Contagion
I've started reading Contagion by John R. Talbott, Wiley $26.95 226 pages. I do not expect to finish the book. As usual, maybe because I'm left-handed, I started at the back.
His last sentence (on page 266) is: “If this crisis was a shot across the bow, maybe it will be the clarion call needed to make people rethink how they wish to live their lives, to decide what is truly important in life, and what ultimately they hope to accomplish with their short time here on the planet.”
Next I read the preface. I was not too impressed. He said he has “had a fairly incredible run of accurate predictions.” He also said “Unfortunately, the worst is not over.” Now I agree with that. Next I checked for references: there were 18 pages. That's good. Then I checked the index for the word dividends. Not there. Not good.
Which Investments and Which Countries Will Weather the Storm the Best? was the title of Chapter 13. I read that yesterday afternoon as skating on the lake is over. There were some interesting ideas. Example: “The benefit to staying liquid and holding a large amount of cash even though it is low yielding is that you are prepared to take advantage of asset prices when they sink.” 166
LIFE INSURANCE COMPANIES: I immediately thought of the current prices of our three life insurance stocks. (unbelievable closing prices March 9 2009: MFC $7.13; SLF $15.00; GWO $11.35). Talk about beyond the mean…the other way! “investors can,” as the Economist said recently, “act irrationally.” I wonder if this will be the low price. Insurance company stock prices rallied on March 10, to celebrate the release of my brothers from hospital…one in Ottawa, the other in Victoria. I expect the lows to be tested again. We hope they hold, eh. I think the insurance companies will, as Mr Buffett said about the banks on CNBC last week, “earn they way out of it.” On GWO at $13.95, to yield 8.8% on the $1.23 dividend, we clicked.
“Given the severity of the crisis I would recommend not holding any common stocks.” 168. What a statement, eh! Balance this with the fact that 'dividends' is not listed in the index. The man, a former investment banker for Goldman Sachs, does not understand dividend growth investing. He deems all common stocks risky. Most of them are.
Talbott continues in Chapter 13 and talks about other investments: bonds of various types and duration, TIPS (inflation-indexed bonds to Canadians)(tick), property for rental income, commodities, gold (tick) and higher risk venture capital, private equity and hedge funds. On page 179 there is a summary: “cash is king, TIPS, gold and China are the best bets I can suggest during these coming hard times.” Canada was not mentioned.
WARREN BUFFETT: Did you see and hear Mr Buffett on CNBC March 9th? Nothing new really. He has to be careful what he says. His Letter to Shareholders is much better. One quotation about banks “they will earn their way out of this”. “Over time”, he said “stocks will be worth more.” What else could he say? He also said, more than once, that 'it'/'this' will take quite a while / won't go away fast.
