Professor Glen Arnold

High price and reputation means better value? Really?

24 Feb 2022 @ 02:18
It turns out that if you tell people that one painkiller costs 10p and the other £2 in tests they will, on average, say that the more expensive one is much better at getting rid of their pain. This is the case even if the compounds are identical (this has even been tested using sugar […]
 

Buffett and Munger - we are living in "the most interesting movie, by far, that we have ever seen in terms of economics", but it could end in "disaster"

16 Feb 2022 @ 22:58
I posted this account of Warren Buffett and Charlie Munger speaking at the May 2021 Berkshire Hathaway AGM last May. What they said 9 months ago has even more resonance today, now that inflation has arrived and the central banks are in quandary.  So it’s worth re-reading. Buffett “The Fed moved with speed and a […]
 

THE ECONOMY AND FINANCIAL MARKETS WILL (PROBABLY) BE HIT HARD

16 Feb 2022 @ 02:11
Pimco’s former CEO and chief investment analyst, Mohamed El-Erian (now president of Queens Cambridge and adviser to Allianz) is someone I admire for his ability to observe and synthesise data relating to the complex system that is the world economy.  I’ve taken excepts from an article he published in the FT last week in which he […]
 

The economy may damage your portfolio

15 Feb 2022 @ 01:29
I’m not, as a rule, a big fan of articles on macroeconomics. But there are historical turning points when I’m fascinated by them. We are at an historical turning point as inflation tops 7% in many western countries. As night follows day central banks will respond to reduce demand in those economies. They are likely […]
 

We are approaching the end of bubbles in US housing, shares, bonds and commodities – Jeremy Grantham is not optimistic

14 Feb 2022 @ 23:26
Jeremy Grantham, a Brit from Doncaster (and Sheffield Uni) who made it very big in America through his deep understanding of markets (co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo (GMO) in Boston), published a piece a few days ago with the title “Let the wild rumpus begin” which gives you a […]
 

Alternatives to discounted cash flow

11 Feb 2022 @ 23:39
In yesterday’s newsletter I outlined James Montier’s objections to the practical use of the simplistic textbook version of discounted cash flow analysis (in his book Value Investing).  Today I’ll describe his suggested alternatives. Reverse-engineered discounted cash flow Take the current share price and use the DCF formula to work out what is currently being implied by […]
 

The dangers of discounted cash flow

10 Feb 2022 @ 23:23
I’ve been re-reading an important book on investing, Value Investing by James Montier, which I highly recommend if you want to separate in your mind the nonsense spouted by “expert investors” from the truly rational. Today I want to look at what James wrote on discounted cash flow, a method we are all supposed to follow, i.e. estimate cash […]
 

An investor edge

08 Feb 2022 @ 02:39
Bruce Greenwald,  a professor focused on value investing at Columbia University’s Graduate School of Business reminds us[1] that every time you buy an asset, such as a share, thinking that it will produce relatively high returns in the future, another investor is selling that asset thinking that it will produce relatively low returns in the future. […]
 

When to sell excellent technology companies

02 Feb 2022 @ 23:33
Philip Fisher, mentor to many growth-oriented investors, concentrated on technology companies with excellent long term potential because they had developed teams of people who could continuously innovate and thus be one step ahead of competitors. When buying he asked questions like, .. . Are the people running a firm outstanding? Does it hold a strong […]
 

Don’t be an impatient investor (which an oxymoron anyway)

01 Feb 2022 @ 23:13
The investor’s worst enemy is likely to himself – his feelings and compulsions, his decision-making flaws. A sound investment strategy can be scuppered because when the crunch-time comes excitement, fear, impatience, greed and other emotions get in the way. Being temperamentally well-suited for investment is far more important than IQ or knowledge of accounting, economics, […]
 
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