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Article Archive: 2005

10 Favorite Value Stocks for 2006
12/28/05   Dorfman
"My favorite stocks for 2006 range from well-known names like New York Times Co. to obscure ones like Schnitzer Steel Industries Inc. None of these stocks are investors' darlings right now. And that's the way I like it. I believe that buying unpopular stocks is a better path to wealth than buying popular ones."

Yield curve inversion
12/28/05   Bonds
"As shown in the chart below, each of the past six recessions (shaded areas) was preceded by an inversion in the spread between the Treasury 10-year yield and the fed funds rate. But there were two other instances of inversion - 1966:Q2 through 1967:1 and 1998:Q3 through 1998:Q4 - immediately after which no recession occurred. It would appear, then, that an inverted yield curve is more of a necessary condition for a recession to occur, but not a sufficient condition. That is, if the spread goes from +25 basis points and to -25 basis points, a recession is not automatically triggered. Rather, whether an inversion results in a recession would seem to depend on the magnitude of the inversion and, to a lesser extent, the duration of it. Recession-signaling aside, the yield curve remains a reliable leading indicator of economic activity. Although the spread going from +25 basis points to -25 basis points might not result in a recession, it does indicate that monetary policy has become more restrictive."

Riding the yield curve
12/28/05   Bonds
"According to a 2003 analysis by the Federal Reserve Bank of San Francisco, each of the six recessions since 1970 was preceded by a yield curve inversion -- an unnerving precedence."

The little essay that beats the market
12/27/05   Value Investing
"So, what should you think? If you want to be a successful stock market investor, you should think about buying pieces of "good" businesses at "bargain" prices. Yes, that sounds simple, but if you actually could find a good business at a bargain price, wouldn't it make sense to buy it? Doesn't that sound like an investment strategy that should work!"

A test of Graham's stock selection criteria
12/27/05   Graham
"The applicability of certain combinations of Benjamin Graham's stock selection criteria were tested on the Industrial securities market in South Africa. Evidence that making use of Graham's stock selection criteria to determine a portfolio, would provide one which yielded abnormal positive returns would suggest, at least, that pockets of inefficiency existed in the overall efficient market, as represented by the industrial shares traded on the JSE."

Peter Cundill in 1998
12/27/05   Value Investing
"For example, if you adjust for the market value of their share portfolios, today 35% of the 3,000 companies listed in Japan are trading below book value. Roughly 10% are trading below net-net working capital. And many of them trade below net cash (which I'll come back and define) and at big discounts to their intrinsic value if their businesses are worth 6 times EBIT."

Warren Buffett in 1974
12/25/05   Buffett
""I call investing the greatest business in the world," he says, "because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There's no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it." But pity the pros at the investment institutions. They're the victims of impossible "performance" measurements. Says Buffett, continuing his baseball imagery, "It's like Babe Ruth at bat with 50,000 fans and the club owner yelling, 'Swing, you bum!' and some guy is trying to pitch him an intentional walk. They know if they don't take a swing at the next pitch, the guy will say, 'Turn in your uniform.'""

The performance of equity premium prediction
12/25/05   Academia
"Given the historically high equity premium, is it now a good time to invest in the stock market? Economists have suggested a whole range of variables that investors could or should use to predict: dividend price ratios, dividend yields, earnings-price ratios, dividend payout ratios, net issuing ratios, book-market ratios, interest rates (in various guises), and consumptionbased macroeconomic ratios (cay). The typical paper reports that the variable predicted well in an in-sample regression, implying forecasting ability. Our paper explores the out-of-sample performance of these variables, and finds that not a single one would have helped a real-world investor outpredicting the then-prevailing historical equity premium mean. Most would have outright hurt. Therefore, we find that, for all practical purposes, the equity premium has not been predictable, and any belief about whether the stock market is now too high or too low has to be based on theoretical prior, not on the empirically variables we have explored."

Mean reversion, forecasting and market timing
12/25/05   Markets
"Long horizon stock investing appears to be much riskier than most people believe. Predicting future stock returns and timing the market appear to be much harder than most people think."

The Queen's Christmas message
12/25/05   Christmas
"The Queen's Christmas Day speech focused on the natural disasters and acts of terrorism that dominated 2005. In her speech to the Commonwealth, she praised the response by people of all faiths to the tragedies of the past year."

Who was Benjamin Graham, and why should I care?
12/25/05   Graham
"Insights into - and from - the greatest investment thinker of all time."

In defense of the Grinch & Scrooge
12/24/05   Christmas
"After attacking corrupt politicians with his biting cartoons, and practically inventing the Republican elephant and Democratic donkey -- Nast drew his Santa Claus for Harper's Weekly in the 1860s. The benevolent 4th century Turkish St. Nicholas was now transformed into a chubby pipe-smoking red-suit wearing, gift-toting American icon, and it didn't take advertisers long to catch on. Victorian era ads, though larger and more visual, still proffer conservative gift choices for Christmas. How about a nice pen set, or some chocolates? By the turn of the century Santa is seen hawking Victrolas, Kodaks, bicycles and sleds. By the 1930s a highly commercial Saint Nick, fashioned from Nast's caricature, is seen swilling Coca-Cola and puffing on Lucky Strike cigarettes. In American, Santa even gives away lung cancer."

In defense of Ebenezer Scrooge
12/24/05   Christmas
" No businessman in the history of literature has been as misunderstood as Ebenezer Scrooge. His very name is now a synonym for pinch-fisted churlishness and humbuggery."

Barclays Canada announces four new ETFs
12/24/05   Indexing
"XTR will replicate the performance of the S&P/TSX Income Trust Index. XDV will replicate the performance of the Dow Jones Canada Select Dividend Index. The fund will focus on investing in stocks with higher yields and proven dividend growth and sustainability. XRB, which is designed to proved fixed income investors with inflation protection, will replicate the performance of the Scotia Capital Real Return Bond Index."

Graham on fixed income
12/24/05   Graham
"investors are led to believe that the very name 'bond' must carry some espcial assurance against loss. This attitude is basically unsound, and on frequent occasions is responsible for serious mistakes and loss."

Still going strong
12/19/05   Value Investing
"Kahn, the chairman of Kahn Brothers, a low-profile New York investment firm, might be Wall Street's oldest active investor. He's in the office every business day, reading scientific periodicals, annual reports and newspapers in search of undervalued stocks in the tradition of his friend and mentor, Benjamin Graham, widely considered the father of value investing."

Why you'll grow rich...very slowly
12/19/05   Gross
"In the past decade, we've ridden two jaw-dropping bull markets. First came stocks. Now real estate is the bubble du jour."

A pink slip in your stocking?
12/19/05   Management
"There was a time that layoffs took a holiday between Thanksgiving and New Year. Not any more."

Sticker shock
12/18/05   Law
"caught between lawsuits claiming they failed to protect consumers from "hidden" hazards--is there really any mystery about what can happen when you stand on the top of a ladder?--and the impossibility of making their products idiot-proof, manufacturers slap warning labels on everything but the kitchen sink in order to ward off liability."

We're still too exuberant
12/18/05   Markets
"So he uses a ten-year earnings average, an approach advocated by Graham and Dodd in Security Analysis, the value investor's bible. And while prices are clearly above the long-term trend any way you cut it, by that measure they are still mountainously beyond normal."

Act like a saint but think like an investor
12/18/05   Taxes
"TD Economics released a paper in October that provides a novel way to think about charity. The idea? Think about your giving as you do your investing. And why not? It can mean more meaningful and effective giving. Here are some highlights from that paper."

Deep trouble
12/16/05   World
"Nagle explains that the U.S. is compromised by the demands of security, environmental issues and other factors. This has had a serious impact on the pressing need to upgrade port infrastructures. For instance, the well-run South Carolina State Ports Authority is seeing a shortfall in federal funds promised versus those actually paid--and this authority is not alone."

You're worth $135,500
12/16/05   Thrift
"The country's net worth reached $4.4-trillion at the end of the third quarter, valuing Canadians' net worth at $135,500 per capita, Statistics Canada reported Friday."

Yankee doodle dandies: the top 1000 U.S. stocks
12/16/05   Stingy Investing
"This year we've expanded our successful stock selection method to cover 1,000 of the largest stocks in the U.S. We've focused only on the very best stocks and moved our giant Top 1,000 U.S. Stocks table online with all the detailed information that you've come to expect from the Top 200."

So easy, so profitable: Benjamin Graham's Simple Way
12/16/05   Stingy Investing
"If you're looking to pick up a few good value stocks, Benjamin Graham's Simple Way will tickle your fancy. Graham, who taught Warren Buffett, was the father of value investing. The system he outlined in his 1976 article, "The Simplest Way to Select Bargain Stocks" has since become a staple of savvy investors."

Newspapers: buys among the battered
12/16/05   Stocks
"If newsboys still stood on corners trying to hawk papers, this could be one of their pitches: "Extra, Extra, Read All About It! Pundits Ring Death Knell for Newspaper Biz!" The demise of the newspaper industry has become a favorite topic on both Wall Street and Main Street. Doomsayers point to perceived fundamental weaknesses as circulation figures weaken and advertisers shift spending away from newspapers and toward other media."

The Top 200: rating every major Canadian stock
12/16/05   Stingy Investing
"We're pleased to say that our modest experiment succeeded beyond our wildest dreams. Our highest-ranked stocks gained an average of 57.6% since we picked them. That's right, you read correctly. We said 57.6%. Even our second-tier picks thumped the market by double-digit amounts."

Few bargains left
12/16/05   Value Investing
"Based on a price-to-cash flow basis, Europe and Asia are around 9 1/2 times, versus 12 1/2 times, roughly, U.S. At 12 1/2 times, the U.S. is not cheap by historical measures. We are very much valuation-driven, as opposed to outlook-driven. Not that the outlook seems very rosy, by the way, but it is more because of valuation. Five years ago, the beauty was we had a bifurcated, two-tier market with very expensive growth stocks and tech stocks on the one hand and quite a few cheap small and mid-cap value stocks on the other. That gap has disappeared, so everything looks quite expensive in the U.S."

Philip Morris wins
12/16/05   Stocks
"'This win is very helpful on the litigation scene,' said David Dreman, who oversees $15 billion at Dreman Value Management in Jersey City, New Jersey, including 14.6 million Altria shares and 3.1 Reynolds American shares as of Sept. 30. 'This is a case that a lot of other states were watching.'"

10 rock-solid stocks
12/16/05   Stocks
"After reviewing the latest research and interviewing dozens of analysts and money managers, we trained our sights on 10 moderate-P/E stocks positioned to benefit from secular -- not cyclical -- trends."

Tweedy Browne goes gunning at VW
12/16/05   Tweedy
"Look out Germany Inc., here come the angry U.S. investors. In a development that takes globalization of investor activism to a new level, the powerful U.S. fund manager Tweedy, Browne is mounting an all-out assault on Volkswagen's highest-ranking board member."

ETFs are performing well at a lower cost
12/12/05   Indexing
"Name a mutual fund category and I'll show you its slimmer, more athletic alter ego."

TD plans to terminate ETFs
12/12/05   Indexing
"Effective December 13, 2005, subscription orders for new units of the Funds will no longer be accepted. Redemption orders for baskets of shares and for cash will be processed until termination date, on or about March 13, 2006. The outstanding units of the Funds will continue to be listed and posted for trading on the TSX. Units may be purchased or sold on the TSX in the ordinary course of business until the close of market on the termination date, either through registered brokers or participating dealers."

Your holiday present
12/11/05   Thrift
"Commercialism runs rampant this time of year and while this type of consumerism is good for the economy and makes all those malls seem like the place to be it also usually means that January and February - when the bills start arriving - can be pretty tight financially. This is made worse by the fact that some many people wait until then to do their RRSP contribution as well."

Bankruptcy law backfires on credit card issuers
12/10/05   Debt
"The industry muscled through tough changes that were supposed to make more filers repay some of what they owe. But that isn't happening."

Third Avenue's discount mantra
12/10/05   Whitman
"Martin Whitman, manager of the Third Avenue Value Fund, hired Curtis Jensen in 1995 as a successor. A decade later, Whitman, 81 years old, still has not set a retirement date, and his mutual fund is outperforming the Standard & Poor's 500-stock index for a sixth consecutive year."

When status has too high a price
12/10/05   Thrift
"Dr. Shaun Saunders, a researcher at the University of Newcastle in England, studied more than 1,000 people and found materialistic folks who try to keep up with the Joneses are more likely to be angry, depressed, frustrated, and anxious."

Europe's farm follies
12/09/05   World
"But there is also a more general resistance to reform that reflects the special place of farming in the French imagination. Its importance runs deeper than agriculture's tiny 4% share of the workforce or its 3% share of GDP. It is not by accident that French politicians rush each year to the Paris Agricultural Fair to pose for the cameras with heaving bulls. Why are the French so infatuated by farming? And what would happen to French farming if subsidies were slashed?"

Hear that hissing sound?
12/08/05   Real Estate
"To judge the fair value of homes, the OECD uses the ratio of prices to rents, which is a sort of price-earnings ratio for housing. If prices are too high relative to rents, potential buyers will rent not buy, eventually pushing down real prices. In Australia this ratio is 70% above its average level over the period since 1970."

Drowning in fines
12/08/05   Government
"As an example of the record of state regulators, take the office of New York's attorney-general, Eliot Spitzer. New York received $100m in a settlement with Merrill Lynch, after the equity-research furore, and $40m in another with Canary Capital, over mutual-fund trades. All of it has been funnelled into the state's general fund. None has yet gone back to the investors who had been ripped off."

Seth Klarman's guide to finding value
12/06/05   Klarman
"If Benjamin Graham were alive today, he might, at first blush, be more impressed by the appreciated value of Seth Klarman's book Margin of Safety, than with the performance of his investment fund ... that's at first blush. Seth Klarman is a value investor and Portfolio Manager of the investment partnership The Baupost Group, and when Klarman first published Margin of Safety it had an original cover price of $25. The book is now out of print, and today sells on eBay for $1,145. That's an increase of 4580%."

John Dorfman's small stocks
12/06/05   Dorfman
"I'm partial to small stocks, partly because they are followed by fewer investors than large stocks. That increases my chance of finding a bargain."

The world according to "Poor Charlie"
12/05/05   Munger
"The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification. Because I just think the whole concept is literally almost insane. It emphasizes feeling good about not having your investment results depart very much from average investment results. But why would you get on the bandwagon like that if somebody didn't make you with a whip and a gun?"

A Christmas Carol
12/04/05   Christmas
"MARLEY was dead: to begin with. There is no doubt whatever about that. The register of his burial was signed by the clergyman, the clerk, the undertaker, and the chief mourner. Scrooge signed it: and Scrooge's name was good upon 'Change, for anything he chose to put his hand to. Old Marley was as dead as a door-nail."

Christmas movies and bad economics
12/04/05   Christmas
"But let's talk Christmas turkey. The engine driving the "commercialization" of Christmas is, quite simply, children's desire for presents. As every parent soon discovers, it is not the thought that counts for young children, but the goods. They want nice toys, which do not come free. They have to be made, and the cost of making them has to be recouped."

Web site suggests financial planners
12/04/05   Value Investing
"He is a passionate about value investing, investing in seemingly cheap stocks: "Certain patterns are obvious," he says, "and one is that virtually every successful investor over any 10-year period has been a value investor. It doesn't take a genius to figure that out." Something can go wrong with even the best companies and that's the time to buy, when there is a "margin of safety," he said, quoting Benjamin Graham."

Investing logically
12/04/05   Markets
"In looking at the polls, the strategists try to stay one step ahead. "Think of the investor polls as a crowded theater," Johnson said. "If the polls are telling us everyone is in the market, then, if the smallest thing happens, everyone tries to run though one door.""

The true cost of changing careers
12/04/05   Debt
"Just getting the education your dream job requires can cost a bundle. Consider all the trade-offs before taking out your student loans."

Healthy planning
12/04/05   Retirement
"Though the standard age for retirement is 65, only 64% of people age 55 to 64 are employed. The other 36%, not yet eligible for Medicare, either have to be married to someone with employer health insurance or have to scramble to find coverage. The scrambling is occasioned by two things. One is that, even for healthy people, medical insurance is fearsomely expensive. Employers have seen their costs climb 63% over the last four years, says personnel consultant Towers Perrin, and will spend an average of $14,500 next year on insurance for a family of four. The other is that individuals trying to buy insurance on their own confront a difficult marketplace whose providers don't particularly want their business, especially if they have a preexisting medical problem."

Avoid paying someone else's taxes
12/04/05   Taxes
"Sorry to tell you, but pleading ignorance is just as ineffective with the tax collector and the courts. One particular situation comes to mind -- and it's easy to get caught in this trap."

True cost of Christmas: $18,348.87
12/03/05   Christmas
"Avian flu is making it even more expensive for true loves to make the ultimate romantic holiday gesture -- buy every item mentioned in '12 Days.' With repetitions? Make it $72,608.02."

Clicks, bricks and bargains
12/02/05   Stocks
"The internet was supposed to batter traditional retailers. Instead they are coming to dominate it"

12/02/05   Academia
"Did Steven Levitt, author of 'Freakonomics', get his most notorious paper wrong?"

Plenty of room for improvement
12/01/05   Indexing
"Swensen counsels that intelligent investment behavior begins with a priority on asset allocation that rests on the bedrocks of diversification, equity orientation, and tax sensitivity. People should have realistic expectations, however, and remember that, while 200 years of data suggests the superior return advantage of equities, from 1921 to 1996 dividends provided the major part of equities' 4.3% real average annual return."

Arab world, Iraq and al-Qaeda
11/30/05   World
"As al-Qaeda scores own-goals in its backyard, many Arabs, including some Iraqis, are beginning to rethink their position on violence in the name of resistance"

A world of trouble
11/30/05   Markets
"I have found three things in life to be generally true: Never play poker with a man named Doc. Never eat at a place called Mom's. And--most important--never, never invest in anything with "emerging markets" in its title."

Income trust checkup
11/30/05   Trusts
"The number of trusts that have either suspended or cut their distributions continues to rise."

Our elected insider traders
11/28/05   Markets
"It turns out that our senior legislators somehow are very astute stock pickers, whose transactions, when evaluated at published market prices, delivered an overall performance twice as good as that of all the corporate insiders themselves, who must report their every trade in their respective stocks within hours of making them so that they can be published promptly. Could the senators (those who reported trading, anyway) know something the rest of us don't know? While we think about that question, consider that US households overall underperformed the stock market in the same period by 1.4 percent, while their elected representatives in the senate outperformed the market by 12 percent (those corporate insiders outperformed by 6 percent). A rising tide like the 1995r boats."

What's in Buffett's shopping bag
11/28/05   Buffett
"He's making up for missed chances and stocking the liquor cabinet while staying mum on key stakes"

Trusts versus dividends
11/27/05   Dividends
"Trusts are still king if you want the highest possible income, but dividend stocks will be surprisingly competitive on an after-tax basis. The appeal of dividends is all the greater when you consider that you're more likely to get a reliable, even growing, stream of dividends from the average blue-chip stock than you are to get an uninterrupted flow of cash distributions from the average income trust."

Income trusts still the better tax deal
11/27/05   Taxes
"But theory is never perfect. In this case, there will still be a tax advantage to income trusts. Consider an an Ontario resident, in the highest marginal tax bracket in 2006."

Audio interview with Irwin Michael
11/26/05   Value Investing
Find out what the ABC maestro is buying today. [MP3]

Advertising: on the mat
11/25/05   Management
"One of the biggest users of direct mail is the financial services industry, which spent around $2.5 billion on mail shots in America last year. Unfortunately, people seemed less interested than ever in signing up for new credit cards or insurance policies. The response rate from some campaigns has fallen to just 1.4%, according to America's Direct Marketing Association (DMA). In previous years it was well above 2%. When it comes to responding to "direct-order" mail shots (signing up to an offer, as opposed to merely expressing an interest), the rate has fallen even more dramatically, to 0.7% from 3.5% in 2004."

Too many turkeys
11/25/05   Management
"Executive pay is on the rise again - and so are complaints that ordinary performance is attracting extraordinary rewards"

Income trust decision announced
11/24/05   Dividends
"The federal government will cut dividend tax rates to deal with the tax arbitrage issue surrounding income trusts, and resume tax rulings on trust conversions" - Gee, only a few days before an expected election.

