giofranchi

I really wouldn’t call it “macro obsession”… To me, what Mr. Watsa is doing and has always done, is just the number 1 duty of every investor: to understand when it is the right time to be greedy, and to understand when it is the right time to be fearful. Panic of 1837 (really, it has always been the same!!): Imo, someone who is reaching for yield today, will always reach for yield… Remember that we can always find some sort of “logical explanation” for most choices of ours… “well, maybe I don’t understand that business so well, and therefore I cannot be sure its stock is really cheap… but, compared to any other available investment, it must surely be a bargain!”… something of the sort, right? So, how to be like Mr. Vanderbilt? How to have “an abundance of that most valuable item in a deflationary panic”? Well, to possess “a business that always remains in demand” might be useful. Not to reach for yield at the wrong time might also be useful. But I guess the truth is we do not really know… there is no sure formula… Someone succeeds, many others simply don’t… That’s why it is so difficult to understand what Mr. Watsa is doing! ;) giofranchi

Yes! I know… but that doesn’t really bother me. For me it is always the process… As long as the process is right, I let “the madness of crowds” do whatever it pleases! :) Cheers! giofranchi

FFH Q1 2013 Conference Call Transcript giofranchi FFH-Q1-2013-Conference-Call-Transcript.pdf

--AL 2012 Uccmal, let’s assume a 10% saving rate for the last 25 years, and to understand how optimistic this assumption is, let’s just say that we must go back to 1985, to find the last time the U.S. Personal Saving Rate was around 10%… Cdn$4,000 saved each year for 25 years equates to $100,000. So, the “clueless employee” (by clueless I mean that he didn’t care to study investment opportunities and just dollar cost averaged in FFH), now has 11 times his/her original savings… and that imo surely means making some "money of significance"! It seems very strange that such an extremely accomplished investor like yourself hasn’t succeeded in making money out of FFH… ??? giofranchi

I think it is a very popular paper, but I hadn’t read it till now. Maybe, someone else on this board hasn’t read it yet! So, please, find it in attachment. :) giofranchi Founder-CEOs-Investment-Decisions-and-Stock-Market-Performance.pdf

Inflation: FFH’s deflation hedges have already lost most of their value. Rising interest environment: the price of all assets will fall, a lot of room to be opportunistic for FFH. Rising market environment: I don’t see FFH to be much more out of sync with the market than it was in 2012, so 2012 probably is the worst case scenario. Again, as I have already said, 2 more years like 2012…? I can live with that! :) giofranchi

Uccmal, I think you are very optimistic about the market, and very pessimistic about FFH. If it is true that we have entered a new secular bull market, we must have done so in 2009. That would compress the last secular bear market in just 9 years, from 2000 to 2008, the shortest in history. That would be even more peculiar because of the fact the last secular bull market, from 1982 to 1999, stretched market valuations to levels never seen before. Anyway, I guess in no more than two years we will surely know if your view is right, or if Mr. Watsa’s is the one to be correct. Being invested in FFH now, I will do well either way: - If Mr. Watsa is right, I will protect my capital egregiously, - If you are right, and we have entered a 20 years secular bull market back in 2009, two years from now I will still have more or less 15 years to make a lot of money! ;) giofranchi

[amazonsearch]The Art of Value Investing[/amazonsearch] I have read not so "exalting" things about Mr. Tilson on this board… Many of you probably don’t think he is really a very good investor. I don’t know him well, so I cannot judge. What I do agree with is Mr. Montier’s comment on the book: Imo, one of the best compendium of value investing wisdom out there. :) Cheers! giofranchi

April 2013 Monthly Report giofranchi 2013-4-April-Monthly-Report-TPOI.pdf

It will be interesting to see if we feel the same way in 12 months time. Right now the hedging as well as the low P/B is what I find so appealing about FFH. nwoodman, I agree 100%! :) giofranchi

+1 giofranchi

CEO Average Worker Pay Ratio giofranchi

Mr. Charles Gave on "Implied Assumptions" giofranchi Daily+5.1.13.pdf

Just wait until next Thursday and we will know, right? ;) giofranchi

Now that I think about it, the reason might be very simple indeed: almost nobody in Italy or France has read the book in attachment yet!! Well, they really should!! ;D ;D ;D giofranchi 1993-King-Icahn.pdf book-review-king-icahn.pdf

"I'm like the gunfighter you hire to save the town. That gunfighter is there to do good...but he'll only do what he does if he knows he'll get paid for it." —Carl Icahn There is really nothing more that I would add to the topic of capitalism… And I really don’t understand how countries like Italy or France still don’t get such an obvious statement and still embrace communist policies… ::) giofranchi

