Not so sweet Fanny Mae

The Fannie Mae and Freddie Mac saga is big by world standards.

Trillions of dollars of mortgages are involved, in fact the firms between them own or guarantee about half of the $12 trillion in U.S. mortgages.

I asked a question about 6 years ago, what would happen if these two institutions tipped over? This was in the light of many US companies involved in "accounting irregularities" at the time and that Fannie and Freddie was a possible inclusion.

The immediate cause of the problems that became public at Freddie Mac in 2002 appeared to be accounting properly for the use of derivatives, what Warren Buffett has called "financial weapons of mass destruction". Under the previous accounting procedures, income for the years 2000, 2001 and 2002 was understated, with income for the future overstated. Freddie and Fannie management decided that this method would be used to “smooth out” earnings, providing reassurance to financial markets and leading ultimately to lower interest rate costs.

The President of Freddie Mac was sacked for his part in the company's "accounting problems".

While assets of the 2 big macs went up in value, via customers house prices, there wasn't a problem, but as the sub prime saga unfolded property prices were hit and Fanny and Freddie now have a big cash flow problem. They are essentially insolvent.

I now know the answer to my question and it ain't a pleasant one to stomach, especially given the problem was painfully evident years ago.

These entities will probably go under without US taxpayer funds being pumped into them and the current credit crises that the business and financial world is experiencing will get considerably worse and there would probably be a contagion effect with other banks going under. The derivatives market upon which most of Fannie and Freddie's business is backed, would unwind and explode upon other financial institutions holding theses derivatives as assets, some of them the ones we have already seen in the news and some we haven't heard from yet.

As the planet is facing tough economic times at present, for Fannie May and Freddie Mac to go under would no doubt cause a massive recession the likes of we haven't seen in generations so one could understand why Henry Paulson and the Fed are looking at bailing these turkeys out.

But, and its a big giant butt, why should the US taxpayer have to bail out even more financial institutions, this time possibly to the whopping tune of US$1 trillion?

The answer is that they will take the rest of us down with them if nothing is done. Hard to stomach, given those that didn't binge on cheap debt and over spend, were not the ones who took the risks in the first place but will suffer anyway.

In New Zealand our mainstream lenders haven't been as reckless, however, the present Labour government wants to start our own sub prime lending, so it could be a problem for us in the future.

Kiwis would be affected indirectly though by a collapse of the two macs, so it is an important story for New Zealand and every other country because a collapse would affect our fragile economy and faith in markets, lending and business even more than it already has.

The bizarre thing is though, while we have been flooded with Tony Veitch and Winston Peter's stories, coverage by our local media over Freddie Mac and Fannie Mae has been largely relegated to small pieces in the businesses pages and biz segments on TV news, not in the mainstream news, where it clearly deserves to be.

Confidence in the economy is much needed right now, Fannie and Freddie have knocked it about again. What Henry Paulson does in the next few days is going to be the difference between a complete meltdown and the status quo.

Unfortunately, I fear there are more Freddies and Fannies to come.

That just ain't sweet.

Related Share Investor Reading

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Market meltdown: I can smell the fear from here
Mr Market gets his groove on
What happened to risk?
State backed Sub Prime mortgages in New Zealand
The global economy looks bad now, but wait theres more
NZ Sharemarket set for a Winter and Summer of discontent


Share Investor Forum -Discuss this topic

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c Share Investor 2008

10 Basic Buffett questions to ask before investing

In this time of market turmoil, an official bear market, and probable global recession, it is worth turning to someone with a bit of sage advice before one plunks down those hard earned dollars. Warren Buffett has been buying up stakes in large companies of late, the Mars-Wrigley merger and the recently announced funding of a large purchase by Dow Chemical Co. No doubt he has been using some or all of his own techniques.

You and I can too.

