LongTerm

This is not a vote about leaving the EU. Rather it is about a constitutional amendment that, in the guise of making the political process 'work more smoothly', is an attempt, among other things, to concentrate power in the political parties.

Italian real estate is overpriced relative to real estate in other European countries due to structural issues (like insurance companies allocating a large % of investment assets to this category). That doesn't mean the price of real estate won't go higher from here, but given the sorry state of the Italian economy at the moment I don't see a rebound to pre-crisis levels any time soon. Just my opinion, however.

Ha! OK I'll weigh in on this too, and my comments, I'm afraid, will be a bit more caustic. First, I'd say that Italy has a very weak regulatory apparatus. This is doubly so in the financial sector. Banks are often controlled by opaque foundations whose primary goals are not necessarily monetary returns, i.e. shareholders that care more about control than shareholder returns. (I'm seconding and bolding Christopher1's statement about where shareholders fall in the pecking order of importance... dead last, or even below). In addition the Italian version of the US Securities and Exchange Commission is basically non-existent, or even worse; sometimes it appears they are in collusion with fraudsters. Secondly, despite the fact Italy is in its third recession since the 2008/9 financial crisis basically nothing has been done in the political arena to address this; youth unemployment at 40%, etc. It might look like a political deadlock... except that its not! It's more like incompetence or even worse, collusion. Over the past half century the political class has awarded itself increasing power and wealth, financed by an ever-growing public debt. Now, faced with an overtaxed, inefficient economy the politicians are having a hard time accepting that the current system of privileges might have to be changed. And when I talk about politicians I'm talking about the majority of politicians, those in the two major parties, generally known here as the center-right and the center-left (guess everybody wants to claim the center but needs to differentiate themselves somehow); they all seem to want to maintain the status quo at almost any cost. Right now it appears to my untrained eye that the economic platforms of both the major parties are based on a hope and a prayer that the world economy will turn around and somehow come to the rescue of Italy's decimated manufacturing sector. In other words.. "can't we get the export sector to pull us out of this mess?" Unfortunately the answer is no because Italy no longer wields the sovereign power of devaluation with its adhesion to the euro. A year and a half ago we had one of those "let them eat cake' moments that so characterize this when Berlusconi announced that we must not be in a recession because all the restaurants were full, or something of that sort. Third, (as if the first two points aren't enough to dissuade you) there is an Italian penchant for stretching facts. Remember the Greeks and their padding of accounts? I would say the Italians are a bit more mature, but, still, Italy is a Mediterranean country. After all, where did Mr. Ponzi come from? Fourth, though this may enthuse you, the Italian banking system remains relatively closed to outside competition. No, not like it once was, but I can assure you that the cost of maintaining a bank account in Italy is far more than it is in the US. on that note, it should also be remembered that Mr. Fazio, the former Governor of the Bank of Italy, was not too long ago found guilty of fraud relating to the takeover of an Italian bank; the Bank of Italy piloted the takeover so that an Italian bank was the acquirer rather than a Dutch bank which had made the original bid. And if you think this kind of nationalistic stuff doesn't happen anymore... think again, just think Alitalia (another show of incompetence by both politicians and businessmen). So what am I saying? Caveat emptor. You are forewarned.

Sorry, I'm not quite sure as I bought it a number of years ago and it doesn't seem to have a label. It's a bit like one made by Varier called Mult-Balans but it also has a back support. Note that I'm in Europe so what's available in north America may be different. I thought it was incredibly expensive when I bought it (something like $400 or $500 for a couple of pieces of wood and some padding) but it was really worth it as I had terrible back problems and the chair really helped.

I suggest you also try a 'kneeling' chair. At first its a bit uncomfortable on the knees but you'll get used to it. It has certainly worked miracles for me; After many years of sitting behind a desk and suffering slipped disks and other back problems I finally capitulated and bought a kneeling chair with the result that after a few weeks my back pains were gone!

If you're interested in this kind of thing "Moonwalking with Einstein" by Joshua Foer is a fun read.

The logic of the Morningstar report is baffling; they maintain that it is likely insurance operations will produce the same mediocre returns in the future as in the past but that the investment returns of the past are unlikely to be replicated in the future. It looks to me like they are simply afraid of the volatility that the business structure produces and are not interested in the overall long-term results.

