcoin Mania Heads Into the Endgame

Lurking behind the recent falls are fundamental intellectual flaws. Bitcoin’s technological wizardry promises scarcity, which is a prerequisite for the existence of value. But demand is also important. [Edward Hadas, Dealbook]

Another sign of a buyout bubble

KKR & Co. L.P. (NYSE:KKR) says KKR Financial Holdings LLC (NYSE:KFN) will provide cash flow for the buyout firm. You would overpay for that cash flow if you believe you will make even more money pumping those funds into buyouts. The other reason you would pay more to get into the bond fund management business if you believe now is the time to diversify away from buyouts, and buying a linked but technically separate business could be the easiest way to do that. [Stephen Gandel, Term Sheet]

The Most Popular ETF Pitch Is Likely a Curve Ball

By now, most investors are familiar with the sales pitches in favor of exchange-traded funds (ETFs). Proponents of ETFs are quick to point out the greater transparency, costs savings, diversification, and tradability that they offer relative to other investment products. [David L. Allison, CFA Institute]

Asset Manager Regulations Could Crimp Profits: Fitch

Treating large asset managers like banks — by requiring tougher capital and liquidity standards, for instance — could result in lower long-term profitability for those firms, but would also beef up balance sheets, Fitch Ratings said this morning as it weighed in on a subject of high interest to BlackRock, Inc. (NYSE:BLK), Vanguard Group and a handful of other massive investment managers. [Brendan Conway, Focus on Funds]

Levine on Wall Street: I Used to Work at Goldman Sachs Group Inc (NYSE:GS) Too!

Anyway, this will be bad for housing I guess, so various people complain in this article, but none does as good a job as David Stevens, the chief executive of the Mortgage Bankers Association, whose life is presumably now complete because he told the Wall Street Journal, “It’s like Beyoncé’s album: It all of a sudden hit the market.” [Matt Levine, Bloomberg]

Speculating About 2014

In 2014, we will see an uptick in Volatility and correlation. All corrections in 2013 were minor and took the form of sector rotation. The deepest S&P 500 INDEX (INDEXCBOE:SPX) pullback in 2013 was less than 8%. We will see a lot deeper correction in 2014 – to the tune of 15% to 20% that will test and slice below S&P 500 INDEX (INDEXCBOE:SPX)’s 200-day moving average. [Ivanhoff Capital]

Odey shares £55m pay pool with 17 staff

Crispin Odey has shared out a £55m pay-out between 18 members of staff after profits at his London-based hedge fund doubled last year. [Louise Armitstead, The Telegraph]


Finance, Fraud, and Still-Recent Memories

It is not the case, by the way, that there have been “no prosecutions,” as the title of Rakoff’s piece claims. Perhaps he, or the author of that headline, is relying upon a very strict interpretation of the adjective “high-level”. Ralph Cioffi and Matthew Tannin were certainly prosecuted before one of Rakoff’s judicial colleagues in the Eastern District of New York. [Christopher Faille, AllAboutAlpha]

Banks Are Black Boxes (Or Are They?)

The recent financial crisis has negatively impacted the perception of banks and revealed hidden “spider webs” in the financial statements. However, a good checklist tailored to bank investments should prove a useful tool in rationalizing the investment decision for potential bank investments and help reduce mistakes related to investing in banks. [Pope Brar, BeyondProxy]

Wachtell Lipton Sues Rival Carl Icahn And Calls Him A Bully

For decades, Carl Icahn and Martin Lipton have been fierce rivals. Icahn has made his mark attacking corporate boards and trying to shake up companies, while Lipton has spent his career defending those companies from Icahn. [Nathan Vardi, Forbes]

Auditor: “Material Weaknesses” at Bailey Bros. Building and Loan

We have audited the Bailey Bros. Building & Loan Association (the Building & Loan) internal controls and financial reporting as of Dec. 31, 1945. [Climateer Investing]

Maybe Footnoted 88 really is evil

The derivatives industry has been up in arms over this little footnote that spans pages 22 and 23 in the new Dodd-Frank-inspired CFTC rules.. [Paul Murphy, FT Alphaville]

Time to Pop the Corks Again at Investment Banks

As the year draws to a close the results detailing the performances of the world’s investment banks are out, and one phrase appears more often than any other: “the highest since 2007.” [Matt Turner, MoneyBeat]

Best and Worst Newspaper Errors And Corrections of 2013

“In an article on Saturday headlined ‘Flying saucers over British Scientology HQ’, we stated “two flat silver discs” were seen “above the Church of Scientology HQ”. Following a letter from lawyers for the Church, we apologise to any alien lifeforms for linking them to Scientologists.” [Climateer Investing]

Hottest Links: Not The Onion

Grandpa who won romp with 2 hookers

A grandfather who won a tryst with two hookers choked to death before he could enjoy his threesome. [Daily World]

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