The comments by Warren Buffet and analysis by Buffett writers suggest that, at the very least, Warren Buffett looks at the following aspects of a business and its day to day running. These "Buffett criteria" for buying a business, or any investment for that matter, can be put in the form of questions. Questions that any sensible investor should ask before considering a stock investment.

The Basic questions

1. Does the company sell brand name products that are likely to endure?
2. Is the business of the company easily understood?
3. Does the company invest in and operate businesses within its area of expertise or does it have sound management?
4. Does the company have the ability to maintain or increase profitability by raising prices?
5. Is the company, looking at both long-term debt, and the current position, conservatively financed?
6. Does the company show consistently high returns on equity and capital?
7. Have the earnings per share and sales per share of the company shown consistent growth above market averages over a period of at least five years?
8. Has the company been buying back its shares, and if so, has it bought them responsibly?
9. Has management wisely used retained earnings to increase the rate of return to shareholders?
10. Is the company going to regularly require large capital sums to ensure continuing profitability?
See case studies.
This should be the first stage of the process. The next, and most important question, is determining the price that an investor such as Warren Buffet would pay for the stock, allowing for the margin of safety, which Buffett often talks about.

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c Share Investor 2008

Im buying

“Be fearful when others are greedy and greedy when others are fearful” - Warren Buffett


I'm like my wife at the annual Smith and Caughey sales at the moment. Last week I picked up some more Fisher and Paykel Healthcare Ltd [FPH.NZX] and Michael Hill International Ltd [MHI.NZX] and today I added 2000 more shares of Pumpkin Patch Ltd [PPL.NZX] @ NZ$1.53 and included a new addition to the Share Investor Portfolio by adding 3000 Briscoe Group Ltd [BGR.NZX] shares @ 99c each.

I'm really liking retailers at the moment and am taking my opportunity to buy while others are selling. The downturn isn't going to last forever and those daring to be contrary now will be rewarded well in the future.

I vowed I wouldn't add any extra funds to the portfolio but it is only a small purchase and I am going to pay it back from the $10000.00 in dividends coming around September.

I would however like to get my hands on Hallenstein Glasson Holdings Ltd [HLG.NZX], another good retailer which is now paying an excellent gross dividend of around 18% based on current profit figures and an historically very low share price.

Now clearly stocks could get cheaper before they recover, but I bought today at a price that I am happy with and what I consider will add value long term to my investment stock portfolio.

The Share Investor Portfolio is still well in positive territory when imputation credits and dividends are factored in but down around 4% when the tax credits are excluded.


Related Share Investor Reading

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Share Investor's Annual Stock Picks

Share Investor's 2011 Stock Picks: Looking Back
Share Investor's 2011 Stock Picks
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Share Investor's 2008 Stock Picks

Brokers 2011 Stock Picks




c Share Investor 2008

New Zealand Stockmarket gurus needed, please

Warren Buffett is one of the most Googgled names on the internet when it comes to financial related web searches, but even more so when the economic crap hits the fan, and for good reason.

Buffett is one of the worlds preeminent long term investors with a penchant for big deals and eccentric behavior-crazy if you earn less than $1,000,000.00 PA-and at the moment he is involved, through a major stake in Anheuser Busch, the US maker of Budweiser Beer, in that company's possible marriage to Inbev, the large European Brewer.

Buffett was also at the centre of the merger of Mars and Wrigley's and has bought larger stakes in many of his current portfolio positions.

This spending has also led the Sage of Omaha on a recent tour of Europe to look for businesses to buy.

All this interest in buying assets, on the backdrop of a credit crunch and its associated fallout, when everyone else seems to be selling.

If one follows Buffett's investing style, one will know why he is buying at this time. Turbulent times can make for good bargain buying opportunities.

If we relate this back to New Zealand and our investment and economic background, local investors would have to ask themselves, where is our Warren Buffett?

New Zealand has its fair share of wealthy individuals, comparatively speaking of course, but if we look at listed stocks on our NZX bourse, the amount of buying currently by high net worth individuals is quite scarce.

