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What We Are Reading

Macro

Don’t Confuse Cheap with Value

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There are just two ways to behave as an investor,

One requires buying cheap, selling at a profit, and repeating the process. This requires making hundreds, sometimes thousands of smart investment decisions in the course of a career. To make many smart decisions is too hard.

The second way to invest just requires one decision: buy a great business. This way is to adopt a strategy that requires being smart only a few times. Almost no one does this despite the obvious advantages. It requires the right investor base.  This article shows you how. Read More

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Value stocks and Patience – may be the only way to turn around Bleak Returns

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It is a terrible time for investors. With bleak returns seeming to be the norm across the globe in this tumultuous stretch, they are relying on varied valuation metrics in hope of enhancing dividends. This piece discusses the best valuation metrics to gauge whether a stock is “cheap” or “expensive” and also provides an insight into Andrew Lapthorne’s views on why modern-day investors have to be brave to hold on to value stocks and be prepared to lose money for some time.  Read More

Macro

Why India’s Currency Debacle is a Lesson for Westerners

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As Indian citizens struggle with the inevitable teething troubles that the demonetization episode has brought upon them, it is important to know that this shouldn’t seem like a remote threat to Westerners. It establishes a significant point – state-issued paper currency exists only at the acquiescence of the State. One verdict can make it totally worthless. Read on to know why this Indian chapter must be seen as a lesson (read: warning) by the Western civilization and also why the value of gold cannot be debased by government decree. Read More

Macro

What Bridgewater’s Ray Dalio Told The New York Fed

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Ray Dalio, founder, Bridgewater Associates, is a vocal opponent of quantitative easing by central banks. In his speech at the Federal Reserve Bank of New York on October 5 this year, he presented what may seem to be a rather gloomy picture akin to a depression warning.

Learn about long- and short-term debt cycle and read what one of world’s most influential investors has to say about the limits to central banks’ monetary policies.

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Macro

Time to stop dancing: Asset inflation cycle coming to an end?

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Why is it that after ninety-something months of zero or near-zero rates, growth is still sputtering? Why is the corporate sector in an earnings recession? Why is the productivity growth negative? And why do central bankers still insist that no recession is in the forecast?
Read this article to dismiss the myth if in reality the central bankers can control the cycles and public behavior and can act as last anchor of confidence to eternity. Read More

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Australian Real Estate- A Chinese Syndrome?

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People looking to reason out the concerns about the valuation statistics in the Australian real estate market must be awake to one of the most crucial factors – Chinese property buyers. With the lower Australian dollar supporting the demand for Australian housing (especially for foreign investors), the flood of Chinese money gushing into this market is not showing any signs of slowing down. Read all about Australian residential property going under the hammer, the influx of Chinese currency and its implications, and the efforts banks and regulators are taking in this article.

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Why Management is Incentivized to Fabricate Earnings: It’s All About Non-GAAP Bonuses

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In order to make a rational investment decision, it is important to gauge whether a company’s accounting depicts the underlying business economics.  At times, company managements may fabricate the accounting numbers. When the management is compensated based on Non-GAAP numbers, there is an elevated tendency to present an inaccurate profit picture. If one looks beyond the readymade Non-GAAP earnings, S&P 500 is currently trading at a P/E multiple of 24x as against the 18x that is commonly reported.

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