By just about any intrinsic measure – the stock market looks expensive. Ben Graham would be warning investors to heed caution. Now one of the more widely cited metrics is its forward price-to-earnings (PE) ratio – which trades at a very high 22x. However, another intrinsic measure is James Tobin’s Q-Ratio – which now trades at a record high – exceeding that of the dot.com bust. And whilst not a great timing tool – it maintains a very reliable record of picking long-term secular highs.
"Warren Buffett"
Benjamin Graham’s ‘The Intelligent Investor’
Over the 14 years writing this blog – I’ve mentored many people on how to become a better investor. It’s something I enjoy and a large part of why I’ve written this blog for so long. As part of that, one of the (many) books I highly recommend is Benjamin Graham’s timeless classic “The Intelligent Investor”. Unfortunately this is not a great book for those beginning their investing career. It’s very dense and requires a lot of time and focus. I had the idea to write a 20-part summary of the book — where each part corresponds to a chapter. And where practical – I produced up-to-date examples of his principles – simply to illustrate that nothing changes. And whilst someone will always say “it’s different this time” – the truth is very rarely is it different.
Time to be Greedy or Fearful?
Warren Buffett is famous for saying “be fearful when others are greedy; and be greedy when they are fearful”. Today the Oracle of Omaha sits on a record $325B in cash – a record for Buffett – and over 30% of his entire portfolio. Investor enthusiasm today is wildly optimistic about future growth and earnings post the election result. And whilst surging prices are a sign of confidence – markets are also notoriously fickle…
Decoding the Drop in Oil
Middle East tensions are rising. However, oil prices are dropping. Why? The Israeli missile attacks on Iran, while not entirely unforeseen, triggered a negative response in the oil market. Now this may seem curious… contrary to expectations of a price surge due to heightened geopolitical tensions, crude oil prices plunged ~5%. In short, market sentiment tends to prioritize economic supply and demand concerns over (short-term) geopolitical risks
For a full list of posts from 2017…