Momentum speculators mistake random fluctuations for trends; they also forego gains from compounding; hence they usually underperform. This article investigates fundamental assumptions – and refutes the key claim – of so-called momentum investors (who, as we’ll see, are actually speculators). Since the Global Financial Crisis, and particularly over the past several years, … [Read more...] about Why value investing crushes momentum speculation
Warren Buffett’s second-greatest gift to investors
His investment philosophy is his most precious legacy. His second-greatest is the ability to describe and explain it clearly and simply. Warren Buffett, the manager of an investment partnership in Omaha, Nebraska, began to buy the shares of Berkshire Hathaway, a struggling manufacturer of textiles based in New Bedford, Massachusetts, in 1962. He gained a controlling interest … [Read more...] about Warren Buffett’s second-greatest gift to investors
Intangible assets aren’t as valuable as bulls assume
Ben Graham knew what today’s bulls don’t: the higher is the imputed value of a firm’s intangibles, the lower is its return on equity. Warren Buffett’s financial net worth is approximately $US160 billion. That ranks him among the world’s ten richest individuals; it also makes him by far the most successful investor of all time (see also How Warren Buffett has trounced “the … [Read more...] about Intangible assets aren’t as valuable as bulls assume
Australian versus American equities: past, present and future
A recent “analysis” overlooks key facts and ignores major risks. I analyse comprehensively and rigorously, and thus conclude justifiably. Is “the ability to grow your capital materially using a portfolio of Australian shares ... much more difficult than using international shares, US shares in particular”? Have “US shares outperformed literally everything in literally every … [Read more...] about Australian versus American equities: past, present and future
Speculators in gold are playing with fire
Holding it doesn’t abate risks such as modest consumer price inflation; yet owning it at today’s prices creates a significant risk of loss. In a recent article (Why investors needn’t – and presently shouldn’t – own gold, 7 April) I wrote: “why should investors own gold? Its advocates have long cited a handful of attributes which justify its purchase.” Unlike many others, who … [Read more...] about Speculators in gold are playing with fire
How “consensus expectations” harm your financial health
“Forward earnings” and PEs are biased, create unduly upbeat valuations, weaken the quality of earnings – and thus eventually induce losses. It’s “an article of faith among Wall Street research departments,” wrote David Dreman in Contrarian Investment Strategy (1979): “nothing is as important in the practice of security analysis as estimating the earnings outlook.” For … [Read more...] about How “consensus expectations” harm your financial health
Stop calling companies better: they’re merely dearer
Pre-tax margins and ROEs haven’t risen and leverage hasn’t fallen. Exaggerated and misleading assertions “support” today’s high valuations. It’s a symptom of a bull market: speculators devise novel rationales which, they contend, justify stocks’ high prices. Bulls sometimes concede that by previous standards today’s valuations are excessive. But, they hasten to add, it’s … [Read more...] about Stop calling companies better: they’re merely dearer
Forget next year’s commodity prices: focus on 2075’s
Over very long intervals, short-term random fluctuations (“noise”) cancel one another – and ever clearer and steadier signals emerge. In order to help manage risks, form fiscal and monetary policies and anticipate (and thereby profit from) changes of economic activity, some producers, many governments and central banks – and most speculators – attempt to predict short-term … [Read more...] about Forget next year’s commodity prices: focus on 2075’s
How Warren Buffett has trounced “the world’s greatest hedge fund manager”
RenTech speculates, leverage inflates its returns and it barely survived the GFC. Berkshire invests, eschews debt and sails through crises. James Harris (“Jim”) Simons was born in 1938, became a full-time market-timer-trader-speculator in 1978, founded Renaissance Technologies LLC (“RenTech”) in 1982, retired as its CEO in 2010 and as its Chairman in 2021, and died in 2024. … [Read more...] about How Warren Buffett has trounced “the world’s greatest hedge fund manager”
Why “faster and deeper” rate cuts likely wouldn’t lift shares
Bulls claim they would, but history contradicts them: when valuations are extended, sharply lower rates crush rather than boost stocks. Since the beginning of this year, stock market bulls have confidently been predicting two things: firstly, the Reserve Bank of Australia will slash its Overnight Cash Rate (OCR); secondly and consequently, stocks will generate above-average … [Read more...] about Why “faster and deeper” rate cuts likely wouldn’t lift shares