The whole point of value investing is NOT to look at the market and make forecasts as to where it will go and when. Thus looking at historical data can be deceptive at best. It can lead you down the slippery slope of believing that the current trend will continue, or that there will be a regression to the mean, or some other conclusion, and thus into making a PREDICTION, which we know is NOT A WISE THING. The value investor simply looks for companies selling at prices that provide A MARGIN OF SAFETY (and not what people are touting as a margin of safety nowadays, either lots of asset -preferably cash - or lots of earnings power). Personally, I look only on an asset basis. When I stop finding 'bargain stocks', as in the current market environment, I simply stop buying. Any new cash just sits there... waiting. When Mr. Market offers me outrageous prices on some of the assets I own, I sell, and the cash builds up faster. I don't really value things based on where interest rates are, as I acknowledge I can't know where they will go or, more importantly, when. Every time I'm tempted to buy something in today's market I think back to what Mr. Market was offering in 1974 or 1980 or even, for those with more limited time horizon, 2008 and think, "Do I really want to tie my money up in something with an earnings yield of under 5% when I could have purchased this same or a similar business for 20% of the current market offer back then (and thus most probably sometime in the not too distant future)?" For me 'Macro' is only confusing. I don't think I'm smart enough to figure out all the moving parts.

I've been building cash over the past 3 months, but it's getting harder and harder to continue to do so in the face of this expanding market. I've gotten to the bottom of the barrel now and don't want to sell LT holdings like FFH, LUK and BRK because of capital gains tax so I've begun to hedge with puts. The problem is the timing! I always get it wrong. Who was it that said they knew it was a good investment only when it made them nauseous?

Thanks for posting. As always Soros has a way of making a difficult problem approachable for us mere mortals. However, I do find he suffers from the same prejudices that reign in most Anglo-saxon countries when considering the Italian situation, and, perhaps by extension, those in other 'periphery' counries. The result of the recent elections in Italy, and the electoral success of the '5 Star Movement', was not a repudiation of the Euro. Far from it. I believe a vast majority of Italians are pro-Euro, despite a vocal anti-Euro minority. Most, I believe, view the Euro as a guarantee against the poor administration of their own politicians. The vote for the 5 Star Movement was simply a vote against a political class that has hijacked the democratic process while continuing to demonstrate total administrative ineptitude. Of course, if the impoverization of the Southern countries continues, anti-Euro sentiment can only grow. Political will to tackle the 'structural problems' (read bloated, stagnant bureaucracies rooted in a Borbonic system of privileges) is totally missing and the only other effective tool, devaluation, has been taken from the public policy quiver. I do like his idea of the carrot (conversion of current national debt to Eurobonds) and the stick (the need to raise any additional funds using national bonds) as I believe incentives are far more powerful than any legislated or extranationally imposed guidelines. Unfortunately history has shown that these types of policy solutions are rarely implemented without a far-seeing and persuasive popular politician, the likes of which we rarely see these days. I am pessimistic.

Too kind! I'm just a long-term visitor in Italy wondering, like twacowfca, why my US dollar seems so eviscerated, but nevertheless enjoying the 'bread and cheese' as well as the sights of the 'old world' (and happy to lose those 5 lbs!)

