Collection of Benjamin Graham's Papers: Common Sense Investing

Valuehuntr just posted up an excellent compilation of papers by Benjamin Graham from 1930 to 1974. Graham, the author of pioneer value investing books such as Security Analysis and The Intelligent Investor, also penned numerous papers that were not included in his books.

The piece starts with a brilliant comparison of investment versus speculation. Graham writes that, "It is indeed ironical (though not surprising) that common-stock purchases of all kinds were quite generally regarded as highly speculative or risky at a time when they were selling on a most attractive basis, and due soon to begin their greatest advance in history; conversely the very fact they had advanced to what were undoubtedly dangerous levels as judged by past experience later transformed them into 'investments' and the entire stock-buying public into 'investors'."

It's fascinating how early on Graham was able to pick up on a trend that still entangles investors today. The general investing public seems most prone to buy when they're comfortable with the markets, buying 'high' when instead they should be examining their complacency and doing the exact opposite.

Equally disappointing, Graham observes, was the inability for many investors to purchase stocks when they were trading at the largest discounts. This comes down to human emotion interfering as greed and fear get in the way of rational decision making. The most intriguing thing about all this is that behavior Graham identified decades ago still holds true today.

Embedded below courtesy of Valuehuntr is Common Sense Investing: The Papers of Benjamin Graham:



You can download a .pdf copy here.

If you enjoyed Valuehuntr's compilation, keep in mind that Market Folly readers receive an exclusive 15% discount to their Value Edge newsletter, a monthly publication where they generate investment ideas based on various stock screens for both long and short ideas. Some of the screens include: contrarian, cheap franchises, potential activist targets, overvalued companies with poor business prospects and more. We've posted up a sample issue of their newsletter for you to check out as well. Click here to receive the discount.

Notes From Seth Klarman's CFA Conference Speech

Many thanks go out to Distressed Debt Investing for flagging these two excellent set of notes that came out of Seth Klarman's speech last week at the CFA Conference in Boston. And of course, thank you as well to those individuals who compiled them. Last week we briefly summed up Klarman's worries of inflation & the markets, but the documents below are much more in-depth and well worth your time. Make sure to also check out Seth Klarman's recommended reading list.

Embedded below is the first set of notes from Cameron Wright:



You can download a .pdf copy here.


And embedded below are the second set of notes regarding Klarman's speech:



You can download a .pdf copy of this document as well.


For more on this investing legend, be sure to also check out our recent post on Klarman's latest portfolio changes as well as Klarman's lessons from the financial crisis. And make sure to also check out some in-depth notes from other recent investing events that serve as great resources. You can view:

- Notes from the Value Investing Congress
- Notes from Berkshire Hathaway's annual meeting

Stock Market Resources: Bank Loan Performance, Value Screener, & Trend Plotting

This week, we've also stumbled upon some useful tools for investors/traders. We wanted to share these great finds but make sure they didn't get lost in our weekly linkfest. Without further ado:

Great site for analyzing bank loan performance of financial institutions [wlm lab]

Interesting Valuecruncher app [Valuecruncher]

Google finance domestic trends for plotting unique economic insight [Google Finance]

"The Age of Scarcity" by Jeff Rubin (CIBC World Markets)

This one ought to get TraderMark over at Fundmymutualfund.com all riled up. He has been over there pounding the table with his coined phrase "world of shortages" as an investment thesis for some time now. Then, Jeff Rubin over at CIBC World Markets comes out with a slideshow entitled "The Age of Scarcity." Hat tip to Paul Kedrosky, author of Infectious Greed who originally posted the link to the slideshow.

There's 31 slides in all, but I wanted to post up a select few of slides that really illustrate some macro themes we are seeing.



First, we'll look at Global GDP Growth. As you can see from the chart above, Emerging Markets are clearly the leader as an overall % of global GDP growth. And, this comes as no surprise, as pretty much everyone not living in a cave already knew that. What I am more interested in is the percentage that Central & Eastern Europe is accruing. If they are truly benefitting from Russia's emergence, then you would expect their share of global GDP to increase in the coming years as well. After all, they have already surpassed Japan (but I guess that's not much to brag about is it?). For my money I really think Russia has the best risk/reward setup in terms of Emerging Markets.



Next, let's look at the slide above depicting other regions' dependency on the US Market. And, surprisingly enough, Europe, Latin America, and Asia are all less dependent on America than they were back in 2000. Obviously, the world has become a true global economy and nations have diversified their dependency, which is a good thing. Although I do not want to get into a coupling/de-coupling argument here, I do think it is worth noting that the overall trend the past seven years has been that other markets are less dependent on exporting to the US market. But, at the same time, it must be noted that Emerging Asia easily is the most dependent on the US out of the 3 regions. There has been increasing chatter about how the US slowdown could be affecting China, and that chatter is warranted. The US market represents 16% of their exports and we will have to carefully monitor this situation as numerous investment theses hinge on China's continued growth.



Thirdly, I want to stick with the China theme and glance at the Resource Demand Growth slide pictured above. As you can see, China consumes MANY more resources than we do, and they are seeing average annual resource demand growth of 30% for aluminum and 28% for nickel. This just goes to show that a) China is a hungry monster and b) they are a huge piece of the "age of scarcity" puzzle. Also, I just want to point out that this slide further reiterates my bullish stance on aluminum/Alcoa, as I mentioned here. Demand for these resources is unreal.



Lastly, I want to turn to the housing sector in the US. This slide above shows what we already know: the housing market sucks and prices are falling. What's interesting though is that so many people out there are calling for a '2nd half recovery,' yet they don't seem to realize that the housing market will STILL be in turmoil. In fact, it could very well be even worse by then considering that this summer another major wave of ARMs (Adjustable Rate Mortgages) are resetting back from their low teaser rates to sky-high interest rates. This reset window will obviously take a few months to truly affect the homeowner, as they soon discover their mortgage payments will increase substantially. And, as this plays out months down the road, these homeowners will face forclosure, guaranteeing the next leg down in the housing market. And, it will slap all those '2nd half recovery' pundits right in the face. Interestingly enough though, CIBC here predicts that housing prices and subprime mortgage delinquencies will in essence stabilize towards the beginning of '09. So, they seem to be calling for a early-mid '09 housing recovery cycle. What you cannot see from this chart though is prime mortgage delinquencies, which I anticipate will also see rising delinquencies as people who might have good credit were still baited into taking the teaser rate ARMs which will be resetting. So, while CIBC could theoretically be right in calling a stabilization of subprime delinquencies, you still have to take into account the various other types of mortgages (like prime) which will also undoubtedly see rising delinquencies due to the crazy mortgages people with various credit grades and people from all walks of life were signing up for.

Those are the main slides I wanted to highlight, as I felt they clearly depicted some macro themes we have been seeing and will continue to see. You can check out the entire CIBC World Markets "The Age of Scarcity" slideshow by Jeff Rubin and Avery Shenfeld here.