Bumpy times for bitcoin
After an extended period of relative calm, bitcoin has experienced some considerable swings to the downside over the past couple of weeks, and even saw its own mini “flash crash” Monday. For a brief moment on the BTC-e exchange, the value of bitcoin plummeted to $309, although it quickly recovered from the drop some speculated had been linked to margin trading, which the exchange introduced in November. Meanwhile, the Coindesk Bitcoin Price Index tumbled $60 to a low of $435.60; it has since recovered to trade at around $480 on Tuesday afternoon. This was the first time since May that bitcoin saw its trading price go below $500. Lesser-known cryptocurrencies litecoin and darkcoin were also hit during Monday’s rout.There was no one particular peg to Monday’s downward movement for bitcoin, although the price has seen declines since July, when New York became the first state to propose firm regulations for cryptocurrencies. Last week the Consumer Financial Protection Bureau also issued a warning on bitcoin, noting, “Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions.”This kind of volatility is not exactly new to bitcoin, which last year saw its prices hit a peak of around $1,150. Traders may be used to navigating such movements, but they may be more disconcerting to the average consumer looking to use bitcoin as currency to purchase items from the growing list of retailers who accept it.  Such purchases are also complicated by the recent IRS ruling that bitcoin is property, not currency, and therefore subject to the capital gains tax. High-res

Bumpy times for bitcoin

After an extended period of relative calm, bitcoin has experienced some considerable swings to the downside over the past couple of weeks, and even saw its own mini “flash crash” Monday. For a brief moment on the BTC-e exchange, the value of bitcoin plummeted to $309, although it quickly recovered from the drop some speculated had been linked to margin trading, which the exchange introduced in November. Meanwhile, the Coindesk Bitcoin Price Index tumbled $60 to a low of $435.60; it has since recovered to trade at around $480 on Tuesday afternoon. This was the first time since May that bitcoin saw its trading price go below $500. Lesser-known cryptocurrencies litecoin and darkcoin were also hit during Monday’s rout.

There was no one particular peg to Monday’s downward movement for bitcoin, although the price has seen declines since July, when New York became the first state to propose firm regulations for cryptocurrencies. Last week the Consumer Financial Protection Bureau also issued a warning on bitcoin, noting, “Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions.”

This kind of volatility is not exactly new to bitcoin, which last year saw its prices hit a peak of around $1,150. Traders may be used to navigating such movements, but they may be more disconcerting to the average consumer looking to use bitcoin as currency to purchase items from the growing list of retailers who accept it.  Such purchases are also complicated by the recent IRS ruling that bitcoin is property, not currency, and therefore subject to the capital gains tax.

Jim O’Shaughnessy’s Awesome “What I’ve learned” series

yahoofinancecontributors:

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O’Shaughnessy Asset Management’s Jim O’Shaughnessy drops more knowledge in a week, then some people ever manage to gather in a lifetime.

Witness his recent mullti-part series running on his Tumblr over the past week titled What I’ve learned in 30 years of investing.

Here a listing of the five parts for your reading pleasure. If you’re serious about investing and building wealth wisely over years, you’ll probably want to have a good read.

Part 1: Always use time-tested strategies

Part 2: Ignore the short-term

Part 3: Dig deep

Part 4: Never us the riskiest strategies

Part 5: Insist on consistency

We’ll add to this listing if and as Jim adds to this series.

Legends of the financial blogosphere

yahoofinancecontributors:

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Today we welcome 3 new Yahoo Finance contributors.

This is really special too because all 3 of them are bona fide leaders of the investment web and have deservingly earned reputations as legends of the financial blogosphere.

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Barry Ritholtz is, perhaps, the most read financial blogger of all time, penning daily at The Big Picture blog. His witty yet cutting style brings light to everything from the macro-economic landscape to the inequities of Wall Street. 

Barry is the chairman and CIO of Ritholtz Wealth Management. He’s also a columnist and radio show host at Bloomberg and his book, Bailout Nation, is a definitive read on the financial crisis.

You can find Barry’s Tumblr, The Little Picture, HERE.

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Abnormal Returns’ Tadas Viskanta is the preeminent curator of the financial web and really invented the smart link-fest that most every financial media outlet attempts to imitate. Tadas is the tastemaker who has discovered more talent than Jimmy Iovine and he serves it up daily for your clicking pleasure.

Tadas’ book, Abnormal Returns: Winning strategies from the front lines of the investment blogosphere is as Jim O’Shaughnessy put it - “a gift that will save you thousands of hours of research and maybe more.”

You can find Tadas’ Tumblr HERE.

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David Merkel is the Cal Ripkin of investment blogging. He gives you more quality analysis daily than seems humanly possible and we’re convinced that if fledgling investors did nothing else but closely read The Aleph Blog daily, they would become investing experts over time.

