Professor Glen Arnold

Today I want to illustrate the importance of finding a company with good economics and good managers.  But that isn’t enough.  You must also discipline yourself to only buy at a reasonable price – even if that means waiting 15 years! The Capital Cities investment made by Berkshire Hathaway in 1986 is founded on a […]

As you know, in response to the possibility of a crisis I’ve bought assets that rise in value as the US stock market falls (if I falls a lot). But not everyone can buy puts on the Dow, so the second element might be more relevant:  I will be in no hurry to invest money […]

China has leapt ahead in the indebtedness stakes – the nonfinancial sector now owes the equivalent of over 200% of annual Chinese output – see chart (China’s GDP is $12.5trn, so that is a lot of debt).  But also note that “Advanced economies without a crisis” and those “Hit by a crisis” both have nonfinancial […]

The IMF Global Financial Stability Report for April 2018 said downside risks “remain large” as “easy financial conditions continue to fuel financial vulnerabilities, leaving the global economy exposed to the risk of a sharp tightening in financial conditions.” There is a “risk of abrupt, adverse feedback loops in a period of asset price adjustments.”  I […]

Students of financial and economic crisis, and authors of the book Manias, Panics and Crashes, Kindleberger and Aliber, point to cross-border flows of investment money, particularly debt, as a cause of booms and busts.  Foreign lenders in particular can take fright and turn off the tap.  They are inclined to do that if they think […]

Warren Buffett made a comment to Berkshire Hathaway shareholders (written spring 2017) on major market declines – something he rarely does: “The years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks. No one can tell you when these traumas will occur – not me, not Charlie, […]

Last week I bought put options on the Dow Jones.  They rise in value if the US market declines by a large percentage.  I don’t know for sure that the US market and, through contagion, the UK market will fall in the next six months.  But given the current stretched US valuations I want to […]

Previous newsletters this week have told the story of yet another successful Buffett investment, but now is the time to draw the key points for investors today to take with us.  I’ve jotted down a few here.  You might like to add to the list. If you spot a good business it might be worthwhile […]

First, Mrs B, Chairman of the Board had no intention of retiring for a long time yet, and Buffett had no intention of asking her to do so.  Her salary was raised and she worked her customary 7 days a week selling carpet. She was quoted in the local paper as saying, “I come home […]

Let’s start with profit.  In 1982/3, on a turnover of about $100m pre-tax margin was about 7%.  After tax that was roughly $4.5m for shareholders to take away as owner earnings (Buffett’s numbers, set out at the 2014 Berkshire shareholders meeting).  So the one-year price to earnings ratio was about 13.  Looking at that data […]