Archive for December, 2008
Welcome back Franco fan! Please share your thoughts and leave some comments!
The Wall Street Journal published an article today detailing once famed stock picker and mutual fund manager Bill Miller’s recent demise. It is a well written story of how the highly praised mutual fund manager ended his 15 year out performance streak over the S&P 500 index in dramatic fashion.
Mr. Miller has profited from investor panics before. But this time, he said, he failed to consider that the crisis would be so severe, and the fundamental problems so deep, that a whole group of once-stalwart companies would collapse. “I was naive,” he said.
A must read for anyone considering active investing (stock picking vs. passive index investing).
Enjoy,
Franco
I would like to officially introduce Frugal Franco’s first guest post. A friend of mine, who goes by many names but we’ll call him the Bargain Burro, recently submitted a diary esk dictation of a memorable Black Friday. Enjoy!
Franco
Tuesday
I went over to my friend’s house and had to listen to him brag about his new flat screen TV all night. I sure would love to steal his thunder by getting a bigger one for less money. Fortunately, black Friday is right around the corner.
The final episode of this series opens in summer of 2006 at the peak of the US housing markets. Consumers have been leaning on their home equity to finance their spending and drive economic growth. In addition, the advent of the credit default swaps have made risk a transferable and tradeable product. The perception that risk can be stripped out of an investment vehicle and transferred to another counter party has driven credit spreads (the difference between the cost of risky, corporate debt and the risk free US government debt) to historically low levels. Tight credit spreads have made it very cheap to borrow money and create leverage to amplify returns. But all that is about to change as the era of easy money and excessive leverage comes to a screeching halt.
