Dollars and Jens
Tuesday, March 22, 2005
Doral Financial
If you haven't been following Doral over the last few trading days, you're missing out on a lot of fun.

I just thought I'd mention it.

Tuesday, March 15, 2005
Devil Take the Hindmost
The canal mania came to an abrupt end with the commercial crisis of 1793, brought on by the outbreak of the French revolutionary wars. Canal share prices collapsed. The investment returns of the new canals turned out to be miserable in comparison with their predecessors, which had been built by local landowners and merchants with a clear idea of their advantages. By the turn of the century , the overall return on capital invested in canals had fallen from a pre-mania level of 50 percent to around 5 percent. Even a quarter of a century later, one in five canals was still unable to pay a dividend, and aggregate dividends as a percentage of capital invested produced a return similar to those of risk-free government bonds.
I'm reading Edward Chancellor's history of financial speculation — perhaps I should capitalize that phrase, as it's his subtitle — and it's full, naturally, of stories of the "plus ça change" variety.
By January 1850, railway shares had declined from their peak by an average of over 85 percent, and the total value of all railway shares was less than half the capital expended on them. Owing to overconstruction of railroads and increased competition, the average receipts per mile of rail track were a third less than those before the mania. Railway dividends averaged less than 2 percent of capital expended. Even five years later, more than a quarter of the rail companies could not afford to pay dividends and the great majority paid less than 5 percent.
I wonder whether any readers of this were big telecom investors.

I enjoy the book; I should say I think some of his opinionating leaves me wondering whether he's leaving out large chunks of the story. The book is generally driven by anecdotes; his analysis may or may not be correct, but it's never really argued, even if it's given that patina.

Some of the sentiment, though, is hard to argue with:

The four most expensive words in the English language are "this time it's different."
John Templeton

Saturday, March 05, 2005
It's Here! It's Here!
The 2004 Berkshire-Hathaway annual report is available; you can also download just Buffett's letter. They are only available in PDF format; those links go to HTML cover-pages.

If you want to read Buffett's comments about investing and society, but don't want to read about Berkshire Hathaway, you should skip to near the end (as always). Read starting with the section titled "foreign currencies", in which Buffett discusses current account deficits. Later he writes about director independence. "Forein Currencies" starts on page 20 in the annual report, and probably 18 or so in the stand-alone letter.

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