Tater’s Takes: Value Investing Videos

April 29th, 2011 by Potato

Right up the street here is the Ivey School of Business, which has the Ben Graham Centre for Value Investing. I’ve never been in person, but they do have some good presentations by renowned value investors up on their website.

I like the most recent appearance by Prem Watsa:

“If you ask 10 chemical engineers to design a refinery. If you took the average of their designs, you’d get a pretty good refinery. If you were building a bridge and had civil engineering, or any human activity, and took the consensus, you’d get a good… whatever you were designing. But if you asked 10 oil company analysts for their opinion, and they were all positive on oil, you would not want to buy an oil stock: you’d be very disappointed. Because their opinions are already in the stock market. If one of them changes his mind, the prices come down. All of what you do in human activity, in terms of going with the consensus, does not work in investing; it works just the opposite.” [Transcribed quickly, not exact]

Just because you’re a financial blogger doesn’t necessarily mean you’re purely rational with money: Krystal from the very popular and successful Give Me Back My Five Bucks just bought a townhouse (in Vancouver at 260X rent!!), and had a 20% down payment ready to go, but then decided to pay off her 0% car loan and had to pay CMHC insurance with the smaller downpayment. As one commenter put it: she just turned a 0% loan into a 3.75% one, and paid $5k for the privilege. I’m of course more concerned by the extreme price: her own spreadsheet of costs shows that she’s spending about $200 more per month to own instead of rent, and that’s with an interest rate below 4% — what’ll happen in 5 years at renewal?

Similarly, Echo grapples with the decision of whether to take an offer of 3% below ask on his house, or turn it down and hope for more, putting at risk his ability to close on the next house (that’s already lined up). In all fairness, it is a very tough decision, and for such large amounts, a few percent here or there (indeed, if houses typically go for 1-2% under asking as he suggests in the comments it may be only a percent) can be serious money: up to $8k in his case. But I think of equities a lot, and there, a 1-3% move is just a rough day, nothing to go changing plans over.

Mike at Money Smarts gives us a walkthrough on how to optimize your PriceLine bids.

Patrick describes some of the ridiculous reversals of causation spouted by realtors. I also like the comparison at the beginning: high prices in anything but shelter are met by outrage.

Larry MacDonald questions some housing bear logic in a Canadian Business Magazine article. As you can guess, I disagree. In particular, rent control largely doesn’t distort the price-to-rent metrics in Ontario because rent control goes away upon vacancy (and the rental amounts I use are taken from listings). All it does is strengthen the case for renting when the price-to-rent gets out of whack because you don’t need to worry too much about that measure correcting via skyrocketing rents (vs falling prices). “I must confess to feeling somewhat dismayed at hearing others trash what is one of the most important components of my and most other Canadians’ net worth.” That “most important” part is where some of my dismay comes from: real estate is too much of the balance sheet for too many Canadians these days. It’s not sacred, and it’s not risk-free. He then mentions the affordability indicator is not very out-of-line. Unfortunately, affordability indicators are to a large extent interest-rate indicators, and yes, interest rates are low. Will they stay low? Is that a bet you want to lock-into for years to come? Larry suggests that they will stay low, but that argument is based on “the Bank of Canada likely will only allow rates to rise as long as the economic recovery is progressing” i.e.: that rates will stay low as long as economic growth is poor and we’re in a near-recession state. But that contradicts the other part about previous corrections occurring in periods of higher unemployment: if our economic growth remains poor enough to keep rates low, we can’t really count on a strong economy to counter the high price-to-rent readings. Plus I highly recommend taking a look at Barry Ritholtz’s trashing of the US affordability measures: what good is a measure that, even in the midst of one of the worst housing bubbles ever, never indicated that there was an affordability problem?

A Wired sciblog entry on a measles outbreak in the US, with some requisite preaching about getting immunized.

Just days after deciding to continue to pass on RIM, it lowered guidance and plunged 14%. I’ll be watching it a little more closely now to see if sentiment gets negative enough for it to become truly cheap.

Penny Arcade linked to Good Old Games today: a direct download service offering old games at reasonable prices with no DRM. They also include “working on Windows” as one of their selling points, which is tempting: I haven’t put much effort into trying to make it work, but I can’t seem to get my MOO2 to work on Win7, so that could be tempting.

And finally a question: do you have any tips for cheap science demos for high school students in electricity? I may be doing an outreach activity in a few weeks…

4 Responses to “Tater’s Takes: Value Investing Videos”

  1. Ben Says:

    That “Krystal” is something else, anyone who would take financial advice from her must have rocks in their head. I read her columns b/c they usually have titles that are of interest to me, but I’m always left shaking my head. I think she’s a complete tool.

  2. Mike Holman Says:

    Yes, I certainly optimized my Priceline bid. :)

    Nice roundup. I would argue that although lots of renters do leave rent-controlled apartments – a lot don’t. Especially if they are a renting at a big discount to the market rate.

    I don’t think rents are that high in Toronto, so I’m not sure how many people are out there with really cheap apartments – perhaps none?. It would be interesting to see more study done on that.

    @Ben – Krystal doesn’t give financial advice – she just writes about her own experiences, some of which are the learning type.

    Most people make a lot of financial mistakes – the people who end up wealthy are the ones who learn from them.

  3. Rez Says:

    GOG has a sale this weekend on MOO (and this version will definitely run on Win7)!

  4. Potato Says:

    $3? Hells yeah. Plus, I never did play Master of Magic. Thanks Rez!