9 Things I’ve Learned from Benjamin Graham about Investing

1.   The last time I made any market predictions was in the year 1914, when my firm judged me qualified to write their daily market letter based on the fact that I had one months experience.  Since then I have given up making predictions. 

You will not outperform the market in making macroeconomic forecasts. Yes, markets will swing up and down. No, you do not need to forecast those swings to be a successful investor.

2.  Abnormally good or abnormally bad conditions do not last forever.  The market will be cyclical even though you can’t beat the market with macro forecasts.  

While it is in those swings that opportunity is created, it is by ignoring the temptation to make macro forecast that these great investors find success.

3.   The disciplined, rational investor searches for stocks selling a price below their intrinsic value and waits for the market to recognize and correct its errors. It invariably does and share price climbs. When the price has risen to the actual value of the company, it is time to take profits, which then are reinvested in a new undervalued security. 

When you focus on intrinsic value you need not time the market.  By focusing on the micro (e.g., the value of individual company or bond), the macro takes care of itself.

4.   The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future. 

Everyone makes errors and mistakes and so having insurance against those mistakes is wise.  With a margin of safety you can be somewhat wrong and still make a profit.  And when you are right you will make even more profit than you thought. Finding a margin of safety is not a common event so you must be patient. The temptation to do something  while you wait is to hard for most people to resist. The best investors are those who have a temperament which is calm and rational.

5.   Market quotations are there for [your] convenience, either to be take advantage of or to be ignored. 

This is consistent with Buffett’s point that one should value the market for its pocketbook not its wisdom.

6.   The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. An investment is based on incisive, quantitative analysis, while speculation depends on whim and guesswork. 

If you are trying to predict the behavior of a crowd you are a speculator.  Great masses of people have a strong tendency to herd which inevitably produces swings in prices. By focusing on value instead of price the intelligent investors can find profits over the long term. In the short run, the market is a voting machine but in the long run it is a weighing machine.

7.   Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate on Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings. 

Ultimately a share of stock is partial ownership of a business. Too many investors abandon all that they have learned in business.

8.   It is bad business to accept and acknowledge possibility of a loss of principal in exchange for a mere 1 or 2% of additional yearly income. If you are willing to assume some risk you should be certain that you can realize a really substantial gain in principal value if things go well. 

 It is only acceptable to undertake a risky investment if you are properly compensated for that risk.

9.   The investors chief problem and even his worst enemy is likely to be himself.  

If you can’t explain the ‘pause’, you can’t explain the cause…

New paper finds another huge error in carbon cycle assumptions equivalent to 30 years of man-made emissions

…another huge error in the global carbon cycle assumptions used by carbon cycle models such as the highly-flawed IPCC Bern model and as the basis for other models including climate and ocean ‘acidification’ models. The authors “provide estimates of the climate benefits due to CO2 fertilization of the terrestrial biosphere,” finding, “enhanced vegetation growth [from CO2 fertilization] over that period reduced atmospheric CO2 concentration by 85 ppm below what it would have been without that effect, thereby avoiding approximately 0.3°C of warming. This represents a dramatic shift of the carbon budget, by more than 250 billion tons of carbon–more than 30 years of emissions at current rates.”

…more HERE

The U.S. Treasury has booked a $9.7 billion loss on its $49.5 billion bailout of General Motors Co. on the sale of nearly all of its shares it received as part of its $49.5 billion bailout.

Given how far GM stock is below breakeven, it seems likely that the loss to taxayers, primarily to insulate labor unions from the impact of their folly in demanding 95% pay for workers who were laid off and lavish fringe benefits, making American cars uncompetitive with German, Japanese, and other foreign makes, will exceed the nice round figure of ten billion bucks.

In a quarterly report to Congress Tuesday, the Special Inspector General overseeing the $700 billion Troubled Asset Relief Program bailout fund disclosed that the Treasury had realized a significant loss on its sale of most of its 60.8 percent stake in GM. Through Sept. 30, Treasury sold 811 million shares of the 912 million shares it received in the automaker as part of its 2009 bankruptcy restructuring.

The taxpayers’ ownership stake in the Detroit-based automaker – swapped for more than $40 billion in loans, was initially 60.8 percent, but is now down to about 7 percent, the Treasury said. “Because the common stock sales have all taken place below Treasury’s break even price, Treasury has so far booked a loss of $9.7 billion on the sales,” the report said.

2014 World Outlook Financial Conference

Agenda

         Coming soon.

Truly worth the wait… a very exciting list of speakers and topics will be posted here soon – you won’t believe what we have in store for you this year. Prepare yourself for the next generation of huge-growth investment opportunities