Excellent sources of on-line information relevant to value investing

Excellent sources of on-line information relevant to value investing include

• The Rediscovered Benjamin Graham – a collection of hard-to-find lectures delivered by Graham during the 1940s at the New York Institute of Finance.
• My Hero, Benjamin Grossbaum by James Grant – “my subject is Benjamin Graham: his life, his investment philosophy, his writings and his Jewishness. About his love life, I will say little, as my time this evening is limited – just three hours, I believe. … I am a frankly worshipful admirer of Graham’s. I love him for his heart as much as for his head. Between 1929 and 1932, his investment partnership lost 70% of its value. Not until 1936 did it recoup all it relinquished since the Crash. Yet Graham persevered and, along with his partner, Jerry Newman, went on to achieve a brilliant long-term investment record – not excluding those three disastrous years. We have all heard the platitude, ‘The first rule of investing is not to lose money and the second rule is not to forget the first.’ Very helpful. Well, Graham shows that a debilitating loss is no reason to give up. Never quit.”
• Should Rich Corporations Return Stockholders’ Cash? – in this, the first of three articles written for Forbes magazine at the nadir of the Great Depression, Mr Graham proposed a principle which was then novel and has since become commonplace (and commonly bastardised).
• Inflated Treasuries and Deflated Stockholders – in the second of the three articles written for Forbes in 1932, Mr Graham noted and described an oddity: “a great number of American businesses are quoted in the market for much less than their liquidating value; that in the best judgment of Wall Street, these businesses are worth more dead than alive.”
• Should Rich but Losing Corporations Be Liquidated? – “if gold dollars without any strings attached could actually be purchased for 50 cents, plenty of publicity and plenty of buying power would quickly be marshalled to take advantage of the bargain. Corporate gold dollars are now available in quantity at 50 cents and less – but they do have strings attached. …”
• Benjamin Graham, Securities Expert – The New York Times (23 September 1976) recorded the death of the “founding father of modern securities analysis.”
• Remembering a Classic Investing Theory by David Leonhardt – “Today, the Graham-Dodd approach produces a very different picture from the one that Wall Street has been offering. Based on average profits over the last 10 years, the P/E ratio has beenhovering around 27 recently. That’s higher than it has been at any other point over the last 130 years, save the great bubbles of the 1920s and the 1990s. The stock run-up of the 1990s was so big, in other words, that the market may still not have fully worked it off.”
• Experience by Bernard Condon – “At 91, the man Warren Buffett famously dubbed a ‘superinvestor’ is still picking unloved stocks. Walter Schloss has lived through 17 recessions, starting with one when Woodrow Wilson was President. This old-school value investor has made money through many of them. What’s ahead for the economy? He doesn’t worry about it.”
• Mr Buffett’s Letters to Shareholders – the annual communications of Warren Buffett (Chairman of Berkshire Hathaway Inc., Graham’s best-known pupil, colleague and standard-bearer) are must-reads for value investors. So too are notes taken at Berkshire’s Annual General Meetings, and Berkshire’s Owner’s Manual
• Mr Munger’s Letters to Shareholders – the written communications of Charles Munger, Berkshire’s Vice-Chairman and head of Wesco Financial Corp., are also must-reads. So too are notes taken at Wesco’s Annual General Meetings.
• Tweedy, Brown Company, LLC – the principles of this New York-based investment firm, as its home page makes clear, are drawn explicitly from Graham.
• What Has Worked in Investing – sets out the approach to investment used by Tweedy Brown LLC since at least 1958, when Tom Knapp joined the firm from Graham-Newman Corporation. WHWII provides both principles and a wealth of evidence which demonstrates that Graham’s principles of value investing, first described in 1934 in his book (co-authored with David Dodd)Security Analysis, continue to serve investors well.
• The Superinvestors of Graham-and-Doddsville – an edited transcript of an outstanding speech delivered by Mr Buffett at Columbia University in 1984. “The academic world, if anything, has actually backed away from the teaching of value investing over the last 30 years. It’s likely to continue that way. Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.”
