giofranchi

Find in attachment the HDGE ETF Market Commentary for May 2013. giofranchi HDGE_PMCommentary_052013.pdf

Société Générale on US Energy Independence. giofranchi Econote17_US_energy_EN.pdf

Enjoy! :) giofranchi Image Credit & Copyright: Isaac Gutiérrez Pascual (Spain)

Kraven, my point of view is different: I am always invested in productive businesses, I just try to “adjust” my defensiveness / aggressiveness according to the “climate” or the “pendulum”, paraphrasing Mr. Marks. The operating activities of the businesses my firm controls keep generating some cash: do I put it to work immediately, or do I wait for better opportunities? It depends basically on two things: 1) Do I see great bargains today? 2) How is the “climate” or the “pendulum”? I just try to answer those two questions and act accordingly. That doesn’t mean I am out of business… as long as I can prevent it, I will never be out of business! ;D Furthermore, I don’t understand why a lot of people think FFH stock price will decline with the market, if a correction comes… It is true that FFH stock price fell from January to March 2009, yet it is also true that FFH stock price appreciated +36% in 2008, while the market tanked –37%… So, who really knows? What I know for sure, instead, is that FFH shareholders will benefit from a market correction like the shareholders of no other company. :) giofranchi

Hi bmichaud, in your historical analysis you just forgot to mention that going from 1937 to 1949 we had to endure one of the bloodiest war in human history… Will we behave in a wiser manner this time? I really hope this time is different! Let’s pray it is so. giofranchi

Thank you very much! ;) giofranchi

The problem with that kind of thinking is simply that, if it were true, we would have finally find a way to earn a higher return on our capital. On average, though, the return on capital is a sort of “social contract”. A too high return on capital for too long a time will not be easily accepted today, as it has never been accepted throughout history. What is for sure is that, as long as the consumer saves only 1%-2% of income, and as long as the government runs large deficits, the “new era” of permanently higher returns on capital cannot be proven: If we don’t save, like we used to do, and the government spends, like never before, profit margins MUST be higher! And the fact this spending binge has been going on for almost 30 years doesn’t mean it is sustainable forever, certainly not if, to sustain it so far, we have progressively run into heavier and heavier debt! giofranchi

Yes! Of course, you are right! My point is simply that also the micro is traded in the market (unless you own a private business). And market behavior as a whole will somehow affect also our micro picks. Therefore, when I think that in the future the probability of averaging down in my investments will be high, I tend to build up cash and I reluctantly put it to work. That’s all. Imo, this is much more important, because my circle of competence is currently limited to just a few dozen companies, and I don’t see extreme bargains among them. Your circle of competence, instead, might be made up of hundreds or even thousands of companies, and the probabilities of still finding great bargains among them might be very good indeed. So, I guess, it depends a lot on the situation: you could afford to completely disregard the averages, while at the same time it would be imprudent for someone like me to do so. giofranchi

Imo, this week missive is one of Mr. Hussman’s best. Not to be missed! giofranchi wmc130513.pdf

--John P. Hussman giofranchi

Great quote from today’s market commentary by Mr. John Hussman: -- J. Paul Getty giofranchi

Packer, I don’t really get either one of the bull arguments… 1) Stocks in general are not overvalued: the P/E of the S&P500 is 19, that is to say we enjoy an earnings yield of 5.3%… How many businessmen do you know who would even get out of bed in the morning for a 5.3% return? Not a single one. And earnings are also inflated, because margins are at an all time high! So, actually, you cannot even count on a 5.3%... You don’t have to look at Shiller PE Ratio, or Q Ratio, Market Cap / GDP Ratio, or Regression to the Mean Growth Trend, to get to the conclusion that stocks in general are overvalued. It is enough to think about what gets a businessman out of bed in the morning! :) It is enough to think about what will happen to the market, if the Fed stops buying… 2) I don’t even get Mr. Greenblatt’s argument: because a cautious businessman is not refraining from buying undervalued stocks; instead, he is just heeding Mr. Baruch 9th rule of investing: Always keep a good part of your capital in a cash reserve. Never invest all your funds. giofranchi

http://www.ritholtz.com/blog/2013/05/bernard-baruch-10-rules-of-investing/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29 giofranchi

The only thing we have to fear is the lack of fear itself. giofranchi The-Only-Thing-We-Have-To-Fear-Is-The-Lack-Of-Fear-Itself.pdf

TPOU is having another stellar year: +15.2% so far. And the stock price is gradually closing the gap to NAV. Yet, it still should rise 13.3%, before trading at NAV. giofranchi 2013-05-08-Estimated_NAV_Announcement.pdf

Oh, no! … Now that I have started the very first cycle of lessons about value investing at the Politecnico of Milan, I should warn my partners that chances are I will underperform dramatically in the future … ::) giofranchi

Part 5 in attachment. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Part 6 in attachment. giofranchi On-Insurance-Investing-Part6.pdf

Eclectica Q1 Review, 2013 giofranchi Q1-Review-2013-Hendry1.pdf

Maybe, after all, Mr. Watsa is right about the real estate bubble in China… please, take a look at what they are building over there… ;D ;D ;D If someone find this insulting, or bad taste, I really beg your pardon… not my fault!! ;) giofranchi

I simply don't know of a financial journalist that I have enjoyed more reading... It is very sad news... http://www.ritholtz.com/blog/2013/05/a-few-words-about-alan-abelson/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29 giofranchi

First of all, let’s be clear: there are a lot of different types of deflation, and I am only referring to a deflation in market prices, a drop in the value of the indices. The idea that monetary policy will dictate and control market prices forever is something I have an incredible hard time to accept, without believing that unintended consequences might follow. In other words, I do not have much faith in price control engineering, without risks. giofranchi

Yes, I agree! But, to do well, stocks also need to be undervalued. Today, vice versa, the general market is overvalued. I am not saying a correction is coming. I am only saying that the risk of it today shouldn’t be overlooked. And you don’t buy insurance, when you know something for certain, you buy insurance, when you don’t want to overlook a risk. UUP might be a good way to hedge, because I don’t see the USD depreciating much against other major currencies, even if a correction doesn’t materialize. So, I think it will protect and even increase purchasing power in a correction, on the other hand it will not cost much, if the market keeps marching upward. giofranchi

In attachment what Mr. Gary Shilling has to say about USD strength. Imo, not only “cash is king” in a deflationary scare, but also the USD remains “the only game in town”. And I don’t see how it could fail to appreciate against other major currencies. Would like to hear what people on the board think about it! Thank you, giofranchi insight-0513b-USD.pdf

-- Thomas Gayner, Markel Corp. giofranchi

LakesideB, you are very welcome! :) giofranchi