The recent Market Panic finds most of us in a soul searching mode, revisiting investment rules and principles that if better adhered to might have saved us some pain. In this vein, there have been some heated discussions at “the day job” about companies that might be “too big or too complicated” to truly understand. This, in turn, has gotten me thinking about an important principle, or better yet, presupposition, which could be called Scrutability. In this edition, I will attempt to define this concept and illustrate it with some examples from my own recent experience. I will also suggest some criteria by which one might avoid getting on the wrong side of this principle, and conclude by applying this principle to GE, a very prominent recent example of the perils of inscrutability.
We can start with the premise that investors, indeed, thinkers of all stripes, have differing notions as to what it means to “understand” a situation. For some of us, “understanding the business” is a non-negotiable starting point. What do I mean by this? We get a couple of important clues from the likes of Warren Buffett, as seen in his ability to “pass” on most ideas he hears after just a few minutes of discussion, and Peter Lynch with his egg timer rule. It is the ability to honestly say, “Yes, I understand how these guys make their money, why their ability to hold their own against competition should remain intact if not improve, and how they are more likely than not to be able to do more business with more customers over time”. One needs to determine that the company in question is either a great business at a decent price, or a decent business at fire sale price, or a business in an industry that has just changed in a way that it can finally be a decent business but its still priced like its always going to be just a decent business in a terrible industry. If it is not clearly one of these, it is simply something that shouldn’t be bothered with, an opportunity cost versus time well spent. The ability to make these judgments entails at least a bit of knack (business sense) and no small amount of hard work accumulating a body of supporting data that is both “experience” and a good grasp of relevant present and prospective conditions.
We confuse the issue when we talk in terms of “complexity” being the issue. Complexity, which is the opposite of simplicity, is not necessarily a problem. Indeed, it is a source of opportunity, if it is amenable to being reduced by intellectual effort down to something simple, and there is rarely much investment opportunity in that which is both obvious and simple. I would argue that one of the hallmarks of a truly great investor is the ability to recognize a simple understanding of a seemingly complex enterprise. A more accurate term than complexity would be the slightly arcane “scrutability”. To be scrutable is “to be capable of being understood by study and observation”. Another hallmark of an at least mature investor is the ability to recognize when the answers to the central questions about an enterprise are excessively inscrutable. If Warren and Charlie can say that some businesses are “too tough” to understand, why can’t we? It doesn’t mean that there aren’t businesses where just because they wouldn’t try we shouldn’t (they have a much different pallet of opportunities to work with), but we do need to exercise the same sort of humility. If the question of “exactly how do they make their money…?” is at its core inscrutable, just don’t go there!
A couple of points of clarification are in order before I start illustrating with some of my recent misadventures. I think we all understand that no one has 100% clarity about everything there is to know about a situation, especially when entering a new position. It is not an either/or between total ignorance and omniscience. One recognizes what the most important issues are for a company and endeavors to have a really clear understanding of them, but also recognizes that there are other issues that might matter but are “somewhat inscrutable”. That is, one has to have a reasonable expectation that with the passage of time, study and observation will clarify the matter. (I will give examples). The art of investing then includes the ability to recognize where “somewhat inscrutable” issues might be significant enough to do damage the value of the enterprise, which means passing on the idea, as well the ability to recognize the difference between “somewhat” and “completely” inscrutable.
Inscrutability does not refer to that which we wish we knew but can be confident of learning more about at some identifiable event in the future, like an earnings release or court ruling. Questions where there will be a pretty definitive answer “we’ll know when we get there” are about something different than scrutability. Strictly speaking, scrutability is more about whether one has the resources to observe, to ask the right questions of the right people and to otherwise “get one’s arms around it”.