The only bargain seeking done recently by my recollection is from Rod Duke, the major shareholder in the Bricoes Group [BGR] who just last month added to another purchase of Pumpkin Patch [PPL] made a few months before. This takes his holding in the children's clothing retailer and manufacturer to just under 10%. Duke's reasons for buying was that it was a cheap buy and that the company had "good long-term prospects". Something that Warren Buffett would probably agree with, if he knew that New Zealand had a stockmarket!

Savvy family investment vehicle Masthead, run by the Stewart family, are busy snapping up listed hospital provider Wakefield Health[WFD] and their move right now will turn out to be a timely one in years to come.

We have also seen the like of Graig Norgate, from PPG Wrightsons [PGW] farm group who has been buying assets recently, but his buying has been done overseas in Uruguay.

Mainfreight [MFT] and Freightways [FRE] have also recently bought assets in Australia.

Now I'm not suggesting at all that investors should blindly follow these large investors when they make a purchase, do your own research, but you have to ask yourself, they didn't get wealthy in the first place by being stupid with their money.

Perhaps the reason most of our wealthy kiwi investors are shunning the local stockmarket is that there are not enough quality companies to choose from. Probably an element of truth there, but we do have some well run and managed listed vehicles that truly represent value at the moment.

The likes of Mainfreight, Pumpkin Patch and Hallensteins Glassons[HLG] today represent good value for the investor buck.

Low trading volumes over the last few months, and especially the last week, might suggest that mum and dad investors are running for the hills and that bigger foreign investors are standing on the sidelines because they know things could get alot worse, in regards to the local and global economies.

What Warren Buffett does through his recent investing activity, is signal to other less savvy investors, like yours truly, that now is a good time to be buying. In other words, be greedy when others are fearful and fearful when others are greedy.

The confidence that Buffett's buying brings to the US market is lacking in New Zealand and that lack of confidence would be somewhat eschewed if we had our own guru like pied piper to follow.

This lack of confidence is reflected in the lack of depth of IPOs so far this year, with the notable exception of Pike River Coal[PRC] and without interest from those seeking capital to expand, it is doubtful we investors will be interested as well. Good start up companies however will always do well.

While having wealthy net worth New Zealanders investing in the New Zealand stockmarket isn't necessarily crucial, it is nonetheless desirable for that to be the case, especially during hard economic times.

It gives a positive direction for other investors to follow, instead of following brokers to the next "hot thing", that is bound to blow up in the investor's face.

Warren Buffett does that for millions of American investors, can we have a candidate for us down here please?

Disclosure: I own MFT, PPL, and Freightways shares

c Share Investor 2008

Dont dare use the "D" word

The announcement on March 31 (US time) that secretary Paulson is going to regulate the United State's financial markets with changes to it not seen since the Great Depression leaves me with a thought that has been running rat wheels in my mind ever since the current "Credit Crunch" kicked off.

Midway through last year, the Fed began sticking its filthy little hands in dikes all across the financial backbone of the USA by propping up institutions who had lent too much money to those who now cannot pay and to keep the wheels of commerce greased by trying to increase liquidity in the credit market-so we can do business with each other.

Now I am skeptical at the best of times as to State involvement in anything, let alone interfering in capital markets and don't have the foggiest whether the announcement by Paulson is going to change anything in the future at all.



Latest on global financial fallout

German watchdog eyes $600 bln global bank losses: report Reuters
Overhaul of Wall Street regulation doesn't address current crisis Int' Herald Tribune
International Financial Panel Urges Bank Disclosures on Risk Exposure Wall Street Journal
G7 to press big banks to reveal extent of credit crunch losses Times Online
US prepares to give Fed sweeping oversight powers Taipei Times
Ghosts of the Great Depression Business Spectator
US Fed to be grilled over massive support to financial system MercoPress
World Bank cuts East Asia growth forecast Channel News Asia
East Asia Economies Pressed by Inflation The Associated Press

The 1933 changes didn't stop the bear market in the 1970s, it didn't stop the sharemarket crash of 1987 or the tech bubble bursting in 2000 or the current credit crisis because of dodgy lending and investment practices related to that lending.

