New Markets, New Strategies

Terms of Use......Page 5
Want to learn more?......Page 6
Acknowledgments......Page 9
Contents......Page 13
Introduction......Page 17
1973–1974 Revisited......Page 18
Part I: Investment Themes for the Next Decade......Page 23
Imagine a Private Company......Page 25
The Historical Importance of Dividends......Page 26
Two Percent Dividend Yields: Who’s to Blame?......Page 27
Case Study: McDonald’s......Page 29
Dividends and Growth Stocks......Page 31
Lowering the Tax Rate on Dividends and Capital Gains......Page 32
Potential Impact of the Tax Cut......Page 33
The Future......Page 38
A Note on Preferreds......Page 39
Key Take-Aways......Page 40
The Third Rail of Investment Strategy......Page 41
So What’s a Hedge Fund?......Page 42
Origins of the Present-Day Hedge Fund......Page 44
Size and Structure of the Hedge Fund Market......Page 45
Why the Growth in Hedge Fund Assets Is So Important......Page 47
The Influence of Commissions on Research......Page 49
Why Growth in the Industry Will Slow......Page 51
The High Water Mark......Page 54
Case Study: Tiger Management......Page 55
The Future: Past as Prologue?......Page 56
Key Take-Aways......Page 57
3 Washington Becomes the Center of the Universe: How 9/11 and Corporate Scandals Have Shifted the Balance of Investment Power......Page 59
War and Market Performance......Page 60
Market Performance and Exogenous Shocks......Page 62
Determining Geopolitical Risk: The Importance of Oil......Page 63
Investment Opportunities in the Defense Sector......Page 66
Investing in Iraq’s Reconstruction Efforts......Page 68
The ’62 Market Drop: Kennedy vs. U.S. Steel......Page 69
Regulators Gain the Upper Hand......Page 71
The Limits of Government Influence: The Go-Go Years......Page 72
The Presidential Election Cycle......Page 73
Tort Reform......Page 74
The Future......Page 77
Key Take-Aways......Page 78
4 Investing in Good Corporate Governance: Picking Companies That Show Shareholders Respect......Page 79
A Short History of Financial Skulduggery......Page 80
Sarbanes-Oxley and Good Corporate Governance......Page 82
An Investor’s Checklist: Warning Signals......Page 84
Good Corporate Governance Outperforms......Page 95
The Need to Take the Long View......Page 96
Key Take-Aways......Page 97
5 Winner-Take-All Markets: The Impact of Free Trade and Technology on Investors, Companies, and Workers......Page 99
Globalization and the Modern Corporation......Page 100
The New 800-Pound Gorilla: China......Page 102
Free Trade and the Outsourcing Myth......Page 105
A New Industrial Revolution: Information Technology......Page 108
Investing in Creative Destruction......Page 109
Key Take-Aways......Page 110
Part II: A Framework for Investing......Page 111
6 Taking Advantage of the Changes in Investment Research: Opportunities and Pitfalls in a Post- Bubble Environment......Page 113
May Day and the Collapse of Independent Research......Page 114
Decline in Quality, Eliot Spitzer, and the Settlement......Page 116
Sell-Side Research and Performance......Page 119
Sell-Side Research and Market Efficiency......Page 120
Case Study: Taiwan......Page 121
A New Approach to Investment Research......Page 123
Key Take-Aways......Page 127
7 The Need for a New Contrarian Approach: Charting Your Own Path......Page 129
The Contrarian Approach in a Nutshell......Page 130
Lord Keynes: The First Contrarian......Page 131
The Importance of Sentiment......Page 133
Opinion-Based Indicators......Page 134
Market-Based Indicators......Page 136
Media Enthusiasm......Page 139
The Importance of Confirmation......Page 140
Case Study: The “Coconut Crowd”......Page 141
It’s Better to Be Right than “Smart”......Page 142
Key Take-Aways......Page 146
8 The Importance of Valuation: It’s All about Potential......Page 147
It’s Not Rocket Science......Page 148
Intrinsic Value: Earnings, Inflation, and Interest Rates......Page 149
P/E Ratio: Linchpin of the Comparable Approach......Page 151
Which Earnings?......Page 152
Key Top-Down Metrics......Page 155
The Importance of Flexibility......Page 159
Where Are We Now?......Page 160
Key Take-Aways......Page 161
9 Bringing It All Together: The Market Balance Sheet and the Thrifty Fifty......Page 163
The Market Balance Sheet......Page 164
The Market Balance Sheet in Practice......Page 172
The Thrifty Fifty......Page 173
Key Take-Aways......Page 180
10 The Case for Active Management: The Future of Mutual Funds......Page 181
More Moderate and Stable Returns......Page 183
Low Nominal Growth......Page 185
The Size of Indexed Assets......Page 186
Mutual Funds Still Make Sense......Page 188
Thoughts on the Recent Scandals......Page 189
Key Take-Aways......Page 191
Conclusion......Page 193
Part I......Page 195
Part II......Page 197
Index......Page 201
About the Author......Page 209