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151 banks (cont.) crisis investing and, 265-69, 271-72, 273,276 industry for, 106, 182-83, 184, 304, 326 loans by, 266-67, 272, 277-78, 351, 354, 440n management of, 266, 267, 269 real estate investments of, 265, 266-67, 269, 440n regulation of, 266, 267 trust departments of, 30, 48, 88, 102, volatility of, 302 Banz, Rolf, 317-25, 326, 327, 328, 333 Barwns, 203, 204, 205, 315, 396 "Barrs Bionic Betas," 299 Baruch, Bernard, 71, 355 Baseline Data Service, 366 base rate, 225-26, 229-30, 232-33, 236, 237 Basu, Sanjoy, 1489, 151, 331 Behaviord Finance, 158 Bell, Alexander Graham, 71 Bell South, 106 Berlin, Irving, 70 Bemard, Victor, 131,391 Berry, Michael, 91, 119, 147n beta, 145, 151, 153, 297-301, 352, 381, 383, 395, 396, 400-401, 442n "big bath theory," 104 biotechnology industry, 55, 200, 362, 364, 365 Black, Fischer, 385 Blue Chip Economic Indicators, 72, 73 Bogle, John C, 31, 155 bonds: capital of, 294 compound interest on, 304 crisis investing for, 273-75 default rate for, 243, 244 discounts on, 273 govemment, 28-29, 234, 273, 274-75, 278, 280-92, 293, 294, 295, 297, 301, 304, 306-15, 401, 403, 440n inflation and, 273-74, 280-90, 291, 292,294,295,304, 305-15 interest rates and, 168, 234, 240 junk, 51, 237, 243-t5, 257, 297 long-term, 240, 273, 274-75, 278, 282, 307 market for, 234-35, 240 municipal, 247, 273, 404 portfolio for, 244 retum on, 228, 244, 278, 280-96, 305-15 risk of, 305-15 short-term, 295 stocks compared with, 280-96, 305-15 taxation and, 273, 284, 290-92, 305-15,404 trends in, 72, 223, 234-35 underwriting of, 106 volatility of, 168-69 war, 288-89 zero-coupon, 273 book value: price vs., see price-to-book value ratio (P/BV) relative, 52-53 Boston Chicken, 106, 369, 371 Brealey, Richard, 103 Breen, William, 432n "bubbles," 265-69, 348-72, 393 Buffett, Warren, 54, 56, 84, 382 Bums, Arthur, 287 businesses, see corporations Business Week, 72, 228, 368 Canary Wharf Project, 353 capital: appreciation of, 23, 146, 161, 162, 164, 166, 169, 195, 196 assets and, 185, 400-404, 424n, 442n bond, 294 debt vs., 171, 176, 181, 275, 423n erosion of, 294, 304, 305-15 human, 403 limited, 186-90,213 markets for, 149, 39904 preservation of, 21, 49, 154, 207, 275, 303,311,314 working, 176 capital asset pricing model (CAPM), 400-404, 424n, 442n capital gains: long-term, 23 as retum, 146, 195, 196 taxation of, 186, 187, 196, 403, 441n capital market theory, 149 Carlyle, Thomas, 322 Carroll, Lewis, 69 Cascade Communications, 93, 233 case rate, 225-26, 229-30, 232-33, 236, 237 cash flow: analysis of, 50, 53 forecasts of, 101 growth in, 248-55 one-time gains and, 5 In
price vs., see price-to-cash flow ratio (P/CF) taxation and, 50,53, 163 value and, 148 Cassidy, John, 378 Center for Research in Security Prices (CRSP), 153, 154,321,1, 323n Cetus, 362 charts, 423,45, 84,217 Chrysler, 170, 172, 340 Churchill, Winston S., 71, 261 Citicorp, 106 Clark, Jim, 368 Clews, Henry, 217 cognitive biases, 19, 21, 216-37, 348, 372 Cohen, Abby Joseph, 16 collectibles, 237, 2412, 279, 280, 282. 315 Columbia/HCA Healthcare Corporation, 175 Columbia Savings and Loan, 51 commissions, 31, 57, 61, 104-5, 107, 166, 186, 196, 321,322, 323, 337-38 Common Stocks as Long-Term Investments (Smith), 283-84 Compaq, 54, 64, 82,213 CompuServe, 54, 367 Compustat database, 119, 120, 143-44, 146, 1478, 152, 153, 154, 155-56, 187, 194, 248, 253-55, 330, 43In, 432n computer industry, 53, 54-55, 71, 93, 1412, 220, 277, 326, 364 Computing and Tabulating Company, 54 Conseco, 106 construction industry, 110-11, 351-52, 353, 358 consumer price index, 223 "Contrarian Investment, Extrapolation, and Risk" (Lakonishok, Shleifer and Vishny), 153, 154 contrarian investment strategy, 149-59 absolute vs. relative, 200, 213 academic research on, 150, 151-53 acceptance of, 17-19, 24, 149-59, 397-98 altematives to, 204-5 consistency of, 190-92, 193 for crisis investing, 261-78, 374 criticism of, 23, 149-59, 318, 325-27, 328 eclectic approach to, 171-73, 186, 204,212 efficient market hypothesis (EMH) vs., 140, 150, 151-53, 154, 178, 374, 376, 384, 