giofranchi

I have just bought more FFH today. Gio

So they've been dead wrong for the last 6 years, but the market declines over a week & 1/2 period, and now they're right? This thread is ridiculous. I know you don’t like how Fairfax operates. And that’s fine! But let me ask you a question: if the market stays in some kind of turmoil for a while (a few months), if US government bond yields keep going down, and if Fairfax share price declines with the overall market, don’t you think it could be worth buying at least some shares before they announce 2014 year end results? Gio

True. Usually wars were needed to restructure debts, bringing them down to acceptable levels and starting a new expansion cycle. Absent a war? Like we all hope is the case this time? Well, total debts in western countries might come to be as large as in Japan… I highly doubt with different results: deflation anyway. Gio

Why not? It is either restructuring of the debt or (hyper)inflating it away. Inflation is not an option because you simply cannot inflate away so much debt. Instead, when you restructure debt, deflation just follows. Gio

I wouldn’t presume to have any clue about what’s coming after the developed countries debt problem is finally solved… But, until it is solved I see only two possibilities: deflation or hyper-inflation. Gio

China accounted for 40% of world money creation 2009-12. Since 2012, PPI has fallen for 31 consecutive months. Not saying you're wrong, but I'm not sure that monetary inflation necessarily ends up in PPI or CPI. It ends up in assets. The end of a debt super-cycle is reached in two ways that I know of: deflation or hyper-inflation. Anything else just kicks the can down the road. The debt super-cycle we have lived through until now is the largest accumulation of debt in human history. Therefore, it is only logical that its consequences will be at least as extreme as in the past. Imo the question here is not if inflation is a monetary phenomenon, the question is if hyper-inflation is a monetary phenomenon… And the answer is: yes, surely! Those people who will be in charge of monetary policies in western developed countries might have only two choices in the near future: either accept a deflationary scenario, or destroy paper currencies. After all that’s what Von Mises said, isn’t it? No need to invent anything new. I don’t think they will decide to render paper currency totally worthless, and that’s why I think a deflationary scare might be the most likely outcome. Gio

Good letter by John Mauldin. If he is right, Fairfax is going to earn $billions! ;) Gio 141013_TFTF2.pdf

ALS is the only company on the list I had a large position, because it is the only one in your list with what I reckon to be both a good entrepreneur at the helm and a good business (royalties in some very diversified basic necessities of life). But I sold the largest part of my investment in ALS before the sell off. Why? Because I got concerned about what ItsAValueTrap once said: their PG side of the business has never discovered a profitable mine. Therefore, it seems to me that, at least as long as they have debt to pay down, it will be difficult to expand their portfolio of royalties. And I decided to wait and see. I also wanted to shift a lot of capital into Liberty Media because of the planned (and now announced) spin-off. That might have been not such a good idea, given the fact Liberty Media is down more than the general market during the last few days. Gio

He surely has made some mistakes… Anyway, who hasn’t? Despite those mistakes, he enjoys a great track record and has become a billionaire… I wish I knew how to make the same mistakes!! ;D And think what he could accomplish, if he has learnt his lessons and won’t repeat the same mistakes in the future! ;) Gio

What do you mean by "larger risks"? Larger positions? A more concentrated portfolio? An activist investor is practically forced to focus on very few positions. I don't know of any activist who is "widely diversified". Gio

Do you think they did what Ackman is doing? I am sure you don't. Therefore, why a post like that? Trying to be hilarious? ;) Gio

I don’t agree. And I would suggest to read [amazonsearch]Confidence Game[/amazonsearch]. Ackman is a true workaholic and I would never bet against him. Gio

--Warren Buffett praising the CEO of Shaw Industries --Shaw CEO Robert Shaw I know I will get on the train with Bill Ackman. He is a self-made billionaire and has the right track record. Maybe not just now, but sooner or later I surely will. Cheers, Gio

Exactly! :) Gio

+1! Cheers, Gio

--Prem Watsa Thank you! :) Gio

Congratulations! And my best wishes to all your family! :) Cheers, Gio

That is very ominous indeed. I have also heard that every time there was a crash it came in a year with 12 months. We have 12 months in the year now. Food for thought. It is good to be hilarious… It might be as good to make sure we will do fine both if a market crash comes and if it doesn’t… I am quite confident I will do fine in both scenarios… But I guess I am only an arrogant son of a… (sorry mom… I love you! ;D) Cheers, Gio

One bullish view (from Anatole Kaletsky), one bearish view (from Charles Gave)... though I hope the bull is right, I think the bear makes much more sense... Gio EVA+10.3.2014+NA.pdf

--Ben Graham, 1972 If you check the link I had posted, you get a P/E of 25.8 times average earnings (Shiller P/E), and a P/E of 19.3 times TTM earnings. Ben Graham might not have been a truly outstanding investor... but he knew one thing or two about "value investing"! ;) Gio

Well, maybe… But I think that’s only part of the story… I mean, the last time I saw Cooperman on Bloomberg (a few days ago) he shared the stage with Howard Marks. Obviously, Marks wasn’t sounding pessimistic on the markets… But at least he expressed some caution. A bear might be too unpopular to appear on TV, like you suggest… But is it really necessary to throw caution to the wind? Both Tepper and Cooperman seem serious investors to me. Certainly they both have been extremely successful! What need do they have to appear on TV and express views contrary to their true beliefs? Gio

Well, I know very few people on this board are John Hussman’s fans… And after his dismal performance of the last few years I would be very surprised if it were any different… But, listen, the fact he might not be a very good investor (a judgment that imo is yet to be proven), doesn’t automatically mean that all his research is flawed, useless, and meaningless… Far from it!! Instead, the data he provides are very carefully put together. If you have read some commentaries of his, you’d know very well how during the last 50 years the Shiller P/E ratio, the P/S ratio, and the Q ratio have been reliable indicators of future stock market returns. Moreover, those three ratios always lead to very similar results. The TTM P/E ratio, instead, isn’t a reliable indicator… Hey! In 2008 the TTM P/E for the S&P500 was over 60… What other proof do you need?! ;) Hussman always provides his readers with interesting graphs spanning 50 years, in which you can see an overlapping of the Shiller P/E ratio, the P/S ratio, and the Q ratio, with subsequent market returns. And they might not be perfect, but they fit pretty well! The same graph with the TTM P/E ratio, instead, is just a mess… Gio

Ok… 1/19.3 x 100 = 5.2%... Now get any book about Buffett and see if he would ever invest in a company yielding 5% (if he doesn’t think its earnings might increase substantially in the future)… only because interests rates are low… Gio

Ahahahahahah!!!! Very interesting! ;) Gio

Ok… Would you value a company based on what it is yielding today? And comparing that yield to the other choices available? I know I would never do so because: 1) today’s yield might simply not be there tomorrow, 2) I am not really a fan of relative valuations. If what a company is yielding today is not a good way to value its business, why should yield be used to judge the future prospects of 500 companies? Gio