SOME EXAMPLES OF WHAT I MEAN
A couple of years ago I decided to buy shares in Pfizer. I was able to get very comfortable with the broad and diverse product lines that were going to deliver sales, earnings and cash flow over the next several years. We knew the company was committed to getting costs out and that redeployment of cash into dividends and repurchase was a high priority. We also nailed down a “what if they lose the patent challenge?” worst case valuation pretty well. There was a lot there, though, that was relatively inscrutable. However many potential new drugs were in the pipeline, no one, not even the company, knew which project would produce what revenues. We discerned an ongoing attack on intellectual property, as manifested in Ranbaxy’s patent challenge, as one of those issues that could get better, get worse or stay the same. All one can do regarding an issue like that is to make sure that a worst case outcome is not a company killer and then pay attention and look for clues. The same goes for that assault on the fruits of innovation that is being undertaken by the Tort industry. With PFE, we enjoyed an above average dividend supported by a very identifiable stream of free cash flow while we waited for the passage of time to give us opportunities to clarify some of the issues that would bear on long term profit growth potential. There were surprises both positive (additional indications for Lyrica, troubles for competitors to Lipitor) and negative (early loss of Norvasc, Exubera, torceptrapib getting pulled from trials). A new CEO came along promising “increased urgency”. Over the course of a year or so, I was able to surmise that while there was no danger of PFE not being able to post moderate earnings growth near term and fund its generous dividend, the risk/reward of “the core of what they do” (developing and marketing new drugs) was at best barely holding its own. Not only does the bar keep going up on new drug approval (i.e., it has to be more efficacious than the drug it will supplant) but the threats that patent challenges and tort might steal away the rewards of innovation were at least holding their own. Coming to this conclusion, which could only happen by patient study and observation of “peripheral” issues over an extended period of time, lead us to exit the stock at an approximately break even price.
Similarly, when we entered into Seagate Technology, we knew we had a technology leader and the low cost producer of an essential item for meeting the rapid growth in demand for data storage. We had a pretty firm basis, which proved out, for industry consolidation leading to improved profitability. We had the core of “how these guys make their money” figured out. However, there were a couple of issues which could only be regarded as “relatively inscrutable”. One was that while STX is far and away the leader among what was then seven (now six) companies that make disk drives (HDD), most of the competitors are subsidiaries of Asian conglomerates, so an understanding of the competitive dynamic would be less than ideal at the outset and slow in coming. Similarly, there was a lot of buzz about flash memory as a potential substitute for HDD. I was able to determine that neither of these issues were likely to matter near term and proceed with the investment. Since then, the beneficial effects of industry consolidation exceeded expectations, even if in the midst of the Hundred Year Financial Flood it is no longer apparent. I have learned only bits and pieces about Asian drive makers, but enough to know that they are at best holding their own. I have learned considerably more about flash memory, including where it is likely to start selling in any kind of quantity, but also that the point when solid state drives start taking enough share to materially slow the growth in HDD keeps slipping out in time.
As I reflect on how varying degrees of inscrutability have affected other recent investments, a couple of general observations come to mind. One is that when the prevailing bias of the Market turns negative as it did a year ago, inscrutability even with regard to secondary (non core) issues can be deadly. Inscrutable problems are the fodder of “short” ideas. Things that are easily ignored when the bias is positive loom large when the aversion to uncertainty intensifies. It also goes without saying that financial leverage magnifies the damage that can be done when inscrutability turns against us. In thinking more specifically about stocks I have owned recently, I find a common source of “inscrutability that hurt” where there are impediments to understanding the competitive dynamic. This occurs when all or most of the competition is privately held, in a non-reporting JV or buried deep in a big company. In the cases of STX and CYMI, the passage of time has rendered the competitive dynamic reasonably scrutable. The same could be said about HTCH, although the question still lingers as to whether TDK will be successful in fixing the Magnecomp assets it acquired and what it might eventually do with them. KEM would be a good example where an inscrutable competitive dynamic has remained obdurately so, as so many capacitor makers are either buried deep in a Japanese conglomerate or are small niche producers. Finally, the worst example of getting bit by an inscrutable matter would be in Handleman, where I failed to recognize that the music industry’s inability to recover its faltering value proposition could be so detrimental to a distributor’s welfare. Surely, “How well is the music industry going to do in competing for discretionary income?” is an inscrutable matter.