David runs Aleph Investments, an investment management shop, in Maryland and is an actuary by training, which surfaces regularly on Aleph Blog as an astute attention to risk management.

Welcome gentlemen! Amazing to have you as a part of Yahoo Finance Contributors.

Even Warren Buffett Gets Killed in the Stock Market

bencarlsonyahoofinance:

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Yesterday Warren Buffett’s Berkshire Hathaway stock price broke $200,000. Buffett’s performance over the years is an amazing feat.

Since 1980, when the price was in the $200-300 range, the stock has compounded at an annual rate of 21% per year. That’s good enough to double your money every three-and-a-half years.

But those returns didn’t always come easy to Buffett or his investors. There were times when his patient style of value investing was out of favor and the stock experienced large losses. Here are the biggest losses in Berkshire Hathaway stock since 1980:

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It’s hard to believe when you see the size of his returns, but every six to seven years Buffett suffered a large double-digit loss.

In one of Buffett’s most famous quotes on investing in the stock market he states, “Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”

This is an unfortunate reality that investors in risk assets need to understand.

It’s unrealistic to assume individual investors should expect to see the same outsized returns that Buffett has earned over the years. But it’s also unrealistic to assume that it’s possible to make money in the stock market without occasionally seeing large losses. You can’t earn the rewards without accepting some risk.

Photo: JD Morris

(via yahoofinancecontributors)

The Bottom Line by Carl Icahn

carlicahn:

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Among other things, I’m known to be a “reductionist.”  In my line of work you must be good at pinpointing what to focus on – that is, the major underlying truths and problems in a situation. I then become obsessive about solving or fixing whatever they may be. This combination is what perhaps has lead to my success over the years and is why I’ve chosen to be so outspoken about shareholder activism, corporate governance issues, and the current economic state of America. Currently, I believe that the facts “reduce” to one indisputable truth which is that we must change our system of selecting CEOs in order to stay competitive and get us out of an extremely dangerous financial situation. With exceptions, I believe that too many companies in this country are terribly run and there’s no system in place to hold the CEOs and Boards of these inadequately managed companies accountable. There are numerous challenges we are facing today whether it be monetary policy, unemployment, income inequality, the list can go on and on… but the thing we have to remember is there is something we can do about it: Shareholders, the true owners of our companies, can demand that mediocre CEOs are held accountable and make it clear that they will be replaced if they are failing. I am convinced by our record that this will make our corporations much more productive and profitable and will go a long way in helping to solve our unemployment problems and the other issues now ailing our economy. We can no longer simply depend on the Federal Reserve to keep filling the punch bowl.

Federal Reserve Chair Janet Yellen recently commented on our Monetary Policy at the International Monetary Fund saying, “Monetary policy faces significant limitations as a tool to promote financial stability.” She continued that, “Its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or supervisory approach.” Yellen’s comments suggest, and I agree, that we are in an asset bubble.

Adding to this, Standard & Poor’s issued a report just a few days ago titled, “How Increasing Income Inequality is Dampening U.S. Economic Growth and Possible Ways to Change the Tide.” In it they say: “Our review of the data, as well as a wealth of research on this matter, leads us to conclude that the current level of income inequality in the U.S. is dampening GDP growth, at a time when the world’s biggest economy is struggling to recover from the Great Recession and the government is in need of funds to support an aging population.”

There is also a dire situation regarding pension funds which supports the view that Main Street Americans are the ones falling victims to entrenched CEOs and Boards doing poor jobs at running companies. A study by Ray Dalio, founder of Bridgewater Associates, calculates 85% of public pension funds going bankrupt in three decades and only able to achieve 4% returns on their assets. These inexcusable numbers are mainly due to pension and mutual fund managers “voting with their feet” or simply voting for current management of companies in their funds, regardless of their effectiveness on shareholder value.

Our current system of corporate governance protects mediocre CEOs and boards that are mismanaging companies and this must be changed. With this system we will not meet the needs of Main Street America, nor will we be ready for when the asset bubble we have today bursts – whether it is the next one, five, ten, or 20 years. Nobel Laureate and professor of economics at Columbia University, Joseph Stiglitz recently told CNBC, “These very strong stock market prices are in a sense a symptom of the weak economy, not a symptom that we are about to have a strong recovery to our real economy.” He also said, “In the United States, from 2009 to 2012, 95 percent of the gains went to the upper 1 percent. Ordinary Americans are using up their savings.”

Currently, we must focus on the simple solution that I believe could alleviate many of these problems we are facing. The solution is shareholder activism. Icahn Enterprises L.P. (IEP) reported its Second Quarter 2014 results on August 5th and as I said, I am very pleased with our performance. What makes me especially happy is that I believe that IEP’s performance not only in Q2 but since 2000, gives testimony to my belief that activism, when properly practiced, meaningfully enhances value for all shareholders as well as the economy in general. If you bought IEP in the beginning of 2000 you would have an annualized return of 21.5% compared to the S&P 500’s 3.8% and if you bought IEP April 1 2009 you would have an annualized return of 34.3% compared to the S&P 500’s 20.5%, through July 31 2014.