Walking the line between scrooge and santa
11/23/05   Thrift
"Here's how to prevent dreams of the Sugar Plum Fairy from becoming a nightmare when the credit-card bill arrives: Develop a holiday spending plan."

Experts and markets
11/23/05   Academia
"Economist Burt Malkiel says it this way: "While it is abundantly clear that the pros do not consistently beat the averages, I must admit that there are exceptions to the rule of the efficient market. Well, a few. While the preponderance of statistical evidence supports the view that market efficiency is high, some gremlins are lurking about that harry the efficient-market theory and make it impossible for anyone to state that the theory is conclusively demonstrated.""

Ben Bernanke's favorite stock
11/23/05   Stocks
"If you found out that Warren Buffett, Peter Lynch, or Alan Greenspan held only one stock in their personal portfolio, chances are you'd want to know what it was. So when I learned that Ben Bernanke, who is likely to succeed Alan Greenspan in the world's most powerful economic policymaking post, held only one stock, I found that newsworthy. Bernanke held stock of a company that evokes strong feelings -- both pro and con -- among investors. That company is Altria Group, formerly Philip Morris, one the world's largest manufacturers of cigarettes."

FMF and 'predictable results' a cautionary tale
11/23/05   Trusts
"FMF, for those who managed to sidestep the shrapnel and don't know the company, is in the mortgage-origination business. It sounds very safe and boring, but in the U.S., it's not. FMF's business model is to find people who need money to buy a home, then sell those loans to other investors at a profit, usually within 35 days. Most of its business is so-called "sub-prime" mortgages -- generally, borrowers with poorer credit. It operates in 38 states. Naturally, then, when it came time to go public, FMF looked to the Toronto Stock Exchange as the best place. FMF may not have any executives, customers or offices here, but it is based in Southfield, Mich., and isn't Michigan right on the border with Canada? You can see the logic. What our country does have is a group of yield-crazed investors and investment banks willing to cater to them. So out the door went FMF units, promising an 11-per-cent yield that was as solid as Jell-O."

E*Trade slashes its fees in bid to shake up market
11/23/05   Brokers
"Discount broker E*Trade Canada is to announce today that its minimum commission for trading stocks on the Internet will fall 26 per cent effective Jan. 10. The new rates are to be $19.99 for mainstream investors and $9.99 for active traders, down from E*Trade's current top fee of $26.99 and as much as $29.95 at other firms."

5 stocks that might exploit a year-end bounce
11/22/05   Dorfman
"As a year winds down, many people sell their losing stocks to reduce their income tax. Traditionally, some of these stocks get oversold. They often bounce back in January as bargain hunters swoop in."

Stock turkeys of 2005
11/22/05   Markets
"But with the holidays and the end of the year fast approaching, investors are also bound to be pondering turkeys other than the birds Americans will be eating Thursday -- i.e., those of the stock variety. And there are plenty of them."

Value investors struggle to find stocks
11/22/05   Klarman
"Investor Seth Klarman is a patient man. Which is good, because as president of the $5.4 billion investment group Baupost Group, he isn't finding much to buy these days. About 45 percent of his Boston-based fund is in cash, waiting for good companies to fall from investor favor."

Berkshire Hathaway reveals stakes
11/22/05   Buffett
"According to amended U.S. regulatory documents, Berkshire Hathaway disclosed that it held 44.7 million shares of Anheuser-Busch stock valued at about $1.9 billion and 19.9 million shares of Wal-Mart stock valued at about $874 million as of September 30."

Spur growth -- dump mortgage deduction
11/19/05   Real Estate
"Then in 1988, Nigel Lawson, Margaret Thatcher's finance minister, the Chancellor of the Exchequer, changed the rules. He pulled the top tax rate down to 40 percent and cut back on MIRAS. Property values dropped as much as 20 percent -- for a while. The fact that interest rates were heading up at the time made the pain even worse."

End the tax year right
11/19/05   Taxes
"We're quickly coming to the end of 2005. And people can get pretty creative with their spending to create last-minute deductions. (Hey, sometimes deductions seem so logical you'd swear they must be legal.)"

Norshield receiver finds little money
11/19/05   Funds
"Retail investors in the failed Norshield Group of companies, which include Norshield Asset Management and Olympus United Funds, may only get back $8.5 million of the $132 million they placed in Norshield funds, according to the second report of receiver RSM Richter."

Tweedy analyst the saga's driving force
11/18/05   Tweedy
"Ms. Jereski, a former investigative reporter for The Wall Street Journal, had left journalism and taken up a job analyzing stocks with Tweedy, a small but storied New York firm built on the value investing model of Warren Buffett. For the better part of a year, Ms. Jereski had been hounding Lord Black and other officials at Hollinger International Inc. to explain why tens of millions of dollars worth of non-compete fees were being collected by the executive team, rather than the company itself."

Warren Buffett, unplugged
11/17/05   Buffett
"The hands-off billionaire shuns computers, leaves his managers alone, yet has notched huge returns. He just turned 75. Can anyone fill his shoes?"

No good deed goes unpunished
11/17/05   Burgundy
"Short-termism is not a victimless crime. It has been creeping up on us for years. In its earlier manifestations, it simply demanded earnings increases every quarter, and drove managements to give earnings guidance and sometimes to manipulate earnings. Later it made managers embrace compensation schemes like stock options that aligned managers with very shortterm oriented shareholders in seeking to pump up stock prices by any available means. And now, it appears that short-termism will increasingly affect the capital structure decisions and growth strategies that managers implement on behalf of their shareholders. These decisions are the very essence of stewardship and we wonder if shareholders are aware of what they might potentially be losing if companies end up remote-controlled by financial engineers. A company is not just an accumulation of assets and liabilities. It is a living organism with its own culture and rules, and it needs strong and committed leadership in order to thrive."

Sarbanes-Oxley 'reform' harming economy
11/14/05   Accounting
"Although Sarbanes-Oxley was sold as a cure for Enron-like corporate misbehavior, the law mostly fails to target the real wrongdoers and instead punishes all public companies as a class. Its costliest part, called Section 404, mandates that auditors not just sign off on a company's numbers, but also its "internal controls.""

3 big reasons couples fight about money
11/14/05   Thrift
"Arguments about money are often really struggles for power. Managing these issues can smooth out the bickering."

U.S. portfolio disclosures offer imperfect view
11/14/05   Markets
"In addition to excluding short positions, the rules also allow filers wide discretion to exclude their long positions as well. The filers of 13-F's can apply to the SEC to keep certain stakes confidential. Even if unsuccessful, the lengthy SEC review process can result in months of secrecy."

Guys, step aside - women are better investors
11/14/05   Markets
"The logical conclusion is that men should be cleared off the trading floors. Hedge funds should be installing day nurseries. Investment banks should be getting rid of all that black granite and redecorating their offices in some nice pastel shades. The men have been in charge of the money for long enough. It's time to give the women a chance. It may not be that simple. The markets are competitive and ruthless. If women were better at investing than men, wouldn't more of them be running the big funds? Gender discrimination may be one reason. Yet it is also possible that the truth is more subtle than someone such as Horlick makes out. While a 'feminine' touch may well be the key to putting together a winning portfolio, it probably doesn't matter much whether such an approach appears in the office in trousers or a skirt."

Patient Capital Q3
11/11/05   Value Investing
"Income trusts have also increased in value because interest rates have declined. In effect they have behaved like fixed income instruments; rising as interest rates fall. It should follow then that as interest rates rise income returns should at best be muted. In our view, the combination of unsustainable distributions, very high valuations and rising interest rates spell the potential for a substantial loss of capital in the future."

Stick to your guns, Fannie
11/11/05   Dreman
"If you own either of these stocks, hang in there. If you don't, buy them. They're cheaper. Fannie Mae trades at an estimated 6 times trailing earnings, giving you a margin of safety even if earnings are restated downward. Freddie is at 15 times earnings."

Disentangling size and value
11/11/05   Value Investing
"When we separate the size effect from the value-versus-growth effect, we find that size as measured by market capitalization is far less powerful than is generally believed. And, reciprocally, the value effect - because some of its efficacy has been siphoned off by the mislabeled size effect - is far more powerful and more consistent than is generally believed."

When index funds go bad
11/11/05   Indexing
"The results indicated that, as with most active funds, investors' timing decisions were costly when it came to index funds. The dollar-weighted returns for virtually all large-cap index funds were worse than their official returns for the trailing 10-year period through the end of the third quarter 2005. As the table below shows, poor timing cost Vanguard 500 shareholders 2.7 percentage points of returns per year over the past decade."

5 Dow dogs about to have their days
11/09/05   Value Investing
"The traditional Dogs of the Dow theory no longer works, so here's a better way. Track down giants like Wal-Mart and Home Depot that are snapping up their own stock."

Invest one drip at a time
11/07/05   DRPs
"Investing relatively small amounts every month in dividend stocks can add up to big money in the long run. Here's how to figure out what to buy -- and how to buy it."

Better than Buffett
11/07/05   Value Investing
"Companies mired in bankruptcy and turmoil may look ugly to some investors, but to Ian Cumming and Joseph Steinberg they're downright foxy. Using their publicly traded investment firm, Leucadia National, the duo have built a reputation as master takeover artists who buy distressed companies at discount prices, revive them and sell them for hefty profits."

Don't wind up divorced and destitute
11/06/05   Thrift
"The worst thing you can do is to ignore money matters while you're married. Here are 9 ways to divorce-proof yourself now."

ETFs provide access to the world of bonds
11/06/05   Indexing
"It's never easy to buy bonds in small, retail-sized amounts without getting hosed a couple of points in commission. It's not that dealers are trying to rip you off, it's just that it costs a dealer about $50 just to write a ticket; so on, say, a $5,000 bond purchase, the transaction costs alone are a point, and your broker, er, account executive, needs to get paid something, too."

Volatility, thy name is bonds
11/06/05   Funds
"Bonds are supposed to protect against the sort of stock market treachery we saw this October, but you'd never know it from what actually transpired. As stocks fell, bonds gave them a run for their money."

Test yourself
11/06/05   Taxes
"So you think you're smart when it comes to tax issues? How about taking the Mackenzie Financial Great Canadian Tax Test? This week, the mutual fund company released the results of a test given to 1,565 Canadians. Over all, Canadians get a "C" grade."

Value investors value newspapers
11/03/05   Stocks
"Despite obituaries detailing their demise, newspaper companies still hold intrigue for some contrarians. Here's why they haven't written off old media yet."

Man versus machine
11/03/05   Economy
"Both the automated parking and the automated ticket machine were new since the last time I'd been to that theater, no more than a few months ago. And that is why America's low-skilled workers are taking it on the chin. Forget the guy on the phone in Bangalore telling you how to use your new computer. He's a red herring. The job loss statistics tell the same story as they always have: Technology replaces far, far more low-skill jobs than foreign workers do. Think voice mail, ATM machines, automated customer service lines, self-serve gas, online bill paying, automated package tracking, and on and on."

Simmering Six and Six-High Six
11/01/05   Dorfman
"Each November, I write about two groups of stocks. One I call the Simmering Six. These are half a dozen stocks that have risen strongly in the first 10 months of the year, yet still meet some basic value criteria. These are stocks I like. The other group is the Sky-High Six. These are the six stocks with the highest price-earnings ratios among companies with a market value of $500 million or more and earnings per share of a dime or more. Almost without exception, these are stocks I would avoid."

Investing 'cult' could use more members
10/31/05   Value Investing
"Most business schools emphasize modern portfolio theory, the central tenet of which is that the market is so efficient it cannot be beaten with any regularity. Portfolio theory stresses, sensibly enough, diversification as the best way to spread market risk, but it also generally holds that because the market is efficient, those who beat it are lucky rather than skilled. As Buffett put it to me recently, ''You couldn't advance in a finance department in this country unless you taught that the world was flat.''"

Held hostage in China
10/28/05   World
"David Ji used a few good contacts in his homeland to build a billion-dollar business selling cheap DVD players in the U.S. Then he crossed a supplier--and disappeared."

Digging for deep value
10/28/05   Value Investing
"The basic idea of that approach is to find stocks that are attractively priced in relation to expected future earnings growth. And sometimes, the market hands value investors opportunities that are almost too good to resist. We'll call these kinds of stocks "deep value"."

When lobster was fertiliser
10/28/05   Markets
"Demand for lobsters, for example, has evolved in a curious way. The armour-plated delicacy used to be super-abundant and dirt cheap, he says - so cheap that it was fed to inmates in prison and children in orphanages. Farmers even fertilised their fields with it, and servants would bargain with their employers to be given it no more than twice or thrice a week. As the crustaceans became harder to find, canned lobster ceased to be profitable. Live lobsters, by contrast, grew in status as they became dearer. A meal that cost $4 (in today's money) in the 1870s cost $30 or more a century later. What was once a manure substitute is now a prized delicacy. What the lowliest servant once refused, the swankiest restaurateur now offers with pride. Mr Jones's menus may reveal something about the historical fate of fish, crustaceans and molluscs. But there is no accounting for that peculiar land-based mammal that eats them."

The flu of 1918: Dow data
10/26/05   Markets
The data shows that the big influenza epidemic of 1918 had little impact on the markets.

33 Stocks in the Buffett portfolio
10/26/05   Buffett
"Many of these stocks aren't Buffett's picks, since Lou Simpson, who manages the equity portfolio at auto-insurance subsidiary GEICO also invests the firm's capital. Buffett and Simpson share similar investment styles--buying high-return businesses, focusing on best ideas--and they operate independently. Although we're occasionally asked, we rarely devote time to guessing which stocks are Buffett's picks and which are Simpson's. We think this is irrelevant--as Buffett pointed out in his 2004 shareholder letter, Simpson is one heck of an investor, having outperformed the S&P 500 SPX by 6.8% over the past 24 years. We'd gratefully learn from either."

Share Purchase Plans 2005
10/26/05   Stingy Investing
"The long-term risk-averse investor should consider three factors when selecting stocks with Share Purchase Plans (SPP). First, they should demand a low price. Second, they should require earnings stability. Finally, investors should look for modest, but not necessarily spectacular, earnings growth. I've used these three criteria to find interesting stocks for Canadian MoneySaver readers in 2001 and 2003. In this article, I take a look at the performance of my past picks and provide a new list of SPP stocks to consider."

Q&A session with Warren Buffett
10/25/05   Buffett
"The major themes Mr. Buffett spoke about--do what you're interested in, have passion, always act with integrity, don't follow the crowd, respect your community, the best ideas are the obvious ones"

Profiting from the unexpected
10/24/05   Markets
"Using options, he can keep betting for years on unlikely events, losing a small amount of money on his many bets that turn out wrong. But in the rare instances when he's right, he makes a fortune. It sounds impossible, but he is proof it works. "People see me lose money all the time," says Taleb, who shared his tax returns to show that he still makes a seven-figure income from trading even while only doing it part-time. "I reduced my trading out of love for philosophy," he says. "Not out of a desire to make money out of books.""

Save big on a tiny income
10/23/05   Thrift
"19 ways -- and counting -- to save when you make next to nothing."

Tax Evasion
10/23/05   Taxes
"My grandfather always had words of wisdom for me. He used to say: "Tim, if at first you don't succeed, skydiving is not for you." I think it's interesting that skydiving is a lot like tax evasion. If you do it once and you're successful, you'll want to do it again. And each time you succeed, and reap the personal benefits, you'll try it over and over. But let me tell you, when things go wrong, they can go very wrong."

Polaris and Exxon show high profit and low debt
10/22/05   Dorfman
"Two qualities I love in a company are high profitability and low debt. High profits signal that a company is doing something right -- providing superior service, offering an innovative product or filling a need that others haven't yet discovered. The allure of low debt is subtler. It's not just a matter of averting bankruptcy. Low debt allows a company the luxury of choice. For example, it can acquire strapped competitors, increase dividends or pour money into new products."

Graham's Simplest Way
10/21/05   Stingy Investing
"Benjamin Graham is often called the father of value investing and during his lifetime provided the world a variety of useful stock-selection techniques. Remarkably, some of his simplest methods have continued to outperform long after his passing. Although many of Graham's methods are easily described, their continued success relies on the fact that they can be psychologically hard to put into practice."

Six feet under
10/21/05   Stocks
"Is Batesville Casket deviously fixing prices and gouging the bereaved? Or is it just a tough company protecting the channel?"

A hole in the middle
10/20/05   Bonds
"At the end of the day, the sharpest shock may come from the bankruptcy courts after all. Delphi was known to be a vulnerable firm in a troubled industry. Refco, America's biggest independent-commission futures broker, caught the markets by surprise when it filed for protection this week. If the next couple of such surprises lead to a reduction in the supply of capital - either because investors take fright and bond spreads balloon or because banks turn stingy - that will make the cycle turn faster. Until then, all one can say is that credit quality, like Krispy Kreme's finest product, has a hole in it."

Imitation is the sincerest form of flattery
10/18/05   Buffett
"First we empirically determine the returns Berkshire Hathaway has experienced in both the long-term and risk arbitrage investment activities and estimate annualized returns in the arbitrage investments to be several times larger than even Buffett's estimates. Next we show a popular mischaracterization of Warren Buffett's investment style. Most books and financial press accounts describe Buffett as a value investor who looks for undervalued securities. This is not borne out by his investments from 1980 to 2003. Using the Fama and French size and book-to-market categories we show Buffett's style is consistent with a growth investor in big stocks. Buffett himself admits in his 1987 Letter to Berkshire Shareholders "Charlie and I have found that making silk purses out of silk is the best that we can do; with sows ears, we fail." His philosophy places emphasis squarely on the determinants of value: the estimation of future cash flows and growth rates which is also consistent with his principle of investing in businesses that he understands and is not difficult to predict."

ConocoPhillips, GM are in my purloined portfolio
10/18/05   Dorfman
"Once a year, I turn myself into a thief. Don't call 911. What I'm stealing are stock ideas from some of my favorite money managers. Yes, they are my competitors. But most of them are also my friends. And my theft is accomplished by combing through public filings of their holdings."

Bill's bad bet
10/18/05   Value Investing
"As Miller sees it, "Five thousand years of commodity-price history" says that oil should be priced at the "marginal cost of production"--the price at which it makes sense for companies to find and extract it from the ground. And that, Miller says, is currently about $40 per bbl."

The $91 Billion conversation
10/17/05   Buffett
"Warren Buffett and Bill Gates answer questions, first for 2,000 Nebraska students, then for FORTUNE. The billionaire buddies on the economy, philanthropy, and investment strategy"

Bay St.'s rich secret: churning income trust funds
10/17/05   Trusts
"Some day, investors will realize that they will get richer if they avoid turning over their trust investments every year. You don't churn your mutual funds because you don't want to pay the fees, so why would you churn your trust funds? Avoid it and you'll save the agent's fee year after year. Add it all up and you're talking real money. Churning your trust fund is even more ridiculous when you realize that the new fund you bought at the end of the year might look pretty much like the one you just sold."

Rush to file for bankruptcy
10/16/05   Debt
"For the week ending Oct. 8, bankruptcy courts reported a total of 102,863 filings, up from the previous record high of 68,387 the week before, according to data from Lundquist Consulting. Year-to-date, the number of filings has grown 19.4 percent compared with the same period in 2004. Based on preliminary data, Lundquist researchers are expecting to see more than 200,000 personal bankruptcy filings for for the week ending Oct. 15, said Jane Truch, senior manager of research and analytics at Lundquist."

Barclays muscles in to zap TD's last advantage with ETFs
10/16/05   Indexing
"Barclays dominates the ETF business in Canada to the extent that TD is very close to invisible. But while Barclays has offered ETFs for investing in the blue-chip S&P/TSX 60 index, it had nothing for investors who wanted to buy into the much broader S&P/TSX composite (200 stocks versus 60). Now, Barclays is about to neutralize TD's one small advantage."

Canada Savings Bonds buyers are selling themselves short
10/16/05   Bonds
"Old habits die hard -- that's the polite explanation of why people waste their time and money buying Canada Savings Bonds."

