A Maestro of Investments in the Style of Buffett, by G. Fabrikant

A rare interview with Geico’s Louis Simpson:

“I have always felt I could do a better job in adding value by being somewhat removed from the circus and parimutuel atmosphere of the market … We are sort of the polar opposites of a lot of investors. We do a lot of thinking and not a lot of acting. A lot of investors do a lot of acting, and not a lot of thinking … If I have the Bloomberg on, I find I am looking at what the market is doing. I am looking at every news story. I really like to be the one who is parsing the information, rather than having a lot of irrelevant information thrown at me.”

Market was pretty mixed in the morning but the buying kicked in around noon and was strong all afternoon. Looks like every single Short and UltraShort ETF made the new lows list. Young QID has overtaken the QQQQ — I made the point long ago, why trade the Q’s when you can double your leverage in the QID? (The QLD is not particularly liquid if you were wondering.)

Amazon (AMZN) was the stock du jour, doing over 250,000 trades. It popped after the close on Tuesday and continued up all day Wednesday.

Young QID, star of the show, old QQQQ slinks to the sidelines on screens around the world.

David Halberstam, back in 1999, on the sorry state of American journalism:

“… television executive producers have redefined what constitutes news — often going for stories that television likes to cover, stories which are telegenic, because they have action or are sexy or are tabloid- or scandal-driven.

We have morphed in the larger culture from a somewhat Calvinist society to an entertainment society, and that is reflected in the new norms of television journalism — where the greatest sin is not to be wrong but to be boring. Because boring means low ratings.

… gradually, but systematically, there has been an abdication of responsibility within the profession, most particularly in the networks.

Television’s gatekeepers, at a time when a fragmenting audience threatens the singular profits of the past, stopped being gatekeepers and began to look the other way on moral and ethical and journalistic issues. Less and less did they accept the old-fashioned charge for what they owed the country.

The viewpoint seemed to be — from their testing and polling — that the American people did not want to know what was going on, so why bother them with unwanted facts too soon? So, if we look at the media today, we ought to be aware not just of what we are getting, but what we are not getting; the difference between what is authentic and what is inauthentic in contemporary American life and in the world, with a warning that in this celebrity culture, the forces of the inauthentic are becoming more powerful all the time.”

“The forces of the inauthentic….” Well said! I wonder if the execrable Roger Ailes has ever thought about what he owes his country?

Utilities (XLU) are like the Energizer Bunny — they just keep going and going (up).

Whirlpool (WHR) was the stock du jour moving to a new high on over nine times normal volume.

Why we read (and re-read) P.G. Wodehouse:

“Mr Meggs’s home-town was no City of Pleasure. Remove the Vicar’s magic-lantern and the try-your-weight machine opposite the post office, and you practically eliminated the temptations to tread the primrose path. The only young men in the place were silent, gaping youths, at whom lunacy commissioners looked sharply and suspiciously when they met. The tango was unknown, and the one-step. The only form of dance extant — and that only at the rarest of intervals — was a sort of polka not unlike the movements of a slightly inebriated boxing kangaroo. Mr Meggs’s secretaries and typists gave the town on startled, horrified glance, and stampeded for London like frightened ponies.”

From the story, A Sea of Troubles

Chop, an absolutely perfect day to lose money trading. Lots of Regional Banks on the new lows list, including one I’ve spoken highly of here before, IBCP. And there’s poor Sirius Sat. Radio (SIRI) under $3.

MEDI bought out — given the price action since mid-March, a lot of people knew what was brewing there. Bausch & Lomb (BOL) looking fabulous — I wondered about buying it back during the “eye fungus” thing, but held off (too bad). Lots of Metals on the new highs list — the best proxy for that sector is the Metals & Mining SPDR (XME).

Cummins (CMI) was the stock du jour, moving to a new high on around five times average volume.

Looking at a chart of the Istanbul Stock Exchange National 100 Index today reminded me of my old Mugabe posts.