PRACTICAL STEPS TO AVOID PAIN OF LOSS
I think every investor needs to develop their own short list of rules of how to manage inscrutability. Mine starts with the recognition that it matters a lot more in Bear markets (or Bull Markets that are “long in the tooth”). It also should include a daily, if not more frequent, reminder, that the ill consequences of inscrutability going against you will be greatly magnified by financial leverage, including the presence of covenants on credit agreements that seem benign until the floodwaters have been rising for a while. The meat of it, though, is to have a list of “Just Don’t Go There” industries, to work up the same facet of intellectual humility that has served the team of Buffett and Munger so well. For me, such a list includes most financial companies. I say “most” to acknowledge the sort of exception I would make for the likes of Wells Fargo. My approval of WFC is not because Buffett owns it but because Buffett had the wisdom and the opportunity for interaction to be able to “sign off” on the executives who set the tone as to how WFC lends and otherwise manages risk. (Banking reminds me of what they used to say about communism: if it wasn’t for human nature, it would be a great system.) I doubt WFC is unique in this respect, but don’t know how I would recognize the exceptional leader. I also screen out defense companies whose sole business is highly classified contracts. (The classified nature of what USEC does has added to the inscrutability of the issues that surround their position as a fuel supplier to the utility industry.). The issues I mentioned in regard to Pfizer are such that I am unlikely to look at another drug company. I find the competitive dynamic of specialty retailing to be unacceptably inscrutable, although a more “diversified” retailer with a solid value proposition might be attractive at the right price. Even in industries as “safe” as electric utilities are thought to be, some work I did on Public Service of New Mexico indicated that a highly politicized utilities commission can be an unacceptably inscrutable problem.
SO WHAT ABOUT GE?
GE is a great example of a company that has defined inscrutability for about as long as any of us can remember. I actually owned it in 1990, but I was much younger then and even then, the finance part of the giving investors pause (at least during the recession). Based on my ad hoc scrutability screen as it has since evolved, I never would own GE. My belief is that no reasonable amount of study and observation could produce an intellectually honest answer to the core “just how do they make their money” question. It is influenced by past exposure to a few of their operations (How they marketed Power By the Hour and their CAT scan systems comes to mind.) All of the leverage only adds to my aversion. We can debate just how leveraged they are, but to paraphrase a colleague who go unnamed, its “whether she is closer to 300 than to 400 pounds is debatable, whether or not she is blimp is not.” In a Bear Market, it just doesn’t matter.
That said, I am not so alarmed as to think that the stock needs to be sold here in what are probably the last days of a Great Bear Market. Buffett’s deal reminds me of when he bought the assets of Fruit of the Loom. It was a low cost, vertically integrated producer of a consumer staple but badly run. He did not buy the company, he bought assets out of bankruptcy and eventually cobbled it together with Russell (which was a stock buy) and who knows what else. It will never be a great business, but the price was right for the okay business that it can be in a somewhat consolidated market. I believe even though Buffett has many more insights into GE (through personal contacts and in the dealings of BH entities) than mere mortals like us will ever have he comes to the same “it’s too tough” conclusion against owning it on the same terms we would. However, based on what he can know, he has obviously determined that whatever GE’s problems are, they are not terminal. It might take them many years to re-tool the management and compensation systems that were very much geared to what some have called “a golden age for financial services” (usually in the context of said age being over), but he will be well paid to wait.
Buffett probably also recognizes that GE is perhaps singularly well situated with respect to all that energy and transportation infrastructure re-tooling that is going to be the big economic driver of the next decade or so. I also believe that he recognized that the reason GE was willing to pay up to his terms was in part because no one at the company has ever been as uncertain about GE’s future as the last few months events have rendered them. It is also likely that he was able to determine that the capital infusion has a reasonably good chance of being enough to allow them to effect an orderly deleveraging as opposed to joining in on the “fire sale”, resulting not only in better realizations but the preservation of at least a semblance of what used be known at “the GE mystique”.
Saturday, October 25, 2008
Sunday, October 19, 2008
Quite Possibly the Biggest Dump of Your Life
While the first half of this month found us thinking a lot about a particularly dreadful October we endured some 21 years ago and being bombarded with comparisons to the one 79 years ago, the Market was actually a source of encouragement during the week just ended. It was not simply because the indices actually managed a weekly gain for the first time since I can remember. It is because what I think I saw was that vast pile of “assets for sale, name your price, I just want some cash I can hold in my hand” appears to be diminishing down to a size that is manageable relative to piles of buying power that have been waiting nervously on the sidelines. In “technical analysis- speak”, the Market had a great test of a really major low this week.
What I have in mind started on the previous Friday morning, when for what seemed like the umpteenth time trading opened with a wave of “get me out!” sales hitting bids well below the previous day’s close. It was something on the order of a 1000 point gap down opening, the likes of which even multiple decades of being there for the opening does not prepare one for. It closed down for the day and way down for the week, but far less than down 1000 on the day for the Dow. Based on the intraday lows for three indices (DJIA, S&P500 and NDQ) the Market that day traded 46% below its peak of almost exactly a year before. I noticed quite a few stocks indicated higher after the close, in stark contrast to the prior Friday, when a late in the day slump gave off the distinct aroma of no one wanting to be long anything over the weekend.