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Even more telling is the annualized return of a person who invested in 23 companies whose Boards Icahn designees joined between January 1 2009 and June 30 2014: if the person invested in each company on the date that the designee joined the Board and sold on the date that the Icahn designee left the Board (or continued to hold through June 30, 2014 if the designee did not leave the Board) they would have obtained an annualized return of 27%.

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I believe that the main reason for our success is we adhere to the activism model which we have spent many years developing. What we essentially do is attempt to hold managements accountable through our rights as shareholders and seek to ensure the right people run the companies we invest in. We do not micromanage however. If a company is doing more poorly than its peers we take a hard look, and in a number of these cases the CEO is not the right person to be running the company.

True corporate democracy does not exist in America and as a result many unfit CEOs are not held accountable. Poison pills and other board tricks disenfranchise stockholders. As a result entrenched CEOs and Boards of Directors may be protected even if they are ineffective. Many large money managers agree but amazingly hardly anything is done about it - even though the most important thing in a company is its CEO. To this point, in a recent essay in the Wall Street Journal, Bill Gates discusses one of his and Warren Buffett’s favorite books, ‘Business Adventures’ by John Brooks. Gates says, “Brooks’s work is a great reminder that the rules for running a strong business and creating value haven’t changed. For one thing, there’s an essential human factor in every business endeavor. It doesn’t matter if you have a perfect product, production plan and marketing pitch; you’ll still need the right people to lead and implement those plans.”

The mantra of opponents of shareholder activists, such as lawyer Marty Lipton is that “short-termist” is synonymous with “shareholder activist.” But my record belies this statement. I have held many positions for long periods of time; some up to 30 years.

Again, I believe that the kind of shareholder activism that IEP practices has been extremely successful because we seek to bring true corporate democracy to the companies we are involved with through exercising our rights as shareholders to hold CEOs accountable and change unproductive management that needs to be changed. I believe that America needs this to correct the economic course we are on and push back against the approaching storm clouds resulting from the many problems we face today, including a major asset bubble that continues to grow.

Carl Icahn’s first piece on Tumblr. Pretty Cool!

Yahoo Finance Contributors Digest 08/11: Fading the Rally Edition

philpearlman:

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Here’s a sampling of some of the finer posts from Yahoo Finance Contributors today…

2014 in charts so far (Ryan Detrick)

Has the healthy eating movement hit an inflection point? (Scott Krisiloff)

Can technology drive unexpected prosperity? (Chris Ciovacco)

About that bearish Zillow Barron’s cover (Dan Nathan)

Are investors fighting the trend higher in equities? (Urban Carmel)

Do Risk-Adjusted Returns Matter? (Ben Carlson)

Is a bounce in 3-D stocks coming after the 60% decline? (Chris Kimble)

Anheuser-Busch InBev looks good here, Buy some Bud (Greg Harmon)

The Power of Shareholder Yield (Jim O’Shaughnessy)

Current setup suggests further short-term stock market weakness (Dana Lyons)

Learning to shun the Instagram Life (Carl Richards)

3 ways to play natural gas (Jeff Hirsch)

Investing in Mobile: The Gaming Stocks (Gordon Bowman)

This week is back-loaded so stay tuned (Peter Kenny)

Basic Materials Look Attractive Relative to the S&P500 (JC Parets)

Four Books For New Investors (Patrick O’Shaughnessy) 

Gaming the Fed’s Visible Hand (Erik Swarts)

photo thanks to: Enokson

Yahoo Finance Contributors Digest 08/08/14: Morning Edition

philpearlman:

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Here’s your daily selection of brilliance from Yahoo Finance Contributors

Back to the bad old days? (Dan Nathan)

A sign of possible capitulation: Trin closes over 2.0 (Urban Carmel)

Thunder from down under going to impact the S&P 500 again? (Chris Kimble)

Inverse ETF volume is not flashing Panic (Dana Lyons) 

Consumer sector heats up on back-to-school sales (Jeff Hirsch)

Are the markets running out of rocket fuel? (Scott Krisiloff)

Investment advice does not have to be complicated to be good (Ben Cralson)

Can the bulls make a stand near support? (Chris Ciovacco)

The Boston Beer Company has a secret weapon, and it isn’t even beer (Estimize)

Possible trend change in Cliffs Natural Resources (Adam Grimes)

Go long NASDAQ 100 and short Russell 2000 (Jeremy Hill)

Playing Conoco Phillips for a bounce with a call spread risk reversal (Greg Harmon)