The interventions by the Fed and its global equivalents, to shore up credit liquidity is the main rat on the wheel in my mind.

What have these interventions stopped?

One can only speculate but one can do that with a largish amount of surety.

During the Great Depression, when faith in financial markets at the time was at an all time low there simply wasn't any intervention by the State apparatus to ameliorate what happened on that infamous day in 1929 when Wall Street threw a woopsey and capitalism jumped out of tall buildings in the financial districts around New York and around the world.

Have interventions in financial markets by State backed funds globally stopped some sort of 2008 crash from happening?

Probably, but not to the extent of 1929, but it is clear that it would have been a crash of some serious nature had there not been intervention.

Another question I have running through my head is, how long will the squillions of taxpayer dollars pumped into the economy stave off the inevitability of a bigger blowout?

That is harder to answer. In order to know better one would have to know the losses involved in the Sub prime loans and associated sub prime bonds, and we are no closer to knowing that than knowing if Hillary Clinton is going to be the Democratic Party leader or if Barry Obama still loves his preacher.

The vexed question of the massive derivatives market also looms in the minds of investors:

Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one another. The troubles of one could quickly infect the others. On top of that, these dealers are owed huge amounts by nondealer counterparties. Some of these counterparties, as I’ve mentioned, are linked in ways that could cause them to contemporaneously run into a problem because of a single event (such as the implosion of the telecom industry or the precipitous decline in the value of merchant power projects). Linkage, when it suddenly surfaces, can trigger serious systemic problems.

"Derivatives are financial weapons of mass destruction. The dangers are now latent--but they could be lethal".

[Warren Buffett 2003]


Warren Buffett aside, I don't think anyone fancies the Fed's chances of shoring up the derivatives market should the dominoes start to topple.



Warren Buffett has always
feared the massive derivatives
market.

What is clear is this scenario has at least the rest of the year to fully play out and further State intervention should be carefully applied only if is really going to work and not because the Fed needs to be seen to be doing something.

Hold onto those gold bars and keep the cash under the mattress, you just might need them.


Essential related reading from Share Investor

The Global Economy looks bad now? But wait there's more
Global credit squeeze: There is no free lunch
Current Credit crunch a blessing in disguise
Lenders must come clean over losses to restore faith in credit markets
Watch for dead cats bouncing
Global Market Meltdown: I can smell the fear from here
Warren Buffett's The Intelligent Investor
Global Market's dropping and your portfolio
Global Market Meltdown: What is Warren Buffett doing?
A sensible approach to global market volatility

Visit Everything Warren Buffett-for everything Warren Buffett

C Share Investor 2008

Warren Buffett is number one with a bullet

I have been obsessed with Warren Buffett and Auckland Airport this last week and it appears readers of this blog have been as well. Record numbers have visited.

Welcome to my many new readers and I hope you stay awhile.

In the wake of Buffett's letter being released last Friday, the biggest financial subject googled has been "Warren Buffett's letter to stockholders".


Warren Buffett makes it to the number one spot as the world's
wealthiest man and the most googled financial subject, all in the
same week.


The momentum continues as the Forbes Rich List came out today and news that Buffett hit the top of the list for the first time.

The indication for me about the frenzy over what the Sage of Omaha has to say during the last week is that people are looking to him for reassurance over where the economy and markets may be heading over the short to medium term.

Answer?

I'm not sure even he knows but the uncertainty is certainly taking its toll on investors.

In the wake of all this interest, I have started a new website Everything Warren Buffett, where you can check out his portfolio, look at all his letters, view video and audio and get some great investment tips from the great man.