Monday roared famously and there was some follow through on Tuesday morning, at least for the Dow and S&P. Indeed, from the intraday lows Friday to the Monday close, about 15 trading hours, the indices all shot up better than 19%. Does anyone remember anything catalytic happening over the weekend, like the surprise change in the short selling rules that caused a ripple of excitement a few weeks back? I certainly don’t. No, the selling simply reached an unsustainable emotional climax early Friday and burned itself out. Fifteen trading hours later, the recovery had gotten ahead of itself. This lead to another miserable seeming day on Wednesday, as buyers slinked back to the sidelines and the Liquidation Imperative resumed, no doubt with at least a few of those savvy traders who had bought the opening on Friday joining in.
The rationale for the rally petering out was “recession fears” emanating from earnings releases, as if anyone with access to the internet or a TV in the house might suddenly realize that the global economy might be in danger of slowing down and so he had better sell his stocks. I was particularly struck by how Intel’s release of a record quarter and an outlook that suggests a perhaps unprecedented control of its destiny culminated in a headline about a “murky outlook”. (Is that a “Dog Bites Man” headline or what?) This weakness carried over into Thursday, with the NDQ seemingly leading the way down, setting up what was perhaps a defining moment. Several hours into it, the NDQ got to within 1.2% of the low it made on Friday, 10/10, and then bounced up to close almost 10% above that intraday low. The other two indices got within about 3% of their Friday lows and then made similar moves. This is what the technicians call a successful test of a low. It is an indication that buying interest is no longer being overwhelmed by selling interest. This sharp reversal was followed by a Friday that gapped sharply lower but spent most of the day seesawing with an upward bias, up on the order of 3% at one point before closing down fractionally for the day and up for the week.
What’s going on here is that we are in the late phases of a wholesale liquidation. Call it the Great Asset Dump of 2008. Every day for the past several weeks plan sponsors, committees, spouses, etc. reached a pain threshold and said “Enough!”, and more assets hit the market. It matters, especially in the hedge fund world, that the end of the third quarter was two weeks ago (could they be almost done re the Sept 30 notification deadline?). It wasn’t just stocks and bonds, either. Over the past couple of years, commodities got hoarded, and not just by speculators. All this talk of oil coming down because of weak demand is the same sort of smoke that took it to $147. For instance, uranium has exhibited signs of trade liquidation, dropping a couple of bucks a pound every week over the past month or so. Does anyone think that we are headed into a situation that will involve a reduction in base load electric power generation? I don’t think so. No, what we are going through is simply liquidation. Assets that got squirreled away, some of which (like mortgage backed securities and blue chip stocks) were meant to be held more or less indefinitely, have been hitting a market were even the most seasoned investors have found themselves wondering if maybe this isn’t The Big One and pondering that wisdom about running away so as to live to fight another day.
The Big One, indeed. A recent poll suggests a substantial number of Americans have responded to the barrage of 1930s imagery in the media and have started mouthing the D-word. Other commentators have offered up plenty of comparative statistics that just how far fetched the idea of Depression is at this juncture. Having been a “downsize-ee” at a very inopportune time of life many years ago myself, I can understand depression finding its way into the thinking of many thousands who thought that the fat hog that is the financial services industry would be taking care of all those tuitions, payments on multiple residences and other accoutrements in the great game of keeping up appearances. Cumulative weeks of dealing with people who have had the realizable value of much of their life’s savings being priced by frantic liquidators is depressing, as is not being barely able to look at the prices of stocks you thought you bought so cheaply on a very bad day like March 17. However, we forget that for an awful lot of people, this Market is just a spectator sport, one more place where “other people” do what they do. Last weekend, we took a drive out to a State Park about two hours west of Austin. With all the talk about looming recession, one would have thought that a park several gallons of gasoline away from even outer suburbia would have been close to empty but for a few rangers twiddling their thumbs, but we had to park way off in the overflow parking area instead of in the very large main lot. On the way back, we went through Fredricksburg, a popular destination for shopping and overeating, that one would have also expected to be forsaken by hard pressed householders intent on shepherding their few remaining shekels so as to postpone their inevitable rendezvous with a bread line. There was hardly a parking space to be had along the main street. These little anecdotes suggest that while there are likely many individualized instances of dire financial straits out there, Main Street America, speaking generally, is a long, long ways from depressed.