Blast from the past. In late December, 1992, we decided to take our very young children and their French teacher and the French teacher's young children plus her mother and sister on a trip from the states to Paris where the French teacher had lived a few years before then. At that time the US was starting to take its medicine after unwise financial choices whose chickens had finally come home to roost. I imagined we would stay at a first class hotel in downtown Paris with off season rates. Did I get a shock. The lowest rate for a first class room was $300 US up to $600 US per night! And we needed two or three rooms plus a small suite. That price was outrageous so we wound up staying at a one star hotel in Vincennes recommended by some low budget missionary friends. Madam Roberta reverted to the mode of her student days at The Sorbonne. We rode the metro. Madam Roberta showed us wonderful sights that tourists never see, and we met gracious French nationals. We walked miles and miles every day from Christmas through the New Year. We lived on bread and cheese. Each of us lost 5+ pounds of extra weight. (Although we did eat once at moderate priced Goldenbergers for the best French dinner we had ever experienced). It turned out to be the best vacation we had ever had. I think if our Southern European friends would go off the Euro to a devalued national currency that they might have to live mostly on bread and cheese for a couple of years. They might wind up a few pounds lighter without starving. And then they would enjoy life more with a full employment economy. :) I quite agree with StubbleJumper on this one, and to a lesser degree twacowfca, but with a twist. There are already a large number of people living on bread and cheese in the Southern European countries. They are hardly the ones that can be asked to tighten their belts for a few years. I would say rather that the problems in those countries can be traced to a precise group of actors; There is a great collusion between a large majority of the wealthy in these countries and their agents, the politicians. In large part, the wealthy in these countries are an extremely conservative force that generally eschews the concept of market economy (while often paying homage to it verbally, a la Berlusconi); they prefer to maintain their wealth through privilege without putting their capital at risk. And, unfortunately, there is a general lack of countervailing forces. This is clearly manifest in the inability of governments in these countries to collect taxes due under current legislation (never mind making the theoretical tax burden more equitable). We all, at heart, know that when a country wants to implement an effective (notice I didn't say 'just') tax regime, it does so, and without much fuss or fanfare. So why don't these countries collect taxes? It's quite simple; there is no political will to do so. The political class been co-opted and thus impedes any encroachment on the privileges of the wealthy. Now, before you all come to the conclusion that I am some kind of Pinko nut, I want to assure you that what I am lamenting is the lack of CAPITALISM in these countries. It is state intervention (from the right as well as from the left) that has distorted these markets, and this has been exacerbated by the Euro context. The Euro was supposed to provide fiscal discipline to the Southern sphere; in fact it provided subsidized borrowing while none of the implied economic discipline was ever implemented. So now that they have maxed out their credit, these countries are forced to face the decision they have put off for 10 years; Open the economy, do away with privilges, tax unproductive assets and facilitate productive investment OR exit the Euro. But, as far as I can see, few of the major actors in these countries are incented to move their countries towards a more open, market economy. The Left, with its ties to the trade unions, want to maintain the privileges of the 'working class' (which, because of global competition and the Euro, continues to shrink), while the Right is unable to think beyond their bank account (the one in Switzerland, that is). But, something will have to eventually give. Either these countries exit from the Euro or they begin to open the economies to real competition. Unfortunately both sides are playing a game of chicken, and its the poor honest folks in the middle who will have to pay. We can only hope that one side blinks before severe damage is done. Well, too late for Greece! I find that there is little understanding in the Anglo-Saxon countries of the core problem facing Southern Europe. I think it can be summed up in the following question. Why is it that a politican in the UK has to resign when a 'fixed' parking ticket comes to light, but a politican in a Southern European country can embezzle 23 million euros from a defunct polital party, not go immediately to jail and offer half the monies back as a legal settlement? and perhaps even be re-elected! Until the mentality changes in Southern Europe, without fiscal, economic and judicial discipline enforced at the European level, the Euro experiment is doomed. The Southern countries need the devaluation tool in their arsenal to survive in the prevailing political environment.

Thanks for posting. These guys have some of the best ideas around.

Well, it is actually possible that they might merge in the future! ;) giofranchi Possibly, but they tried it in the past and were rebuffed. They need a new widely available competitor, like Internet TV, to make a renewed case for it.

touche! funny! But, really, perhaps it explains why there is limited participation in those stock markets and therefore the markets are not very deep. Which goes to your point about value investing working in counties with deeper markets.

Well, you have García-Paramés, but he is from Galicia, the Spanish Celtic fringe (where people are famously tightfisted). In general, Mediterranean societies put an enormous value on conformity. If you go against the majority, it is often considered morally wrong, even if you happen to be intellectually right. Take Keynes "it is better for the reputation to fail conventionally than to succeed unconventionally" and multiply it by 10. Well, I think there is also the issue of a 'level playing field'; in other words, you need to have a stock market that treats minority shareholders more or less on the same footing as controling shareholders (and I use that statement quite loosely). This is not the case in many, if not most, mediterranean countries where controlling shareholders routinely abuse minority shareholders with impunity. How can there be value investing if 1) there is poor disclosure, 2) there is unequal disclosure (i.e. you can't be sure that you are acting on the same information as other investors, particularly company insiders), and 3) there is little or limited recourse against abuse (shareholders can expect little help from the legal system for righting even those limited abuses that are proscribed).