385, 396 forecasts vs., 139, 140-41 by industry, 193-213 interiinking components of, 23 investor psychology and, 18-19, 158-59, 397-98 market performance and, 154-57, 159 methodology of, 139-59, 193 for portfolios, 85n, 160-92 price vs. value in, 230-31, 393-94, 446n profit in, 139,248-55 risk and, 1459, 151, 153, 268-69, 275-78 rules for, see rules, contrarian investment statistical analysis of, 150-57 visibility and, 1415, 158 Contrarian Investment Strategy (Dreman), 146, 256, 280,318, 369 Cooper, Gary, 69 corporations: failure rate for, 170, 367-69, 370 financial position of, 171-73, 174, 275, 276, 298 networthof, 49, 51 profits of, 50, 51, 256-57, 278 startup, 114-15,332, 362 see also individual corporations correlations, statistical, 84, 380-81 country funds, 205-10, 213 Cowles Commission, 228 Crawford, Archibald A. H., 44-45 Crazy Eddie, 51 credit cards, 277-78 crisis investing, 261-78 banks and, 265-69, 271-72, 273, 276 for bonds, 273-75 bottoming out and, 269, 270 buy-and-hold strategy for, 263-64 contrarian approach to, 261-78, 374 credibility and, 277-78 dividends and, 271-76 essentials for, 266-68 event triggers and, 261 investor overreaction and, 261-62, 265,269-71,276-78 "margin of safety" in, 275 market reaction in, 261-64 opportunities for, 261, 268, 316-17 for panics, 265-66, 267, 269-71 pharmaceuticals and, 272-73, 274 portfolios for, 263-64, 268-69, 275, 276, 278
crisis investing (cont.) price-earnings ratio (P/E) and, 268, 271,272-74, 276 price-to-book value ratio (P/BV) and, 266-67, 271, 272, 273, 274, 276 price-to-cash flow ratio (P/CF) and, price trends and, 263 probabilities and, 266 recovery and, 263-64 retum on, 261, 263-64, 278 risk management in, 268-69, 275-78, 298 rules on, 262, 275 self-confidence in, 261, 262 sell mentality vs., 262 for specific crises, 262-66 value and, 261-62, 271-75, 276 Crowd, The (Le Bon), 356-57 Gulp, Michael, 105 cumulative average residuals, 386n Custer, George, 68 "Dark Side of the Moon" study, 253-55 Day ofthe Jackal, The (Forsyth), 69 debentures, 305 DeBondt, Werner, 256 debt: capital vs., 171, 176, 181,275,423n credit card, 277-78 defaults on, 208, 266-67, 272, 277-78, 305, 351,354, 440n financial instruments for, 313-15 govemment, 288-89, 290 load of, 51, 298 Decca Recording Company, 70 decision-making: forecasts as basis of, 74, 79-80, 84, 113, 115-16 information processing in, 76-77 investment errors and, 19, 38, 214-15, 216,218, 234-35,344 judgment and, 19, 22, 38, 193, 215-16, 344 Deep Blue, 391,394 deficits, budget, 288-89 deflation, 282, 287-88, 295 Degeorge, Franjois, 104 Dell Computer, 131,220 DFA Small Company Fund, 328-29 diagnosis, 75-76, 77, 80, 81, 109, 429n diamonds, 2412, 280 Diana Co oration, 366 DiCarlo, Michael, 366 Dickens, Charles, 69 Digital Equipment Co oration (DEC), 71,220 Dimensional Fund Advisors, 327-29 Dingle, John, 36 Disciplined Investment Advisors, 221 dividends: crisis investing and, 271-76 cuts in, 267, 305, 391 expected, 52, 53, 79, 101 by industries, 194-203 portfolios and, 161-62, 167-69, 173, 176, 178, 179, 181, 183-85, 187, 188 price vs., see price-to-dividend ratio (P/D) reinvestment of, 167n, 168, 197 yield of, 53, 118, 146, 154-58, 161-69, 178, 181, 183-85, 194-203, 228, 252, 267, 271-76, 327,331,386 Dodd, David, 49-56, 172, 256, 295, 298, 305-6 dollar, strength of, 207, 209, 280, 281, 282, 287n, 288-89, 294, 297, 304, 311 Dorfman, John, 85, 104 Dow Jones Industrial Average, 15, 17, 62, 144-45, 228, 239, 242, 262, 263, 3390, 349, 381 Dreman Foundation, 108n, 281 Dreman Value Management L.L.C., Drexel Bumham, 244 Dulles, John Foster, 68-69 Dun & Bradstreet, 115 Duracell, 132 eamings: analysis of, 50, 51-52, 60-61, 76, 256-57 forecasts of, 23, 52, 53-56, 76, 77-79, 87,88, 90-102. 108-9, 111-14, 115,298 growth rates for, 76, 88, 99-103, 1415, 172-77, 181-86, 191, 248-57, 294 indicators of, 248-55 by industry, 95-96, 100, 101, 199- of IPOs, 332, 366, 368 management of, 104 momentum of, 57-59, 92-93, 101 near-term, 88, 90 per share, 77, 78, 101 price vs., see price-to-eamings ratio (P/E)
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