No. of Recommendations: 16
Hi folks --

I've been saying for a few days that we've been seeing evidence of massive institutional selling in some of our companies. No one puts out a press release, of course, but the amount of puking out of stocks has been incredible.

We hope you enjoy the issue tomorrow -- we've put a lot of thought into the message and the companies we're recommending. Frankly, I'm ecstatic about the prices we're being offered.

Thanks for sticking with us. I can't tell you how much it means to come onto these boards to find discussion that is rational.

A few things for your enjoyment/edification:

Longleaf Partners put out an excellent conference call today. Pay close attention to what they have to say about hedge funds. This is happening to so many companies, especially overseas. So many positions simply do not make sense to me. (Cemex gets mentioned).

http://www.longleafpartners.com/media%20files/1007...

Also, Ken Heebner was on CNBC this afternoon. I don't invest like he does, but I recognize that he is extraordinarily smart and quite savvy.

Heebner notes that some of the market's collapse has to do with a massive liquidation of hedge funds, with other funds being forced to sell as well to de-lever. He notes that this has a reflexive impact, as it increases the level of fear. He thinks that the pressure can only last for a few days or weeks as the liquidations slow.

He also says that he's finding unbelievable bargains (vouch), and particularly likes Mosaic, trading at a P/E of 3. I think he's depending too much on a peak earnings number, but regardless it's pretty darn cheap.

http://www.cnbc.com/id/15840232?video=882351284&pl...

Hang in there. The sun will, in fact, come up tomorrow.

Foolish best-
Bill Mann
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Bill,

If I were to put $25K on GG stock, can you guys give me a buying list, dont' so go to BestBuy now.
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Beg your pardon?
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Bill,

Thanks for the links and the words of encouragement. Looking forward to today's GG issue.

John
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It's truly amazing to me how much non-U.S. stocks have been punished during this bear market. In this time of fear, people are fleeing anything that is considered "risky" for the traditional safe haven of the U.S. market and U.S. Treasures, ignoring the fact that many of the world's problems originated here and that the United States will experience slow to no growth over the next several years.

As evidence of this, I heard on either Bloomberg or CNBC this morning that the MSCI index has an average P/E ratio of something like 8.5 while the S&P 500 is over 18. Despite the obvious problems out there, I personally believe that growth outside of the U.S. will be significantly stronger than inside of it over the next decade. So in the flight from risk people are selling stocks that are cheaper and at the same time likely to grow faster than U.S. stocks in the name of safety. Very irrational.

Deej
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It's old. The prices are crasing/ crashed so fast.
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Thanks for the Longleaf link Bill. I really enjoyed listening to that call. I think to some extent is was because their message was something I was dying to hear, but even removing my need for a little confirmation bias, it was interesting to hear their take. It almost made me want to buy a little Longleaf Partners now that it's been reopened.
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As evidence of this, I heard on either Bloomberg or CNBC this morning that the MSCI index has an average P/E ratio of something like 8.5 while the S&P 500 is over 18.

Hey Deej,

I confess, I haven't spent any time looking at the whole market like that, but the folks on the Longleaf call said there are a lot of numbers being thrown around for the current P/E of the S&P 500. They said their view of it is that it's currently in the 12-13 range and that higher numbers are extrapolating the current one-time writeoffs as if they constitute normalized earnings.

I have no ability to handicap this sort of thing, but I thought I'd throw it out there.

kevin
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Despite the obvious problems out there, I personally believe that growth outside of the U.S. will be significantly stronger than inside of it over the next decade. So in the flight from risk people are selling stocks that are cheaper and at the same time likely to grow faster than U.S. stocks in the name of safety.

I agree with this completely. However, most people don't seem to be able to move away from the traditional notion that non-US = too risky. When I talk with friends and co-workers about investing in foreign markets, especially emerging markets, they think I've jumped off the deep end.

What most people seem to miss is that references to a "global recession" are not entirely accurate. Economic growth will not in fact "recede" (i.e., be negative) in all countries. There will still be pockets of economic growth, but the growth will simply be slower than it has been.

China's economy, for example, will likely slow to maybe 7 or 8% growth, but it certainly will not be negative anytime soon. The same cannot be said for the US or Europe.

Huk
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I think there are a couple key reasons for the world wide drop.

#1, We have no idea how the Asian, East European and Russians will handle banking and liquidity problems.

#2, The Euro banking system problems were not caused by the USA. They dug their own hole just like we did

#3 We can go to the Treasury or Fed and get action that covers our whole 50 state financial system. The Euros have a central currency serving individual countries that all have different needs and directions. Tough system to work with.

#4, There is a panic by investors but that is mainly fueled by funds and institutions scrambling to convert to cash. Take a mutual fund, the market dives and investors start checking out. That cash out money to pay for those shares being sold must come from somewhere. Short term borrowing is tight so that means selling equities to get the cash to pay for the funds customers who are leaving. Since the market is tight, the easy to move equities are "the best" nobody wants junk.

#5 Liquidity. Companies need short term borrowing to do their daily stuff. It's tight.


If I see anything "good" in what we are going through it is that this and the next Q condition of a companies balance sheet will be closely looked at and those with cash, growth and product / service should win.

Bears


Another thing I am unsure of but would speculate, China has so much cash on the books and such government control, they will pour in and do whatever is required to keep their economy moving.
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CM001-

The new issue comes out today. So if you're looking for current best buys, just wait about 60 minutes and you'll have it.

Danny
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Everyone likes to focus on China, but let's not forget India.
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I definitely like India longterm, but the government can't seem to get out of its own way. Unless and until India tames its bureaucracy, curbs its zeal for regulation, and gives small businesses some breathing room, it won't reach its full potential.

I think picks like HDB and SLT are a great way to play broader Indian themes, but I doubt we'll see smaller, entrepreneurial Indian picks from GG anytime soon.

Huk
(Long HDB, thinking about SLT)
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I definitely like India longterm, but the government can't seem to get out of its own way. Unless and until India tames its bureaucracy, curbs its zeal for regulation, and gives small businesses some breathing room, it won't reach its full potential.

You will have to wait for about 50 years if not 100. Small businesses do have a lot of breathing room in India, relatively speaking.

but I doubt we'll see smaller, entrepreneurial Indian picks from GG anytime soon.

The best of Indian stocks are not listed as ADRs. I have to buy directly from the Indian stock exchange.

Anurag
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I have to buy directly from the Indian stock exchange.

Anurag,

Do you mind if I ask how you do this? Do you use a company here in the states?


Cheryl
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The longleaf link above is not working for me... I'm guessing this is the same thing:
- http://www.longleafpartners.com/news/q308concall.cfm

I've had a couple of Heebner's funds for a while. He has a lot of churn but has generally made the right calls on time. The thing I like about him is that he forms his own opinion about things very independently and does not give a darn what the conventional wisdom of the quarter is.
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Cheryl,

I am an Indian National living in US. I am allowed to have accounts in India. I have to trade at night though.

I think now their are firms in the US that allow you direct investments globally. Someone even posted a link on GG. I don't remember. There may be a minimum order size or higher than usual commission. But the best Indian stocks are not even visible due to lack of ADRs.

Anurag
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What reporting and auditing standards do Indian companies have to follow?

N.
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