- Jose Raul Capablanca, Cuban chess player who was world chess champion from 1921 to 1927 and one of the greatest players of all time History suggests the endgame for stocks is S&P Composite P/E10 of 10 to 12 in the coming years. When, of course, nobody knows. What will cause the decline in prices, of course, nobody knows. Will it be a gradual contraction in P/E, or will it happen all of a sudden? Of course, nobody knows. Even if you don’t believe that history will rhyme, and instead you believe this time it is different, you should ask yourself: can stock prices really stay elevated forever? What are the implications? Well, the most obvious implication is that we will never see a new secular bull in stocks again. Because the only true reason for a secular bull in stocks to begin is that their prices are very much contracted. So, if today you hold a lot of cash (or some put options, or some short positions), it means you believe in endgame n.1. Vice versa, if today you are 100% invested in the stock market, it means you believe in endgame n.2. But, please, don’t tell me the endgame is irrelevant, because, like Mr. Marks has said: “if you don’t follow the pendulum, and understand its cycle, then that implies you always invest as much money as aggressively.” Personally, I have an idea where the pendulum will be a few years from now, and I think the following quote is crystal clear: Prem Watsa, FFH Conference Call Q3 2012 giofranchi I waffle on this line of thinking. The problem is timing. Chess is a relatively short game; you can be pretty sure that you will make it though a game in a day or two. The problem with investing is that it is long term from a human lifespan perspective. The stock market can stay high (have a higher than average PE10) for a decade or stay low (a lower than average PE10) for a decade. Can you really wait out a decade while inflation, no matter how minimal, eats away at your capital? Not to speak of the fact that other investors are actually making money while you hibernate. Perhaps this is feasable if you are investing your own money, but I think VERY difficult if you manage others'. The beauty of the Templeton approach is that it doesn't go for the gold ring; assets are gradually shifted between stocks, bonds and cash following an almost mechanical rule. Thus the human penchant for DOING something is, in some way at least, sated, while at the same time no market predictions are used outside of reversion to the norm. As to 'the endgame', I don't see things as black and white as you do. Even though I tend to agree with your view of the pendulum and where it is today, I am still heavily invested; I try to focus a good portion of my portfolio on special situations that are not as dependent on market fluctuations. In fact, I have to say I try NOT to have a view on where the market will be in a couple of years because I find I am invariably WRONG! My market timing has mostly to do with whether I find 'bargains', as I define them, or not. When I can't find anything that meets my investment criteria, I am in cash, but unhappily so as I know that inflation is slowly eating away at my capital. Don't get me wrong. I generally follow the Klarman rule of having a good portion of my portfolio in cash (10-20%) because I always think that a great 'bargain' may persent itself tomorrow and I want to be ready. Of course, this is in the context of a private investor, not someone managing others' funds. longterm

Thanks for posting. I'm very much in this camp right now. I see alot of investor complacency; a low VIX reading in the US and fully/overvalued equity and fixed income markets. I can hardly even find a 'special situation' that is priced with an appropriate return. The markets seem to be just begging for some type of dislocation. Yet the macro situation is at best daunting. The only way out for an over-indebeted world is either accept the slow grind of deleveraging or debt repudiation and all the political turnmoil that accompanies it. It really does look to me like we're "sleepwalking toward a precipice".

It is difficult for any German politician facing election (OK, all of them) to be in favor of German intervention. German voters look at the profligate Greeks, Italians and Spanish and wonder why they, the thrifty Germans, have to pay for Mediterranean mismanagement, why the wealthy in the South don't view it as an obligation to pay their taxes (which might go a long way to reducing budget deficits), and why corruption and waste in these countries can't be curtailed. Merkel recently received an electoral rebuke for being too lenient. Democracy and soverign borrowing can lead to difficult political situations where common sense disappears.