Now for the reckoning
10/14/05   Stocks
"Wilbur Ross, a financier who made an impasse-breaking deal with the USW that enabled the bankrupt steel industry to consolidate and leave Chapter 11 in good shape, notes two important lessons from that experience that the UAW - and others, too - might do well to heed. First, American firms need to be globally competitive and can no longer afford to award pay and fringe benefits solely according to American norms. Secondly, "at the end of the day, the only job worth having is one at a solvent company. What's the point of a gold-plated contract with a firm that is going bust?""

Which side are you on?
10/14/05   Stocks
"Delphi's Mr Miller would have us focus on one: the clash between the interests of young workers and those of their predecessors. As he put it stirringly in an interview with the Financial Times, inter-generational warfare looms "as young people increasingly resent having their wages reduced and taxed away to support social programmes for their grandparents' income and health-care concerns". Short of flinging the oldsters to the sharks, there is no escaping the demographic trend that has fewer workers supporting more baby-boom retirees in most of the developed world (and part of the developing world). The question is whether the burden should fall on workers in specific firms, on all workers, or on taxpayers in general."

A broker battered
10/14/05   Crime
"The boss of Refco, one of America's leading futures brokers, has been arrested on fraud charges a couple of months after the firm's successful flotation. The scandal may damage the reputation of an industry that has lately begun to forge an image of respectability"

Moral hazard
10/14/05   Government
"A suprising thing happens when the government dishes out heavily subsidized pension insurance: People use it."

Lexmark and Brunswick hit new lows
10/13/05   Dorfman
"The New Lows list -- a daily compilation of stocks hitting 52-week lows -- is a rich hunting ground for stock-market bargain hunters."

Pfizer and Kimberly-Clark show dividend appeal
10/11/05   Dorfman
"Don't scoff at dividends. In flat and down years, they are a big component of total return in the stock market. And they are sincerity barometers, giving an indication of how much faith a company's board really has in its prospects."

How fund rankings can cause stocks to gyrate
10/09/05   Funds
"Mutual funds are a main cause of the boom-and-bust cycle that so often occurs among individual stocks and industry sectors, a new study has concluded."

Amerigroup and Diebold are on the casualty list
10/09/05   Dorfman
"Amerigroup Corp. stock was smacked around last quarter, ending with a 52 percent loss. Diebold Inc. was beaten down 23 percent. Wabash National Corp. was roughed up for a 19 percent decline, and H&R Block Inc. was bruised with a 17 percent thrashing. I am putting those four stocks on my quarterly Casualty List. At the end of each quarter, I put a few stocks that have suffered big declines, and that I think have comeback potential."

Trailer fees: a vitamin or toxin?
10/09/05   Funds
"Most investors don't understand trailer commissions and the inherent conflicts-of-interest they cause. Many don't know they exist despite the many articles that have been written on the topic. Now that you know they exist, ask your adviser to disclose them and make sure you get your money's worth."

RRSP overcontributions can boost your nest egg
10/09/05   Taxes
"When it comes to the last year for making contributions to your registered retirement savings plan, a little creativity can help you boost the final value of your portfolio. Here is one approach to take."

Piggy bank -- or house of cards?
10/08/05   Real Estate
"More and more homebuyers are discovering that in a bull market, acquiring assets with other people's money is the path to riches. They're borrowing a rising percentage of their purchase prices, contributing to the housing boom. The danger is that if prices begin to fall, people who have stretched to buy houses with 100% financing will be under water on their mortgages and at risk of default if they have to sell."

The sun also rises
10/08/05   World
"The slow growth in productivity that makes OECD forecasters gloomy about Japan's potential was a consequence of the country's astonishing waste of capital during the 1990s, combined with a reluctance to cut jobs. Money was misallocated during the great stock and property bubble of the 1980s, but then even more was wasted in the next decade, as banks kept "zombie" companies alive and politicians raided the biggest pork barrel in history. Now that is past, even a modest improvement in the allocation of capital and the use of labour would boost returns and productivity. Reforms in corporate law and changes in the capital markets make it likely that the improvement will be better than modest. And, as workers become scarce again, further investment in information technology and other sorts of automation should boost productivity."

Is your kid a spoiled brat?
10/06/05   Thrift
"Instead of an iPod nano, give your kids the tools they need to be financially independent adults."

Weitz buys Wal-Mart, Tyco
10/06/05   Value Investing
"Weitz has managed the fund since 1986 and sticks to the value- investing philosophy developed by the late Benjamin Graham and adopted by Buffett, the world's second-richest man according to Forbes magazine's annual survey. He buys shares of companies he views as inexpensive that have products or services he understands, excess cash and limited competition."

Empty houses, falling prices: A boom dies
10/03/05   Real Estate
"You can see how the housing bubble is bursting in places like Columbus, Ohio, where builders and lenders threw common sense away and enticed people to buy homes they couldn't afford."

Blogging toward financial sanity
10/03/05   Thrift
"I was skeptical about starting a blog, but then a real community emerged -- and together, we're bucking up our fiscal resolve to battle spending and debt."

So what do you have to do to find happiness?
10/03/05   Health
"It's difficult to resist the logic of the happiness doctors. Stay in your Eeyore-ish bubble of existentialist angst and have a life that's short, sickly, friendless and self-obsessed. Or find a way to get happy, and long life, good health, job satisfaction and social success will be yours"

Think before giving a child the title to your home
10/02/05   Taxes
"There are four key lessons to learn from this story: Parents should always talk to their kids about their estate planning. Mr. D and the others had no idea that they were on the title as owners of the property. They may have been able to do some planning to minimize the ultimate tax hit. Always get proper tax advice when doing estate planning. The lawyers involved in transferring the title to the children did not appear to understand all the tax implications. Think twice before putting a child on the title on your home. In most cases, all you'll save are probate fees, but the potential tax (and other) problems you create will far outweigh these fees."

8 financial train wrecks you can avoid
09/30/05   Thrift
"'Just because they say 'I love you' doesn't mean they'll pay you back' -- and other tales of money misery. Watch. Learn. Take notes."

Too broke even to declare bankruptcy
09/30/05   Debt
"One of the indignities of going broke is that filing for relief is expensive and getting more so. Here are six ways to scrape up the cash."

Saxon fund keeps it simple
09/30/05   Funds
"Howson believes his value-investment style has also contributed to his success. He emphasizes the adherence to his style - the fact that he applies it consistently - and points to his outright rejection of technology stocks for Saxon Balanced fund over the past five years as an example of that discipline leading to strong results over the long term."

Coffin spiral
09/29/05   Dreman
"Military pilots call it a "coffin spiral"--when their plane is so out of control that they can't recover. That's the situation today for long-term bonds, those with maturities over ten years. The reason is that a killing turbulence of inflation is on the way, pushing bond yields up and prices down. The first sign is energy's rising price--filling up the tank is twice as expensive as two years ago--and that affects all corners of the economy."

Make room for dividend payers
09/28/05   Dividends
"You can't find a clearer sign that a company is profitable, well-managed, and committed to sharing the wealth with shareholders than a long track record of paying dividends. If the company has also consistently increased the amount of cash paid out in dividends, that's all the better. Studies have shown that the shares of companies that pay dividends tend to beat those that don't, usually with a lot less risk."

The Caribbean and sugar
09/27/05   World
"Four decades after independence, it is hardly surprising that colonial trade patterns are under threat. Caribbean economies do have a future, but a very different one, as service centres. As well as tourism and offshore finance, both of which could expand further, there are plenty of niches. A recent World Bank report noted that almost 70% of overseas medical graduates registered in the United States were trained in the Caribbean's 23 offshore medical schools. Some countries need help to make the switch from sugar and bananas. But the future need not be sour - provided that the Caribbean's politicians look to embrace it, rather than cling to the past."

Dividends and the three dwarfs
09/26/05   Dividends
"Dividends not only dwarf inflation, growth, and changing valuation levels individually, but they also dwarf the combined importance of inflation, growth, and changing valuation levels. This result is wildly at odds with conventional wisdom, which suggests that, while the return from bonds is wholly dependent on income, stocks provide growth first and income second."

Beyond bling
09/25/05   Stocks
"Claire's Stores meets five of those six criteria and has two other points of note. It has increased its dividends by at least 10% a year, on average, over the past 12 years, and it has no long-term debt. It has certainly made money for its shareholders. But should we care particularly about one smallish company, whose main stock in trade is selling flash fake jewellery?"

Changing income trust rules could crack nest eggs
09/25/05   Taxes
"Let's put this whole concern in perspective. In 2004, $300-million in tax revenue was "lost," according to the Department of Finance. Actually, not true. This claim ignores the fact that many of those dollars will be collected in the future. Income trusts typically result in a tax deferral rather than an elimination of tax. But let's not argue over such trivial details. It's also important to realize that $300-million represents just 15/100ths of 1 per cent of Canada's $195.8-billion in revenue in 2004-05. That's the equivalent of a $50,000-a-year income earner giving up $75. Heck, the income trust market has plenty of room to grow before deferred tax revenue should be a concern. A word to Mr. Goodale: Take a Valium."

Steer clear of 'flood cars'
09/25/05   Thrift
"Hurricane Katrina swamped hundreds of thousands of new and used cars. Some of them will be polished up and sold in used car lots near you. Here's how to protect yourself."

Protect your wallet in a divorce
09/25/05   Thrift
"Making plans to preserve your assets in case of a divorce may not be very romantic. But with half the population headed for divorce court after a trip down the aisle, it's not such a bad idea."

Schnitzer, Chevron, Reebok pass '15-15' screen
09/22/05   Dorfman
"The concept is pretty simple. These stocks show earnings growth of 15 percent or better for the past five years. And they sell for 15 times earnings or less. Hence the name 15-15. This year only 6 percent of the 2,448 U.S. stocks with a market value of $500 million or more passed the screen."

Wild west accounting
09/21/05   Accounting
"If you steal a Canadian's wallet, you could end up in jail. But if you steal a Canadian's retirement savings, little is usually said or done about it. Unlike in the United States, we are not seeing any exemplary prosecutions for securities fraud in Canada. And without any widely perceived deterrent, we are virtually encouraging the scam artists to continue taking advantage of Canadian investors."

Investing in the dark
09/21/05   Accounting
"One of my chief complaints about the trusts is that a majority of them don't seem to be setting aside enough money for maintaining their assets when it comes to calculating how much cash is available for unitholders. It didn't take some trust managers long to figure out that by underestimating maintenance needs, they could overstate distributable cash and get a higher selling price for their units. Recognizing that this is a problem, the CSA stated that it "might" require companies to improve disclosure on the issue in their prospectuses. The bigger problem, aside from the word "might," is how they are going to know who does and does not comply with this guidance. The truth will only be known years later when the selling shareholders have vanished and remaining investors have no recourse."

FPA's Robert Rodriguez likes cash
09/20/05   Value Investing
"If I look at the marketplace in general, we see the market as being very flat in valuation. So therefore, the undervaluation in small- and mid-caps has effectively been eliminated in the last five years because of their superior performance vs. large-caps. There may be some value in the micro-caps. But we still think that the earnings expectations are still overstated on average. We have been saying for a while that earnings in large-cap stocks will be disappointing, and you are starting to see that now."

Betting against the crowd
09/20/05   Value Investing
"For contrarians like Wadhwaney, 51, investing is a matter of avoiding manias and searching instead for bedraggled castoffs that are cheap precisely because the In crowd won't touch them. "I don't buy prime merchandise," he says. "I buy stuff that's fraught with discomfort. I buy some terrible things." Terrible things that produce terrific returns."

When booms go bust...
09/19/05   Real Estate
"A look at the not so distant past reveals numerous examples of cities that went through housing busts -- followed by years of falling prices. Some have never fully recovered."

Can government build cities?
09/19/05   Government
"A disturbing trend after Katrina was summed up in George Bush's promise to have the federal government completely rebuild the Gulf Coast better than before the storm, and do so with taxpayer money. Can we really expect government to create quality cities using redistribution, government programs, and regulations?"

Crazy loans: Is this how the boom ends?
09/18/05   Debt
"Lenders are pushing risky loans with low payments. Desperate home buyers snap them up. Worried yet?"

Family trust can be an educational building block
09/18/05   Taxes
"If you're a successful business owner, you can use the profits of your business to help fund the cost of your child's primary or post-secondary education. There's more than one way to skin this cat, but the idea of a family trust can make sense."

Your six biggest money fears
09/18/05   Markets
"We all worry about money. Problem is, we're scared of the wrong things. Find out why your biggest money worries may be misplaced -- and start building an action plan for the events that should really concern you."

Omaha's other oracle
09/18/05   Value Investing
"Although he operates with a decidedly lower profile than his Omaha neighbor Warren Buffett, Wally Weitz's investment record speaks volumes. His flagship Weitz Value fund has returned an average 15.7% per year for the 10 years through June 30, vs. 9.9% for the S&P 500. Since founding Wallace R. Weitz & Co. with $11 million in assets in 1983, Weitz now manages more than $7 billion. Weitz is finding plenty to invest in these days"

The taming of the screw
09/15/05   Stocks
"For centuries now the screw has held things together, and for almost as long it has been frustratingly inept at its central purpose. Concrete cracks when it is punctured by a screw. Plastic creeps away from the pressure, sliding down the threads so that even a tightened screw loosens almost instantly. Carmakers have to mold brass inserts into plastic parts to accept screws; otherwise they might loosen and cause a dreaded rattle. Kenneth LeVey has a better idea. A product development director at Illinois Tool Works, the nation's biggest screwmaker, he has reinvented what the company dubs the threaded fastener in a way that lets it grip tight where it used to let loose--and compete with cheaper screws made by offshore rivals."

America's airlines, flying on empty
09/15/05   Stocks
"The benefits of Chapter 11 are supposed to be avoiding the unnecessary liquidation of businesses, and the job destruction and total loss to creditors this can involve. But in the airline industry this emergency ward for stricken companies has turned into long-term intensive care, inadvertently wreaking further damage on rivals. In mid-October tougher new rules for Chapter 11 will come into force, so troubled airlines have an incentive to go bankrupt soon, to benefit from today's more benign regime."

Third Avenue Q3
09/14/05   Whitman
"A few months ago, I signed an agreement with Wiley to update the 1979 book of which I was the senior author, The Aggressive Conservative Investor. The updated version ought to be out in November."

Eight big-cap stocks to buy
09/14/05   Dorfman
"Small and mid-sized stocks are my investment territory, but many people like the relative safety and stability of large stocks. Accordingly, once a year I offer my opinion on the 20 largest U.S. stocks by market value. "

When to sell a stock?
09/14/05   Stocks
"So when should you sell? The best answer was provided by the elegant Philip A. Fisher, who died in 2003 at the age of 96 after a 74-year career as a money manager. In his important book, "Common Stocks and Uncommon Profits," published in 1958 and currently available in a paperback edition, he wrote, "It is only occasionally," he wrote, "that there is any reason for selling at all.""

Is this a lifetime selling opportunity?
09/13/05   Markets
"Today, on the other hand, it seems as if investors had thrown any caution into the wind. Cash returns are so low - courtesy of Greenspan's ultra easy monetary policies that the entire world is 'investment mad'. Investors all over the world are hunting for investment opportunities the way gold diggers were rushing to California during the great gold rush of the late 19th century."

Olstein Annual
09/13/05   Value Investing
"We believe that any fund that doesn't admit to being a value fund (seeks to buy undervalued companies) is by admission willing to buy overvalued companies. Funds not paying attention to value (growth at any price, momentum, crowd psychology, etc.) are relying on the foolishness of other investors to make money and we believe only a select few can be successful at this greater fool's game. Admittedly, funds that are capable of consistently outguessing the psychology of crowds will probably have the highest returns. However, we believe that a fund that buys only growth companies at any price is playing Russian roulette with its shareholders' money."

The brains business
09/12/05   Academia
"This survey will offer two pieces of advice for countries that are trying to create successful higher-education systems, be they newcomers such as India and China or failed old hands such as Germany and Italy. First: diversify your sources of income. The bargain with the state has turned out to be a pact with the devil. Second: let a thousand academic flowers bloom. Universities, including for-profit ones, should have to compete for customers. A sophisticated economy needs a wide variety of universities pursuing a wide variety of missions. These two principles reinforce each other: the more that the state's role contracts, the more educational variety will flourish."

Buy cheap and get paid to wait
09/11/05   Dividends
"Remarkably, the most overlooked aspect of dividends is the power of compounding. Depending on your starting point, dividends have made up as much as 60% of the total return of the S&P 500 in the last 100 years. Additionally, because of recent tax code changes, dividends now offer a competitive after-tax return to many fixed-income instruments, especially considering the present low-yield environment."

Extinction of the predator
09/11/05   Stocks
"How merger mania has been a disaster for the world's great car manufacturers"

Little to fear but fear itself
09/11/05   Health
"Perhaps the true tragedy of Chernobyl is that the biggest observable health impact so far has been on the mental health of the millions who have been told they are at risk. Many of these people received radiation doses no larger than they would get on a holiday in a place such as Denver, where the altitude increases exposure to cosmic rays, yet they have spent their lives anticipating illness and incapacity, and this has translated into such undesirable behaviours as drug abuse and long-term dependency on the state."

How teens get sucked into credit-card debt
09/11/05   Debt
"Card companies are now soliciting high school students, who too easily find themselves buried in red ink."

Allegations aside, Norbourg a plain dumb investment
09/11/05   Funds
"And now for a short seminar on crummy mutual funds, courtesy of Norbourg Asset Management. You know Norbourg -- it's the Montreal money manager alleged to have embezzled $70-million in client money."

Always evolving BMO wins again
09/11/05   Brokers
"BMO InvestorLine is just such a broker and that's why it came out on top in The Globe and Mail's annual on-line brokerage rating for the fourth consecutive year. Other top brokers this year are E*Trade Canada and TD Waterhouse."

Bic sells 100 billionth pen
09/08/05   Stocks
"It was also one of the first examples of globalization. You can find these pens everywhere because Bich had a modern concept of low-cost, global marketing. They invented or adopted many of the principles we talk about now, but at a very early stage."

Blue-chip bargains
09/08/05   Tilson
"In fact, as the following chart from venerable investment manager GMO shows, higher quality companies -- which they define as those with "high profitability, stable profitability, and low debt" -- are at their lowest valuations ever relative to the overall market"

Clipper Semi-Annual
09/08/05   Value Investing
"In the long struggle between mice and men, the rodents are winning. Their victory will create lower costs for most investors and lower income for some humans."

Who's really to blame for $4-a-gallon gas?
09/07/05   Markets
"It's easy to get mad at the big oil companies, but the real story is far more complex. Here's the story behind the story, plus four energy sector picks."

The perfect storm
09/07/05   Markets
"There is arguably a drift towards greater risk-taking overall, especially when interest rates are low, so the system has not become any safer and may in fact be less safe. Banks now securitise and flog to third parties their plain vanilla mortgages, keeping on their books the more complicated and less liquid assets that are harder to sell. When interest rates spike upwards, asset prices crash or for any other reason lots of investments have to be unwound in a hurry, banks may be looking for liquidity rather than supplying it to others to keep markets orderly."

Not in my backyard
09/07/05   Government
"Extensive damage wreaked on Gulf of Mexico oil refineries last week by Hurricane Katrina has spurred talk of spreading out the nation's key oil refineries. But the word around the industry is that oil companies would just as soon keep taking chances on occasional hurricane damage rather than take on the hurdles of exorbitant costs and regulations that accompany new construction."

Wal-Mart becomes a lifeline
09/07/05   Stocks
" When the hungry man threatened to get his gun if Wal-Mart's doors didn't open the day after Hurricane Katrina smashed through town, store manager Ray Mathews knew he had trouble. The storm had shattered skylights and flooded the west end of his Wal-Mart Supercenter in Columbia, Miss., 20 miles north of the Louisiana border. The lobsters had died, and the meat and the vegatables were spoiling as the power was out. Mathews couldn't reach most of his 400 workers, either. They were largely stranded when the storm ripped open their homes, knocked down trees, and shut down area gasoline stations. Now, desperate local residents who depend on the Wal-Mart in this remote town were knocking loudly on locked doors."

Tax treaty could help prevent a nasty bite
09/04/05   Taxes
"I once heard that the definition of a tax pro is someone who tells you about problems you didn't know you had, then fixes them in a way you don't understand. This has never been truer than in the area of U.S. estate taxes. Most Canadians aren't aware that they could be subject to U.S. estate tax."

