money jungle

Amazing Warren Buffett Interview Video

Posted in value investing, warren-buffett by moneyjungle on December 23, 2008

Here’s an amazing hour and a half Q&A with Warren Buffett, recorded at the University of Florida.


McKinsey: The Finanical Crisis Hasn’t Increased the Cost of Capital

Posted in risk, theory by moneyjungle on December 11, 2008

In the latest McKinsey Quarterly, Richard Dobbs and Tim Kollar argue that the current financial crisis hasn’t increased the cost of capital. While the cost of long-term debt has risen in the past year, their data shows that (aside from junk bonds) it is still at historically low levels, due to the dramatic drop in interest rates that occurred after 9/11.

To assess cost of equity, they created a DCF model that relates changes in earnings to changes in share prices. By analyzing the behavor of consumer staples companies with stable earnings, they contend that the current drops in the market have increased the cost of equity by only half a percentage point.

Taleb: “anything in finance that has equations is suspicious”

Posted in nassim-nicholas-taleb, nnt by moneyjungle on December 10, 2008

The latest McKinsey Quarterly has another interview with Nassim Nicholas Taleb, with some great quotes concerning the dangers of modern finance:

“The Quarterly: You question many of the underpinnings of modern financial theory. If you were the dean of a business school, how would you overhaul the curriculum?

Nassim Nicholas Taleb: I would tell people to learn more accounting, more computer science, more business history, more financial history. And I would ban portfolio theory immediately. It’s what caused the problems. Frankly, anything in finance that has equations is suspicious. I would also ban the use of statistics because unless you know statistics very, very well, it’s a dangerous, double-edged sword. And I would ban linear regression. All these things don’t work.”

Heebner Long Financials

Posted in kenneth heebner by moneyjungle on December 6, 2008

The journal reports that Kenneth Heebner has made a big bet on financials and put over 40% of CGM Focus to work in the sector. Top picks include Citigroup, BofA, and Wells Fargo, which he considers to be historically cheap based on price-to-tangible book and price-to-preprovision earnings ratios.

Nassim Nicholas Taleb: “Markets are Stupid”

Posted in macro, nassim-nicholas-taleb, nnt, predictions by moneyjungle on December 6, 2008

“In a complex environment that is dominated by black swans and rare events, markets are not very good”

Wide-ranging Charlie Rose interview covers Taleb’s black swan theory, the roots of the current crisis, the future of banks as utilities, and a chilling view on the deflation and deleveraging to come in the market.

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