The Index looks pretty good until you look at it together with the Turkish Lira chart.

Then when you pull it all together, adjusting for Lira devaluation, you can see that the run since 2002-2003 when the Lira stabilized has been darned impressive. Currency-adjusted price charts are key.

Bloomberg has a great feature where you can currency-adjust any chart… see the drop-down menu in the upper-right-hand corner? Another reason why the terminal may be worth $1500 a month.

I was bothered by this story, which was widely read today: In Case You Missed It: Charts Show Bond Rally Is Over.

Bloomberg stories are cobbled together with a bunch of quotes and data and facts, but they’re not necessarily coherent. The author gets quotes from no less than six people: John Kosar, Louise Yamada, Ed Yardeni, James Grant, Lacy Hunt, and Walter Burke. The writer tried to contact Burton Malkiel, but he was traveling, thank god. The article also mentions Bill Gross, Peter Peterson, Paul Volcker, and Alan Greenspan.

Anyway, some guy named John Kosar is quoted/paraphrased:

The turning point was so obvious that even “a five-year- old who has a ruler and a pencil can draw a line under the lows and make a determination'’ that bond yields have bottomed and are poised to climb for many years to come.

Well, this [thirty]-five-year old just drew this line and I can’t determine that bond yields have bottomed, let alone “are poised to climb for many years to come.” What nonsense. It’s true that the trend has shifted in the bonds on the monthly time frame, but so what, that doesn’t mean they are “poised to climb for years to come.” No wonder “technical analysis” has such a bad name.

Two more precious lines that entertain or annoy (depending on your mood):

“Yamada in 2001 correctly predicted 10-year Treasury yields would range between 3.5 percent and 5.5 percent for several years….”

Hooey! Isn’t it more accurate and honest to say: “Yamada in 2001 happened to guess that 10-year Treasury yields would range between 3.5 percent and 5.5 percent for several years….”

“Greenspan reduced inflation below 4 percent.”

Poppycock! Isn’t it more accurate and honest to say that “inflation fell below 4% when Alan Greenspan happened to be Federal Reserve Chairman.”

There was one useful thing to take away from the article and here it is:

“Investors who bought Treasuries in 1981 reaped almost twice the returns as those who bet on the Standard & Poor’s 500 Index … The 13 1/4 percent bond due in 2014 that the government sold on May 15, 1984, returned an annualized 24 percent. The S&P 500 returned 13 percent, including dividends, during the same period.”

Good interview with Michael Pralle, CEO of GE Real Estate, in the week’s Barron’s. He has interesting things to say about commerical real estate around the world — I found his take on Mexico (he’s super bullish) especially telling.

“Ignoring the residual value, the current yield for real estate is about 7% or 8%. And when you look out at the rest of the world, Russian debt is about 5.6%, Brazilian debt is 6.2%, and junk bonds are 7% or 8%. The 10-year Treasury yield is about 4.7%. You’re in a world where there is very, very little risk premium. When you look at what you can earn on real estate compared to what you can earn everywhere else, real estate doesn’t look that bad. It’s expensive only in a historical context, but it’s not expensive relative to the other asset classes. Besides, it’s a hard asset so it’s always going to be there.”

Another good bit:

“When I took over GE Real Estate seven years ago, I looked at the kind of profits property owners were earning — how they can deploy very little capital and get a lot more of the potential profit.

Say you have a $100 project. You might have a $75 first mortgage on it, and a $15 slice of mezzanine debt. For the last $10, you bring in an equity partner for $8 and you, as the real-estate guy, would put in $2. The way it would work is your mortgage guy ends up earning $1, the mezzanine guy would get another $1 or $1.50. The equity guy, for putting up 80% of the last $10, might get $2 or $3 or $4. But the real-estate guy putting in the $2 is getting $5 or $6.

To me, it was obvious that returns were accruing to the people who own and operate real estate. In fact, 85% of all profit in global real estate is made in owning real estate.”