NZ Herald-The Battle for the Airport

There has also been a great deal of interest from overseas about the Auckland Airport Saga. Brokers and those in the financial industry are watching what is happening closely, and I'm sure, given the recent government interventions, they are not liking what they are reading.

It seems that particular story isn't over yet, with murmurs of legal action against the Labour government.

Related Share Investor reading

Buffett dines out on a good result: So can you
Warren Buffett's 2008 letter to Berkshire Hathaway highly anticipated - Includes Buffett letter in PDF
Warren Buffett 2008 Letter in Blog Format
Global market meltdown: What is Warren Buffett doing?
The Intelligent Investor: Book review

Subscribe to Everything Warren Buffett in a reader

c Share Investor 2008

Global Market Meltdown: What is Warren Buffett Doing?

As we approach Global Stock Markets, the volatility that surrounds them can create opportunities for making a purchase rather than a reason to sell.

I am reminded of what Warren Buffett looks for when buying companies and the cheaper share prices that we are now experiencing are making one of Buffett's tenants of investing more focused as the markets get lower:

His investment criteria included companies with "good returns on equity", little or no debt, "simple" businesses that he could understand, and consistent earnings, Mr Buffett said in his latest annual report. (Warren Buffett 2007 Berkshire Hathaway Annual Report)

Sure , Buffett is talking about companies that he buys having a good return on equity as an operating business. As an investor in cheaper shares though one can use falling share values to buy good companies and as an investor make better returns on your "bargain" purchase therefore making your returns all that much better.


Buffett has been hoarding his cash like your grandma over the last few years and many potential targets would have revealed themselves over the last few weeks of turmoil:

Warren Buffett says the current market chaos and turmoil will probably create buying opportunities for him and Berkshire Hathaway:
"You get more excited when there's a lot going on, you can't help it. And frankly, it will probably present more opportunity to us because when dislocations occur things get more mispriced and that sort of thing...
"So it can be a time of opportunity. It won't be for sure, but generally speaking, when there's a certain amount of chaos in certain sections, the fallout, and its unpredictable where the fallout will be, but the fallout sometimes offers some real opportunities." (CNBC Aug 15 2007)

Shares of health insurers, steel makers and department stores are down by as much as 18 per cent than they were in May, when Buffett said he would "figure out a way" to raise up to $US60 billion for the right deal. WellPoint Inc, Nucor Corp, Kohl's Corp and dozens more companies are now closer to meeting his investment criteria.

He has disclosed purchases a few days ago that his company has bought a new stake in Bank Of America and increased his stakes in Wells Fargo and Bancorp in the last quarters SEC filings.

As these companies have been beaten down over recent times you might expect the Sage of Omaha to be sniffing around them again.

Warren Buffett's history shows that he has done well during market turmoils as he tends to be doing the opposite to everyone else.

He bought beaten down stocks during the 1970s bear market lull and it paid off handsomely as the 1980s began a bull market not seen since the likes of the 1920s. His mentor Benjamin Graham made money off the 1930s bear market by doing exactly the same thing.

I guess we just have to learn from history. Markets have always had these volatile "corrections". Currently most investors seem gripped in the fear mode and it looks unlikely that the slide will be ended until some certainty comes back to the market.

Buffett and his mentor Benjamin Graham were able to ride these market blowouts and actually make it a positive. Their history and reputations as value investors are largely made during these times of turmoil.

Take a lesson from Warren. Keep cool, keep your head, keep your shares(if they were good ones to begin with!) and look for the bargains that will come.

c Share Investor 2007

Mainfreight keeps on Truckin

I'm a very recent convert to the Mainfreight Ltd [MFT.NZ] convoy but shareholder or not one cannot help but be impressed by this company.

It all starts at the top with great management. Don Braid, Managing Director and Bruce Plested, Executive Chairman, along with a great team locally and globally help drive this company forward.

Management are decisive, show strong leadership, and have very clear goals about where the company is going and significantly how they are going to get there:

"As we grow to become a world player we must maintain our culture and style of business by keeping a strong grip on our policy of being anti-bureaucratic; continuing to allow branch managers to make bold decisions; being energetic and entrepreneurial; and so continue to grow our business.

