Forbes Praises Active Value Investing
May 24th, 2008
Rich Karlgaard, the publisher of Forbes magazine, mentioned my book in his article:
- The new Benjamin Graham is Vitaliy N. Katsenelson. I highly recommend Katsenelson’s book, Active Value Investing: Making Money in Range-Bound Markets (Wiley, 2007). I like to think the old Ben Graham would have recommended it, too.
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4 Comments Add your own
1. Dave | May 29th, 2008 at 6:24 am
Vitaliy,
There seems to be some overlap between the range-bound market in stocks that you argue started in 2000 and the secular bull market in commodities that Jim Rogers says started in 1999. Do you agree with Rogers that we are in a secular bull market for commodities? If so, is this just a coincidence that it’s happening during a secular range-bound market in stocks, or do the two normally go together? The 1970s was a time of rising commodity prices as well, and that decade was also part of the previous range-bound market in stocks, as you pointed out in Active Value Investing.
I’d be grateful if you could share your thoughts on this. Thanks for the insightful posts.
2. Vitaliy | May 30th, 2008 at 8:07 pm
Dave, that is a great question. But I really don’t know the answer to it. As I understand commodity cycles are created by over/under investment in production. Not sure if interest in stocks (especially at the end of the secular bull market) was a cause of under investment in search and production of commodities.
Best,
Vitaliy
3. Dave | June 2nd, 2008 at 3:34 am
Vitaliy,
I did a little more reading on Jim Rogers after I posted that question, and I have his answer. You hit on part of it above. According to Rogers, after the end of a secular bull market in commodities, commodity prices are dropping so stocks look more attractive as an investment; then, the lower commodity costs boost the margins of non-commodity producing companies, fueling their profits. As the secular bull market in stocks continues, demand for commodities gradual increases, but supply doesn’t increase as much, because, as you pointed out above, investment goes to stocks rather than commodities. When tech stocks, or drug stocks, or whatever non-commodity sectors are booming, few want to invest in digging a new mine for zinc or copper or whatever.
So, long story short: it’s not a coincidence that we have a secular bull market in commodities at the same time we have a secular range-bound market in stocks. Jim Rogers’s first response to this is that one should invest in commodities, but he also notes that other asset classes (e.g., stocks) in commodity-producing areas ought to do well too. That suggests a couple of ideas for a value investor in stocks: invest in companies in commodity-exporting countries such as Canada or Australia, or invest domestically in the stocks of regional business in areas that are benefiting from the boom in commodities, e.g., Oklahoma (energy) and Iowa (agriculture).
4. Roman Y | June 6th, 2008 at 2:08 pm
Vitaliy,
Congrats on that!!! It iis an honor to be compared to Benjamin Graham. Well done.
But here is a questions for you:
One part of that Forbe’s article mentioned that in range-bound markets one needs to be a much active investor. That obviously makes sense, as you will have runs and drops. But then what about buying long term that everyone preaches, including Graham’s best student Warren Buffet?
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