Online Stock Analysis tools

http://quotes.wsj.com/SPG/research-ratings
http://www.nasdaq.com/symbol/spg/analyst-research
http://money.cnn.com/quote/forecast/forecast.html?symb=spg

The life cycle of firms

People tend to parrot Warren Buffett too often. One of my pet peeve "Buffet-isms" is "our favorite holding period is forever". We as humans cannot gauge the future, how the economy will shift, what new technologies will arise, or how consumer preferences will change.

The important message from Warren Buffett is that it is good to have a long term holding period, but personally I think this should be much shorter than 'forever'. You don't want to focus on quarterly performance and overtrade, so a good middle ground is 5-10 years.

A good example of a company that shifts, GAP.
What they sold was just not in fashion anymore. Management, no matter how skilled, cannot fight this trend.

GAP could have been a great buy 10 years ago. But its a very different world now.

Explaining US growth outperformance

PIMCO recently out out a short note talking about US economic outperformance relative to DM peers. Their summary is reproduced below:

Q: The U.S. appears to be the furthest advanced in its post-crisis normalization among developed countries. Why? And what is the chance of a surprise to the upside for growth or inflation? 
Mather: There are three key reasons why the U.S. is furthest along. First, the U.S. was more aggressive in its response to the financial crisis through monetary policy, with interest rate cuts and quantitative easing. Second, private balance sheets were cleaned up more quickly, even if through defaults. Third, new regulation forced banks in the U.S. to recapitalize sooner than those in other countries. Many developed nations simply took longer to respond to the crisis for a variety of reasons, so it is not unexpected that the U.S. is further along in the normalization process.

This is the standard explanation of the US economy since the crisis. In my personal opinion this is an INCORRECT representation of the economic forces that were at play. US came just into a period of surplus, primarily from the fracking boom. This created a jobs, investment and current account boost that outweighed all policy actions that were taken. It's a recurring problem that investment analysts downplay the enormity of the US fracking revolution. 

Book Review - The Bankers New Clothes

Book Review - House of Debt

Book Review - Kings of Capital

From GMO 4Q14 letter

http://www.gmo.com/websitecontent/GMO_Quarterly_Letter_4Q14.pdf

Why GDP isn't the best predictor of EPS growth:
"The biggest reason for this non-intuitive result is that the relationship between GDP growth and earnings per share (EPS) growth that most people assume must be there does not exist in the long run. The two developed countries with the strongest EPS growth between 1980 and 2010 were Sweden and Switzerland, which each had lower than average GDP growth. Canada and Australia, which saw the strongest GDP growth, showed very little aggregate EPS growth. Why? A big reason is dilution. Canada and Australia saw strong growth from their commodity producing sectors, but that growth came from massive investment, which was funded by diluting shareholders. Switzerland and Sweden did not invest as much and did not dilute their shareholders, leaving shareholders better off despite lower economic growth."

It's the GDP growth surprise which has stock market impact:
"If you can find cheap countries that are going to have a big positive GDP surprise over the next three years, you’ll outperform by a whopping 14.1% per year for the next three years, whereas if you are unlucky enough to buy the cheap countries that will have the worst GDP surprise, the outperformance is only 0.7%. Our strongest takeaway at GMO is that even the cheap countries with the worst GDP surprise still outperform, and even the expensive countries with the best GDP surprise still lose. The macroeconomic performance matters, but given how hard it is to predict who is going to do better than expected and the fact that it doesn’t change the sign for either the cheap or expensive countries, we’re sticking with value."