The Stingy News Weekly (02/20/2018)
New from StingyInvestor
A better trend-following strategy
"The dual approach provides benefits, according to Philosophical Economics. It generated average annual returns of 12.7 per cent, from January, 1947, to November, 2015, with a volatility of 12.9 per cent. By way of comparison, the S&P 500 gained 11.2 per cent on average annually over the same period with a volatility of 14.5 per cent." [$]
Corrections come and go. It usually makes sense to do nothing
"the vast majority of investors should avoid market timing and follow the lead of Warren Buffett and Charlie Munger instead. Broadly speaking, they buy companies at reasonable prices and hold them for very long periods. They're like collectors but instead of baseball cards they buy good businesses and rarely sell. It's a simple approach that has worked well for decades."
Private equity: overvalued and overrated
"The great postcrisis private equity gold rush is on, fueled by cheap debt and enthusiastic investors. A lawn care chain might get half a dozen calls and emails a week from business brokers and 'searchers.' A regional bank auctioning off a business with $15 million in profits might pitch two hundred prospects, receive fifty letters of intent, and take twelve separate private equity firms to management meetings, ending in a sale price which the majority of bidders considers crazy. And the greatest prize of all - a software company - could sell for many multiples of revenue, regardless of profitability." [Markets]
Scant evidence of power laws in real-world networks
"These results undermine the universality of scale-free networks and reveal that real-world networks exhibit a rich structural diversity that will likely require new ideas and mechanisms to explain." [Science]
Charlie Munger: 2018 AGM transcript
"Most newspapers by the way I think are going to perish. It's just a question of when. I mean they're all going to die. You know the New York Times will continue because people will pay $5 for it in an airport. So there will be a few survivors, but by and large the newspaper business is not doing well. Berkshire Hathaway owns a lot of them. And buying them we figured on a certain natural decline rate after which the profits would go to zero. We underestimated the rate of decline. It's going faster than we thought." [Munger]
Smart beta is sick
"Smart beta may be state-of-the-art, but it has also become the E. coli of institutional investing. There are at least 300 published factors, with roughly 40 newly discovered factors announced each year." [Markets]
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