• The Warren Buffett You Don’t Know – Business Week (5 July 1999) reported “the numbers don’t lie, but the story they tell is out of date. Buffett has not added a major position to Berkshire’s bulging stock portfolio since amassing 4.3% of McDonald’s Corp. in 1995. In the meantime, he has transformed what long has been a sideline at Berkshire – the acquisition of entire companies – into the main event. Over the past three years, Berkshire has spent $27.3 billion. … The $22 billion purchase of reinsurer General Re Corp., which closed late last year, was Buffett’s largest ever.”
• Mr Buffett on the Stock Market – Berkshire’s Chairman, in a series of speeches published in Fortune in November 1999, outlines why he believes that many of today’s “investments” are riskier propositions than their owners realise, and why investors should reduce their expectations about future rewards.
• Mr Buffett on the Stock Market II – updating his 1999 speeches with an address published in Fortune in late 2001, Mr Buffett warns that many people are unduly influenced by immediate past experience. Their behaviour thus tends to be either excessively confident or overly despondent, and is usually herd-like.
• The Oracle of Everything – Andy Serwer, writing in Fortune (11 November 2002), reports that “Buffett has been right about the stock market, rotten accounting, CEO greed, and corporate governance. The rest of us are just catching on.” In 2002 CNBC interviewed Mr Buffett about the past, present and future.
• Why I’m Not Buying the $US – in this article, dated 26 October 2003, Mr Buffett says “I actually hope [my] commitments prove to be a mistake. Any profits Berkshire might make from currency trading would pale against the losses the company and our shareholders, in other aspects of their lives, would incur from a plunging dollar. But as head of Berkshire Hathaway, I am in charge of investing its money in ways that make sense. And my reason for finally putting my money where my mouth has been so long is that our trade deficit has greatly worsened, to the point that our country’s ‘net worth,’ so to speak, is now being transferred abroad at an alarming rate. A perpetuation of this transfer will lead to major trouble.”
• An Interview With Warren Buffett – in Maclean’s Magazine (15 October 2007) “about the joys of making billions and giving it away – and why the kids shouldn’t get it.”
• Mr Munger on Stewardship – Berkshire’s Vice-Chairman, in an article adapted from a speech to the Foundation Financial Officers Group in 1998, contests the conventional wisdom about investing by charitable foundations and large institutions. (His points are unintentionally but quite directly applicable to Australia’s system of compulsory superannuation.)
• Mr Munger on Human Misjudgment – “although I am very interested in the subject of human misjudgement, and lord knows I’ve created a good bit of it, I don’t think I’ve created my full statistical share, and I think that one of the reasons was I tried to do something about this terrible ignorance I left the Harvard Law School with.”
• Mr Munger denounces The Great Financial Scandal of 2003 – “…next, Smith brought in a group of S.E.C. Commissioners and powerful politicians. ‘No, no,’ said the Great Judge, ‘These people operate in a virtual maelstrom of regrettable forces and can’t reasonably be expected to meet the behavioural standard you seek to impose.’”
• Mr Munger on ‘Wealth Effects’ – “my foregoing acceptance of the possibility that stock value in aggregate can become irrationally high is contrary to the hard-form ‘efficient market’ theory that many of you once learned as gospel from your mistaken professors of yore. Your mistaken professors were too much influenced by ‘rational man’ models of human behaviour from economics and too little by ‘foolish man’ models from psychology and real-world experience.”
• Mr Munger on Worldly Wisdom – a speech to the School of Business at the University of Southern California in 1994. “I’m going to play a minor trick on you today because the subject of my talk is the art of stock picking as a subdivision of the art of worldly wisdom. That enables me to start talking about worldly wisdom – a much broader topic that interests me – because I think all too little of it is delivered by modern educational systems, at least in an effective way.”
• Academic Economics: Strengths and Faults After Considering Interdisciplinary Needs – by Charles Munger (Herb Kay Undergraduate Lecture, University of California, Santa Barbara Economics Department, 3 October 2003). “I’ve outlined some remarks in a rough way, and after I’m finished talking from that outline, I’ll take questions as long as anybody can endure listening, until they drag me away to wherever else I’m supposed to go.”
• Charlie Munger on Institutional Funds Management – (speech at the Miramar Sheraton Hotel, Santa Monica, CA on October 14, 1998 to the Foundation Financial Officers Group). “I am speaking here today because my friend, John Argue, asked me. And John well knew that I, who, unlike many other speakers on your agenda, have nothing to sell any of you, would be irreverent about much current investment practice in large institutions, including charitable foundations. Therefore any hostility my talk will cause should be directed at John Argue who comes from the legal profession and may even enjoy it.”