Labour funds reel as Ont. axes tax credit
09/04/05   Funds
"The Ontario government is axing its 15-per-cent tax credit for labour-sponsored funds, dealing a severe blow to the recovering sector. Fund executives were stunned by the move, predicting that this jeopardizes the future of the LSF business in Ontario, its largest market. It's the latest setback for the asset class in Canada. In June, Winnipeg's Crocus Investment Fund became the subject of a criminal probe by the RCMP."

Cash is trash
09/03/05   Value Investing
"What to do with all that cash? Some value fund managers, flush with an influx of new money from clients, are letting it pile up rather than investing it in value stocks they view as too pricey. While they wait for a better day, other value managers say letting money sit around in cash is sinful, and they swear good buys still can be had."

Price gouging saves lives
09/02/05   Markets
""Price gouging" is nothing more than charging what the market will bear. If that's immoral, then all market adjustment to changing circumstances is "immoral," and markets per se are immoral. But that is not the case. And I don't think a store owner who makes money by satisfying the urgent needs of his customers is immoral either. It is called making a living."

The myth of China Inc
09/01/05   World
"Fears that Chinese firms are acting as the commercial arm of an expansionist state are thus belied by a more complicated and disorderly reality. The real reason to fear China's overseas expansion is quite different. Because Chinese firms have grown up in an irrational and chaotic business environment, they may export some very bad habits."

Sequoia Fund shareholders' meeting
08/30/05   Value Investing
"I would add that while we have been pretty good at avoiding mistakes of commission, we have made significant errors of omission. I think that if I had to point to one big mistake we made, it was putting undue emphasis on possible macro economic problems and overreacting to some that seemed overwhelming at the time but were dealt with reasonably well."

Turnround hope can be bad for you wealth
08/30/05   Funds
"Mutual fund managers sometimes grumble that investors are too focused on short-term returns but hanging on to a poorly performing fund for too long is a far more common problem."

How to create a shortage
08/29/05   Government
"Legislatures rarely repeal bad laws just as presidents refuse to admit that their military adventures are mistakes. The oil and gasoline price controls of the 1970s began with an executive order in 1971 (as part of Nixon's "Phase One" wage and price freeze that accompanied the collapse of the Bretton Woods international monetary system), and were around for a decade before they were eliminated. One hopes that Hawaii's new system will not be in existence that long, but don't be surprised if legislators continue to ignore the free market and spit into the wind."

Five ways to be prepared for U.S. estate tax laws
08/27/05   Taxes
"Today, let's talk about planning ideas for U.S. citizens and permanent residents. Next week, I'll finish off this topic with planning ideas for Canadians with U.S. situs property."

Oil and the global economy
08/27/05   World
"The fact that America's economy has been able to shrug off higher oil prices mainly as a result of a housing and mortgage bubble is hardly a comforting thought. What happens when house prices flatten, or even fall? Consumers will then feel the full force of dearer oil. Come to think of it, a further spike in oil prices could even be what pops the housing bubble, if it unsettles consumers enough. So far, the rising oil price has done little harm; but worse may well be on the way."

Google's stock sale mystery is simply solved
08/26/05   Stocks
"There is no mystery here, folks. When companies think their stock is undervalued, they buy it back. The Googlers are in the opposite fix. Their stock is overvalued, so what do they do? Sell more. Quickly. Before sanity returns to the marketplace."

IFIC chairman Michel Fragasso steps down
08/25/05   Funds
"The chairman of the Investment Funds Institute of Canada stepped down Thursday after RCMP and other police officers swooped down on several offices in Montreal and Toronto as part of a major fraud investigation against his company, Norbourg Asset Management Inc. Michel Fragasso, a senior vice-president of Norbourg, resigned late Thursday as chairman of the national association for the mutual fund industry in the wake of the Norbourg police investigation."

Top 25 Boards In Canada
08/25/05   Management
"Canadian directors have been cleaning up their act since the collapse of WorldCom and Enron nearly five years ago sparked a North American corporate governance revolution. While governance was once merely a footnote in a company's annual report, now many of Canada's largest corporations brag about their independent directors, the top-notch financial experts sitting on their audit committees and their beefed-up board oversight."

Beat the S&P with strong consumer brands
08/25/05   Stocks
"Peter Lynch, in the book One Up on Wall Street, refers to these companies as "The Stalwarts." Jeremy Siegel, in one of the great investment books of the year, The Future for Investors, calls them "corporate El Dorados." Warren Buffett has long preached the virtues of these types of companies having "economic castles protected by unbreachable moats.""

How Buffett accumulated $40b
08/25/05   Buffett
"Warren Buffett celebrates his 75th birthday next week. The legendary investor is currently worth some $40b and is the second richest person in the world. While his friends and family struggle to think of a suitable present, mere mortals like you and me probably ought to reflect on how he accumulated so much money."

Sharks in the housing pool
08/25/05   Crime
"Deed thieves, property flippers, equity strippers -- these con artists are duping banks and homeowners, and there are lots of them"

The 5 most outrageously overpaid CEOs
08/24/05   Management
"Here's the pantheon of execs whose paychecks soar while their companies suffer. Also: 5 who produce stellar results for a comparative pittance."

Occidental and Ryland return to sane portfolio
08/24/05   Dorfman
"I designed the Sane Portfolio in August 1999 as a middle-of-the- road, slightly conservative portfolio. Since then, I have refreshed its holdings each August. For the past six years the average 12- month return on the Sane Portfolio has been 14.9 percent, compared with 0.1 percent for the Standard & Poor's 500 Index. All performance figures in this article are total returns including dividends."

The problem with indexes
08/22/05   Dreman
"Benchmarks used to gauge your portfolio's performance are severely flawed. Know their drawbacks before judging how you did."

Watchdog sniffs accounting firms
08/22/05   Accounting
"As a result of the inspections of 23 accounting firms, four firms have had restrictions placed on their business until they improve their auditing practices. Three firms (none of which are named in the report) have been barred from accepting new auditing work from publicly traded companies, while certain partners in a fourth firm will no longer be permitted to perform audits on publicly traded companies."

The three myths of condo investing
08/21/05   Real Estate
"The growth in condo-investing mythology may be more worrisome than the risk of overbuilding. Here are three whoppers that need reality checks."

Three reasons you could end up paying U.S. estate taxes
08/21/05   Taxes
"You see, there are three categories of people who will be subject to the U.S. estate tax -- and you could be counted here: (1) U.S. citizens, (2) permanent residents of the United States, and (3) those who own "U.S. situs property.""

Is your boss a psychopath?
08/19/05   Management
"Odds are you've run across one of these characters in your career. They're glib, charming, manipulative, deceitful, ruthless -- and very, very destructive. And there may be lots of them in America's corner offices."

Google's new shares: are they worth the price?
08/18/05   Stocks
"In the end, Damodaran's analysis produced a value that's far less than the current stock price. He figures Google is currently worth just $110 per share. And this assumes that the company will grow like gangbusters, taking in $49 billion in sales by mid-2015, compared with just $3.2 billion last yearan increase of some 1,400%."

For jihadist, read anarchist
08/18/05   World
"Bombs, beards and backpacks: these are the distinguishing marks, at least in the popular imagination, of the terror-mongers who either incite or carry out the explosions that periodically rock the cities of the western world. A century or so ago it was not so different: bombs, beards and fizzing fuses. The worries generated by the two waves of terror, the responses to them and some of their other characteristics are also similar."

Boom and bust at sea
08/18/05   World
"China's astonishing rate of growth cannot last forever. Indeed, spot rates for bulk carriers in Asia recently hit a two-year low after falling by half from a peak in March as Chinese demand has cooled a bit. And the more slowly growing trade across the Atlantic is vulnerable to any slackening of economic activity in Europe or America. If growth and trade stumble while shipping lines are piling on extra capacity, the result could be empty holds, plunging shipping rates and rapidly sinking profits."

Hang on for a tidal wave of bankruptcies
08/18/05   Debt
"There's an Oct. 17 deadline looming: Changes in bankruptcy law will make erasing debts more difficult. But many who rush to file may find their troubles are worse later on."

Six 5-star stock ideas from master investors
08/18/05   Stocks
"Investment companies can themselves make great investments. These businesses often benefit from significant managerial ownership and much longer investment horizons than mutual funds subject to quarterly evaluation by "consultants" dare pursue."

Chubb, U.S. Steel look cheap based on cash flow
08/18/05   Dorfman
"The corporate scandals of the past four years have made a lot of investors cynical about reported earnings. Earnings can be manipulated -- and even when they aren't, they can be unintentionally deceptive. No single measure of corporate performance or stock value is perfect or totally tamper- proof. That's why many professional investors look at stocks using several different measures. One useful lens is the price-to-cash-flow ratio."

The inevitable crisis
08/17/05   Markets
"I am not a pessimist by nature and I have a low opinion of doomsayers who regularly predict the next Great Depression. But there is clearly a crisis looming on the horizon, the only unknown being its magnitude. This crisis will come from the south - the US - and we know why."

A volatile brew
08/17/05   Accounting
"No more will investors be led astray by earnings that don't reflect the value of options to workers. Um, not so fast. Turns out the FASB didn't quite mandate the method managements use to figure out option costs, giving them wiggle room. Hence many companies have rewired the black box of accounting, the options pricing model, to ease the earnings hit--chiefly by tinkering with projected volatility assumptions of the underlying stock."

What they won't tell you about capitalism
08/16/05   Markets
"Thomas DiLorenzo has written a masterpiece. This book should be required reading for every college freshman to immunize him against the anticapitalist drivel he will get in his history and economics classes. It should be required reading for every college graduate to destroy the myths of capitalism that he was exposed to while a student. But this is not just a book for students, for every teacher, politician, and minister needs this book as well. For those of us who are already true capitalists, we have not only a great reference source, but a great weapon in our arsenal against all varieties of socialism, interventionism, and anticapitalism."

Big jobs that pay badly
08/16/05   Markets
"Most of us work hard for a living. And if we're lucky, we're well compensated for the effort. But there are some jobs you should take only if you really love the work because the investment you make to get the job and the hours you keep aren't necessarily commensurate with what you earn."

Naked shorts' long shelf life
08/15/05   Markets
"What if they passed a law and no one followed it? Not one of those bizarre, outdated laws you hear about -- like in Maine, where people are required to bring shotguns to church -- but a brand new law with an entirely sensible goal, like keeping people from selling equities that don't exist."

Life without a paycheck
08/14/05   Fun
"And look at your own life. Haven't you dreamed, at least once, of setting out on your own path while you're still young enough to enjoy it?"

S&P/TSX index outpaces managed funds
08/14/05   Indexing
"Annual management expense ratios of 2.5 per cent "are a huge hurdle for any manager, no matter how skilled they are, to consistently have to overcome to deliver value-added over and above what a[n] . . . indexing strategy delivers," Mr. Silgardo said."

Winning the active management game
08/13/05   Funds
"Swensen offers advice to help individual investors triumph over very daunting odds."

Ben Graham might like LandAmerica and 4 others
08/11/05   Graham
"Benjamin Graham -- professor, hedge fund manager, author and bon vivant -- is widely considered the father of value investing. Graham died in 1976. Were he alive today, I think he might like such stocks as LandAmerica Financial Group Inc. (LFG) and National Western Life Insurance Co. (NWLIA)."

Perils at the pump
08/10/05   Markets
"Oil prices hit yet another record this week, on fears of political instability in the Middle East and refining problems in America. So far, the world economy has managed to chug along without much ill effect. But how long can consumers go on paying ever more at the pump without cutting back elsewhere? And why aren't high prices bringing new supplies to market?"

A must-read for Berkshire fans
08/09/05   Munger
"A large, heavy, coffee table book, Poor Charlie's Almanack is part fanzine, part analysis, and a lot of pure Munger. It's an eye-catching, cleverly designed volume, colorfully illustrated and sporting a breezy style and easy-to-digest layout. Its creation was clearly a labor of love for the participants. The title is, of course, a play on Poor Richard's Almanack, the 18th century almanac written and published year after year by Benjamin Franklin, one of Munger's heroes."

Invest like Warren Buffett
08/08/05   Buffett
"If you're looking for a guide to help you navigate this brutal bear market, can we suggest a candidate? He's folksy and a bit old fashioned, the type of person who likes nothing better than relaxing over a Cherry Coke and a Dairy Queen hamburger. He's also hopeless when it comes to technology and he insists on living in the middle of nowhere (Omaha, Neb. to be precise). Still, we think he's got potential. For one thing, he's already made a few billion dollars in the stock market. Better yet, he's survived and even thrived during previous market downturns."

7 ways to fight off bankruptcy
08/08/05   Debt
"Single women -- and particularly single moms -- have a tenuous hold on financial security and face a serious risk of bankruptcy."

Is housing too expensive? Blame the government
08/07/05   Real Estate
"Elementary economics tells you that in a competitive environment, the price of a new house should equal: the price of land + construction costs + a reasonable profit for the developer. But in most cities, that sum is not even close to what buyers are paying."

A Buffett-style performance
08/07/05   Buffett
"The screen continues to harbor quite a few health-care and financial shares, as companies in these sectors typically feature high margins and high return on equity -- key criteria for Buffett. Once again, a sprinkling of technology and energy concerns made the list as well."

Mortgage insurance: homebuyer beware
08/07/05   Real Estate
"The Crown corporation with the lion's share of the mortgage insurance business is making a killing for Ottawa. And Canadians are paying through the nose."

Hardly in the public interest
08/07/05   Government
"mutual fund investors now have to act much more quickly if they feel they've been a victim of financial assault. For unsophisticated investors, seniors, retirees, widows, non-English-speaking immigrants and others the new Act can spell economic disaster."

When a trust, by any other name, is just a stock
08/07/05   Trusts
"Leslie Lundquist owes her fame in money management circles to income trusts. As the lead manager of two income funds for Calgary's Bissett Investment Management, being a doomsayer on the trust market isn't her shtick. So perhaps when she admits to getting nervous, we should pay attention. And Ms. Lundquist is skittish on the latest crop of trusts -- not because they're bad companies, but because "there's no conceivable reason why they should be trusts instead of stocks.""

The top 10 items the taxman will query on your return
08/07/05   Taxes
"Today, I want to share with you the top 10 items on tax returns that were most often questioned by the Canada Revenue Agency (CRA) last year. These come from an informal poll of tax specialists at my alma mater, accounting firm Deloitte, and appears in the firm's newsletter "Tax Breaks.""

It's crucial that executors understand all their obligations
08/07/05   Taxes
"The fact is, being in someone else's will doesn't always mean you're going to get an inheritance. You might, for example, be named the executor of the will and not a beneficiary, in which case you won't exactly be cashing in. In fact, the executor's job comes with a number of responsibilities."

Dying without a will can cost
08/07/05   Taxes
"When it comes to your estate, failing to prepare a will may save you legal fees in the short term, but could cost your family later. Dying without a valid will is called "dying intestate," and it's rife with problems."

After Fahd, Abdullah. But then?
08/06/05   World
"With the death of Saudi Arabia's ailing, octogenarian King Fahd, his only slightly younger half-brother, Abdullah, takes over the desert kingdom. Though things may continue much as before in the short term, the new ruler will have to cope with strong - and conflicting - pressures for change"

Is Warren ever wrong?
08/06/05   Buffett
"So did Warren somehow, in some fashion, conjure up this heatwave? It's hard to believe, but he really does seem to be scarily in the right place at the right time. It's likely that this week, with temperatures nearing 120 degrees in places like Phoenix, the nation will exceed all previous energy consumption - and the investor-owned utilities will be supplying it. All it takes to make money, it would seem, is do whatever Buffett says he's doing."

The estate tax - does it really matter?
08/06/05   Taxes
"How many families are able to maintain efficient and successful portfolio management for generations at a time? And how likely is it that the third and fourth generations of unearned wealth will be happy with distribution rates of a couple percent? Toss in a decade or two of lax or unlucky portfolio management and a few generations of spendthrift heirs, and familial wealth shrinks faster than the prawn plate at a Cajun wedding."

First style-based international ETFs
08/06/05   Indexing
"Barclays Global Investors announced today that the iShares MSCI EAFE Value Index Fund and the iShares MSCI EAFE Growth Index Fund began trading on the New York Stock Exchange. Each fund's expense ratio is 0.40%. These exchange traded funds (ETFs) are the newest additions to the largest international ETF product line in the U.S."

Beer war
08/06/05   Markets
"It used to be that if you brought a case of cheap beer like Lakeshore Creek to a party, you were considered, well, cheap. Not so anymore. The value beer market is booming--consumers these days seem less concerned about image, and more about value."

Using debit is better than paying ABM fees
07/22/05   Thrift
"With almost every financial institution charging non-customers up to $1.50 to use its automated banking machines, the number of transactions where people used ABMs from other financial institutions fell to a 10-year low last year. Meanwhile, usage of direct payment notched yet another year of solid growth. The numbers are a confirmation of a growing recognition that the cost of using any old bank machine is one of the biggest wastes of money in financial services today, whereas debit represents one of the best values."

Jeremy Siegel's buy list
07/22/05   Value Investing
"There's ample evidence that seeking above-average yields (and picking up value-priced bargains in the process) leads to outsized returns; this is basically the "dogs of the Dow" strategy played out on a larger field. Siegel reports that a portfolio owning the 100 top-yielding S&P stocks beat the index by 3 percentage points annually and smacked the lowest-yielding 100 by nearly 5 points. And so much for reward being earned by taking risk: The highest-yielding quintile was slightly more volatile than the index, but the lowest-yielding stocks were the riskiest of all."

Confessions of a compulsive shopper
07/22/05   Thrift
"Maxed-out credit cards, more than $50,000 in shopping-related debt and the slow realization that she chatted more with other Gymboree-obsessed moms than she did with her own family finally convinced Rogers that she needed to kick her habit."

Leith Wheeler doesn't buy 'new era'
07/22/05   Funds
"The investment team doesn't buy the idea that oil has entered a "new era" in which oil prices stay at $60 (U.S.) a barrel or higher, and so applies a "very conservative" price of $34 a barrel three years from now when valuing oil and gas producers. "We believe that over time more supply will come on stream and demand will stabilize," Mr. Palfrey said."

Cap-weighted portfolios are sub-optimal portfolios
07/21/05   Academia
"In this paper, we show that under a fairly innocuous assumption on price inefficiency, market capitalization weighted portfolios are sub-optimal. If market prices are more volatile than is warranted by changes in firm fundamentals, then cap-weighted portfolios do not capture the full premium commensurate their risk. The sub-optimality arises because cap-weighting tends to overweight stocks whose prices are high relative to their fundamentals and underweight stocks whose prices are low relative to their fundamentals. The size of the cap-weighted portfolio underperformance is increasing in the magnitude of price inefficiency and is roughly equal to the variance of the noise in prices. However, portfolios constructed from weights, which do not depend on prices, do not exhibit the same underperformance observed for cap-weighted portfolios. We illustrate this cap-weighting underperformance empirically by comparing returns from cap-weighted portfolio vs. non-cap-weighted portfolios with similar characteristics. We also derive testable implications from our model assumption and find empirical support."

China severs link to dollar
07/21/05   World
"China dropped its politically volatile policy of linking its currency to the U.S. dollar on Thursday, adopting a more flexible system based on a basket of foreign currencies that could push up the price of Chinese exports to the United States and Europe."

Who killed Richard Cullen?
07/21/05   Debt
"I tell Lord Griffiths about Richard Cullen's suicide, and he sighs. "I had a friend," he replies. "A clergyman. I met him for dinner one night. He was suffering from cancer. He broke down over dinner and confessed to me that he had 32 credit cards. He said he was using each card to pay off the charges on the others. He told me about the shame he felt. You could just sense the emotional pressure. I'm no doctor ... " Lord Griffiths pauses, then says, "He died soon afterwards." Then he says that a friend of his recently compared the credit card industry to slavery - that the lenders are the new slave masters and the borrowers the slaves."

Back to Basics Q&R
07/19/05   Markets
"If you want something to monitor, then I suggest that you monitor the following: How many of your kids believe that they have an honest shot, should they choose to do so, of getting rich in this country?"

