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IN THIS ISSUE

The Contrast Between Behavioural Finance and T
By Graham Elliott Shircore, CFA
Telular
By Aaron Edelheit
Boombustology and Value Investing: Why Context
By Vikram Mansharamani, PhD
Benzinga's Value Investor Report On Jamba Juic
By Brandon Cunningham
How to Find Intrinsic Value with Your Real Est
By Craig Haskell
The "Pink Elephant" Of US Government Spending
By Gregory White

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VALUE INVESTING ARTICLES

THIS MONTH'S ISSUE

Boombustology and Value Investing: Why Context Matters
By Vikram Mansharamani, PhD

As one who has fought with global equity markets during the past 20+ years, I remain confused by the typical value investor’s belief that “top-down” issues are not worth contemplating. Why is it that Graham and Dodd investing (as practiced by many value investors) downplays the role of context in the investment process? Wouldn’t the prudent investor want to understand risks and uncertainties relating to the environment in which he/she is investing?

Perhaps because I have spent a great deal of time investing outside of the United States, I have never had the luxury of dismissing macroeconomics, politics, or the actions of other investors. Consider Indonesia before and after the Asian Financial Crisis. Investing in the best companies at reasonable prices did not protect you. The utter bloodbath in the currency markets destroyed dollar returns. Likewise, many value investors faced steep losses during the second half of 2008 and the first quarter of 2009. Herd behavior and self-fulfilling dynamics unfortunately drive these dynamics.

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johnchew
Comment
Sat April 16, 2011, 16:44:17
Note who called the bust BEFORE it happened.

http://site.theaustrianswereright.com/

Best,


John Chew
elbag
Comment
Wed April 13, 2011, 13:08:29
The web site is virtually impossible to read due the the background color choice.
m.anand56
Comment
Wed April 06, 2011, 06:41:56
What happens if China hard lands? Let me know if my chain of thought makes sense.

Commodity, Oil, Metal prices go down dramatically. This will bring down the inflation, interest rates and cost of key raw materials, at both the developed markets like US, UK and also the other emerging markets like India, Brazil, Russia, Indonesia etc.

Consequently, there can be a huge increase in employment, productivity, and margin expansion.

Which in turn will lead to the huge upsurge in stock values in these markets.

Due to this confidence returns and people in US spend more. They do not hesitate to take further debt. Now China will still be able to make goods much cheaper than others. Outsourcing starts again in a big way and China GDP grows.

The whole cycle repeats!!!!