• Decision-Making for Investors: Theory, Practice and Pitfalls – “individuals who achieve the most satisfactory long-term results across various probabilistic fields” says Michael Mauboussin, “tend to have more in common with one another than they do with the average participant in their own field.” Further, the “distinguishing features of probabilistic players include a focus on process versus outcome, a constant search for favorable odds and an understanding of the role of time. Success in a probabilistic field requires weighing probabilities and outcomes – that is, an expected value mindset.” Another “key to success is a high degree of awareness of the factors that distort judgment.”
• Columbia University’s Seminar in Value Investing – the Columbia Business School, New York City, was the academic home of Benjamin Graham; together with Graham-Newman Corp. it was therefore the birthplace of value investing. After an absence of many years, value investing is now enjoying a renaissance at CBS.
• The Heilbrunn Center for Graham & Dodd Investing – is an example of the renaissance of value investing at Columbia Business School. The Center imparts Graham and Dodd’s original principles, advances new approaches and makes selected research papers available on-line.
• The Evolution of the Idea of ‘Value Investing’: From Benjamin Graham to Warren Buffett – by Robert Bierig, summarises writings, speeches and lectures by, as well as biographical material about, Mssrs Graham and Buffett.
• Honoring Benjamin Graham: The Father of Value Investing – by Albert L. Auxier (Barron’s, 9 May 1994). “We celebrate Benjamin Graham’s 100th birthday – and the 60th anniversary of the publication of Security Analysis – by examining his investment philosophy. For this purpose, we rely heavily on The Intelligent Investor, which he considered more useful thanSecurity Analysis to a young security analyst.”
• Ludwig von Mises, Meet Benjamin Graham: Value Investing from an Austrian Point of View – by Chris Leithner (a paper presented in February 2005 for Austrian Economics and Financial Markets (an audio file of the presentation is also available). “This paper shows that value investors and Austrian School economists hold compatible views about a range of fundamental economic and financial phenomena. These include price and value; risk and arbitrage; capital and entrepreneurship; and time-preference and interest. Indeed, with respect to these matters each group may have more in common with the other than each has with the mainstream of its respective field.”
• Navigating the Financial Markets with an Austrian Compass – by Kevin Duffy (presentation to The Mises Circle in Manhattan, 22 May 2010).
• The Australian Debt Clock – provides estimates of private sector debt, Commonwealth, state and local government debt, the supply of money and other statistics.
• The Intelligent Australian Investor: Timeless Principles and Fresh Applications (John Wiley & Sons, 2005) by Chris Leithner “is a guide for the retail fundamental investor and will appeal to those followers of the great US investors, Benjamin Graham and Warren Buffett. This book provides readers with a comprehensive understanding of value investing and will be of great interest to those seeking a serious conservative text on investment in Australia. ”Order from Amazon.com. See also the reviews by theAustralian Investors’ Association and in Policy Magazine
• The Evil Princes of Martin Place: The Reserve Bank of Australia, the Global Financial Crisis and the Threat to Australians’ Liberty and Prosperity (Amazon/Create Space, 2011) by Chris Leithner demonstrates that “government – and not the free market – causes the financial crises in Wall Street that become economic crises in Main Street. Indeed, the eruption of the ‘Global Financial Crisis’ demonstrates that ‘capitalism’ (a term of abuse coined by Karl Marx to smear his opponents) hasn’t failed; socialism has. It wasn’t ‘extreme capitalism’ (a term of abuse coined by ex-Prime Minister Kevin Rudd to smear his opponents) that caused the panic and bust: it was the partial, corrupted and bastardised capitalism of the ‘mixed economy’ that he and the mainstream champion.” Accordingly, the eradication of crises necessitates the repeal of pernicious laws (such as legal tender) and the abolition of damaging practices (namely fractional reserve and central banking).The Evil Princes of Martin Place: The Reserve Bank of Australia, the Global Financial Crisis and and the Threat to Australians’ Liberty and Prosperity is available from Amazon.com (paperback), Amazon.com (Kindle), Amazon.ca, Barnes & Noble and elsewhere. In Australia, reviews of The Evil Princes have appeared at Menzies House (reprinted at onlineopinion.com.au) and atEconomics.org.au – the latter is worth an extended visit. In Canada, reviews have appeared in English and en français. On 5 April 2011 on ABC Radio Queensland, Steve Austin and Chris discussed the book’s arguments and implications; see also An Interview with Chris Leithner on Austrian Economics and Australian Central Banking (11 July). On 26 November 2011 in Sydney, a presentation entitled “The Evil Princes of Martin Place: The Panic of 2007-2008 and Why We Should End the RBA” was delivered. To see a video of the presentation click here. Finally, a Canadian edition – entitled, naturally, The Evil Princes of Wellington Street – is in the works.
