Arnold Van Den Berg Interview, Spring 2013

[Guest hellsten]

Arnold Van Den Berg interview:

http://csinvesting.org/wp-content/uploads/2013/06/MoneyManagerInterviewArticle_Spring_2013.pdf

 

- Natural gas

 

One example, the irony of ironies, is that Egypt is bringing

over their largest fertilizer manufacturing plant to the U.S. because they can buy the natural gas cheaper here than in the Middle East.  This is truly amazing. 

 

- 3D printing

 

Also in the manufacturing sector is 3D printing. This is one of the most exciting developments I have seen in a long time.

 

- US vs Japan and Europe

 

These are phenomenal developments that are going to make us, the United States, the low cost producer and manufacturer of many goods and services.

 

our research shows that in order for Europe to be competitive with America today, they would need to reduce their costs another 30%. This is in addition to the reductions they have already made!  Japan is no longer competitive with the United States; they are bringing their automobile plants over here, and they are starting to print money again to reduce the value of the yen.

 

- interest rates

 

credit risk can drive up interest rates

 

Can interest rates go up even if we don’t have high inflation?

 

Yes.  Credit  risk can cause a dramatic  rise in interest  rates if people begin  to  fear  that  they may not get  their money back.  Spain, Greece, Italy and Portugal had very modest inflation a couple of years ago, running around 2.5% to 3.0%.  It was a little higher in Spain and roughly 4.0% in Italy, but pretty much like the U.S.  Then, in a matter of weeks, Spain’s bond went from 4.5% to 7.0%.  Greece went from 4.5% and 5.0% to 30%.  Italy went from 4.0% to 7.0% and Portugal went from 5.0% to 20%.

 

if you concentrate on these  three  things, your investment  decisions,  overall, will  probably  be very good. They are inflation, interest rates and the fundamentals of businesses.   

 

- Value Line Median P/E

 

First, because it uses a median P/E versus an average P/E, the distortions caused by a small group of large companies, typical of an S&P 500 average P/E, have been removed.  Second, it is made up of 1,700 companies versus 500 in the S&P 500 and only 30 in the Dow  Jones Industrial Average, and it includes a lot of mid and smallTcap companies. Third, it uses two quarters of forward earnings and two quarters of trailing earnings versus all forwardTlooking earnings.  Therefore, I believe it gives you a very good evaluation of the general market. As of March 15, 2013, the median P/E is 16.6.

 

- market valuation

 

If 17 to 18 is the peak given this current rate of growth, our

opinion is that this is a fairly valued market today with only 3% to 10% left on the upside. 

 

He would probably say the market is overvalued now, because it is up over 10% since the interview was published.

[zarley]

Excellent interview.  Thanks for sharing.

[DynamicPerception]

As always straightforward and understandable for the layman.

Thanks for posting.