From web-savvy patient to a 'cyberchondriac'
07/19/05   Health
"As a physician, I'm not troubled by the autonomy of the informed patient. What troubles me is the proliferation of the partially informed patient and, frankly, the misinformed patient -- the patient who crosses the line from Internet-educated patient to cyberchondriac. My impression is that people believe more of what they read than what I tell them. It seems that traditional Western medicine based on scientific evidence is less and less trusted by the general public. Meanwhile, some dubious theory from the Internet will be swallowed hook, line and sinker nine times out of 10."

In the future, you'll need less money
07/19/05   Retirement
"Has your financial planner told you to save more? He may be dead wrong. He isn't alone. Most of the models used for retirement planning may also be wrong for the same reason. How can this be? Easy. The models and their supporting software are based on an assumption that isn't supported by real data about our spending and how it changes as we age."

Investors turn on hedge funds
07/18/05   Funds
"Hedge funds have struggled to make money this year, which means that for the first time in recent memory, it's getting tough for them to attract new money as well."

Harry Potter and the all-too-rare windfall
07/18/05   Stocks
"The latest volume in the Harry Potter series is set to break all publishing records, to the delight of booksellers. The success of the Potter books has also made its author vastly wealthy and provided a windfall for its publisher. But it is an oddity in an industry that is growing slowly and rarely sees bumper profits"

Consider the easy way out
07/17/05   Taxes
"When it comes to dealing with your cottage in your estate planning, sometimes the best approach is taking the easy way out."

Huge lawsuits threaten businesses
07/15/05   Law
"Denver defense lawyers say their clients are increasingly the target of lawsuits where the claims are so big, the future of their business is at stake. They're called "bet the business" cases, and they can involve many different areas, from mergers and acquisitions to intellectual property to securities."

Ingram Micro, Sunoco look cheap on price-sales
07/15/05   Dorfman
"Of all the arrows in the value investor's quiver, the one that best points to potential turnarounds is the price-to-sales ratio. Most investors are more familiar with the price-earnings ratio, published daily in many newspapers. It is a stock's price divided by the company's per-share earnings. A high ratio indicates that investors expect good things ahead; a low ratio shows that they distrust a company's prospects. The price-sales ratio works the same way, except that the denominator in the fraction is a company's sales per share."

Dig a moat for your investments
07/15/05   Markets
"But what are we to make of the procession of successful investors who openly, and for reasons other than personal profit, explain their methods? Warren Buffett, via his shareholder letters, may be the most famous example, but many others have followed suit. George Soros, Joel Greenblatt, Seth Klarman, John Neff, Marty Whitman, David Dremen, Bill Gross and Ben Graham have each authored how-to investment books outlining many of their insights. Savvy investors aren't in the business of aiding competitors, and we think its wise to conclude that each of these businessmen believes their investment moats originate elsewhere. But we'll defer to the master (15th quote) to reveal the secret; "The most important quality for an investor is temperament, not intellect.""

America's great sorting out
07/14/05   World
"America has a small problem with class - and a bigger one in its schools"

Japan's economy: more mountains to climb
07/14/05   World
"After privatising the post office and its related bank, which reforms should Japan attempt next?"

The Las Vegas pill
07/14/05   Health
"How treatment for Parkinson's disease turned some patients into gamblers"

Warren Buffett Q&A
07/13/05   Buffett
"I know more about business and investing today, but my returns have continued to decline since the 50's. Money gets to be an anchor on performance. At Berkshire's size, there would be no more than 200 common stocks in the world that we could invest in if we were running a mutual fund or some other kind of investment business."

In at the top
07/13/05   Markets
"Public pensions are rushing into real estate the way they rushed into tech in the late 1990s. Maybe it's a good time to get out."

Demolishing shaky tax shelters
07/11/05   Taxes
"As the feds continue to scuttle dubious and outrageous schemes, new players are reshaping a chastened financial-advice industry"

Housing markets pricing out middle class
07/10/05   Real Estate
"The red-hot housing market in booming cities across the country has made the dream of owning a home out of reach, not only for low-income families but also for white-collar professionals."

The hidden costs of moving
07/10/05   Real Estate
"Not only is moving one of life's most stressful and exhausting experiences, it can cost more than you ever imagined. Here's why."

Use put options to defer your tax payments
07/10/05   Taxes
"The dilemma? You're concerned about a stock dropping in value, and want to sell it right away, but you don't want to trigger a significant tax bill today by making the sale."

The corporate savings glut
07/09/05   World
"Companies in the main developed economies have switched, as a group, from being big borrowers to being net savers: ie, their profits exceed their capital spending. The total increase in companies' net saving in the past four years has been more than $1 trillion, 3% of annual global GDP and five times the increase in net saving by emerging economies over the same period."

Outsourcing: Getting the measure of it
07/03/05   World
"Then again, says the McKinsey Global Institute, if current demand continues, the supply of suitable labour in the popular cities of Prague and Hyderabad will run short by 2006 and 2008 respectively. The demand for engineers from Britain and America alone, it claims, will use up the suitable supply in all of China, India and the Philippines by 2011."

Hedge funds: a wild quarter
07/03/05   Funds
"The once-high flying funds are struggling to make money as market conditions have gotten tougher."

Make sure your sale of home isn't AINT
07/03/05   Taxes
"Some tax questions are equally tough to answer. Such as: If you buy a home, fix it up and sell it for a profit, how will that profit be taxed? As a capital gain, or business income?"

06/29/05   Gross
Doom and gloom abounds in Bill Gross' latest missive.

Great shareholder letters
06/29/05   Funds
"Mutual fund managers are required to publish quarterly reports, which are usually accompanied by a letter to shareholders, written by the portfolio managers. These letters are available to anyone who's interested on most funds' Web sites. Shareholder letters are often packed with rich content, including: commentary on the current state of the market; investing philosophies; recent stock picks; opinions on what the future may bring; and pretty much anything else the manager wants to talk about. Although a letter is typically written for the benefit of shareholders in a particular fund, it also serves as a great fix for stock junkies who hope to glean some keen insight from investment managers and perhaps pick up a good pick or two along the way."

Protect your funds from an oil spill
06/26/05   Funds
"Maybe you're prepared for your energy mutual fund to fall in value if oil prices snap back, but what about your Canadian equity fund, your dividend fund, your balanced fund, your income trust fund, your U.S. equity fund and your global equity fund? Each of these categories is home to fund managers who have loaded up on energy stocks. Combine their funds in just the right way and you might find that 25 per cent or more of your portfolio is living and dying by oil prices. For even moderately conservative investors, that's too much."

Fund firms plan to give investors a break
06/26/05   Funds
"A fee-cutting revolution has broken out in the mutual fund industry. CI Mutual Funds, the country's third-largest fund company, said yesterday that it will ask its clients to vote on a proposal that will cut fund ownership fees across the board, then lock them in as of the beginning of September."

CRA gives your home a break
06/26/05   Taxes
"Just because you start using part of your home as an office for your business does not mean you'll have to pay tax on that part of your home when you sell it later. You can continue to call the entire property your principal residence as long as you meet the three conditions outlined by the CRA above."

Video: Blue-Ribbon Panel on Value Investing
06/24/05   Whitman
"Whitman School alumni and Wall Street giants Marty Whitman, of Third Avenue Management, and Robert Menschel, of the Goldman Sachs Group, discuss their approaches to investing and the people and experiences that have shaped them as financiers."

Threatening eBay's dominance
06/23/05   Markets
"In 2002, John Wieber started worrying about his business, which sold refurbished computers through Internet auctioneer eBay Inc. Although he was earning $1 million a year in revenue, profits had started to slip as competitors flocked to the site. EBay also raised its fees, further cutting margins, and fraud was becoming a problem. So Mr. Wieber revamped his Web site and began selling through other online companies, such as Inc. and Yahoo Inc. Last year, his sales neared $5 million, but his eBay revenue grew at a much slower pace, making up only a quarter of the total. It will likely fall still lower. Of the auction site, where he got his start, Mr. Wieber says: "Too many sellers, not enough buyers.""

S&L redux
06/22/05   Retirement
"Not so in America, where people are speaking openly of a taxpayer bail-out to rival the rescue of America's savings-and-loan (S&L) sector in the late 1980s. The pensions insured with the PBGC showed a shortfall of almost $354 billion at the end of the last fiscal year, compared with $279 billion a year earlier. If the deficits of less underfunded plans are rolled in, the total shortfall is more than $450 billion."

The arithmetic of mutual fund investing
06/22/05   Bogle
"Most of you are likely familiar with the EMH - the Efficient Market Hypothesis - that suggests that most stocks are fairly valued, most of the time. But the relentless rules of humble arithmetic remind us of something both more certain and more profound than the EMH. I call it the CMH - the Cost Matters Hypothesis - the iron rule that investors as a group must always lose to the stock market by the amount of the costs they incur."

Third Avenue Q2
06/20/05   Whitman
"This year, I led seminars on value investing at the Schools of Management at both Syracuse University and Yale University. At the first session of the seminar programs, I contrasted the underlying assumptions pervading value investing with the underlying assumptions that seem to govern both academic finance and conventional research department analyses. Hopefully, it will be useful for TAVF shareholders if I share with them what I said at these first sessions, as well as how I believe the Fund's investment approach comports with a number of the underlying assumptions."

American Everyman
06/19/05   Buffett
"Buffett's public image represents a singular cultural accomplishment whose difficulty is hard to overstate. Until Buffett came along, the notion of a folk-hero investor was an oxymoron in America. Before the 1920s, buying and selling corporate securities was regarded by ordinary people as an occult activity practiced by a shadowy elite acting in nobody's interest but its own."

Be careful how you donate through your will
06/19/05   Taxes
"But "generous" is a good way to describe many Canadians, as an increasing number of us are leaving gifts to charity in our wills. But if you're not careful, the tax relief you're counting on from your gift to charity may not materialize as hoped. Let me explain."

The danger of a global house-price collapse
06/17/05   Real Estate
"The whole world economy is at risk. The IMF has warned that, just as the upswing in house prices has been a global phenomenon, so any downturn is likely to be synchronised, and thus the effects of it will be shared widely. The housing boom was fun while it lasted, but the biggest increase in wealth in history was largely an illusion."

The global housing boom
06/17/05   Real Estate
"Japan provides a nasty warning of what can happen when boom turns to bust. Japanese property prices have dropped for 14 years in a row, by 40% from their peak in 1991. Yet the rise in prices in Japan during the decade before 1991 was less than the increase over the past ten years in most of the countries that have experienced housing booms (see chart 3). And it is surely no coincidence that Japan and Germany, the two countries where house prices have fallen for most of the past decade, have had the weakest growth in consumer spending of all developed economies over that period. Americans who believe that house prices can only go up and pose no risk to their economy would be well advised to look overseas."

Shifting patterns in the load universe
06/17/05   Brokers
"A further issue, Investor Economics says, is that, while de facto advisors are going fee-based, they have not embraced the unbundling of fees. "Although unbundling fees is economically neutral from a client and advisor perspective," Insight says that several of the industry people interviewed for the report "suggested that the idea of sending a bill to clients for services rendered remains an unappealing option for many advisors.""

Another Buffett buffet
06/15/05   Buffett
"Third auctioned lunch with billionaire investor expected to fetch at least $200,000 for charity."

Warren Buffett's problem child
06/15/05   Buffett
"Now at the center of a series of investigations, General Re is one of Berkshire Hathaway's biggest buys -- and worst investments"

Retired Vanguard manager still aggressive
06/13/05   Neff
"Legendary money manager John Neff hasn't lost his touch in retirement. He says that since he retired as manager of Vanguard Windsor Fund at the end of 1995, his stock portfolio has gained 18 percent a year, or double the return of the Standard & Poor's 500 index. "I am doing pretty well in my dotage," said Neff, 73."

Getting stiffed on a loan?
06/12/05   Taxes
"The question is this: When you lend money and the loan goes sour, is there tax relief available? The answer depends on the type of loan. Let me explain."

Munger' s worldly wisdom
06/10/05   Munger
"It's quite interesting to think about Wal-Mart starting from a single store in Bentonville, Arkansas against Sears, Roebuck with its name, reputation and all of its billions. How does a guy in Bentonville, Arkansas with no money blow right by Sears, Roebuck? And he does it in his own lifetime - in fact, during his own late lifetime because he was already pretty old by the time he started out with one little store.... He played the chain store game harder and better than anyone else. Walton invented practically nothing. But he copied everything anybody else ever did that was smart - and he did it with more fanaticism and better employee manipulation. So he just blew right by them all. He also had a very interesting competitive strategy in the early days. He was like a prizefighter who wanted a great record so he could be in the finals and make a big TV hit. So what did he do? He went out and fought 42 palookas. Right? And the result was knockout, knockout, knockout - 42 times. Walton, being as shrewd as he was, basically broke other small town merchants in the early days. With his more efficient system, he might not have been able to tackle some titan head-on at the time. But with his better system, he could destroy those small town merchants. And he went around doing it time after time after time. Then, as he got bigger, he started destroying the big boys. Well, that was a very, very shrewd strategy."

A born gambler rolls the dice at 88
06/10/05   Value Investing
"Ever since Kirk Kerkorian revealed last month that he was buying a major stake in General Motors Corp., people have been speculating about his motives. Here's one safe bet: The wealthiest man in Los Angeles is not acquiring shares in the biggest and sickest automaker out of any special affection for cars."

The slavery shakedown
06/10/05   Law
"In other words, Thompson's apology was for something Wachovia didn't do, in an era when it didn't exist, under laws it didn't break. And as an act of contrition for this wrong it never committed, it can now expect to pay millions of dollars to activists for a wrong they never suffered. What is going on here?"

Fast food and strong currencies
06/10/05   World
"The Big Mac index, which we have compiled since 1986, is based on the notion that a currency's price should reflect its purchasing power. According to the late, great economist Rudiger Dornbusch, this idea can be traced back to the Salamanca school in 16th-century Spain. Since then, he wrote, the doctrine of purchasing-power parity (PPP) has been variously seen as a "truism, an empirical regularity or a grossly misleading simplification.""

Variance among U.S. equity indexes
06/08/05   Indexing
"Financial planners often are called upon to select equity market indexes against which their clients' portfolios might be measured. As will be shown in this paper, the choice of which equity market indexes are chosen as benchmarks can make a sizable difference in the comparison of performance. In light of this, one should be aware that "benchmark index shopping" is a potential hazard in a world where comparison of performance is widespread. More bluntly, it is possible that a mutual fund company (or financial planner) might shop for a benchmark that had the worst performance relative to their fund or portfolio, precisely to make their own fund(s) or portfolio(s) look better."

Reality retirement planning
06/08/05   Retirement
"Traditional retirement planning assumes that a household's expenditures will increase a certain amount each year throughout retirement. Yet data from the U.S. Bureau of Labor's Consumer Expenditure Survey show that household expenditures actually decline as retirees age. Consequently, under traditional retirement planning, consumers tend to oversave for retirement, underspend in their early years of retirement, or postpone retirement."

Soft and flat? Danger!
06/06/05   Bonds
"Not too fast and not too steep would normally be a good path to follow. Unless, of course, you are hiking in today's land of economics. Then that path, to some, looks pretty scary."

Market-timing your RRIF withdrawals
06/06/05   Taxes
"You might be cringing at the thought of market-timing RRIF withdrawals. But this involves less risk than regular market timing because you're not changing investments. You're simply choosing when to pay tax on the withdrawals."

Tackling the bears-with no bull
06/03/05   Markets
"The wonderful thing about being old and rich and respected is that you get to say pretty much anything to anyone. And if you're really fortunate, like legendary investment guru Stephen Jarislowsky, the 79-year old founder of Montreal-based Jarislowsky Fraser, you even get to write a book airing your blunt opinions."

Patient Capital Management Q1
06/03/05   Value Investing
"In March of 2000 we truly believed that over a typical five-year period we would be presented with enough attractive investment opportunities to get us into a fully invested position. As we have come to see the past five years have been anything but typical. While the technology based NASDAQ declined sharply the broader based TSX Composite and S & P 500 have remained largely unchanged. In addition, volatility in the share prices of the businesses that interest us have been unusually muted. Not surprisingly, the high quality investments that we seek have not reached our buy prices."

Scientists create 'trust potion'
06/03/05   Academia
"Some may worry about the prospect that political operators will generously spray the crowd with oxytocin at rallies of their candidates. The scenario may be rather too close to reality for comfort, but those with such fears should note that current marketing techniques - for political and other products - may well exert their effects through the natural release of molecules such as oxytocin in response to well-crafted stimuli. Civic alarm at such abuses should have started long before this study."

Lula's mid-term blues
06/03/05   World
"Last month, Veja, a weekly magazine, published excerpts from a videotape showing a manager of the federal postal service taking a bribe. He claimed to belong to a bribe-collecting network headed by Roberto Jefferson, the boss of the Brazilian Labour Party (PTB), a member of the governing coalition. Mr Jefferson denies wrongdoing. The bribe-taker has since recanted. But allegations keep coming. Federal police are investigating charges that the state-owned reinsurance monopoly has funnelled money to a brokerage headed by a friend of Mr Jefferson."

The frog and the ox
06/03/05   World
"In reality, a weak Europe is much more of a threat to America's interests than a strong one. The no vote not only guarantees several more years of Eurodithering and introspection: it also makes it much less likely that Europe will be able to absorb Turkey, let alone Ukraine, anytime soon, if ever."

Tobacco settlement faces increasing challenges
06/03/05   Law
"But Philip Morris USA is pleased. In the first quarter of 2005, the nation's largest cigarette maker saw operating profit rise and its domestic market share grow to 50 percent, up from 48.3 percent two years earlier."

Set your financial house(s) in order before getting married
05/29/05   Taxes
"It's the season for weddings, and so I want to share some financial advice for those getting married this year -- particularly those who already have some income and assets."

Zero to a billion in two years flat
05/27/05   Crime
"Bob Rusko got an eerie feeling when he first stepped into the office of Portus Alternative Asset Management Inc. It was midnight on Friday, March 4, and Rusko's team had been trying to get into the company's two offices in downtown Toronto all evening. Portus had been put into receivership by an Ontario court that afternoon and Rusko, a senior vice-president at KPMG Inc., was named receiver. Things had gotten off to a bad start. The landlord at the company's main office wouldn't let Rusko's people in. Another team had gone over to Portus's other office, located a few blocks away on the 69th floor of First Canadian Place. This time no one stopped them. Rusko joined them. When he opened the door, he couldn't believe his eyes. The place had been stripped bare. There were no phones, no computers, no paper. Even the paintings had been ripped from the walls, leaving small gouge marks where the nails had been. Just about the only thing left behind was an empty tequila bottle."

The gang of 17
05/27/05   Government
"Just how convoluted are the regulations that govern the investment industry? Suppose we used the industry's model to regulate the way we buy and drive cars. First, force every driver in Canada to get a driver's licence and licence plate for every province and territory, even if they don't live there or own a vehicle there. Then, force them to display all 13 plates on their bumpers. After that, require everyone to pay a fee to another agency to regulate speed. Then, set up another agency to enforce traffic rules. To top it all off, have an Association of Car Dealers decide what reckless driving is. The association should also fine salespeople who harm their clients, but let dealers collude on new vehicle pricing. Does that sound crazy? It would sound fine to anyone in the securities business."

Buffett unit to buy utility for $9.4B
05/25/05   Buffett
"The acquisition is Buffett's largest since he bought reinsurer General Re Corp. in 1998. Under it, MidAmerican Energy, his Des Moines, Iowa-based unit, will assume $4.3 billion of net debt. PacifiCorp provides services to 1.6 million customers in six western states."

Appraisal fraud: your home at risk
05/23/05   Real Estate
"In theory, it's in a bank's best interest to make sure its loans are based on accurate appraisals, said M. Thomas Martin, of the National Mortgage Complaint Center in Seattle. "But if you're selling the loans to the secondary market, you really don't care," he said. "The higher the value, the better.""

Put stock in trusts, or trust in stocks?
05/22/05   Trusts
"First, there are oil and gas royalty trusts. They're trendy, they're pleasant to own because of their generous payouts of cash every month or quarter and they've shown some serious horsepower in the past few years. Crashworthiness is uncertain, however. If oil prices were to plunge, these babies could do some damage."

Royalty trusts offer tax benefits
05/22/05   Taxes
"Now, if you're looking for a real hot tip, consider a royalty trust. There are more than just a couple of tax reasons to look at them."

