As stocks returned a whopping 30% in 2013, there have been growing concerns about a stock market bubble. Especially considering that the rally supported by only meager earnings growth.

While many have made comprehensive arguments showing why stocks are not in a bubble, Marc Faber, author of “The Gloom Boom And Doom Report,” continues to argue that we’re in a bubble that’ll pop as we head for a financial crisis.

In an interview with Bloomberg TV, he says we are in a “gigantic financial asset bubble.” He also thinks the bubble could burst at any moment.

“I think we are in a gigantic financial asset bubble. But it is interesting that that despite of all the money printing, bond yields didn’t go down. They bottomed out on July 25, 2012 at 1.43% on the 10-years. We went to over 3.0%. We’re now at 2.85% or something thereabout. But we’re up substantially. Now, this hasn’t had an impact on stocks yet. In fact, it pushed money into the stock market out of the bond market. But if the 10-years goes to say 3.5% to 4.0%, then the 30-year goes to close to 5.0%, the mortgage rates go to 6.0%. That will hit the economy very hard.”

“[The bubble] could burst before. It could burst any day. I think we are very stretched. Sentiment figures are very, very bullish. Everybody’s bullish. The reality is they’re very bullish because they think the economy will accelerate on the upside. But my view is very different. The global economy is slowing down, because the global economy’s largely emerging economies nowadays, and there’s no growth in exports in emerging economies, there’s no growth, in the local economies. So, I feel that the valuations are high, the corporate profits have been boosted largely because of the falling interest rates.”

This is not a totally new call. Faber has repeatedly said that we’re headed for a 1987-type sell-off.

Faber also said Facebook is a fad and that lower interest rates are punishing savers. Here’s the entire transcript from Bloomberg TV:

…..continue reading the topics below all on one page HERE

Faber on the Fed and how far the ‘rubber band can be stretched’:

On whether the Fed is creating a two-class system:

On how to help the people on the lower end of the economic spectrum:

On whether the government is spending too much money:

On bitcoin:

On interest rates:

On his view of overvalued stocks, including Facebook:

On overall market valuation concerns:

…..again read them all HERE

It isn’t often a fabulous weekend away can be profitable. But that’s exactly the combination we offer you at Michael Campbell’s World Outlook Financial Conference in Vancouver on Jan 31st and Feb 1st.

Our 25th annual event is once again being held at the spectacular Westin Bayshore Hotel overlooking Coal Harbour, Stanley Park, the wonderful Seawall and a view of the North Shore mountains.

If you’re thinking about a mid-winter break we invite you to consider our special group rate accomodation package that includes the Westin’s Heavenly Beds and view rooms, complimentary Health Club and WiFi access plus spa discounts.

But this special offer expires on Friday January 17th – so order today. For more information and to book CLICK HERE. 

See the next generation of huge-growth investment opportunities

The World Outlook Financial Conference features top analysts from the English speaking world giving their forecasts for gold, the US and Canadian dollars, the stock markets, real estate, interest rates and the bond market.

They are chosen for two straightforward reasons: their integrity and their track record. The World Outlook Financial Conference Small Cap Portfolio was up 86% in 2012. It is up 32% year-to-date in 2013. Can you afford to miss hearing the picks for 2014? Last year you would have also heard:

* Real estate recommendations that returned more than 30% annually.
* Warning on oil & gas markets that saved investors from 20% losses.
* Currency recommendations that returned 30% in 3 months
* And many more…

Bring a student for FREE

As you may know Michael Campbell is hugely interested in educating our younger generation and to that end we have a special offer – if you buy a ticket – you can bring a student absolutely free.

The only thing is that we ask you to let us know in the Order Notes that you want a student ticket when you purchase your ticket because we have a limited number of tickets set aside. Students have really enjoyed the conference ait is also a great way to share/create a common interest with your children – no matter what their age.

Conference Details

Where: Westin Bayshore Conference Centre, Downtown Vancouver
When: Friday afternoon and evening, January, 31 and all day Saturday, February 1, 2014
To book Your Ticket: CLICK HERE or call toll free 1.877.926.6849
Cost: $119 for a two day pass

Back during my schooling years, I studied the same problem again and again so that I didn’t make the same mistake come exam time.

Problem was, I was horrible at application.

If the exact question came out in the exam, I killed it.

But that rarely happened. The question was always worded differently and confused the heck out of me.

I ended up screwing up similar questions multiple times.

The market is like this.

You make investment mistakes and in order to make sure you get it right next time, you focus and tell yourself you won’t make that mistake again.

But then a slightly different stock comes along and before you know it, your tendencies start to come out….. again.

This happened again in 2013 and since I know I am not perfect, I want to share some short reflections on the common investing mistakes that I have made.

It’s time to confess.

Common Investing Mistakes that I have Made

1. Trying to Time the Market

Everyone is affected by what the market does to a certain degree.

The biggest problem is that with the market zooming up, uncertainty about when to buy creeps in.

