The Loneliest Job" Nancy Gibbs - Time Jan 25 2010.
Eisenhower recalled how as a general, before D-Day, he had to decide whether to send two paratroop divisions into a sector where 9 out of 10 would probably be slaughtered. He eventually decided the troops were essential to the mission and said, "I felt that only once in a lifetime could a problem of that sort weigh as heavily on a man's mind and heart". Then he became President and found a comparable burden :
"when one man must conscientiously, deliberately, prayerfully scrutinize every argument, every proposal, every prediction, every alternative, every probable outcome of his action, and then-all alone-make his decision. "
Friday, January 15, 2010
Graham-Style Formula
Benjamin Graham was known for his thorough financial analysis of companies, but he also experimented with many simple rules of thumb. Here is a valuation formula adapted from The Intelligent Investor:
P/E = 8.5 + 2G where P/E is the fair P/E ratio, and G is the earnings growth rate.
The idea is that you get a formula that's simple enough to use in the privacy of your own skull, without needing a computer or calculator.
There is a drawback with this formula: as written, it gives answers that are on the high side. But the good news is that with some modifications, this style formula can give you a very fair estimate of the real answer. It's almost as simple as the PEG ratio, and much more accurate.
This calculator lets you check the accuracy of the formula. (It's initialized with a more conservative version of the formula than what's given above.)
Benjamin Graham was known for his thorough financial analysis of companies, but he also experimented with many simple rules of thumb. Here is a valuation formula adapted from The Intelligent Investor:
P/E = 8.5 + 2G where P/E is the fair P/E ratio, and G is the earnings growth rate.
The idea is that you get a formula that's simple enough to use in the privacy of your own skull, without needing a computer or calculator.
There is a drawback with this formula: as written, it gives answers that are on the high side. But the good news is that with some modifications, this style formula can give you a very fair estimate of the real answer. It's almost as simple as the PEG ratio, and much more accurate.
This calculator lets you check the accuracy of the formula. (It's initialized with a more conservative version of the formula than what's given above.)
