Saving Merv’s reputation
Posted on September 24, 2007 by Richard Beddard
Filed Under Markets |
Former banker Sean Park would put bankers and especially Northern Rock chief executive Adam Applegarth in the dock, not Mervyn King. Bankers turned safe debt into toxic losses using excessive leverage, and Northern Rock ran itself like a hedge fund.
The former chairman of the US Federal Reserve says the Fed’s not independent, the current governor of the Bank of England says he is. Sounds like Al’s a pragmatist, and Merv’s an idealist to me. Inevitably, though, there are degrees of independence says the president of the Federal Reserve Bank of Minneapolis.
Robert Peston, the Beeb’s business editor, won’t bow to the wisdom of crowds. He thinks Mervyn King could have done more to help Northern Rock earlier, but the public love Mervyn (see the comments). Maybe he’s starting to change his tune, or at least incriminate more people.
Meanwhile there’s more to the markets, than the credit crunch:
Mohnish Pabrai says price volatility isn’t a proper measure of risk, which is the permanent loss of capital or business impairment.
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The FSA thinks the foxes should have the chickens’ best interests at heart, or to put it more prosaically, fund managers should stop flogging funds when they’re at the height of fashion only to lose investors’ money when they fall. Sounds a bit like shutting the coop door.
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Greens don’t like it but coming up on the inside track in the race for secure energy sources is CTL, coal-to-liquid. Producing oil from coal is carbon and water intensive but it has two big attributes says Foreign Policy: America has loads of coal, and the military wants to liquefy it.
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Get Rich Slowly blog says this video’s a Q&A session with Warren Buffett from 1998.
Warren Buffett is often associated with bargain hunters like Benjamin Graham and Walter Schloss, which is how he started out, but clearly his style has changed:
“It’s very hard to earn a lot as an investor, when the business you’re in doesn’t earn much money… Now some people do it. In fact I’ve got a friend Walter Schloss who worked with [Benjamin] Graham at the same time I did and it was the first way I went at stocks, to buy stocks selling way below working capital. Very cheap quantitative stocks.
“I call it the cigar butt approach to investing. You walk down the street looking for a cigar butt someplace. Finally you see one and it’s soggy and kind of repulsive, but there’s one puff left in it. So you pick it up and the puff is free, I mean it’s a cigar butt stock. The puff is free, then you throw it away, walk down the street and try and find another one. It’s not elegant… but it works… Those are low return businesses.
“But time is the friend of a wonderful business. It’s the enemy of the lousy business. If you’re in a lousy business for a long time, you’re going to get a lousy result. Even if you buy it cheap. If you’re in a wonderful business for a long time, even if you pay a little too much going in, you’re going to get a wonderful result. If you stay in a long time”
Meanwhile Mark Hulbert says researchers have found prima facie evidence that companies manipulate their earnings, and suggests investors should avoid companies with long unbroken streaks of earnings increases.
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