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av({"version":"1.0","encoding":"UTF-8","entry":{"xmlns":"http://www.w3.org/2005/Atom","xmlns$blogger":"http://schemas.google.com/blogger/2008","xmlns$georss":"http://www.georss.org/georss","xmlns$gd":"http://schemas.google.com/g/2005","xmlns$thr":"http://purl.org/syndication/thread/1.0","id":{"$t":"tag:blogger.com,1999:blog-1255205710242367002.post-5387606027891575573"},"published":{"$t":"2012-12-10T19:29:00.005-08:00"},"updated":{"$t":"2012-12-10T19:29:52.577-08:00"},"title":{"type":"text","$t":"Investment, overcapacity \u0026 collapse"},"content":{"type":"html","$t":"\u003Cbr \/\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E1. Sell stocks of companies that announce\u0026nbsp;\u003Cstrong\u003Ehuge acquisitions\u003C\/strong\u003E, that overdiversify, or that spend a fortune on a lavish new headquarters.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E2. Avoid stocks where\u0026nbsp;\u003Cstrong\u003Emanagement picks fights\u003C\/strong\u003E\u0026nbsp;with analysts (or, by extension, hedge funds). See Overstock.com in 2005; Netflix in 2010.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E3. Watch out when\u0026nbsp;\u003Cstrong\u003Eexecutives start selling\u003C\/strong\u003E\u0026nbsp;a lot of stock — regardless of plausible-sounding excuses. Top execs in homebuilders, mortgage underwriters and Wall Street dumped billions before the 2008 crash.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E4. “Run a mile” from all stocks in an industry going through a huge\u0026nbsp;\u003Cstrong\u003Einvestment boom\u003C\/strong\u003E: Massive overcapacity and consequent collapse is inevitable.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E5. Steer clear of investing in\u0026nbsp;\u003Cstrong\u003Emanufacturing companies\u003C\/strong\u003E. Their industries are usually plagued with extreme cycles of boom and bust, overcapacity and slumps.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E6. Pay little attention to\u0026nbsp;\u003Cstrong\u003Eeconomists\u003C\/strong\u003E\u0026nbsp;or\u0026nbsp;\u003Cstrong\u003Emarket gurus\u003C\/strong\u003E.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E7.\u0026nbsp;\u003Cstrong\u003EMistrust all mathematical trading formulas\u003C\/strong\u003E\u0026nbsp;as well — they invariably fail just when you most need them to work.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E8. Look for companies where the\u0026nbsp;\u003Cstrong\u003Einsiders are buying\u003C\/strong\u003E\u0026nbsp;lots of stock.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E9. Look for companies generating a lot of\u0026nbsp;\u003Cstrong\u003Ecash\u003C\/strong\u003E\u0026nbsp;— a great sign of sustained outperformance.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E10. Look for companies which have\u0026nbsp;\u003Cstrong\u003Emonopolies\u003C\/strong\u003E\u0026nbsp;(or near monopolies), and those which manage to take out their main competitors.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E11. Remember you are\u0026nbsp;\u003Cstrong\u003Ebuying businesses\u003C\/strong\u003E, not just stocks. Pay close attention to the quality of the business, and especially the quality of the management.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E12. Look for companies which have earned the\u0026nbsp;\u003Cstrong\u003Etrust of consumers\u003C\/strong\u003E, and which have very strong brand names.\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E\u003Cbr \/\u003E\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cspan style=\"font-family: Arial, Helvetica, sans-serif;\"\u003E\u003Ca href=\"http:\/\/www.ritholtz.com\/blog\/2012\/12\/buntings-laws-of-investing\/\" target=\"_blank\"\u003Ehttp:\/\/www.ritholtz.com\/blog\/2012\/12\/buntings-laws-of-investing\/\u003C\/a\u003E\u003C\/span\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cbr \/\u003E\u003C\/div\u003E\u003Cdiv style=\"background-color: white; color: #333333; line-height: 21px; text-align: justify;\"\u003E\u003Cbr \/\u003E\u003C\/div\u003E"},"link":[{"rel":"replies","type":"application/atom+xml","href":"http:\/\/thoughtmeme.blogspot.com\/feeds\/5387606027891575573\/comments\/default","title":"Post Comments"},{"rel":"replies","type":"text/html","href":"http:\/\/thoughtmeme.blogspot.com\/2012\/12\/investment-overcapacity-collapse.html#comment-form","title":"0 Comments"},{"rel":"edit","type":"application/atom+xml","href":"http:\/\/www.blogger.com\/feeds\/1255205710242367002\/posts\/default\/5387606027891575573"},{"rel":"self","type":"application/atom+xml","href":"http:\/\/www.blogger.com\/feeds\/1255205710242367002\/posts\/default\/5387606027891575573"},{"rel":"alternate","type":"text/html","href":"http:\/\/thoughtmeme.blogspot.com\/2012\/12\/investment-overcapacity-collapse.html","title":"Investment, overcapacity \u0026 collapse"}],"author":[{"name":{"$t":"Unknown"},"email":{"$t":"noreply@blogger.com"},"gd$image":{"rel":"http://schemas.google.com/g/2005#thumbnail","width":"16","height":"16","src":"https:\/\/img1.blogblog.com\/img\/b16-rounded.gif"}}],"thr$total":{"$t":"0"}}});