We expect to double the size of our business over the next 3-5 years."

Don Braid, GM, 2007

Mainfreight's management "style" then starts at the top and filters through all aspects of the business. Local decision making is crucial to the smooth running of the business and a smooth running business is more efficient, grows faster and makes more money.

One of the first things Warren Buffett looks at when buying into a company is the quality of its leadership. The management of Mainfreight and its people set it in a class above all, in my opinion, of listed companies in New Zealand and if it was large enough I believe Buffett would put this company in his portfolio because it is a well run, with a business that is easy to understand, revenues that continue to grow and an efficient use of shareholders capital, with good returns to shareholders. Certainly Mainfreight's historical financial background would attest to how well run the company has been.

The company is not afraid to ruffle political and financial analysts feathers either:


"To the financial analysts and other scaremongers who downgraded us in the early part of the 21st century as we put together our offshore strategy, you were wrong, and we were right. Stop discouraging New Zealand companies from expanding offshore – of greatest risk is the low growth available in New Zealand.

More and more the New Zealand economy slides down the OECD economic rankings as we milk our productive sector in the hope of remaining a first world country with taxpayer funded hospitals, education and social welfare.

There needs to be a clear understanding that the productive sector is the only means by which a country can prosper – interesting, challenging enterprises earning profits are the mechanism which creates opportunities for people to do well for themselves, the enterprise, and for mankind". Bruce Plested, Mainfreight, annual report 2007


The same approach is used when dealing with shareholders. Information in company reports is straight to the point with little or no "corporate speak", so one can actually read their company report and understand what the hell is going on. A rarity but an essential ingredient. Shareholders must know how their investment is doing and they must be able to do that easily.

The focus by the company on global growth has enabled Mainfreight to slowly assemble a network of operations around the globe that encompass a wide number of countries. With bases now in Australia, Asia and various states in the USA, Mainfreight is starting to have the ability to lever its logistics capabilities off an increasingly enlarged network and customer base.

Their current expansion goals have largely been met and medium term goals have already been mapped out and management are working towards achieving theses goals. Acquisitions have been a cornerstone to Mainfreight's expansion but once purchased and integrated, organic growth is a feature of these add-ons.

Mainfreight intend to have "global significance" in international logistics in the US, Europe, China and Australasia, with an aim to double revenue growth from the present 1 Billion NZ dollars. With full year profit of 55 Million NZ Dollars for 2007 the future for profit growth also looks good if margins can be maintained or even improved as logistical costs come down as the company grows.

In Bruce Plested's closing remark in his 2007 Chairman's report he takes a swipe at New Zealand's current economic decline and unfriendly business climate:

"In summary, we do not have a large enough or vibrant enough business sector in New Zealand. Economically, New Zealand has been on a long slow decline relative to other OECD countries for close to forty years, and this decline has accelerated in recent years. Surely with the benefit of hindsight, New Zealand governments can recognise that our productive sector is not performing to the level necessary to ensure this nation’s future health and prosperity.

Right now we need bold new initiatives and inspirational leadership. Other countries have found ways to reverse economic decline, and that has involved low company tax rates as in Singapore and Ireland and a reduction in the weight of compliance costs.

Whatever the outcome, Mainfreight has a determination to remain a New Zealand owned and operated business while continuing to pursue global aspirations".

Like many New Zealand businesses and business people, Bruce seems to be implying that Mainfreight exists in spite of what the current Labour government are doing to screw our economy and is clearly annoyed at the impediments that his business faces.

While it would be nice to have a government being "business friendly" we all know that the opposite is more than often the truth.

It is to Mainfreight's obvious advantage then that they see global expansion as their way to grow. They clearly cannot easily expand in their country of origin.

