Updated NZ Risk Profile and NZ Cost of capital since most recent change in OCR and CPI release.

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Plenty of paper and ink has been wasted trying to find and write about Buffett's "deep secrets" and "fundamental never go wrong" investment principles. One thing I have noticed watching him closely since 1987 - as much because I enjoy his wit and language as anything else, is that he is fleet of foot, happy to change his mind, never says never and is at least three jumps ahead with his next "knight's move"....

This note is more of exactly that (from "Deal Journal")



Posted by Heidi N. Moore

There has hardly been a major deal done this year that didn’t have Warren Buffett’s fingerprints on it. The Oracle of Omaha jumped in to finance Mars’ acquisition of Wrigley and Dow Chemical’s acquisition of Rohm & Haas. He bought Marmon Holdings, offered to reinsure $800 million of bonds held by struggling bond insurers including MBIA and Ambac Financial.

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Strong article on incentives, learning and performance....

Click: Article from The Banker

One well documented phenomena to emerge from behavioural economic studies has been the uncanny ability of humans to find patterns where none exist. This has obvious implications for finance and especially investment strategies.....

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Dear Sir / Madam

I read with interest David Young's tear sharing over Bridgecorp. I read with alarm his faith in rating agencies and the idea that we should sleep more safely once there is compulsory rating of non bank institutional investment opportunities- read finance companies. Those eager to regulate in this direction, or worse invest purely off the back of ratings should note that Enron had a strong rating, well above investment grade right up to and including the day of the fall......

It was not alone in this as the many U.S. litigants routinely chasing rating agencies Moody's and Standard and Poors demonstrate. Both companies do an excellent job for those they aim their products at - professional, mainly institutional investors - not Mom and Pop.

Better then to stick with some very reliable indicators. My favourites are (1) If high interest rates are promised there be dragons. This indicator out performs everything else - period. (2) Companies wanting small amounts of money for short periods of time at attractive interest rates are in deep. Stay away. (3) Large amounts of advertising even on TV but especially in rags indicates trouble. Make a cup of coffee or turn to the cartoons.

I argue that like all good economics this is simple stuff. All it requires is to absolutely eat, sleep and breathe the fact that there is no free lunch for anyone at all.... not even regulators or rating agencies.

"Historical Correlation Between the S&P 500 and various asset classes

It is worth visiting this blog and looking at the charts (click to enlarge when at the blog)....

We recently decided to see how correlated the S&P 500 is with various asset classes and if they were becoming more or less correlated in recent years. We first calculated the weekly percent change going back to 1988 of the S&P 500, FTSE 100, Nikkei 225, MSCI World, MSCI Emerging Market, 10-Year Treasury Note, Oil and Gold. We then calculated a 1-year rolling correlation between the weekly percent changes of the S&P 500 and each market. The historical correlation charts are shown below.

While equity indices globally have become more correlated with the US in recent years (see MSCI World, Emerging Markets, FTSE 100 and Nikkei 225 charts), the S&P still has a relatively low level of correlation with non-equity related assets.
Bespoke Investment Group: Historical Correlation Between the S&P 500 and various asset classes

Further proof that it is "expected earnings" not past earnings that drive share prices.......

"Unsold iPhone rings up Apple stock record
Page 1 of 2 View as a single page 12:53PM Friday June 08, 2007
By Scott Hillis


SAN FRANCISCO - Apple Inc. has not yet sold a single iPhone, but investors are driving up the company's shares to record highs as they bank that the combined telephone and media player will be a major hit.

A slew of brokerages from UBS to Piper Jaffray are raising their targets on Apple's stock to as much as $US160 ($NZ216) - equivalent to about 40 times its expected fiscal 2008 profit.

That's high for a stock that has traded at multiples in the low 30s the past couple of years.

The new target multiples, coming after the stock has already risen nearly 30 percent since the iPhone was unveiled in January, implies that analysts see the new gadget as a break-out product for Apple when it is launched on June 29.
"

Unsold iPhone rings up Apple stock record - 08 Jun 2007 - NZ Herald: New Zealand Business and Personal Finance News

Taleb's "The Black Swan" gives us the clue as to why technical analysis is narrative fallacy....

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