Ben Graham’s Net Net and other factoids


Peter taught me this rule, that a famous investor Ben Graham showed you can invest in “net net’s”: which are true value-oriented stocks. That is, invest in stocks that are trading at 65% of net curretn asset value (NCAV = current assets minus all liabilities include long term debt and preferred). Basically, you are paying nothing for the fixed assets of the company.

Other fascinating factoid, I don’t know if it is true and also some sobering notes about the government indexes:

* 90% of the return on stocks are made in 1.5% of the days the exchanges are open
* Current CPI from the government really understates inflation because it doesn’t include mortgage costs nor does it include energy costs as these are too “volatile” and also the use of “hedonic”: pricing where even if something has the same cost, the government says, well, a computer two years is better, so in effect, prices have fallen. A little strange. For instance “core inflation”: deletes food and energy which are of course growing very fast right now. Most folks think true inflation is 8-10% not 2-3%.
* “True unemployment”: is also probably higher because of the narrow definition of who is unemployed. The government excludes people who are “not actively looking for work in the last four weeks, whatever that means). Another way to look at it is that in January 2008, 13% of the men aged 25-54 do not have jobs. which is up from 11 perfecnt in 1988, 9 percent in 1978 vs. the 5% that is normally reported. The gap has to do with the “actively looking for work definition”

Related Posts