Warren Buffett Discusses The Stock Market's Predictive Power In This Brief Video From 1962

Sam Ro | May 29, 2013, 7:04 AM | 1,325 |

Warren Buffett will tell you that his investment career began in the 1940s when he bought shares in a company as an 11-year.

However, there isn't much footage of the Oracle of Omaha available before the 1980s.

Reformed Broker Josh Brown points us to this rare 1962 interview with Buffett on ValueWalk.com.

In this brief clip, Buffett discusses the predictive power of the stock market.

"The stock market has been a good forecaster from time to time in the past," he said.  It also has been a rather poor forecaster occasionally."

He addressed an ongoing sell-off in the stock market.

"For example, the last four or five years, the stock market has been booming along presumably forecasting better business which has really not materialized," he said.  "So maybe the stock market is correcting a previously incorrect forecast this time."

Watch the whole clip here:

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13 Fascinating Maps From The Ultra-Addictive Tumblr MapsOnTheWeb

Rob Wile | May 28, 2013, 4:44 PM | 19,422 |

We recently came across a tumblr called Maps on the Web.

It's pretty much exactly what it sounds like. Lots of maps. And it's mesmerizing. Not only are maps fun to look at, they also explain the world.

Here are 13 of our favorites from more recent postings:

 

Check out all of the maps here --->

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We Are In The Middle Of A Hope-Destroying, Sideways-Moving Market

Vitaliy Katsenelson is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley, 2007) and The Little Book of Sideways Markets (Wiley, December 2010). He writes a monthly column for Institutional Investor

In early May I had the pleasure of attending and speaking at the Value Investing Congress in Las Vegas. The last time I had spoken there, it was May 2008 and the market was just coming off its top.? The Standard & Poor’s 500 index was trading at 18 times trailing earnings. Profit margins were at a modern-day high. They subsequently collapsed but came back to set an even higher high. If you normalize profits for high margins and look at ten-year trailing earnings, in 2008 stocks were trading 66 percent above their average. They were at 30 times ten-year trailing earnings.

In all honesty, I could do the same presentation today that I did five years ago, since market valuation is not dramatically different from what it was then. A cyclical bear and a cyclical bull market later, the S&P 500 is at (the same) 18 times trailing earnings and 26 times ten-year trailing earnings. Investors who were on the sidelines the past few years and who are now pouring money into stocks, expecting that we are in the midst of a secular bull market, will likely be disappointed. The previous sideways market, of 1966–82, included four cyclical bull markets and five cyclical bear markets. From 1970 to 1973 the Dow went from 700 to 1,000, just to drop again, to 600.

Sideways markets are there to destroy hope. It is when nobody wants to own stocks ever again, when valuations are below their historical average, that a secular sideways market finally dies (actually, more like goes into hibernation), and the next secular bull market is born. But even that is not enough: Stocks need to spend time at below-average valuations. In the 1966–82 market they spent half of their time at below-average valuations. During the recent crisis we tiptoed into below-average valuations, but we danced right back out.

To believe we are in the midst of a secular bull market, you have to be very comfortable with three things, starting with profit margins. Today corporate profit margins are hitting all-time highs. Historically, profit margins have been mean-reverting — high margins were never sustained by corporations over a prolonged period of time because, as legendary value investor Jeremy Grantham puts it, “capitalism works.” ?When a company — Apple, for example — starts earning very high margins, its competitors (like Samsung) come in with lower prices. In response, Apple must lower its margins. If margins decline even as the economy grows, earnings growth will be very benign or negative.

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World Growth Outlook Gets Cut

Time & Life Pictures/Getty Images

* Euro zone seen mired in recession with 0.6 pct contraction

* Boosted by monetary easing, U.S and Japan to lead recovery

* Euro zone warned against becoming complacent as risks ease

PARIS, May 29 (Reuters) - The recession-hit euro zone will fall further behind a generally improving United States and a rebounding Japan this year, the OECD said on Wednesday, cutting its global growth forecasts.

In its twice-yearly Economic Outlook, the Organisation for Economic Cooperation and Development forecast the world economy would grow 3.1 percent this year before accelerating to 4 percent in 2014.

The estimates marked a slightly more pessimistic view after in November the Paris-based think tank forecast global growth of 3.4 percent this year and 4.2 percent next year.

The United States was seen driving global growth with the world's biggest economy projected to expand 1.9 percent this year and then accelerating to 2.8 percent in 2014, which would be the country's best rate since 2005.

In contrast, the euro zone was estimated to remain in recession for a second year. The OECD sees its economy contracting 0.6 percent in 2013 and then returning to growth next year with a rate of 1.1 percent.

However, the outlook diverged widely within the 17-nation bloc with regional powerhouse Germany seen achieving growth of 0.4 percent and rebounding to a rate of 1.9 percent in 2014.

After years of debt crisis testing the euro zone's capacity to hold together, OECD chief economist Pier Paolo Padoan said that risks to the economic outlook have finally begun to recede.

However, he warned that the easing in the euro zone's debt crisis may lead to reform fatigue.

"As far as Europe is considered, we are concerned that complacency could set in," Padoan told Reuters. "That is a new risk that is coming up in Europe."

Unlike the United States in the 2008-09 financial crisis, the euro zone still needed to tackle problems in its financial sector holding back the flow of credit, he said.

CENTRAL BANK STIMULUS

Lifting its estimate for Japan, the OECD said that the central bank's pledge to ramp up its monetary stimulus aggressively would help its economy grow 1.6 percent this year.

The OECD took a more pessimistic view on China, forecasting that its economy would grow 7.8 percent this year, down from a previous estimate of 8.5 percent.

With economies in most countries still in recovery mode, the OECD said central banks should keep monetary policies easy while the European Central Bank should even dramatically step up its efforts to get credit flowing to the economy.

The OECD called on the ECB to make banks pay for holding deposits with it and urged it to buy assets such as securitised loans from credit-starved small and medium-sized firms, two options ECB policymakers say they are currently considering.

In the case of the U.S. Federal Reserve, the OECD said it may soon be justified to begin curbing its purchases of government bonds and mortgage-backed securities

However, it warned that a slower pace of purchases would have to be carefully flagged to markets in order to avoid an abrupt sell-off by other investors that might cause yields to spike dangerously higher.

The OECD not only gave its blessing to the Bank of Japan's dramatic increase in monetary surplus but said further moves could be used to boost the economy.

It noted improvement in Britain's pace of fiscal consolidation in both 2013 and 2014, but repeated the concern mentioned by the International Monetary Fund last week that a Help to Buy programme might end up pushing house prices up.

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Now It Makes Sense Why Germany Is Talking About Stimulus Easing Up On Austerity

The big chatter these days in Europe has to do with easing up on austerity, and even, gasp, seeing some fiscal stimulus out of Germany.

Why has it taken this long?

Because it took this long for the German economy to finally start to wobble. But now there are increasing signs that it's happening.

From Bloomberg's Stefan Riecher:

The number of people out of work climbed a seasonally adjusted 21,000 to 2.96 million, the Nuremberg-based Federal Labor Agency said today. That’s the fourth straight monthly gain. Economists predicted an increase of 5,000, according to the median of 35 estimates in a Bloomberg News survey. The adjusted jobless rate held at 6.9 percent, just above a two-decade low of 6.8 percent.

Remember, the big trend is that while Europe collapses, the German employment picture has looked absolutely fantastic throughout the crisis.

Natixis

So there's been no impetus to change the status quo.

But if the German situation stops looking so hot, then that changes things.

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The Japanese Market Is Such A Mess

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