Best investment adviser Richard Losch's blog

Value Investing vs Index Investing

The real value of a company today is measured by its potential for further cash flows, and the task of the value investor is to make as intelligent an estimate as possible of those future cash flows.

Index Investing is not always a bad idea, but while following the crowd can yield positive short term results, it will almost always lead to poor long term results.

How to Play an Index Bubble

With the S&P 500 trading at 17.2 times forward earning and the CAPE (Shiller PE ratio) over 27 times earnings the market is clearly overvalued by historical standards.

Successful Investors

In his 2014 publication, "Excess Returns: A Comparative Study of the Methods of the World’s Greatest Investors", Frederik Vanhaverbeke condenses extensive data from the field and attempts to draw some general conclusions regarding investment success.

Is the Market Overvalued?

The FED indicates it might raise interest rates a quarter point and Mr. Market gets depressed. We have been living with these abnormally low rates for so long that investors seem to have lost perspective. Realistically, it is going to take a lot more than a quarter percent raise from here to have any impact our economy. In 2008, the FED had to raise rates to 5.50% before the economy started to cool. In 2000, rates got to 6.75% before the tech bubble popped. The 1990, recession was preceded by rates of over 10%, and the granddaddy of all bubble poppers was Volker’s 1981 peak of 22.5%.

What’s Next for the Market

The FED indicates it might raise interest rates a quarter point and Mr. Market gets depressed. We have seen these abnormally low rates for so long that investors seem to have lost perspective.

Operating Earnings

Operating earnings from Berkshire’s wholly owned operating companies grew from $4.0 billion in 2006 to $18.9 billion in 2015. The CAGR for the last five years was 13.23 %, and 16.85 % for the last ten years.

Article by investment manager in Bay Hill Living

The article written by investment manager Richard Losch and published in "Bay Hill Living" magazine, April 2016 issue. In this article investment manager Richard Losch written about building a foundation in investment.

Building a Foundation

With the news being uniformly bad in this morning’s WSJ I see nothing to be gained by piling on. Yes the market is overvalued, but what is there to say that it will not get wildly more overvalued before it corrects like it did in 2000. So I will try to find a more positive perspective.
Since I first got involved with the stock market (as a registered representative at Merrill Lynch in 1967) the market has experienced approximately twenty, 10%-20% corrections similar to what we experienced in 2015. This included three bear markets that could be classified as generational 50% corrections, and one (1987) approached 40%.

3G Culture - Dream Big

“Dream Big” is a history of the 3G partners from their days a Garantia Bank in the 1970’s up though the Imbev’s purchase of Anheuser-Busch in 2008. The story is carefully researched and provides a detailed history of the partnership, its formation, and a history of the individual partners in the time that lead up to formation of 3G Capital.

Myopic Loss Aversion

This rather obscure term is meant to describe the psychological result of too carefully following your investments. The investor’s goal should be to buy low and sell high. Myopic loss aversion causes us to do the opposite.
While close attention to your investments might seem like a good idea, for many investors it can generate negative side effects. If your goal is successful long term investment, constant checking your results by way of an irrationally volatile stock market can cause the inexperienced investor to sell at the wrong time, or to buy the current media frenzy.


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