What matters most in here is that governments are working together to pre-empt those worst case scenarios that prey on our imaginations. The interventions present the potential for all kinds of unpleasant consequences down the road, but they are just that, potential and out there in the future. In the here and now, the specter of the metaphor shifting from meltdown to black hole needs to be put to rest. There are all kinds of bad things that might come out of the government getting more deeply involved in the credit markets, and as time goes by we need to pay attention to how it plays out. There is also potential, although I would not go betting this way anytime soon, that the end games on a lot of these actions can be managed ways that exceed our expectations. For example, the Treasury could earn a nice return for a few years, then sell its shares at a profit five years from now and be out of banking, providing the taxpayers with at least a whiff of relief.
What matters is that the restoration of confidence that things aren’t going to just get worse and worse, which seemed to take root this week, makes those with the urge to liquidate just a little less frantic each week, and those with the deep pockets (like that smart guy from Omaha, who wrote that very encouraging op-ed in the NYT) a little more confident. The Great Asset Dump of 2008 will go on, irrespective of what we read about the economy or earnings, until it becomes apparent that “what’s for sale” has shrunk to a point that it can be easily absorbed by the large piles of buying power that have been sitting nervously on the sidelines. Then there will be more days like Monday and fewer days like all the others that have collectively seared our memories. But for the degree to which most us used up so much of our buying power snapping up bargains before the real ugliness started, these brutal weeks will likely prove to be a blessing. What will likely follow is a multiyear era when all but the most snake-bit equities actually produce double digit returns, a repeat of what many astute value investors reaped during that otherwise dreadful time that was the back half of the Seventies. (You can look it up.) There is something out of kilter about a world where an enterprise like Intel, with its cash hoard overflowing, its innovation engine back in high gear and its competitor in disarray, for less than thirteen times current year earnings and ten times likely year ahead earnings. (I’m thinking something like twenty times earnings a little more than $2 within four or so years.) I’m with Warren, cash is about to become trash.
What I have in mind started on the previous Friday morning, when for what seemed like the umpteenth time trading opened with a wave of “get me out!” sales hitting bids well below the previous day’s close. It was something on the order of a 1000 point gap down opening, the likes of which even multiple decades of being there for the opening does not prepare one for. It closed down for the day and way down for the week, but far less than down 1000 on the day for the Dow. Based on the intraday lows for three indices (DJIA, S&P500 and NDQ) the Market that day traded 46% below its peak of almost exactly a year before. I noticed quite a few stocks indicated higher after the close, in stark contrast to the prior Friday, when a late in the day slump gave off the distinct aroma of no one wanting to be long anything over the weekend.
Monday roared famously and there was some follow through on Tuesday morning, at least for the Dow and S&P. Indeed, from the intraday lows Friday to the Monday close, about 15 trading hours, the indices all shot up better than 19%. Does anyone remember anything catalytic happening over the weekend, like the surprise change in the short selling rules that caused a ripple of excitement a few weeks back? I certainly don’t. No, the selling simply reached an unsustainable emotional climax early Friday and burned itself out. Fifteen trading hours later, the recovery had gotten ahead of itself. This lead to another miserable seeming day on Wednesday, as buyers slinked back to the sidelines and the Liquidation Imperative resumed, no doubt with at least a few of those savvy traders who had bought the opening on Friday joining in.
The rationale for the rally petering out was “recession fears” emanating from earnings releases, as if anyone with access to the internet or a TV in the house might suddenly realize that the global economy might be in danger of slowing down and so he had better sell his stocks. I was particularly struck by how Intel’s release of a record quarter and an outlook that suggests a perhaps unprecedented control of its destiny culminated in a headline about a “murky outlook”. (Is that a “Dog Bites Man” headline or what?) This weakness carried over into Thursday, with the NDQ seemingly leading the way down, setting up what was perhaps a defining moment. Several hours into it, the NDQ got to within 1.2% of the low it made on Friday, 10/10, and then bounced up to close almost 10% above that intraday low. The other two indices got within about 3% of their Friday lows and then made similar moves. This is what the technicians call a successful test of a low. It is an indication that buying interest is no longer being overwhelmed by selling interest. This sharp reversal was followed by a Friday that gapped sharply lower but spent most of the day seesawing with an upward bias, up on the order of 3% at one point before closing down fractionally for the day and up for the week.