• Mr Buffett, Meet Ludwig von Mises and Murray Rothbard – by Michael Rozeff. “We have much to learn from Warren Buffett as investment genius and as business manager. But he and others have much to learn from Ludwig von Mises and Murray Rothbard and those following in their footsteps who are advancing the Austrian School of economics. … When he ventures out of his area of expertise, [Buffett] often falls flat on his face. He needs to meet Ludwig von Mises and Murray Rothbard. He needs exposure to the Misesian tradition. He does not understand that government intervention is economically and socially destructive.” (see alsoThe Trouble with Warren Buffett by Doug French).
• Golden Era or Gilded Age? Inflation and Mean Regression in Australian Stock and Bond Markets, 1965-2006 – and Some Base Rates for 2007-2011 – by Chris Leithner (a paper prepared for the National Investors’ Conference of the Australian Investors’ Association, 23-26 July 2006, Marriott Resort, Surfers Paradise, Queensland). “This paper dissents vigorously from the cheery and confident consensus that has pervaded Australian financial markets during the past several years. I doubt, as one of the country’s most prominent finance journalists recently expressed it, that Australians are enjoying ‘a golden era of prosperity.’ Because it is built upon the shaky foundations of high inflation and rising debt, I wonder whether this prosperity is more superficial than genuine. As a result, I suspect that Australians have experienced – and are perhaps concluding – a gilded age.”
• All We Are Sayin’ Is Give Free Markets a Chance (Northern Trust Global Economic Research, 17 July 2008) – “Given the economic and financial market ‘challenges’ of the past year, some pundits and politicians are concluding that these challenges are the result of the failure of freemarkets. I would respond that we cannot determine whether free markets have failed unless we havehad free markets. I do not think we have … There is at least one group of economists that realizes the economic mischief causedby central banks – economists who belong to the Austrian school.”
• The Ridgewood Group – based at Short Hills, New Jersey, is one of the surprisingly few investment advisory firms that takes Mr Buffett’s ideas and principles seriously. The letters to its clients repay careful reading.
• Just When We Need It Most … Is Corporate Governance Letting Us Down? – by John C. Bogle “Mr. Buffett seeks not only long-term returns, but long-term shareholders. … Such linkage means that business results during a given period will benefit the people who own the company during that period – a linkage, in turn, that is maintained if the shareholder group has a collective long-term, business-oriented investment philosophy rather than a short-term market-oriented strategy.”
• Grant’s Interest Rate Observer – an independent, sceptical, contrarian and literate voice, influenced both by Graham and Austrian School economists, about credit, interest rates, bond markets, commodities, real estate and monetary trends. Grant’s column inForbes magazine is an unalloyed pleasure; see also What Has Government Done to Our Money?; the 1998 interview by the American PBS and the 2006 interview (also with Jeremy Siegel) on NPR.

Intelligent investing also requires knowledge of – and healthy respect for – the laws of human action. If you’ve never studied economics, rejoice – it’s less likely that you’ll have to unlearn the mumbo-jumbo, myths and nonsense that pervade the contemporary mainstream.

• Good places to start include Economics in One Lesson by Henry Hazlitt; The Illustrated Road to Serfdom and The Use of Knowledge in Society by Friedrich Hayek; Economics for Real People: An Introduction to the Austrian School by Gene Callahan;Economics in Five Lessons: Power and Market Don’t Mix by James Ostrowski; What Is Seen and What Is Not Seen by Frédéric Bastiat; and Politics and the English Language by George Orwell (especially the section headed “pretentious diction”).

Via Leithner