Should I buy now?

Or should I wait a little to see if the market corrects itself and get a better price?

The fix?

Focus on the investment quality of the business and to buy it at a cheap or fair price independent of what the market does.

2. Focusing on the Stock Price and Not Intrinsic Value

There are two parts to common investment mistake.

If the intrinsic value of a stock is 50% or even 100% higher, then waiting for the stock to drop a measly 2% before buying doesn’t make sense.

I have found myself quibbling over wanting to buy it “just a little cheaper”.

How many times have you found yourself submitting a buy order and entering the bid price just a few cents lower than the stock price?

Stop quibbling over cents.

The second point is that the stock price does not dictate intrinsic value. If the stock drops 20%, it’s easy to get worried, but the best thing to do is nothing.

I’ve made the mistake of making an emotional decision.

The stock price is not an indicator of intrinsic value.

3. Holding a Loser Until it Breaks Even

I fall for this one more often than I should.

A dreaded bias of not wanting to close the position on a stock at a loss that I invested a lot of time and effort on.

GRVY was a net net and had the makings of a huge profitable investment.

Like all things in life, it didn’t turn out the way I had planned.

With my investment down 50%, I did hope that I would break even. But over the past year, I have scaled back the holding.

I still hold a small portion because at the current price, it would also be an emotional move to sell out completely.

The value of the cash on hand far exceeds the stock price and as much as I want to sell and be done with it, I know that even crap stocks make good investments at dirt cheap prices.

4. Overly Focusing on Other People’s Opinion

There are pros and cons to this.

The pros are:

1. it’s a shortcut to investing especially when you’ve found somebody you can trust
2. saves time
3. build a diversified (> 20 positions) based on other solid value investor picks and it beats the market

The cons are:

1. you don’t know what you are getting yourself into
2. you don’t know exactly when to sell
3. you don’t know what to do if something bad happens and you need to keep asking for opinions

It’s truly a big mistake when you end up completely relying on another person on the investment.

I bring up GRVY again. Yes I screwed up on that one, and I know people also bought into it as well. The mistake is that I can’t provide live updates for every move GRVY makes.

Becoming overly dependent on someone else is a mistake which is a huge portfolio risk.

5. Not Utilizing My Checklist Enough

I do have a checklist that I refer to. I purposefully didn’t make it into some gigantic list or to be very exhaustive.

But by using just one set of checklist, I end up looking for the same style of companies. My checklist needs to expand and evolve into something that can handle different types of investments.

A collection of shorter checklists is needed that is suited for different situations such as:

• common value plays
• turnarounds
• high growth stocks
• and net nets

Not only will this help make better decisions, but it will also reduce time during the research phase.

You need to have clear goals of what you want to know instead of wandering and figuring out what you should do be looking for.

Bonus Mistake: Handling Too Many Accounts

This is more of a problem than a mistake, but I would love to hear your opinion on it.

It’s a personal one and it doesn’t look like it won’t be going away anytime soon.

I’m currently managing 3 accounts for my investing.

1. 410k to trade stocks
2. A personal brokerage account
3. A new investment account for OSV

Problem is that I can’t combine any of them and the difficult part is having to log onto all three accounts to make transactions.

Since all three accounts have different balances, it becomes a chore and time waster trying to manage, track and maintain 3 different accounts.

If this sounds familiar to you and you have a method of making it easy, please leave me a comment and let me know.

Going Forward?

Am I the only one to make these 5 mistakes?

Are these the only ones that I’ve made?

No to both.

But looking back throughout the years, I have been making progress in reducing mistakes and there will be many more mistakes to learn from and keep in check.

So think back to some common investing mistakes you’ve made. Now it’s your turn.

What mistakes have you made and what are you going to do about it?

Visit The Value Investing Blog of Old School Value HERE

»» Equities were relatively quiet, but bonds, the Canadian dollar, and European bank stocks made big moves.

»» The U.S. Treasury is about to issue its first new product in 17 years: Floating Rate Notes. Is it time to put money to work in this part of the market? (page 3)

»» Global Roundup: How to position Canadian equity exposure in light of the weak loonie; Overview of ECB and BOE meetings; China breaks record for vehicle sales. (page 4)

For the complete Weekly Report as well as Daily Updates CLICK HERE.

Small-Cap Stocks Historically Outperform Large-Cap Stocks

Between 1926 and 2004, large-cap stocks had an average annual return of about 9.26%. Accordingly, $10,000 invested in large-cap stocks in 1926 would have grown to about $10 million by 2004. That’s not too shabby. However, it pales in comparison to the astonishing 15.9% annual return of small-cap stocks over the same time period. $10,000 invested in small-cap stocks in 1926 would have grown to about $1 billion by 2004! There is also a famous Ibbotson study, which examined the U.S. markets over 70 years and found that small-cap stocks outperformed large-cap stocks 79% of the time over a 15-year period and 95% of the time over a 20-year period.