Boomtown USA
05/20/05   Real Estate
"Something strange happens when real estate makes everybody rich. Is this where your town is headed?"

Many trusts will turn out to be scams
05/18/05   Accounting
"Outspoken forensic accountant Al Rosen has a bit of a reputation in the industry. And it's no wonder. Rosen claims cooking the books is practically a national sport in Canada, laws make it impossible for investors to seek redress and because there are no big lawsuits, the issues are largely ignored by the media. Right now, Rosen has his sights set on income trusts. He says the market is running the same scam Nortel executives used in the late 1990s, only this time around the accounting tricks are being used by companies who are targeting retired people."

Roundup of the Berkshire Hathaway meetings
05/18/05   Buffett
"We don't produce verbatim transcripts--we can neither write quickly nor listen infallibly--but we do believe that we've captured the essence of Buffett and Munger's thoughts. In any event, Berkshire will conduct meetings again next year, and any shareholder may attend. As a bonus, we think Berkshire shares look cheap at the moment, which isn't a bad way to acquire an admission ticket. However, anyone can attend the Wesco meeting, which is usually more intimate, and the odds of being selected to ask a question are substantially higher."

Cash happens
05/18/05   Buffett
"The purpose of this commentary is to provide our clients with an update on our thoughts with regard to this significant investment we have made on their behalf. Though relatively straightforward, in our view, Berkshire's business model and the attractiveness thereof remains misunderstood by the general investing populace. Fortunately, our target audience in these periodic commentaries is an informed and knowledgeable investor universe which has the context and perspective with which to utilize the information contained herein."

Scaling the depths of our 'lizard' investment brains
05/17/05   Markets
"Money begets primal urges. We become irrational, do stupid things. We buy high and sell low. We panic, become guilt ridden. Sometimes we just want to slither away from our money foibles. That's because we are all lizards inside, and once in awhile -- or all too often -- that scaly inner self comes out. This isn't crazy talk. Neuroscientists and economists have teamed up to posit we revert to hot-blooded mania when making certain financial decisions because of unconscious core patterns our brain exerts on our behavior."

PH&N to launch higher-fee funds for clients seeking advice
05/17/05   Funds
"Personal advice has its price, even at Phillips Hager & North Investment Management Ltd., the Vancouver-based no-load fund firm that is well known for having some of the lowest management expense ratios in the business."

The cost of AA programs
05/15/05   Indexing
"For about a decade now, various investment companies have been cranking out marketing material quoting the academic work done in the 1980s and 1990s done by a team of researchers led by Gary Brinson and studying asset allocation and variance for large US pension funds. Most get it wrong."

Beware options in private companies
05/15/05   Taxes
"First, always get tax advice before exercising stock options. Second, stock options in a private company aren't always a good idea if your PUC is very low, unless you can sell those shares to someone other than the company later. Private companies may want to consider setting up a "market-maker" trust to buy shares in these situations."

What cost "noise"?
05/15/05   Markets
"the magnitude of underperformance by the largest-cap stock is huge; the average shortfall over the subsequent year is 7.1 percent, expanding to a startling 5.0 percent a year at 10 years, which compounds to a 40 percent performance shortfall relative to the average stock in the S&P 500 in 10 years."

Notes from Marty Whitman's talk
05/12/05   Whitman
"Running Mutual funds and Money management beats work. These Managers hardly work and continue to generate terrible returns. Market gives you an 8-10% return, and these managers with their intelligence under perform the market."

Words of wisdom
05/11/05   Chou
"Last month, the 2004 Annual Report of the Chou Funds showed up in my e-mail box and I wasted no time in reading his current views on investing. As usual, they were thoughtful, practical, and on-target."

Asset class correlations
05/11/05   Markets
"Asset Class Correlations illustrate a series of rolling 36-month correlation coefficients and 36-month rolling return comparisons between various asset classes, styles, and categories. Rolling correlations are more insightful than the typical long-term correlation matrices found in textbooks. Rolling correlations illustrate the changes that occur between asset classes over time rather than a flat measure covering a long-term period."

Investments legend shares his wisdom
05/11/05   Whitman
"Whitman is one of the truly great investors of modern times. He's also charming, gracious and refreshingly outspoken. He will criticize anyone: Alan Greenspan, Bill Miller of Legg Mason, even Graham and Dodd, the Columbia professors who wrote the classic text, "Security Analysis.""

Investors get break on costs of mutual funds
05/09/05   Funds
"Mutual fund costs borne by the investor are falling and more declines are expected, an industry study has found."

Mutual fund price war
05/08/05   Funds
"The question is whether CI's discount move is a publicity stunt or the opening shot in a fund war that could see the high-cost players capitulate."

Notional pension plans a tax option
05/08/05   Taxes
"This week I want to discuss a creative idea called a notional defined contribution plan"

The diversified dividend aristocrats
05/08/05   Indexing
"Since the passage of the 2003 dividend tax cut, investors have flocked to dividend funds and indexes like pigeons to popcorns. Consider the iShares Dow Jones Select Dividend Index Fund (DVY): Introduced in November of 2003, DVY has been one of the fastest growing exchange-traded funds (ETFs) of all time, and now boast assets of over $6 billion."

The hunt for value
05/07/05   Stingy Investing
"A key premise of value investing is that markets usually overreact to negative news, pushing stocks below their true value as the herd mentality takes hold. That's when value investors swoop in and pick up shares at a hefty discount. To be successful, a strong contrarian streak is essential. Having loads of patience is also important, because the market often takes years to recognize the value it's been overlooking. And during that time, a stock can give investors fits. "Most people probably can't be value investors because they don't have the temperament for it. They'll buy a few stocks and then they'll get spooked out of them and sell," says Norm Rothery, founder of and a financial consultant with Dan Hallett and Associates Inc."

Selling Graham Stocks
05/07/05   Stingy Investing
"While discussing Graham's method for defensive investors, many people asked me how Graham went about selling such stocks. Regrettably, Graham didn't provide a clear selling strategy, but there are a few simple approaches that investors can use."

Dogs of the Dow: these dogs can bite
05/07/05   Stingy Investing
"Want proof? It turns out that 1999 was the worst year on record for the Dogs of the TSX. David Stanley, University of Guelph professor emeritus, tracks the Dogs of the TSX and rebalances his portfolio each year on May 25. Stanley calculates that the Dogs have gained an average of 13% a year since 1987, trouncing the index by 3.6 percentage points a year."

Value of stock buybacks up in air
05/06/05   Dreman
"David Dreman, a veteran investor who heads Dreman Value Management in Jersey City, N.J., said buybacks are "almost a white flag" from corporate officers, an admission they cannot find anything better to do with shareholders' capital. Why invest in a business like that? he wonders. What's the long-term growth story?"

Still earning after all these years
05/04/05   Buffett
"The legendary investor who stood the efficient-markets thesis on its head has hit a spot of bother. But Warren Buffett has survived such spots before"

Buffett exclusive: trade, taxes, terror
05/04/05   Buffett
"Investment guru expounds on reforms in corporate America, trade deficit and terrorism against U.S."

Notes from the 2005 "Woodstock of Capitalists"
05/03/05   Buffett
"Berkshire doesn't do much asset allocation. We don't want to have our search constrained by pre-set limits. On this issue, we are out of step with modern investment management. That's okthey're wrong. We could've owned $30 billion in junk bonds if the market hadn't gone up so quickly. I'm a big believer in the saying that "If it's not worth doing at all, then it's not worth doing well.""

The oracle speaks
05/01/05   Buffett
"It was below freezing in Omaha early Saturday morning, with frost silvering the golf courses and rolling lawns of the city where Warren Buffett's Berkshire Hathaway Inc. is headquartered. But the atmosphere was warm inside the Qwest Center arena, where roughly 20,000 shareholders gathered from around the world to hear Buffett and his vice chairman, Charles Munger, answer questions for more than five-and-a-half hours."

Clipper Fund's Q1
05/01/05   Value Investing
"Start with profits. After-tax profit margins on the Standard&Poor's Industrials are at a record high. Measured as a percentage of GDP, corporate profits are back to levels last seen in 1929. For capitalists, but not workers, these are the (relatively) good old days. It gets better.Not only are profits at historically high levels, but investors are willing to capitalize those profits at generous price-to-earnings ratios. Not only have (note the past verb tense) the prices of stocks been bid up, so have the prices of other long-term assets such as bonds and real estate. While owners have been getting richer, they also benefit from the conspicuous absence of one sometimes fatal fear that historically has afflicted the rich."

Bill Miller's Q1
05/01/05   Markets
"At an investment conference in London in early February I said that not only was I bullish on the market for 2005, but that I was the most bullish person I know. I guess that means now I am the most bullish and wrong person I know."

Follow the Acme brick road
05/01/05   Buffett
"Berkshire Vice Chairman Charles Munger is often dour during the company's annual shareholders' meeting, but this year he outdid himself, seeming to revel as he described the various ills of the business and finance world."

The index to end all indexes?
05/01/05   Indexing
"the ratio between equities and fixed-income investments varies widely over time. At the heart of the equities boom (March 2000), equities made up 67 percent of the index; at the depths of the recent bear market (March 2003), they represent just 43 percent of the index."

The sins of the advisers when it came to Portus
05/01/05   Brokers
"Three commandments dictate the responsibilities that investment advisers owe their clients and at least two of them were trampled when investors were put into Portus hedge fund products."

Some points to consider after filing your return
05/01/05   Taxes
"On a scale of one to 10, the fun derived from preparing your tax return rates about a one -- on par with a root canal. But the process shouldn't end when you drop your tax return into the mailbox or hit the "submit" key to file electronically. There are a number of things to keep in mind after you've filed your tax return that can help you to save tax and minimize future problems with the tax collector. Here are seven ideas."

Berkshire Hathaway has grown, but so has wariness
04/26/05   Buffett
"The stock market seems to think the master has lost his touch. That's the only possible explanation for this puzzling fact: The underlying share price of Berkshire Hathaway is back to the depressed levels of late 1999, even though the company's growth has been excellent."

Making it to the top
04/24/05   Debt
"It's never easy, but getting rich is still being done every day. All it takes is leverage."

Self-employment a great shelter
04/24/05   Taxes
"Self-employment is one of the last great tax shelters, but 2004 has passed so it's too late for self-employment for 2004. Or is it?"

A valuable alternative to empire-building
04/24/05   Markets
"Companies are buying back their own shares in record quantities. In many cases, their shareholders should thank them for it"

Chou's annual
04/24/05   Chou
"In general, we have done well with retail companies such as BMTC Group. But with retailing and restaurant companies it is difficult to get a handle on how the future will pan out, regardless of how well they may have done in the past. Retailing concepts that work well can be easily duplicated by competitors. Also, if consumer tastes change, the retailing companies are faced with serious financial and operational issues. Liabilities such as operating and capitalized leases suddenly become real short-term debt, much needed cash is used up in severance and closure costs, and a host of other problems crop up. In short, these consequences can quickly put a financially sound retailer into a serious short-term liquidity crisis."

New Monopoly game features Warren Buffett
04/23/05   Buffett
"If you've got $30 and some imagination, you can invest with Warren Buffett. A special edition of the "Monopoly" board game featuring Buffett and his Berkshire Hathaway Inc. companies will be unveiled next week in conjunction with Buffett's annual shareholder meeting in Omaha."

Will the walls come falling down?
04/21/05   World
"House prices have been growing at a breakneck pace in many developed countries. This has encouraged householders to keep spending even during the global slowdown. But now that housing markets are looking soft, consumers may be forced to retrench"

Buffett shows a taste for Budweiser
04/21/05   Buffett
"Anheuser-Busch Cos. Inc., the largest U.S. brewer, said Thursday Berkshire Hathaway Inc., the holding company run by billionaire Warren Buffett, has acquired a significant stake in the company."

The origins of mutual funds
04/17/05   Funds
"Mutual funds emerged as early as the second half of the 18th century in The Netherlands. The paper traces the history of mutual funds from the development of securitization in the 17th century to the invention of depository receipts in the 19th century. The apparent motivation for organizing the first mutual funds was to provide diversification for small investors."

It's what he doesn't do that seems to pay off
04/17/05   Whitman
"Another quirk that distinguishes Mr. Wadhwaney and the analysts who work with him - Jakub S. Rehor and Matthew P. Fine - is that they are acolytes in what Mr. Rocco called the "Church of Marty." Marty, as he is known to the staff at Third Avenue Management, is the founder, Martin J. Whitman, 80, who started the flagship Third Avenue Value fund in 1990. Since then, the company has added three funds, including International Value."

Crossed the foreign content line? Here's help
04/16/05   Taxes
"The growing vulnerability of the minority Liberal government poses a potentially expensive problem for people who jumped on a budget measure allowing unrestricted foreign investing in registered retirement savings plans."

Changes that help, changes that hurt
04/16/05   Taxes
"Tax expert Tim Cestnick lists the key tax changes that took place for 2004. Some changes will help you when filing your 2004 tax return, but some will hurt. One thing's for sure: These are changes you shouldn't ignore."

Find your investing edge
04/14/05   Value Investing
"Investing is competitive. There is a seller for every buyer, and transactions often reflect a difference of opinion. Buyers believe the prospective return on an investment is attractive relative to the risk entailed. Sellers usually disagree. One party will fare better than the other, and in my opinion the winners aren't random. How are they determined?"

Sarbanes seeks rent control
04/14/05   Accounting
"Dozens of companies have had to restate, adjust or delay earnings reports in recent months because of problems they've had in accounting for leases. Now some experts are warning that the restatements could be a sign of deeper problems."

04/13/05   Management
"If you want to go in one direction, the best route may involve going in the other. Paradoxical as it sounds, goals are more likely to be achieved when pursued indirectly. So the most profitable companies are not the most profit-oriented, and the happiest people are not those who make happiness their main aim. The name of this idea? Obliquity"

The nature of risk
04/12/05   Value Investing
"We've come a long way these seven decades since Ben Graham first emphasized the margin of safety in Security Analysis. Unfortunately, the wrong direction."

Analysts keep misfiring with 'sell' ratings
04/11/05   Dreman
"Of course, not all stocks with heavy sell ratings are good stocks to own, and not all stocks with many buys are bad stocks. Enron, for example, was widely hated by analysts shortly before its demise, and they were right. "You do have to do a fair amount of research" if you invest this way, to be sure you aren't getting an Enron or a WorldCom, says David Dreman, chairman of Dreman Value Management in Jersey City, N.J. He likes to buy stocks such as retailers, which can rise and fall sharply based on the economy, and tobacco makers, whose fortunes can depend on litigation. He finds analysts tend to abandon them at the bottom and begin recommending them at the top."

Here's one good reason to fire yourself
04/10/05   Funds
"Better performance would be nice. Unitholders have had it rough. If you invested $10,000 in the fund in February, 2000, you'd have about $950 left. That's a loss of more than 90 per cent. How did that happen? "The idea is you go in and find stocks where there's earnings momentum and revenue momentum and you own them and you don't own resources because it's a growthy portfolio . . . and it just hasn't worked." So you've fired yourself?"

Free money on tap for green card holders
04/10/05   Taxes
"It's estimated that there are hundreds of thousands of Canadians who are also U.S. citizens or green card holders. If you're in this boat, you probably don't file a U.S. tax return annually, although you should. Now there's an even greater incentive to file. You see, the U.S. government introduced a tax credit in 2001 that could mean cash in your pocket if you qualify, and file a U.S. tax return."

The hunt for intrinsic value
04/10/05   Value Investing
"An investor, like a gambler doesn't know in advance whether a specific investment will make or lose money. But, unlike gambling, investing has expected returns that are positive. Unlike the average gambler, give an average investor enough time, and he or she will usually make a profit. One of the challenges in investing is to prevent acting emotionally and reducing those expected gains."

Advisers can have knack for making grass look greener
04/08/05   Brokers
"The insidious thing about portfolio transformation is that you have little or no recourse if things work out badly. Just try going to a firm's branch manager and complaining that your perfectly fine portfolio of blue chips was broken up to invest in a lame wrap account. The party line will be that such a move is sound investing because the wrap offers broader diversification and professional management. Compliance departments at firms and investing industry ombudsman offices won't disagree because, in theory, wraps and pooled funds do offer benefits. In real life, these benefits are sometimes illusory or tangible only to the adviser and her firm, which may pocket more in fees."

In Trustville, faithful truck in optimism
04/07/05   Trusts
"When the income trust bonanza began, its sponsors -- namely, the big bank-owned brokerage houses, led by CIBC World Markets -- described it as the perfect vehicle for boring, stable businesses. My, have things changed. Anything goes now, including highly cyclical companies that will struggle to pay for postage stamps, never mind paying distributions, when the good times end."

Jeremy Siegel's buy list
04/06/05   Value Investing
"Siegel suggests investors pursue what he calls "corporate El Dorados"--firms that maintain attractive growth and returns over very long periods. In Siegel's words, "persistence of good earnings growth is better than a transience of superb growth." Altria (NYSE:MO), Tootsie Roll (NYSE:TR), Colgate-Palmolive (NYSE:CL), and Royal Dutch Petroleum (NYSE:RD) would earn that label."

Nobody's fool
04/05/05   Buffett
"Is Warren Buffett lazy? Or foolish? Why else would he allow more than $40 billion dollars to pile up on the balance sheet of Berkshire Hathaway? Why else would he refuse to buy any of the stocks that Wall Street's finest minds recommend?"

Is Buffett in trouble?
04/05/05   Buffett
"the AIG transactions plainly failed what Buffett himself had referred to as the "New York Times test" (and which should perhaps be relabeled the Wall Street Journal test). When considering an action, executives and managers should think about how it would look if it were splashed on the front page of the New York Times. So far, this is one test the Sage of Omaha is failing."

1040 Plunder
04/05/05   Taxes
"In a week I will be a reluctant recipient of plundered property. The modern day Robin Hood purloined the cash last year on my behalf and without my knowledge. Technology comes into play too. Using a piece of sophisticated software, my computer and a phone line, $646 will be wired directly to my bank account. The software? Turbotax. The confiscator? The Internal Revenue Service."

The trust dilemma: Is it time to buy?
04/03/05   Trusts
"The second annual spring correction in the income trust sector is under way, but the price markdowns are nothing to get excited about unless you're open to some contrarian thinking."

Watch out for U.S. tax Form 8891
04/03/05   Taxes
"Form 8891 is new, and my guess is that many Canadians living in the United States, and U.S. citizens, are going to give it a try this year. There are many who had better file Form 8891 to avoid problems with the IRS. Let me explain."

Venture capital: aftershock
04/01/05   Markets
"Meanwhile, many veteran venture capitalists are fretting, especially now that pension funds and endowments are racing to place money in venture capital (partly because they cannot get decent returns elsewhere)."

Low-cost, low-tech ways to protect your home
04/01/05   Thrift
"It doesn't have to cost a fortune to make your home safer. Here are some deterrents to thieves that are simple and work."

The regulators' best friend?
03/31/05   Government
"According to one of the European Commission's pettifogging regulations, cucumbers sold in the single market cannot be too curvy. According to another proposal, packets of coffee and chicory must conform to weights specified in Brussels."

Sharpen the pencil when picking ETFs
03/29/05   Indexing
"Index investors, it's time to review your use of two exchange-traded funds that provide easy access to the U.S. and international stock markets."

Buffett isn't investing; why should you?
03/29/05   Buffett
"Since 1965, Buffet has delivered an average annual gain of 21.9 percent (which averages 11.5 points more than the S&P 500's average annual 10.4 percent gain over the same period). With a track record like that, most investors should want to learn why today is different enough to keep Buffett on the sidelines."

Buffett may face regulators
03/29/05   Buffett
"Regulators have called Warren Buffett to answer questions next month about any involvement he might have had in an insurance transaction between a unit of his company, Berkshire Hathaway Inc., and American International Group Inc., the Wall Street Journal reported Tuesday."

Bargain hunter
03/28/05   Value Investing
"Several findings are apparent from examining the table. First (and of foremost importance to me) is that buying cheap stocks did indeed outperform. Simply buying an equal weighted basket (assuming equal distribution of stocks across portfolios) of the lowest 20% of PEs within the MSCI World index generated significant outperformance (9.7% p.a. on average). Such a strategy would have only resulted in absolute losses in only five out of the thirty years in our sample."

