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)