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A Wounded German Tiger and Margin of Safety

Top 5 of the Week of February 8

It would be great to say that the stock market has turned a corner in February, but you don’t have to look far to find still more dark predictions for the future of the financial world. The Deutsche Bank is in a standoff against the European Central Bank (ECB)—no one knows which way the wind will blow at this present time.

Experts are questioning if the Fed can provide help in this downhill market though James Rickards shows us why he thinks perhaps not. Joshua Brown sits us between two bottom-up value investors and their conversation regarding how to act in a bear market.

And so with all this going on, we thought an article designed with the safety of your investments in mind might be useful—specifically advice from value investor legends regarding your margin of safety. Check out also how just a handful of US companies could create an entirely separate global stock market all by themselves…

A Wounded German Tiger

  • Tyler Durden (blogger for Zero Hedge, not of Fight Club fame) looks at the escalated recent war between, “a badly wounded Deutsche Bank” and the ECB—now allies with the Bank of Japan (BoJ)—thanks to the introduction of a new easing program
  • With the ECB ignoring central bank policy and the BoJ’s surprise move to negative rates adding to the easing policy, Durden highlights the larger consequences these companies perhaps don’t see for the future
  • Deutsche Bank is fighting from a defensive position especially with rising Credit Default Swaps on its debt, and we all know that wounded tigers are more ferocious when backed into a corner

Who will be the victor in the war between Deutsche Bank and ECB? Answer with your comments in the section below.

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Just How Far Down it Has to Go

  • James Rickards argues though not yet in a bear market the looming possibility has excited others to call upon the Fed to cancel their intended plan regarding interest hikes
  • Rickards’, research demonstrates from previous similar events that the decline is probably not on the Fed radar at the moment
  • He believes the market will need to decline 15% before they get involved and desist from their planned rate hikes, as they have their own policy goals in mind until then

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A Bottom-up Outlook

  • Here Joshua Brown showcases a discussion between two investors, “steeped in the Ben Graham school of bottom-up fundamentally-driven stock picking”
  • Brown sympathizes that they are stuck between a rock and a hard place trying to make the most of the market in a bear phase with a long-only, stock-picking mandate
  • “If everything is going to succumb and slide downhill in the end, why put so much time and effort into which pair of skis are going to take you there?”

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Margin of Safety Everyone?

  • With doom and gloom perspectives on the market every day, we need these wise words from Graham, Klarman, and Buffet to protect us from ourselves and whatever path our investments may take in such an unpredictable future
  • This article answers how intelligent value investors (such as you, our readers) can make sure you have a margin of safety for your investments
  • As Buffet puts it, “When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000 pound trucks across it. And that same principle works in investing.”

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5 US Companies Could Create Their Own Stock Market

  • The market cap of Apple and Alphabet (Google) combined comes in at only slightly less than the entire Australian stock market
  • By itself, Apple’s market cap is larger than the whole stock market of Brazil alone
  • If Apple, Alphabet, Microsoft, ExxonMobil, and GE were to join forces as a separate stock market, they could create the sixth largest stock market in the world all on their own
  • We now understand why the US contributes to 40% of the global stock market value, just by looking at the above numbers

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Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form – and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.


Anything you would like to discuss about this week’s top 5? Do you have another favorite that isn’t mentioned here? Feel free to add it below. Let’s start a discussion in the comments section!

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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Babinow Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.