Wesco's letter
03/27/05   Munger
"In fact, the one thing that should interest Wesco shareholders most with respect to 2004 is that, as in 2003, 2002 and 2001, Wesco found no new common stocks for our insurance companies to buy."

No need for foreign equities in Canadian funds
03/27/05   Funds
"Now that the foreign content limit has been eliminated, the rationale for putting foreign securities into domestic funds evaporates along with it."

Renting is the real bargain
03/27/05   Real Estate
"Potential home buyers increasingly are facing a difficult economic and emotional quandary: Soaring housing prices in many parts of the country have made renting a bargain."

Think twice before deducting
03/27/05   Taxes
"When filing your tax return, the temptation will be to claim every possible deduction in order to minimize your taxes for 2004. Yet, it can make sense to defer claiming certain deductions until a future year in some cases."

Could you be hit by the 'jock tax'?
03/27/05   Taxes
"Athletes and entertainers pay millions every year to the states they visit. Now some states are tracking down CEOs and others who earn money on the road."

Buy the numbers
03/26/05   Markets
"Over the long run, a majority of a portfolio's performance is driven by its strategic allocation between stocks, bonds, real estate, cash, and other asset classes. As such, the greater understanding an investor has about asset class selection and how different investments blend together in an efficient portfolio, the better prepared they will be to allocate capital today and in the future to match their financial needs."

Are big cash stakes bad for four prominent funds?
03/24/05   Value Investing
"In investing, the four-letter word that causes the most consternation is cash. It was almost heresy to mention it in the late 1990s, as equities soared to never-before-seen highs. In the subsequent downswing, cash suddenly came back in fashion. Now, after two years of heady gains, it's a bad word again. After all, if you hold cash in a rising market, there's a good chance you'll be left behind."

Shaking up corporate Japan
03/23/05   World
"Takafumi Horie, a 32-year-old internet entrepreneur, has shocked Japan's business establishment by positioning himself to gain control of Fuji TV, a big broadcaster. As takeover fever grips the country, will regulators come to the aid of the status quo?"

Halfway there
03/23/05   Indexing
"The biggest change to hit the S&P 500 Index in modern history got underway at the close of trading on March 18, when Standard and Poor's (S&P) took the first of two steps in transitioning its broad U.S. index family to the free float weighting system."

Finding value in spin-offs
03/23/05   Markets
"The relative dearth of slam-dunk ideas led me to recently revisit a long-standing interest of mine--corporate spin-offs, which I regard as one of the few market inefficiencies still out there."

Small-cap contender
03/23/05   Value Investing
"Manager Curtis Jensen, 42, is a disciple of firm founder Marty Whitman's "safe and cheap" school of investing. That means he looks for companies with low debt, plenty of cash and lots of high-quality assets -- to ensure they can get through the tough times. What's more, Jensen won't buy a company unless its stock is selling for a fraction of what he estimates as its real worth."

Third Avenue Q1
03/23/05   Whitman
"Judged by TAVF's record, the Fund does not seem to participate too much in markets characterized by instantaneous efficiency. On its record, Third Avenue has outperformed relevant indexes on average, most of the time, and over the long term. Believers in the EMH seem to believe that these results are not good enough - TAVF ought to outperform indexes consistently, i.e., all the time. I demur; and I think most investors, or in any event Third Avenue shareholders, would agree with me."

Who gambles in the stock market?
03/21/05   Academia
"The average economic cost of gambling motivated investments is roughly 5% (range is 2-32%) of investors' annual household income. Collectively, these results indicate that people's attitudes toward gambling are reflected in their stock investments."

Big stocks could have big year
03/20/05   Value Investing
"Large caps tend to be more stable, to have greater international exposure (a good thing when the dollar is weak, as it is now), to pay higher dividends and to hold up better than small caps during market declines."

03/20/05   World
"But what will happen if a significant portion of countries decided not to add to their dollar holdings? More than the dollar would weaken. Big foreign buyers of bonds have been keeping interest rates down, perhaps by one percentage point, as Alan Greenspan suggests. That would change, for a start. Without this support, the yield on the ten-year benchmark Treasury bond could rise to more than 5%, pushing up interest rates on mortgages. That, in turn, could prick America's house-price bubble and prompt a general deleveraging, with implications for economic growth both in America and elsewhere. Standard & Poor's, a rating agency, warned on Monday that a weak dollar would substantially increase concerns about credit quality."

Learn to think Like Warren Buffett
03/20/05   Buffett
"Commentary on Buffett's annual letters is now somewhat ubiquitous, so we'd like to take a different tack and share three less-obvious insights we gleaned."

Stalling again
03/20/05   Bonds
"General Motors' latest profits warning is terrible news for the giant carmaker. Is it also terrible news for the credit markets?"

21 Ways to jump start your career
03/20/05   Work
"Letting your job become routine is hazardous to your salary. Here's how to give your career a jolt."

Getting the most out of your tax return
03/20/05   Taxes
"Okay, no need to beat around the bush. Let's jump right into six clever tax filing tips that will save you money, potential time in prison, and the need to lick a bad tasting stamp this tax season. Here we go."

The lies we tell
03/14/05   Thrift
"Be honest, now: Have you ever told your spouse you paid less for something than you really did -- say, a great pair of shoes, or maybe that very cool 52-inch TV now gracing the family room?"

Something wicker this way comes?
03/14/05   Stocks
"Chukumba suspects that a primary reason Pier 1's stock isn't yet trading even lower in the mid-single digits is because of Buffett's interest in the company. "Wall Street is not as bothered as it should be because of Buffett. He's legendary for investing in undervalued companies for the long haul. Absent Buffett and Pier 1 would be in more trouble," Chukumba said, although he did admit to Pier 1's low-debt, significant free cash-flow generation and consistent dividend returns as a few other positives cushioning the stock."

Market phobia? Try value investing
03/13/05   Value Investing
"Some value managers just shrug and buy stocks that are cheap compared with all the others. Others load up on cash. When that happens, it's worth noting."

Even Buffet times it wrong
03/13/05   Buffett
"In Britain, this company would have been laughed off the City stage, ostracised by fund managers, pilloried by governance watchdogs and sold for break-up. Across the Atlantic, Berkshire Hathaway is seen as the living corporate embodiment of successful, sensible investment and American business values."

There are better ETFs than the snappy i60
03/13/05   Indexing
"Meantime, there are several ETFs that have delivered much stronger returns over the past three years and thus deserve some attention. One of the most appealing -- with some reservations -- is TD Select Canadian Value, which has a very solid three-year average annual return of 12.4 per cent. The comparable Canadian equity fund averaged 9.1 per cent in the period."

What should investors be doing?
03/13/05   Taxes
"Now that the foreign content restriction is gone, what should investors be doing?"

Reputation and asset prices
03/11/05   Academia
"What are the equilibrium features of a dynamic financial market where traders care about their reputation for ability? We modify a standard sequential trading model to study a financial market with career concerns. We show that this market cannot be informationally efficient: there is no equilibrium in which prices converge to the true value, even after an infinite sequence of trades. This finding, which stands in sharp contrast with the results for standard financial markets, is due to the fact that our traders face an endogenous incentive to behave in a conformist manner. We show that there exist equilibria where career-concerned agents trade in a conformist manner when prices have risen or fallen sharply. We also show that each asset carries an endogenous reputational benefit or cost, which may lead to systematic mispricing if traders without career concerns possess market power."

Fund firms moving to kill clones
03/11/05   Funds
"With the federal budget passing a third and final parliamentary vote on Wednesday, major mutual funds companies are starting to act on Ottawa's decision to eliminate the foreign content rule."

Steel man forges slot among super-rich
03/10/05   Buffett
"Once again, Warren Buffett comes in at second, but the Sage of Omaha is closing the gap with $44 billion. At one stage last year, the relative stock prices of Microsoft and Berkshire Hathaway led Forbes to draft a press release proclaiming that Buffett had overtaken Gates at the top, only for the stocks to drift the other way."

Lessons from Buffett's Annual Letter
03/10/05   Buffett
"No investor is going to succeed without some discipline, and as Buffett points out, a large number fail to beat the indexes because they lack discipline. A good starting point, in his view (and one that we've long advocated), is a long-term commitment to a low-cost approach. To be effective at such an approach, trading on tips or sentiment (buying things after they've gotten hot and selling them after they've cooled) is best avoided. Moreover, limiting costs, particularly those associated with high management fees or excessive trading, is an important factor in getting the better of broad market indexes."

Vanguard to introduce international VIPERs
03/10/05   Indexing
"The new VIPER Shares will feature expense ratios as low as 0.18%, which are considerably below the expense ratios of the 43 international exchange-traded products available on the market today."

Century Management Q4
03/05/05   Value Investing
"The scope of this publication is greater than any we have written in our 30-year history. The purpose in writing this report is to point out that financially speaking, we are living in historic times. It is extremely unusual for all major asset classes (stocks, bonds, and real estate) to have been bid up to what appears to us as unsustainable levels, all at the same time."

Fuzzy math and stock options
03/05/05   Buffett
"Until now the record for mathematical lunacy by a legislative body has been held by the Indiana House of Representatives, which in 1897 decreed by a vote of 67 to 0 that pi - the ratio of the circumference of a circle to its diameter - would no longer be 3.14159 but instead be 3.2. Indiana schoolchildren momentarily rejoiced over this simplification of their lives. But the Indiana Senate, composed of cooler heads, referred the bill to the Committee for Temperance, and it eventually died."

Selling the nation
03/05/05   Buffett
"An ominous fact: The rest of the world owns a staggering $2.5 trillion more of the U.S. than we own of other countries."

Berkshire Hathaway 2004 annual report
03/05/05   Buffett
"Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous. There have been three primary causes: first, high costs, usually because investors traded excessively or spent far too much on investment management; second, portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and third, a start-and-stop approach to the market marked by untimely entries (after an advance has been long underway) and exits (after periods of stagnation or decline). Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful."

If past bubbles are any indication...
03/05/05   Value Investing
"We're going to talk about bear markets. ... And while everybody thinks they're short term, they last somewhere between 15 and 20 years once they get going."

Running with the trust zombies
03/04/05   Trusts
"I remember when investing in income trusts was so much fun. There were only a limited number of names, so the sector was easy to follow. It was like remembering the names of Canadian sitcoms. Few people cared about income product, so you never felt like a victim of the herd mentality. Around the same time, a friend of mine had a financial advisor loading her up with biotech and semiconductor plays and he dismissed trusts as quickly as an invitation to a leprosy festival. Trusts were deemed to be a retail investor thing, not suitable for "real" investors who knew what they were doing. Meanwhile, all I had to do was stay invested, sit back and make money. It was a wonderfully intimate party and the gains were comfortably-paced. Unfortunately, the party has since been crashed by investors of virtually every stripe. And these party-crashers have an insatiable appetite. They want yield product and they want it bad. They'll devour just about anything, even if it's crap. Call them trust zombies. This has led to valuations becoming strained, especially among the larger trusts, making it harder to find true value."

Global house prices: Still want to buy?
03/03/05   World
"The unusual divergence between house prices and rents does not just affect investors; it also undermines the conventional wisdom that it is always better to buy a house, because "rent is money down the drain". Today in many countries it is much cheaper to rent than to buy."

The relentless rules of humble arithmetic
03/03/05   Indexing
"Warren Buffett's crusty but wise partner, Charlie Munger, is disturbed by the commitment of so many exceptional people to the field of investment management: "Most money-making activity contains profoundly antisocial effects. (As high-cost modalities become ever more popular), the activity exacerbates the current harmful trend in which ever more of the nation's ethical young brain-power is attracted into lucrative money-management and its attendant modern frictions, as distinguished from work providing much more value to others." As Mr. Munger recognizes in the field of money-making, as far as the interests of clients go, there can be no net value added, only value subtracted."

Sequoia Fund Q4
03/03/05   Value Investing
"We're less concerned with the annual movement in share prices than we are with the earnings progress exhibited by our holdings. If earnings grow, the stock price eventually follows." - 75% of the fund is in only 6 stocks

AGF investors have reasons to hang in there
03/03/05   Stocks
"In other words, the worst-case scenario is largely priced into the stock. If the rescue plan doesn't work, there's not a lot of downside here. If it succeeds, the Goldrings have just made a very shrewd investment, and Randy Ambrosie will be allowed to eat red meat again."

Whither the value investors?
03/02/05   Value Investing
"It's been popular to say lately that is now a stock pickers market. It probably is to a large extent; in fact, most of the time it is. Your success will primarily depend on what you pick. Don't forget that the best value managers don't always get the fundamentals right, just be wary of sweeping generalizations about them."

Clipper Q4
03/01/05   Value Investing
Lightning strikes twice at Marsh & McLennan

Dirty dozen tax scams
03/01/05   Taxes
"Don't get scammed by someone who thinks you can dupe the tax man."

A Season for Money Market Funds
02/28/05   Stingy Investing
"Many investors suffer from procrastination and leave their RRSP decisions to the last possible moment. If you're part of this group then I'm right there with you. Although I don't leave things to the last possible moment, I have been known to top up my RRSP with only a few days to spare."

Confusion dogs foreign content change
02/27/05   Retirement
"This week's budget eliminated the 30-per-cent foreign content limit for registered retirement savings plans and pensions, effective immediately. However, a federal finance department official said yesterday that the budget must be passed in the House of Commons for its provisions to become law."

A tale of three options for your RRSP dollars
02/27/05   Retirement
"Let's suppose you have $7,500 after taxes available to invest each year. I want to compare three options for that money: 1) Contributing that amount to your registered retirement savings plan if you have the contribution room; 2) Investing that money in an open (non-registered) account; or 3) Using that money to cover the interest cost on an interest-only loan to invest outside an RRSP."

Eliminating foreign limit? It's about time
02/27/05   Retirement
"Finance Minister Ralph Goodale did investors a favour in yesterday's budget by ending the 30-per-cent limit on foreign assets for pension plans and RRSPs. What's less obvious, but more important, is that he placed the economy on a stronger footing by removing a crutch that served to help to prop up uncompetitive companies."

Tobacco industry ends up good bet
02/27/05   Dreman
"David Dreman scored big when cigarette makers won a court ruling blocking the U.S. government's claim to $280 billion of past profits. His $6.1 billion Scudder-Dreman High Return Equity Fund has 10 percent of its assets invested in Altria Group, whose Philip Morris USA unit is the world's largest maker of cigarettes."

Piercing the stereotypes -- hard work but worth it
02/26/05   Markets
"To keep up your credentials as a hard-nosed value investor nowadays, you're almost obliged to say bad things about the stock market. Prices too high! Bargains too few! Low returns, at best, as far as the eye can see! The only prudent choice is to let cash reserves build up to 30 or 40 percent of the portfolio. The most interesting things about this stereotype, as with most stereotypes, are the exceptions -- the people, in this case some very prominent people, who don't fit the formula."

Why many can't stay on rich list
02/26/05   Markets
"The downfall of the rich is caused by erratic stock markets, heavy taxes and and the irresistible urge to 'shop till you drop', reported The Times of London recently."

Investing in the 'cult of Buffett'
02/26/05   Buffett
"So far, the Mississauga, Ont.-based financial advisor and aspiring television producer has yet to find the perfect candidate, although he has produced a documentary on the world's second-richest man titled Warren Buffett, Money Master, which will air tonight (Saturday) on Global Television."

Meeting with Warren Buffett
02/24/05   Buffett
"The first question I ask is: "Does the owner love the business or does he/she love the money?" It's very easy to tell the difference."

Sir John Templeton reveals the future
02/24/05   Value Investing
"Templeton sought out the best opportunities anywhere in the world he could find them. When he began investing globally in the 1930s, Templeton was truly a pioneer. Many Americans thought it unwise to invest outside the United States and therefore forfeited a world of opportunities. John Templeton's results, however, are the stuff of legend."

Suddenly single
02/24/05   Thrift
"When her husband died suddenly at 58, JoAnn Russe found she knew little about her family's finances."

King Nothing
02/23/05   Law
"Judges appoint Mark Dottore to stabilize troubled companies. Critics say he's cleaning them out."

A worthy successor's worldly views
02/22/05   Value Investing
"Statistically, the best values today are in South Korea, but because South Korea is next to North Korea and has some corporate-governance issues, we don't want to have too much there. The net cash per share of some of the smaller companies there is equal or higher than the market capitalization, so you get the business for free. There is also pretty good value in Japan, which on average trades at 8.2 times after-tax cash flow. What Europe has going for it is that there's still somewhat of a valuation gap between small and big stocks. Small stocks in Europe often are ignored by local institutional investors, which provides opportunity for us."

Can frugal living make you happier?
02/22/05   Thrift
"Without conventional pensions, it's hard to shake the nagging anxiety of geezerhood: Will we outlive our money? A New Yorker cartoon hanging on our refrigerator says it all. A man tells his wife: "If we take a late retirement and an early death, we'll just squeak by.""

Dueling views of reform
02/22/05   Munger
"When it comes to outspoken bluntness, Berkshire Hathaway Chairman and CEO Warren Buffett has nothing on his No. 2 man, Charlie Munger."

4 Stingy Stocks for 2005
02/21/05   Stingy Investing
"I look for two qualities when searching for qbargain stocks; they must be cheap and they must be safe. Not surprisingly, it is often difficult to find stocks that are both cheap and safe. Indeed, the popularity of value investing has increased and good deals are becoming rare."

Consumer-confidence data useless
02/21/05   Economy
"Consumer confidence indexes help move stock markets, influence corporate decisions and alter governments' economic outlooks. But a study says they're essentially useless for forecasting Americans' spending patterns."

How to recognize wide-moat firms
02/19/05   Stocks
"People often think that analyzing moats is as simple as looking for strong historical profitability. Ah, if only it were that easy. In truth, history is an imperfect guide, since the value a company will create for shareholders is dependent on how well it fends off competition in the future. High returns on capital attract competitors, and those great historical numbers will fade fast if a firm doesn't have a strong competitive advantage. Oftentimes, that competitive advantage isn't obvious--you have to do some digging into the firm's business model to figure it out."

Test of good corporate citizenship
02/19/05   Management
"Notice that, as the professors put it, "the lowest average stock price during the period of 180 days straddling the grant date occurs exactly on the grant date." If you think this pattern is attributable to mere chance, then I have a bridge I want to sell you."

The new money men
02/18/05   Funds
"A clever mutual-fund manager could, of course, pursue this approach in the new environment. But it has become much more sensible to start a hedge fund. Why? Because, to cite a phrase of the moment, a hedge fund is "a compensation scheme masquerading as an asset class". Whereas the average mutual fund charges 1% or 2% of assets, and smart buyers can pay a fraction of that, hedge funds charge 1% or 2% plus a big slug of profits, typically 20%, but often more. One well-known, but secretive, fund based on Long Island is reputed to charge 5% of assets plus 44% of profits. Another leading fund charges no maintenance fee but 50% of profits. An industry consultant says he has seen a new fund that will receive 80% of any excess above a guaranteed return linked to a well-known index. Even these huge costs do not really reflect what investors pay, since most hedge funds agree to conduct business through a prime broker, which extracts fees through stock- and bond-lending charges, as well as trading costs based on the fund's net asset value."

Bad for business?
02/18/05   Academia
"Business schools stand accused of being responsible for much that is wrong with corporate management today"

High Performance Graham Stocks
02/18/05   Stingy Investing
"Over the past four years I've used Benjamin Graham's time-tested strategy for defensive investors to uncover undervalued U.S. stocks. In many ways my series on Graham stocks was well timed because, after years of underperformance in the late 1990s, value stocks staged a strong comeback in the early 2000s. Graham's approach has certainly benefited from changed market sentiment and I'm happy to report another year of stellar returns."

Dull, but worthy
02/17/05   Value Investing
"There's an important lesson here for investors in stocks. As a shareholder, you should always think of yourself as an owner, or a partner, in a business. "Focus on companies, not stocks," writes one of my favorite sages, H. Bradlee Perry of Babson Capital Management. The businesses that produce American millionaires deserve your attention. Dull, in other words, is good."

Greed fuelling energy trusts' inevitable meltdown
02/15/05   Trusts
"When the energy trust sector finally blows up -- and it will -- there's going to be plenty of blame to go around."

