Someone just sent me this and its flat out hysterical and worth a few minutes of your time. http://www.bloomberg.com/news/videos/2015-08-06/watch-jon-stewart-s-sickest-wall-street-burns

In addition to just being funny it is a not so subtle reminder that Wall Street exists to serve Wall Street. All those nice folks suggesting fancy sounding investments are not doing so out of altruistic motives. While everyone deserves to make a living and the majority of brokers are good folks who mean well they work for firms that do not give a (expletive deleted) about you or me. Brokers are trained to sell , not evaluate investments and analyze risk. The firms generate product based on selling a story nd collecting fees. Whatever is hot right now is what is on the menu and it is rarely in your best interest. I truly miss Dean Witter because you could pick sector and asset class tops by their mutual fund initial offerings. If they bought out a bind fund rates were going to spike. If they introduced a tech fund, tech stocks were done. It was the single most accurate indicator in the history of markets. Always keep in mind that those big beautiful marble and glass buildings in Manhattan are not the home of benevolent institutions but for profit firms that live on the vig they collect from your money. In essence they are bookies in really nice suits. Caveat Emptor always applies.

This week I have spent a lot of time thinking about oil and energy stocks. I talked about the private equity outlook for the sector in this weeks video and I think it is spot on. Its rough out there right now in the sector and I am sitting on some nice losses from the stocks purchased last year. However looking out five to seven years from now I feel pretty good about our energy stocks. Eventually supply and demand should come back into line and these stocks will challenge the old highs which will represent a significant profit for those of us who actually practice the art of private equity mindset investing. The short run may be unpleasant but keep in mind that Sugar ray Leonard was getting butt kicked for 12 rounds before dominating the 13^th nd then knocking Tommy Hearns out in the 14^th that matters. It is how it finishes not the path we take to get there that counts in long term deep value investing.

I took a look at the S&P 500 this morning and only 12% of the index was down 20% or more over the past year. The bulk of those are of course energy and commodity related companies. In contrast almost 37% of index components were up 20% or more over that time frame. A whopping 3.5% of the index companies’ trade for less than tangible book value at the moment.3% trade for an EV/Ebitda ratio of 5, a level that my private equity friends tell would mark a bargain issue. 4% trade with EV/Ebit ratios that are less than half the median of S&P 500 stocks and could be considered a bargain on that level. We can have lots of discussions about the stock market but none of them will be about how cheap the market is right now.

As I write this the talking heads on TV are talking about a correction and imminent dangers in the market. While there is real damage in the community and energy related sectors lets try to keep our heads about us. We are just 2.43% off the yearly highs in the S&P 500. We have heard a lot of talk about the cracks in the high yield market but even that market is still positive for the year. No one wants a big crack up in the junk bond market that pushes the stock market a lot lower than me. I have lots of cash in the deep value portfolios. It could happen. I think it should happen. But hasn’t happen yet. We make money as deep value private equity mindset investors by reacting not by predicting. The ghost of Hetty Green is resting comfortable and Mr. Womack is most likely fishing on the pond at his farm because he has been nowhere near town as of yet. Our time will come and there are signs it is getting closer but it is not here just yet.

I tend to be a bit oblivious at times of the world around me so I was a little surprised when the wife came home with a big back of school supplies for the youngest. Later that evening they were talking about training camps in the NFL and it hit me that we were getting close to that tradional end of summer that is Labor Day. It also means that August is almost half over and next week will be 13d season. We will start seeing the filings of all the best value and activist managers so we can slip on our pirate hats and steal the very best ideas. I am especially looking at what the bank stocks and closed end activists have been up to in the second quarter as I think those are the two most fertile ground for investor s in this market.

Have a great weekend everyone. The crack staff and I are taking the family to the beach this afternoon so looking forward to an ocean front evening with an adult beverage close at hand. Hope you do the same or similar as the unofficial summer draws near a close.