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Uncle Al

I like Alan Greenspan, despite writing a critical article about him. It is hard not to admire the guy. He has this avuncular quality about him, he is kind of like your uncle who is super smart, kind and buys you a bicycle on Hanukkah. I’ve been reading his book and I can safely say it […]

What we’ve learned…

If we learned anything over the last couple of months it is that we don’t know the second and third derivative of how badly things will play out. We knew that the housing market was in the bubble, what we did not know was how its deflation will play out, i.e. commercial market freeze. We did not know […]

My Book is out!

Active Value InvestingAfter a year and half, 2,000 hours of staring at my laptop, and much receded hairline, my book Active Value Investing (AVI): Making Money in Range-Bound Markets is done! Last year and a half is a blur; it feels like I came out of a prolonged coma – family celebrations, kids growing up are just vague recollections. Like a third child (I have two ‘real’ adorable kids) I nourished the book, carefully choosing every word that went into it, and there were 75,000 of those. And akin sending your child to the real world, I have a sense of pride, and at the same time I am nervous as I want the rest of the world to like it and more importantly to benefit from it.

Let me attempt briefly tell you about the AVI, for in depth take on the book, here is a link to book’s preface. AVI has two parts: in part one, I make the argument that there is a very high probability, that over next dozen years or so the U.S. stock market will be dancing a similar foxtrot that it danced since 2000: it will take investors on a wild roller coaster ride (it will go up, down, and sideways), but at the end of this exciting journey it will not be far from where it is today. The market will be range-bound.

The Fed’s Irresponsible Move

The 2001 rate cuts caused the bubble that is now a crisis. Here we go again  The right decisions are usually the hardest ones: they often require enduring short-term pain for the long-term gain. We learn this as parents early into the job. The Federal Reserve under Mr. Greenspan’s leadership faced a tough decision in […]

London is Expensive

I just came from a week-long trip in London. I got to tell you, London (and probably all Europe) is tremendously expensive. The numbers on price tags look very familiar: Starbucks (SBUX) Chai Tea Soy (okay, I do like those things) is 3.80, a breakfast (two eggs, a toast and a coffee) in your typical […]

Flip Flopper?

The Almighty Bill Gross of Pimco has flip flopped on the direction of interest rates for the second time this month. I can feel Mr. Gross’ pain. At this point predicting the direction of interest rates is like flipping a coin. The global economy is roaring on all engines – a case for higher interest […]

Fly, Don’t Buy Airlines or Why Big Banks Make Dumb Loans

If I’ve learned anything over the years, it’s that people don’t learn. Recently, I talked to my cousin who is an executive with a Russian airline company. In our discussion he mentioned that his company just received semi-unsecured loans (all planes are leased so they are not used as a collateral) from western banks at 10% […]

It Is Not the Cards You are Dealt; But is How You Play Them

“Any time you make a bet with the best of it, where the odds are in your favour, you have earned something on that bet, whether you actually win or lose the bet. By the same token, when you make a bet with the worst of it, where the odds are not in your favour, you have lost something, whether you actually win or lose the bet.” – David Sklansky, ‘The Theory of Poker’

Over a lifetime, active investors will make hundreds, often thousands of investment decisions. Not all of those decisions will work out for the better. Some will lose and some will make us money. As humans we tend to focus on the outcome of the decision rather than on the process.

On a behavioural level, this makes sense. The outcome is binary to us – good or bad, we can observe with ease. But the process is more complex and is often hidden from us.

One of two things (sometimes a bit of both) can unite great investors: process and randomness (luck). Unfortunately, there is not much we can learn from randomness, as it has no predictive power. But the process we should study and learn from. To be a successful investor, all you need is a successful process and the ability (or mental strength) to stick to it.

Dividends and Share Buybacks

November 4, 2005 – /Bloomberg Before the 1982-1998 bull market, dividends accounted for a very large portion of stock market returns. In fact, in the 1966-1982 bear market, they were the returns investors received while watching P/E compress under the market. On a theoretical level, dividends are just a transfer from a company’s corporate […]

Discussion on Katrina

I have a had a very interesting discussion with David Miller, a fellow contributor to, on Federal government’s role in hurricane Katrina. David publishes Biotech Monthly and knows biotech industry inside and out.  I wrote the following: I think the Federal government is to blame in part for the level of destruction caused by […]