Debt can be very helpful or hurtful. In business, debt is called leverage for a reason. It can grow a business and increase earnings. But misusing debt can turn that leverage into an anchor.

James Montier at GMO points out the misuse of debt to fund share buybacks (along with a few other things) and how it relates to the current market prices, in his latest paper Six Impossible Things Before Breakfast.

The debt for buybacks issue has been pointed out numerous times before, but it’s been largely overlooked or ignored. Buying back shares is a short term fix to show “growing” earnings per share. If you’re just looking at this on the surface, earnings per share is higher. Everything’s great, move along. Continue Reading…

I can google anything and get a list of results in less than a second. If I click one of those links and the site takes too long to load, I’ll likely leave before I see it. How long is too long? Two seconds.

Let that sink in.

As a site owner, this will drive you crazy trying to optimize for speed. But just based on the stats, it’s insane. Most people will not wait an extra second or two for results they want. Continue Reading…

The best thing I read this week is an article from Jim O’Shaughnessy on what it takes to be a successful active investor. He lays out the seven traits required for active investing.

But before he does, he covers the obstacle that gets in the way of most passive investors and why active investing is even harder. Continue Reading…