As I write this Mainfreight are in discussions with 3 freight forwarding companies with a view to purchase, with one company already in the hole.

I own shares In Mainfreight and I am looking to buy more for the long-term portfolio at any weakness.

The closing price of MFT shares today is $NZ 7.40, 1c above my original purchase price.


Disclosure I own MFT shares in the Share Investor Portfolio.


Mainfreight @ Share Investor

Mainfreight Ltd: Full Year 2010 Profit Analysis
Long Term View: Mainfreight Ltd
Share Investor Interview: Mainfreight's MD Don Braid
Stock of the Week: Mainfreight Ltd
Questions to Mainfreight's MD Don Braid
I'm Buying: Mainfreight Management delivers the goods
Mainfreight Annual Report Packs a Punch
Analysis - Mainfreight Ltd: FY Profit to 31/03/09
Mainfreight VS KiwiRail: The Sequel
Long VS Short: Mainfreight Ltd
Why did you buy that stock? [Mainfreight Ltd]
Mainfreight 2008 Annual report worth reading
KiwiRail will cost Mainfreight
Mainfreight keeps on truckin
A rare breed
Share Investor's 2008 stock picks

Discuss MFT @ Share Investor Forum

Download Mainfreight Company Reports


Recommended Amazon Reading


The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
Buy new: $14.95 / Used from: $7.50
Usually ships in 24 hours





c Share Investor 2007

The Intelligent Investor: Book Review

If you don’t have this book in your library, then you should not even be contemplating an investment in shares directly, or even indirectly, though a mutual fund.

It is surely not a co-incidence, as Warren Buffett graphically illustrates in his Appendix to this book, that some of the world’s most successful investors learned at the feet of Benjamin Graham and have applied his principles with great success.

This book, like all of Graham’s writings, is easy enough to understand for even lay investors. Graham sets the scene early in the book by explaining the difference between intelligent investing and mere speculation. Using the history of stock market booms and crashes and illustrating them with real life examples, Graham explains how an intelligent investor can stay ahead of the market.

Graham sets out investment principles for both the defensive investor and one who is more enterprising and shows how investor can identify under priced stocks.

As Warren Buffett has said, the two most important chapters in the book are Chapter 8, The Investor and Market Fluctuations, where Graham develops his concept of Mr Market, and Chapter 20, Margin of Safety where he preaches the wisdom of leaving enough room to cover mistakes in judgment of a share’s intrinsic value.

A must buy book, worth every penny, especially during turbulent times.






c Share Investor 2007

Long Vs Short Term Investing

An interesting debate that was carried out on my share investor forum


The 2 opposing sides of this debate are encapsulated perfectly by a third entrant:

Brut wrote

Macdunk & Snoopy

I am new on this tread but I thought I'll add my 2 cents worth... It's great to have two opposing views on investing in the share market, if everyone agreed there wouldn't be a market. By this i mean, if everyone agreed (bulls & the bears) that XYZ stock was worth $5 a share, there wouldn't be a market (nobody would be buying or selling)

I personally like to invest 90% of my portfollio in long term stocks & I have 10% in speculative stocks that I trade. I'm probably not as experience as you guys, but I've learnt that you find a system that works for you & stick to it.
Goodluck to both of you!!!


... It's great to have two opposing views on investing in the share market, if everyone agreed there wouldn't be a market...

Share Investor

Exactly, I couldn't have said it better myself. Snoopy and Macca are examples of the 2 opposite sides of your quote Brut.

Welcome to Share Investor!



The debate over the long and short-term thing rages on. I have a go at both approaches and both can be used in one's arsenal of investing tools, a Benjamin Graham and Warren Buffett approach if you like!!

Many investors say on or the other of these methods is right or wrong. Remember though, when investing do what is right for you dear reader.

Happy Investing,


From Amazon

How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition (Personal Finance & Investment) by William O'Neil Buy new: $16.82 / Used from: $3.57 Usually ships in 24 hours

c Share Investor 2007