What’s going on here is that we are in the late phases of a wholesale liquidation. Call it the Great Asset Dump of 2008. Every day for the past several weeks plan sponsors, committees, spouses, etc. reached a pain threshold and said “Enough!”, and more assets hit the market. It matters, especially in the hedge fund world, that the end of the third quarter was two weeks ago (could they be almost done re the Sept 30 notification deadline?). It wasn’t just stocks and bonds, either. Over the past couple of years, commodities got hoarded, and not just by speculators. All this talk of oil coming down because of weak demand is the same sort of smoke that took it to $147. For instance, uranium has exhibited signs of trade liquidation, dropping a couple of bucks a pound every week over the past month or so. Does anyone think that we are headed into a situation that will involve a reduction in base load electric power generation? I don’t think so. No, what we are going through is simply liquidation. Assets that got squirreled away, some of which (like mortgage backed securities and blue chip stocks) were meant to be held more or less indefinitely, have been hitting a market were even the most seasoned investors have found themselves wondering if maybe this isn’t The Big One and pondering that wisdom about running away so as to live to fight another day.
The Big One, indeed. A recent poll suggests a substantial number of Americans have responded to the barrage of 1930s imagery in the media and have started mouthing the D-word. Other commentators have offered up plenty of comparative statistics that just how far fetched the idea of Depression is at this juncture. Having been a “downsize-ee” at a very inopportune time of life many years ago myself, I can understand depression finding its way into the thinking of many thousands who thought that the fat hog that is the financial services industry would be taking care of all those tuitions, payments on multiple residences and other accoutrements in the great game of keeping up appearances. Cumulative weeks of dealing with people who have had the realizable value of much of their life’s savings being priced by frantic liquidators is depressing, as is not being barely able to look at the prices of stocks you thought you bought so cheaply on a very bad day like March 17. However, we forget that for an awful lot of people, this Market is just a spectator sport, one more place where “other people” do what they do. Last weekend, we took a drive out to a State Park about two hours west of Austin. With all the talk about looming recession, one would have thought that a park several gallons of gasoline away from even outer suburbia would have been close to empty but for a few rangers twiddling their thumbs, but we had to park way off in the overflow parking area instead of in the very large main lot. On the way back, we went through Fredricksburg, a popular destination for shopping and overeating, that one would have also expected to be forsaken by hard pressed householders intent on shepherding their few remaining shekels so as to postpone their inevitable rendezvous with a bread line. There was hardly a parking space to be had along the main street. These little anecdotes suggest that while there are likely many individualized instances of dire financial straits out there, Main Street America, speaking generally, is a long, long ways from depressed.
What matters most in here is that governments are working together to pre-empt those worst case scenarios that prey on our imaginations. The interventions present the potential for all kinds of unpleasant consequences down the road, but they are just that, potential and out there in the future. In the here and now, the specter of the metaphor shifting from meltdown to black hole needs to be put to rest. There are all kinds of bad things that might come out of the government getting more deeply involved in the credit markets, and as time goes by we need to pay attention to how it plays out. There is also potential, although I would not go betting this way anytime soon, that the end games on a lot of these actions can be managed ways that exceed our expectations. For example, the Treasury could earn a nice return for a few years, then sell its shares at a profit five years from now and be out of banking, providing the taxpayers with at least a whiff of relief.
What matters is that the restoration of confidence that things aren’t going to just get worse and worse, which seemed to take root this week, makes those with the urge to liquidate just a little less frantic each week, and those with the deep pockets (like that smart guy from Omaha, who wrote that very encouraging op-ed in the NYT) a little more confident. The Great Asset Dump of 2008 will go on, irrespective of what we read about the economy or earnings, until it becomes apparent that “what’s for sale” has shrunk to a point that it can be easily absorbed by the large piles of buying power that have been sitting nervously on the sidelines. Then there will be more days like Monday and fewer days like all the others that have collectively seared our memories. But for the degree to which most us used up so much of our buying power snapping up bargains before the real ugliness started, these brutal weeks will likely prove to be a blessing. What will likely follow is a multiyear era when all but the most snake-bit equities actually produce double digit returns, a repeat of what many astute value investors reaped during that otherwise dreadful time that was the back half of the Seventies. (You can look it up.) There is something out of kilter about a world where an enterprise like Intel, with its cash hoard overflowing, its innovation engine back in high gear and its competitor in disarray, for less than thirteen times current year earnings and ten times likely year ahead earnings. (I’m thinking something like twenty times earnings a little more than $2 within four or so years.) I’m with Warren, cash is about to become trash.
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