smart-money-report.com Blog

A Motley Fool poster on his notes from attending the meeting Buffett had with a group of Columbia Business School students. The last paragraph is the one that got my attention:

At the end of our lunch, I witnessed Joel Greenblatt meet Buffett for the first time. Greenblatt is in many ways the heir to Ben Graham’s legacy at Columbia, and it was fascinating seeing these two great investors, a generation apart, meet for the first time. Buffett told the surrounding students how lucky they were to have professors like Greenblatt and Greenwald at Columbia. Then he congratulated Greenblatt on his best-selling recent book, The Little Book That Beats The Market. Buffett said: “Terrific book, buying great businesses at cheap prices. Doesn’t it seem so simple?”

I think Altucher may be onto something here. It seems like a good idea for Magic Formula stocks. Earn income while you own them and the worse that can happen is you own additional shares of a good business that is already dirt cheap.

Economist John Williams says:

Real unemployment right now-figured the way that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression-is running about 12%. Real CPI right now is running at about 8%. And the real GDP is probably in contraction. I venture that if you talked about those numbers now with the average person, they would say that they seem reasonable . . . my work shows that the economic perceptions of non-professionals actually have some real validity; there are in fact reasons for the disconnect between official statistics and what the populace is feeling.

Read the whole thing.

Here’s a good site that compiles quotes from well known investors and traders. For example, here’s this gem from Ed Seykota:

The profitability of trading systems seems to move in cycles. Periods during which trend-following systems are highly successful will lead to their increased popularity. As the number of system users increases, and markets shift from trending to directionless price action, these systems become unprofitable, and undercapitalized and inexperienced traders will get shaken out. Longevity is the key to success.

Good advice from Dave Landry. We do most of it.

Here comes the new crude oil ETF (USO). Maybe as early as Monday.

I would link you over there but it’s a paid subscription site. But here’s a snip from RealMoney.com’s Helene Meisler on the stock market’s technical condition:

I have been asked repeatedly in recent days why I am bearish on the market.

I have also been asked why I can’t be more bullish.

So, today I am going to put on my rose-colored glasses and try and find some bullish things to say about the market.

But first I need to show you a few pieces of data that we should ignore for now; paying attention to them could unduly hamper our efforts at adopting a bullish view.

We need to ignore the number of stocks making new highs because that has not been expanding lately.

We also need to ignore the volume. Big time.

Do your best to not even look at a chart with volume, or else you will have to be bearish. Overall volume on the NYSE has been declining since Jan. 20, so don’t look at volume on the charts for the past three months.

The money quote:

What’s important here is that excluding the late-1990’s bubble peak, when S&P 500 earnings have even been close to that trendline (say, within 20%), the average price/earnings ratio for the S&P 500 index has been closer to 9 or 10 – about half current levels. As usual, that’s NOT to imply that stocks are about to drop in half, but investors should certainly not look carelessly at a market trading at 18.2 times top-of-channel earnings.

It’s interesting that the current P/E is about double its “normal” level based on the current position of earnings. If you look at the price/book ratio on the S&P 500, at 3.14, it’s also about double the historical norm of about 1.5. The price/dividend ratio on the S&P 500, at 54, is about double the historical norm of about 26. The price/revenue ratio on the S&P 500, at 1.5, is about double the historical norm of 0.75. This market isn’t cheap…

The money quote:

This is a nonrecurring event, he says. The 100-year flood in Houston real estate was one, the ability to buy oil and gas really cheap was another, and now there’s the opportunity to do something based on a shortage of natural resources. Can you make money? Well, yeah. One way is to just stay long domestic oil. But there may be something more important than making money. This is the first scenario I’ve seen where I question the survivability of mankind. I don’t want the world to wake up one day and say, ‘How come some doofus billionaire in Texas made all this money by being aware of this, and why didn’t someone tell us?

Here are some expensive and cheap gold stocks. FCX is a real bargain. Also, it’s a Magic Formula stock with a return on capital of 50%-75% and an earnings yield of 19%. It just hasn’t triggered a Parabolic SAR buy yet.