Investors and advisers stick up for income trusts
02/15/05   Trusts
"The great thing about writing columns on the question of whether income trusts are alarmingly overvalued is that you never have to resort to writerly hyperbole to keep things on the boil."

Extreme commuting
02/15/05   Economy
"More workers are willing to travel three hours a day. But what is the long-term cost?"

Berkshire doubles Comcast stake
02/15/05   Buffett
"Berkshire Hathaway Inc. doubled its stake in Comcast Corp. and reduced its stake in Nike Inc., according to a Monday fourth-quarter filing with the U.S. Securities and Exchange Commission."

Legg Mason Value Trust Q4
02/15/05   Markets
"Who would park their money in cash at 2% and pay taxes when you could get 3.7% in tax-advantaged dividends in Citigroup stock, and own a piece of the world's largest financial services firm, one that is perfectly well-positioned to be the banker to the developing world's burgeoning consumers, at 11x earnings?"

Funds: The limits of indexing
02/15/05   Indexing
"Index funds are efficient, cheap and easy, but they aren't perfect."

RRSPs show clear advantages
02/13/05   Taxes
"Yet, the RRSP should form the cornerstone of any retirement savings plan if you're the average Canadian. Today, let's compare RRSPs to open accounts (non-registered savings) on six fronts."

Nurture your dividend nest eggs
02/13/05   Dividends
"It pays to be somewhat contrarian and to buy those companies that are lowly rated and hence relatively unloved by the market. Similarly, it pays to buy smaller companies that are likely to be less well known by investors."

Income and the long view
02/13/05   Dividends
"Raver points out that, on average, after ten years the percentage of income attributable to income and its reinvestment is greater than 50%; the value of the income at that point exceeds the value of changes in the asset price of equities. After 78 years - the period covered by Ibbotson - the proportion rises to 96.2% of total return attributable to the dividend portion!"

Dividends count most in the long run
02/13/05   Dividends
"Statistically, the capital gains element in returns ultimately depends on dividends, or more precisely on the rate at which dividends grow. In a comparison of 17 countries, ABN-AMRO finds a close correlation between real returns (net of inflation) and the market average dividend yield plus the rate of dividend growth."

When not to buy an RRSP
02/11/05   Retirement
"about 80% of the time, the RRSP makes sense. So what happens the other 20% of the time? When does it not make sense to buy RRSPs?"

Making RRSP withdrawals is seldom a good idea
02/11/05   Retirement
"There seems to be some confusion about one of the top commandments in financial planning, which is to have an emergency fund containing ready cash. This money is supposed to sit in a money market fund or high-interest savings account. It's not supposed to come from your registered retirement savings plan."

Forget the luxury hook; fund makes promises it can't keep
02/11/05   Funds
"Many people believe that if you rub up against money, some of it will rub off on you. Sometimes, they forget that the heat of the friction makes it easy to get burned."

What's love worth? Try $100k
02/11/05   Fun
"A Valentine's Day flash from economists: If you want to be happy, don't get rich. Get married."

Corporate profits: Breaking records
02/11/05   Economy
"Most analysts still expect American profits to grow by an annual 10% over the next couple of years. With nominal GDP growth of around 5%, that implies the proportion of GDP going to profits growing still larger. But this looks unlikely, and if so, share prices are overvalued. Both economic theory and historical experience argue that, in the long run, profits grow at the same pace as GDP. Such long-standing rules deserve more respect."

The Economist's commodity-price index
02/11/05   Markets
"First published in 1864, with figures stretching back to 1845, The Economist's commodity-price index is probably the world's oldest regularly published price index."

Munger's wisdoms
02/10/05   Munger
"Warren Buffet's eldest son once paid high tribute to his father by saying Buffett is the "second-smartest man" that he knows. When asked who the smartest man he knows is, the younger Buffett said, "Charles Munger," his father's long-time friend and partner. While relatively unknown and overshadowed in the public eye by the legendary Buffett, Charlie Munger has nonetheless carved out an important career and considerable personal wealth of his own, and has proven well worth listening to."

Smart people choke under pressure
02/09/05   Academia
"A new study finds that individuals with high working-memory capacity, which normally allows them to excel, crack under pressure and do worse on simple exams than when allowed to work with no constraints. Those with less capacity score low, too, but they tend not to be affected by pressure."

The top 200: rating every major Canadian stock
02/09/05   Stingy Investing
"Our Top 200 caters to both the value and growth camps. We began by finding Canada's 200 largest companies on the basis of revenue. Using data supplied from the Thomson Baseline database, we then evaluated each of these big firms using two screens - one to test its attractiveness as a value investment; the other to evaluate its appeal as a growth investment."

The acquirer's albatross
02/09/05   Markets
"the results were unambiguous: according to the historical data, acquiring banks have tended to underperform the market almost from the moment their deals close. And the longer time goes by, the worse the relative performance is."

Thinking small over dividends
02/08/05   Dividends
"An analysis by Columbia University professors Doron Nissim and Amir Ziv of dividend-paying stocks between 1963 and 1998 showed that boosts to the payouts are linked to future profitability. The business school professors published their conclusion in a December 2001 article in the Journal of Finance. Another study, published last year by Robert D. Arnott and Clifford S. Asness in the Financial Analysts Journal, shows that future profit growth is fastest when current dividend payouts are highest."

The economics of sharing
02/06/05   Economy
"Technology increases the ability of people to share, but will they share more than just technology?"

Revenge for the small-portfolio investor
02/06/05   Brokers
"Suggested solution for small accounts looking to set up a registered retirement savings plan: Open a self-directed RRSP at an on-line broker. If you have the time, the inclination and the knowledge to drive your own retirement savings plan, then an on-line broker can be a great vehicle. Or not. Open an account at the wrong on-line broker and you may feel as used and abused as a client of an indifferent adviser."

Handle your RSPs properly when leaving Canada
02/06/05   Taxes
"If you're contemplating taking up permanent residence in the United States, there are some things you should know about how to handle your registered retirement savings plan or registered retirement income fund."

Sizing up social security
02/04/05   Gross
"Where Social Security and privatization supporters err is with their assumption that retirees' goods and services can somehow magically be generated or even multiplied by the existence of a certain amount of government or private IOUs. They cannot, at least within the U.S. borders. Production can only come from employed workers and so the basic solution is to produce more workers, either through immigration or postponed retirement for the existing workforce. Productivity gains are often advanced as a solution but employed workers cannot be expected to hand over future advances to retirees without a fight."

Emotion, neuroscience and investing
02/02/05   Value Investing
"It is the long-term investor, he who most promotes the public interest, who will in practice come in for the most criticism... For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion -- John Maynard Keynes"

Health costs spur bankruptcy
02/02/05   Debt
"Half of all U.S. bankruptcies are caused by soaring medical bills and most people sent into debt by illness are middle-class workers with health insurance, researchers said Wednesday."

Vanguard's switch
02/01/05   Indexing
"Vanguard said its preliminary analysis indicates the transition to the MSCI benchmark is not expected to result in capital gains distributions for shareholders, although transaction costs will be incurred as a result of turnover. "Vanguard picked a good time to do this," said Jim Wiandt, publisher of "The move won't have big tax consequences because the fund is sitting on losses from the past few years." "If Vanguard waited and there was a big run in the market, it would be more difficult to do without triggering tax consequences," Wiandt added. Over the past five years through Jan. 31, Vanguard Total Stock Market Index fund has lost 1.1 percent annually, according to investment research firm Morningstar."

Vanguard's new target benchmark
02/01/05   Indexing
"The MSCI US Broad Market Index includes equity securities with primary listing on the New York Stock Exchange, American Stock Exchange, and Nasdaq. The index incorporates Vanguard's view of "best practices" in index construction"

Fund manager focuses on worn stocks with potential
02/01/05   Value Investing
"A bargain hunter, Rodriguez looks for beaten-up stocks with potential to turn around. At the heart of his philosophy is the question, "Am I being compensated for the risks I perceive in this investment?" If the answer isn't "yes," he looks elsewhere - even if that means parking money in cash or money market securities."

The fortress that marty built
02/01/05   Whitman
"When buying stocks, Whitman's mantra is "safe and cheap." Whitman was an expert in bankruptcy investing before entering the fund business, and he favors companies that have the strength to pay off their debts. "First and foremost, we look for stocks with fortresslike balance sheets," says Curtis Jensen, 42, manager of Small-Cap Value and Whitman's heir apparent. The funds are filled with shares of banks, insurers, energy companies, real estate developers and other asset-rich firms whose values are easily quantified."

Where's my $58 million, Madame Wu?
02/01/05   World
"So the lesson, perhaps, is that success in Chinese direct investment requires decades of commitment, deep government relationships, and superhuman effort. New regulations allow total foreign ownership in some industries, thus reducing the use of joint ventures, which Clissold describes as "incredibly difficult to manage because Chinese and Westerners don't think in the same way." The structural advantage of total ownership, however, is probably offset by the fact that, after 15 years and billions of dollars of capital, the low-hanging fruit is probably gone. There's no easy money left, and it wasn't that easy to begin with."

A cautious 2005 outlook
01/30/05   Tilson
"This year is off to a rocky start, with the major indexes already down 3% to 6%. Is this a bad omen for the rest of the year, or will the markets rally for a third consecutive year? I wish I knew. But like most value investors, I tend to worry a lot -- it helps to avoid losing money -- and these days I find plenty to worry about."

Indexing makes sense -- but not with mutual funds
01/30/05   Indexing
"The trouble here is not the concept of index investing. We can argue forever about whether it's better to own actively managed funds or funds that track the major stock indexes, but indexing does makes sense. Unless you use index funds. Costly to own, they're a distant second choice behind exchange-traded funds as a way to put the indexing strategy to work."

Spend now, suffer later
01/28/05   Debt
"It's easy to price a vacation. As for your retirement plan, you probably don't even want to answer because you probably don't have one. Why is it so hard?"

P&G to buy Gillette for $57B
01/28/05   Buffett
""It's a dream deal," Buffett said, adding that he would increase his holdings so that he would end up with 100 million shares of P&G by the time the deal closes."

Slim statements
01/26/05   Brokers
"It's a bit scandalous how bad most investing account statements are. Too often, they just throw some numbers at you that illuminate your situation only after you hunt down previous statements or grab a calculator to exercise your flabby math muscles."

Understanding your account statement
01/26/05   Brokers
"It's not always easy to understand all the information on your investment account statement. So we've teamed up with Dalbar, a research firm specializing in account statements, to develop this program to help you"

The Shiller interview
01/25/05   Markets
"Robert Shiller argues that housing in many cities is undergoing the same irrational exuberance as stocks did in their bubble days."

Interview with Tim McElvaine
01/21/05   Value Investing
"I think most people can come up with 10 reasons to own a stock. The key is instead to come up with the 2 or 3 key reasons to own a stock. Less equals more."

Manager Monitor: Richard Howson
01/21/05   Value Investing
"A long-time value investor and manager of the $337.2-million Saxon Stock, Richard Howson uses a three-pronged process to identify and profit from attractive companies."

Canadians deeper in debt, vulnerable to economic shocks
01/20/05   Debt
"A new report from CIBC World Markets warns that Canadian households are deeper in debt than a year ago and are vulnerable to any economic shock."

O'Shaughnessy sticks to the numbers
01/20/05   Funds
"With so many mutual funds built and sold on the premise that knowing how the underlying companies are run is key, it's interesting to meet an investment manager who doesn't interview company executives at all. If past performance is any indication, the computer-driven, numbers-only approach works."

CEO overconfidence and corporate investment
01/20/05   Academia
"Specifically, standard incentives such as stock- and option-based compensation are unlikely to mitigate the detrimental effects of managerial overconfidence. As a result, the board of directors may need to employ alternative disciplinary measures, such as debt overhang, which can suffice to constrain overconfident CEOs. In addition, the results confirm the need for independent and vigilant directors."

Legg Mason Forum
01/20/05   Value Investing
"I'd like to turn it over to the panel now. But first, here's a picture taken last week of Bill Miller with Paul Samuelson, the Nobel Prize winner from 1970, who is still active at Harvard at the impressive age of 90. Bill had the honor to be the keynote speaker at Harvard's annual Behavioral Finance Conference. Bill went to the first one about a decade ago, at which Charlie Munger was one of the speakers. Samuelson gave the keynote that night. He got up in front of the audience and told them that he had studied a lot of investors and they don't do what they say they do. He didn't doubt that they were good investors; but he argued that what they say they do is not what they're actually doing. So Bill got up to talk with a bit of trepidation, knowing that Samuelson was in the audience."

A fund for '05
01/20/05   Funds
"The Mawer organization is unfamiliar to most people, but it is one of the best boutique houses in Canada , with a number of top-quality funds. The Canadian Equity Fund, managed by Jim Hall, has an above-average performance record over all time frames, with a better-than-average risk rating." - A long-time Frugal Fund

Don't dismiss short side on commodities
01/20/05   Markets
"Unlike other assets, such as debt or equity, he says commodities have no "long bias" that would make an index a buy-and-hold asset. While stocks move up and down, the overall long-term trend is higher. Investors can always hold a bond for its coupon."

Suits contend funds fail to collect
01/20/05   Funds
"In a 2002 law review article, Mr. Cox reported on a study he undertook with a colleague, finding that of institutional investors eligible to file claims for part of settlement proceeds, only about a third actually do so. He estimated that in the aggregate, institutional investors leave more than $1 billion unclaimed each year."

Earnings reports - PR tool?
01/16/05   Accounting
"While publicly held companies strive to put their best foot forward, too often they're disguising information that investors need to have"

To sell or advise?
01/16/05   Brokers
"What do you suppose is the primary role of a financial advisor? Would it come as a surprise to you to know that mot financial advisors earn their living by selling financial products that the prevailing culture in the financial advice business is more like that of a real estate agent than that of an accountant? Real estate agents make money by selling whereas accountants make money by advising."

RRSP mistakes can be costly
01/16/05   Taxes
"This time of year, thousands of Canadians will make some big mistakes of their own -- with their registered retirement savings plans. Let me explain."

Oakmark Q4 commentary
01/13/05   Value Investing
"I could see my son's relief: after years of frustration from a father's job that was difficult to understand, much less explain, finally a payoff. Since this is Dad's profession, he can help me win the contest!"

In search of distress risk
01/13/05   Academia
"This paper explores the determinants of corporate bankruptcy and the pricing of financially distressed stocks using US data over the period 1963 to 1998. Firms with higher leverage, lower profitability, lower market capitalization, lower past stock returns, more volatile past stock returns, and lower cash holdings are more likely to go into bankruptcy."

Tastes, distress, and jocks
01/13/05   Value Investing
"Decades of empirical research using almost any balance-sheet metric you care to shake a CRSP shtick at yield the same monotonous result: value stocks have higher returns than growth stocks. It doesn't matter when-pre-Compustat or post-Compustat-and it doesn't matter where, whether in the U.S., other developed nations, or in emerging markets. While this concept was a tough sell in the late 1990s, anyone arguing against it now will wind up buried under a mountain of affirmative data, to say nothing of recent returns."

AGF introduces low-load option
01/12/05   Funds
"GF Funds has begun re-tooling its operations in an effort to reverse a lengthy spell of net redemptions. The first step, announced today, is a low-load purchase option on its mutual funds. The change means there will be no upfront sales charge and a shortened redemption fee schedule (three years) on the bulk of AGF's funds."

Assante latest fundco to cut fees
01/12/05   Funds
"As a result, 11 Artisan portfolios now have a new management expense ratio (MER) of 2.86% in the class A version and 1.79% MER in the class F version. Toronto-based Assante advisor John De Goey says the cuts are a step in the right direction, but are too little to really benefit consumers."

Strategies for tsunami donations
01/09/05   Taxes
"In fact, thousands of individual Canadians have made a difference by donating more than $50-million to the tsunami relief effort. Tax savings are not the real reason most people have donated. But if you're looking to help, there are some things to keep in mind this week."

Dogs can be investors' best friend
01/08/05   Dividends
"It looks like 2005 could shape up as the year of the dividend. Major investment dealers say in forecast after forecast that investors should look to dividend stocks this year as a way of playing defence in what is widely expected to be a soft year for stocks. Strategists like the classic safe sectors such as utilities, telecom, financials and consumer staples, but maybe you'd like to take a somewhat more aggressive stance."

Third Avenue Q4
01/07/05   Whitman
"The underlying characteristic of these superior managements, in my opinion, is that they seem to focus on the same things TAVF focuses on as a buy-and-hold investor, i.e., long-term wealth creation. Unlike most stock market participants, the primary focus of these managements is not on what periodic reported earnings per share, or periodic EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), might be. In creating wealth, these opportunistic managements realize that there tend to be many ways to create wealth besides enjoying operating earnings. These other methods of creating wealth include enjoying super attractive access to capital markets, both credit markets and equity markets; being able to make opportunistic acquisitions of other companies and other assets; being able to opportunistically launch new businesses; and being able to take advantage of basic mispricings in securities markets in order to, inter alia, repurchase outstanding common stock, spin-off glamorous subsidiaries, or liquidate assets in whole or in part."

Requiem for a brewer
01/06/05   Value Investing
"In this View from Burgundy, we will examine the latest pratfall in Molson's history. While it is modestly instructive on a stand-alone basis, we would also like to draw some broader conclusions about diversification from this sad tale. We will conclude by giving a shareholder's view of how management should invest the cash flow from a superior business."

Schloss archives for value investing
01/05/05   Value Investing
"The Walter Schloss Investing Archive provides historical resources for scholars and showcases the unique history of the value approach."

Benjamin Graham on value investing
01/05/05   Graham
"In 1968, the stock market was floundering badly and Omaha investor Warren Buffett was baffled and worried because he could not find worthy securities to buy. Over the 12 years that it operated, the Buffett Partnership had compounded funds at an average annual rate of 29.5 percent and he wanted to maintain the returns that his investors had come to expect. "The market wasn't very good," said Walter Schloss, a New York money manager and a longtime friend of Buffett's, "and Warren said let's go out and see Ben and ask him what he would do"

Buffett firm helps with SEC probe
01/04/05   Buffett
"The SEC is seeking information from General Re, Berkshire's reinsurance unit, as part of a wider inquiry into the legality of "non-traditional" policies, also known in the industry as "loss mitigation" or "retroactive" products. The regulator is investigating claims that some companies have used these products to hide losses from investors. The accounting rules governing these products are unclear."

Wall on the Street
01/04/05   Markets
"Many investors think they are buy-and-holders, but in fact they use a form of active management that one of my compatriots, Paul Merriman, calls the ICSIA, or "I can't stand it anymore" timing system. Too often this leads to buying at market tops and selling at the market's low. True buy-and-hold investing is the careful selection of an appropriate balance of assets for your portfolio, with the intent to hold those assets until either you need the money or your investment needs change. Securities are never sold to lock in gains or to cut losses. Instead, on a regular basis, the portfolio is rebalanced."

All together now
01/04/05   Accounting
"From 2005, more than 90 countries will either permit or require their quoted companies to present their accounts according to international financial reporting standards. This is a bigger step than many firms, or their shareholders, seem to realise"

First Chinese cars to hit U.S. shores
01/02/05   World
"Malcolm Bricklin, the man behind the Yugo, to lead new import wave in 2007."

It's time for investing spotlight to shine on ETFs
01/02/05   Indexing
"Fee cuts by Fidelity and others in 2004 are welcome and they'll do good things for investors. But if attention is being focused on fees in general, then ETFs get the glory because of their exceptionally low management expense ratios. You can get into the S&P/TSX 60 or composite indexes through ETFs with MERs of 0.17 per cent and 0.25 per cent, respectively, or pay an average 2.4 per cent for a widely held Canadian equity fund."

Make a New Year's resolution on taxes
01/02/05   Taxes
"Make it your New Year's resolution to implement one profitable tax strategy in 2005. To make this easy, let me suggest a few options to consider"

Meritocracy in America
01/02/05   World
"Thirty years ago the average real annual compensation of the top 100 chief executives was $1.3m: 39 times the pay of the average worker. Today it is $37.5m: over 1,000 times the pay of the average worker. In 2001 the top 1% of households earned 20% of all income and held 33.4% of all net worth. Not since pre-Depression days has the top 1% taken such a big whack."

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