By Tim Melvin
Have you read the book There's Always Something to Do by Christopher Russo-Gill?
If not, it should move right to the top of your summer reading list. It is the accumulated reflections of Peter Cundill. A Canadian value investor, Cundill used the Graham Deep Value Approach to return a little more than 15 percent, on average annually, to investors for almost 30 years.
Cundill once described his approach as looking to buy dollars for $0.40, and he focused almost entirely on the balance sheet. He once commented that he did liquidation analysis and liquidation analysis only. He wanted to buy stocks in companies that traded below where he estimated they could be profitably liquidated.
1. Things To Do
Cundill looked all over the world for ideas, and felt that most of the time he could find enough bargain issues to get his funds invested in such
Since last March I've been tracking the confluence of a reduction in the growth of bank savings deposits, the pickup in bank lending, and the Fed's tapering of its QE3 program ("Tracking the perfect storm"), looking for signs of declining money demand that the Fed might be underestimating. The Fed recently told us that tapering will finish within 3 months; bank lending continues to be strong; but bank savings deposit growth has not slowed further. Although there's no evidence of any further significant decline in money demand, these all remain symptomatic of a slow and gradual decline in the demand for money and money equivalents. As such, it is appropriate for the Fed to taper its QE purchases (which were designed primarily to satisfy the world's seemingly insatiable demand for money and money substitutes, since bank reserves are now functionally equivalent to T-bills), and there is no reason
Camilla Hall writes in the Financial Times, "US lending to businesses is reaching record levels but banks are privately warning that the activity should not be seen as evidence of an economic recovery."
Ms. Hall goes on that "much of the corporate lending is going to fund payouts to shareholders, finance acquisitions and fuel the domestic energy boom, bankers say, rather than support companies' organic growth."
This type of behavior is also hitting large regional banks: "The larger part of the usage in the market right now are loan refinancings where companies are paying dividends back out."
Furthermore, included in the business loan numbers is money going to hedge funds, private equity funds and real estate groups that have borrowed money to acquire real estate, bundle the properties and sell securities that use rental payments on the homes to provide the cash flow for the bonds. I have written