By Before Big Institutions Can Buy

The universe I can’t play in has become more attractive than the universe I can play in. I have to look for elephants. It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in.”

– Warren Buffett, discussing the advantages of small-cap stocks

Just like the Buffett quote above states, you have an advantage buying at the small-cap level. It is one of the biggest advantages of investing in small-cap stocks and gives you the opportunity to beat institutional investors. Because mutual funds and other investment vehicles have restrictions that limit them from buying large portions of any one issuer’s outstanding shares, many funds will not be able to give the small cap a meaningful position in the fund. As small-cap investors, we can buy in early and benefit from institutional buying down the road as the company grows and larger investors are able to buy in – often providing better liquidity and pushing the valuations higher.

Lack of Coverage Creates Potential Small-Cap Bargains

In many cases, when Keystone discovers a small-cap stock, we are initially the only official research coverage on the stock and almost always the only independent analysts covering the stock. Compare this too many large-cap stocks which have hundreds of analysts analyzing and following their every move. You can immediately see why the potential to find an undervalued and undiscovered gem is far more likely in the small-cap segment of the market. This is one of the primary reasons why we apply our fundamental research to this area of the market, where we can truly add value and find the best growth and value stocks for your portfolio.

Small-Cap Have Higher Growth Prospects

Due to their size alone, small caps typically have higher growth rates than larger companies. At a basic level, it is easier to double earnings of $1 million to $2 million then to double earnings of $1 billion to $2 billion. However, the market often under prices small caps relative to similar larger companies. That means investors are typically getting better value for their investment dollar with the type of small-cap companies we recommend through our research service due to their growth potential, often not fully recognized by the market because of lack of analyst coverage.

Small-Cap Volatility Creates Opportunities

To be clear, small-cap stocks are intrinsically more volatile, you also need to exercise extra care in examining their fundamentals. Small caps higher relative volatility stems from their relatively low liquidity. This means there are fewer shares available to buy or sell on the open market compared to larger companies, so small caps can move fast, even on relatively small pieces of information or news. For the savvy and well-researched investor, this can mean quick or long-term (as is most often the case) sizable gains. For those who fail to do adequate legwork, steep losses can just as easily be the result.

The financial crisis of 2008 presented generational buying opportunities and our 15 BUY (5 months following) recommendations in the wake of this crisis have made many of our client’s excellent returns. Corrections and other mini-crisis’ will continue to provide excellent opportunities for the savvy investor. The key is to have an experienced navigator constantly evaluating and identifying long-term opportunities in all market conditions with the singular goal of providing you with strong, long-term growth for your portfolio.

Investing in a selective group of individual stocks poised for rapid growth and trading at attractive valuations can deliver big gains and improve the total return for your overall investment portfolio. This is precisely what KeyStone’s Small-Cap Research Service is designed to do for you!

Our final tip is in reference to diversification – “Diversify, But Do Not Over-diversify” – Try to avoid accumulating too many stocks that operate in the same sector (or similar industries) or are dependent on the same geographies, or reside in the same risk category (cyclical, defensive, etc). Within your 8 to 12 stock Small-Cap portfolio, you will have room to diversify into a multitude of different industries and geographies. Having said this, we believe in focusing on a manageable number of great stocks rather than a shot-gun approach which sees many average investors holding 30-150 or more individual stocks in a growth stock portfolio. Avoid this strategy or just an index ETF and call it a day. You cannot beat the market if you are the market.

KeyStone’s Latest Reports Section

1/7/2014
TOP FOCUS BUY AUTOMOTIVE COMPONENT MAKER ANNOUNCES SIGNIFICANT ACQUISITION – LONG-TERM BUY REMAINS INTACT DESPITE 125% GAINS

1/6/2014
CASH RICH COMMUNICATIONS SOFTWARE COMPANY POST STRONG 2013, EXPECT FURTHER ACCRETIVE ACQUISITION IN 2014 – RATING MAINTAINED – GAINS OVER 300%

11/28/2013
EXTRUSION & AUTOMOTIVE MANUFACTURER REPORTS SOLID Q4 2013, LONG-TERM OUTLOOK REMAINS POSITIVE, STRONG BALANCE SHEET LEADS TO POTENTIAL ACQUISITION – BUY RATING MAINTAINED

11/27/2013
RETAIL – WIRELESS DEVICES COMPANY RELEASES THIRD QUARTER RESULTS – 3 YEAR INVESTMENT OUTLOOK REMAINS POSITIVE BUT RATING SHIFTED TO HOLD AS WE LOOK FOR NEAR TERM TURNAROUND

11/21/2013
UNDERFOLLOWED INTERNATIONAL/CANADIAN ENERGY SERVICE STOCK POSTS SOLID Q3, STRONG 5.4% DIVIDEND WITH SOLID BALANCE SHEET ($0.44 PER SHARE NET CASH), NEAR-TERM MODERATE, LONG-TERM POSITIVE – BUY RATING MAINTAINED