8 Fascinating Reads

Here are 8 fascinating things I read this week. 

Prescience

Angelo Mozilo, the former CEO of Countrywide Financial, one of the worst culprits in the subprime mortgage bubble, made a prescient call in 1991:

Oblivious

The S&P 500 went up 30% last year. Only 7% of Americans know this fact:

Unforeseen problems

Google is building an underwater fiber cable system that is literally being eaten by sharks:

Normalcy

Stocks at all-time highs is pretty common, writes Ben Carlson: 

Lagging

I never tire of these charts showing how poorly the average investor performs:

Contrarian

Warren Buffett is building up cash while the average investor is cutting it:

Cash at Berkshire Hathaway stood at just over US $55 billion at the end of June, a record high and 21/2 times the level Buffett had said in the past he liked to keep on tap to meet extraordinary claims at his insurance businesses. It was also up more than 50 percent year on year.

Buffett's green pile was in sharp contrast to individual investors, who had cut cash in portfolios to 15.8 per cent, a 14-year low, the July asset allocation survey from the American Association of Individual Investors showed.

Aging

The world is getting older very quickly:

By 2020, 13 countries will be "super-aged" -- with more than 20% of the population over 65 -- according to a report by Moody's Investor Service.

That number will rise to 34 nations by 2030. Only three qualify now: Germany, Italy and Japan.

Subjectivity

Cullen Roche gives a good take on stock valuations:

The point is, if valuations and market perceptions are as dynamic as I believe then the history of something like CAPE really doesn't tell us much at all.  After all, "value" is really all in the eye of the beholder.  If investors are willing to pay more for stocks today than they were in 1950 then maybe a CAPE of 15 has no bearing on what a CAPE of 25 means.  That is, stocks could simply be perceived differently than they were in the 1950s.  Perceptions change.  And there's no reason why stocks can't be perceived to be inexpensive at a CAPE of 25 just because they once sold at a CAPE of 15.  In other words, what if a CAPE of 35 is the new "expensive"?   Now, I don't know if that's true, but in the process of managing one's risk I think you have to consider that possibility.

Have a good weekend. 

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  • Report this Comment On August 22, 2014, at 3:38 PM, XXF wrote:

    Cullen is wrong about CAPE. CAPE is a P/E measure adjusted over time to give a longer horizon view than a simple P/E, but at it's core it is still measuring what ratio of the current price is an investment earning. An investment that can only earn 1/25 or 4% on capital investment per year had better be pretty low risk or it certainly is expensive.

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