Hottest links for Thursday, March 20th, the late edition. Get our free daily newsletter 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. For your Thursday afternoon reading pleasure, we’ve got an investment banking intern who did something remarkable, a gold miner ETF that has a chance to be a trailblazer, and a great piece on the idea of “threshold concepts” – a key moment or gateway in the study of a new field that one must conquer to make progress.
Hottest Links: Stories
Love Mental Models? Study Threshold Concepts!
The U.S. Federal Reserve is treading carefully with raising rates amid the widespread economic, macro and geopolitical uncertainties sweeping around the world. The Fed raised its target level as high as 20% in the early 1980s to deal with runaway inflation, but we're a far cry from that today — a time when inflation threatens Read More
I think that understanding how to learn about mental models remains (unexplored and unpopular). In other words, the journey that every aspiring renaissance thinker must undertake in order to become “worldly” isn’t as talked about or referenced. [Joe Koster, Value Investing World]
Value Investing, the Sanjay Bakshi Way 2.0 – Part 2
After talking about the important concept of economic moats in the first part of his interview, in this second and concluding part, Prof. Bakshi talks about his thoughts on valuations, mental models, diversification, checklists, and why you must buy great businesses for the long term. [Vishal Khandelwal, Safal Niveshak]
New Book is Out!
My new book “Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market” is finally available on Amazon! [Meb Faber]
Related; The new book Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market (only $4.99) applies the CAPE valuation metric across more than forty foreign markets and finds even greater examples of bubbles and busts abroad than in the United States. [ValueWalk]
The Problem With Forward P/Es
In a recent note by Jeff Saut at Raymond James, he noted that valuations are cheap based on forward earnings estimates. The problem with forward operating earning estimates is that they are historically wrong by an average of 33%. [Tyler Durden, Zero Hedge]
Mortgage Interest Deduction
Should congress limit the mortgage interest deduction? [Barry Ritholtz, The Big Picture]
Technical Analysis and Individual Investors
Individual investors lose money on average, especially those that trade options. This is the case regardless of how they come to their conclusions (technical or fundamental). Another problem is that this particular study that focuses on amateurs goes into how investors who report using technical analysis focus on speculating on short-term market movements. [JC Parets, All Star Charts] Related; Individual investors might be best suited to stick to fundamental analysis rather than technical trading, according to a new academic study. [Mark Melin, ValueWalk]
Margin by any other name
Leverage kills portfolios. Even a cursory glance back at the financial crisis highlights the dangers of leverage for professional and amateur investors alike. In my book I called leverage a “non-starter” for individual investors. [Tadas Viskanta, Abnormal Returns] Related; Last week we passed the five-year anniversary of the post-financial crisis lows. The ongoing bull market, fueled by decent economic news and an activist Fed, may well continue for a long time yet. I don’t have a crystal ball. [Bob Seawright, Above the Market]
Would-Be Investment Banking Intern Destroys Competition With Exceptional Vision
Applying for a internship with one of Wall Street’s storied investment bank’s this summer? Think you’ve got a pretty good chance of landing the gig? Confident that you stack up to everyone else in the pool? [Bess Levin, DealBreaker]
Greenblatt on CNBC: Market Reasonably Valued
So Joel Greenblatt was just on CNBC and said some interesting things. I don’t intend to post every time someone I respect shows up on TV, but this appearance was especially interesting to me for a couple of reasons. One major reason is, of course, market valuation. [KK, Brooklyn Investor] Related; Joel Greenblatt specifically names Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Hewlett-Packard Company (NYSE:HPQ) as some of the companies that he thinks are worth owning, but that doesn’t mean he has shared his best ideas. [Michael Ide,ValueWalk]
Gold Miner ETF: Going Where Other Investors Aren’t
The Market Vectors Gold Miners ETF (NYSEARCA:GDX) climbed 25 percent this year, more than double the 12 percent advance for the SPDR Gold Trust (ETF) (NYSEARCA:GLD), the biggest exchange-traded product backed by bullion. This is the first quarter the company fund is outperforming the metal ETF since 2012. [Brendan Conway, Focus on Funds]
Detroit Legal News, a recession hedge
Sometimes being in the right place at the right time is all that’s needed for success. The DETROIT LEGAL NEWS C (OTCMKTS:DTRL) can certainly take credit for making the best of a bad situation. The company owns legal newspapers and a magazine in Michigan. [Nate Tobik, Oddball Stocks]
Hottest Links: Not the Onion
Student suspended for taking razor from self-harming classmate
Last Thursday at Bayside Middle School, sixth grader Adrionna Harris came to the aide of a classmate who was cutting his arm. She faces expulsion for taking a razor from the student, throwing it away and convincing him what he was doing wasn’t right. She thought she was doing the right thing, so on Friday she told the school administration what happened. The way school officials responded led to this question: was the school’s zero tolerance policy taken too far? [Andy Fox, Wavy]