Yes, I agree! Yet, I find a difference between saying “ok, this company is selling below liquidation value, it is worth more dead than alive, I will put 2% of my assets in it, and I will build a portfolio of 50 stocks all with the same characteristics” , and saying “this company can grow BV per share at (choose a number) % annual for the next 10 to 15 years, I know just a few businesses in which I can put the same confidence, and I will concentrate my assets in those few businesses”. The first sentence requires almost no business judgment, it just requires statistical cheapness and diversification. The second one, instead, requires a lot of business reasoning. And, please, don’t misunderstand me. I want to make this very clear: what you have called “riding the coattails of great investors” might sound to the trader a bit detrimental… to the businessman, instead, shrewd allocation of capital is the number 1 feature he always wants, no requires!, to see in any enterprise. No matter what the enterprise engages in doing or producing, without a CEO who constantly thinks about the maximization of ROIC, the businessman should stay away. Because strategic thinking about capital and resources allocation by the CEO is the number one predictive element hands-down! giofranchi

Not at all! Imo, speculation is something yet different. Speculation is the belief that someone will buy me out at an higher price… because of a trend, because of a fad, because of momentum, etc., but NOT because I have recognized a mistake and I am correcting it! The way I see speculation: somone will buy me out at a higher price, irrespective of "valuation" or "business judgment". The way I see trading, a “valuation” mistake is being addressed. The way I see investing, a “business judgment” mistake is being addressed. I have no idea which among speculation, trading, or investing contributes more to the economy… sincerely, I don’t care. My only point was to emphasize when contrarianism might be (almost) always very useful and effective: and I think it is when you are addressing a “valuation” mistake, when you are trading. By my idea of speculation, if you think of it for a moment, contrarianism might be even less useful to the speculator, than it is to the investor! :) giofranchi

Great trade, Ron! Congratulations!! ;) Hmmm… I must absolutely enlarge my circle of competence… the more I read the posts on this board, the more I realize that mine is a minuscule, almost invisible to the naked eye!, circle of competence… giofranchi

I understand, and I have learnt by heart Mr. Templeton’s teachings! But I cannot believe in contrarianism for contrarianism sake… I MUST always understand what I am doing. The idea of circle of competence always comes first for me, even before the idea of contrarianism… Yet, here I must again make a distinction between trading and investing. Basically, I look at trading as a zero sum game: someone exploits someone else’s mistakes, while no true wealth is created, beyond the one that already exists. My idea of investing, instead, is finding an asset with the potential to create much wealth in the future, and keeping that asset until its full potential has been exploited. Trading is much more short-term, because valuation mistakes tend to be corrected in 1 or 2 years. Investing, instead, is more long-term, because even the best of operations need time to create lasting wealth. So, if you trade, contrarianism really could be your best friend! In a year or two anything could happen! Actually, even if a depressed stock deserves to be depressed (because it really is a bad business!), in the short-term you could count on the market to make the opposite mistake and bid the price of its stock up! ;) An oversold condition truly tends to be bought, while an overbought condition truly tends to be sold… so, a shrewd trader might make a lot of money that way! Investing is different: if you invest, you must understand the quality of the operations you are buying, and the quality of the people you are partnering with. Contrarianism might be useful just as a very attractive entry point. Of course, also investing, to be successful, must rely on some sort of mistake, but I call it a “judgment” mistake, instead of a “valuation” mistake. Entrepreneurs (read investors) recognize value where other people don’t see anything. That’s why they tend in general to create wealth and theirs is not a zero sum game. Furthermore, that’s why I usually like investing much more than trading: because “judgment” mistakes tend to be much bigger than “valuation” mistakes, even if they are much less frequent, and even if they take much more time to be “revealed” and corrected. That’s why you could have invested only once in Berkshire in the early ‘70s and compounded your capital at a 20% annual rate, while a million trading decisions in the meantime would hardly have achieved the same result. giofranchi

Well, of course as a trader who jumps into statistically cheap stocks and sells when they reach FV, what you are doing makes a lot of sense! And you surely follow a system very well thought out and effective! So, no doubt that’s what you should be doing! ;) But you already know my perspective: I was talking to those who invest in a company and “don’t care if the market stays closed for 10 years”… For those people CONVICTION is everything. And I don’t see how you can muster any conviction about the business climate in Europe today… at least, I am sure I cannot! giofranchi

Well, try to imagine how good it would be, if you had your own currency!! ;) Anyway, txitxo, I really hope you are right! I certainly don’t want to live in a society constantly mired in depression… I really hope your “new” economy will grow and eat the “old” one! :) But I know and understand very few and very simple things… I understand that a country, in which the cost of doing business is high, and which cannot be competitive on prices, because of an overvalued currency, is in deep trouble. This even a child can understand. How the “new” economy will grow, which fruits it will bear, at which costs, and when… it really is beyond me! I don’t understand it, and I stay away from things I do not understand. Instead, I go for “the sure thing”: as long as I can find some bargains there, all my firm’s capital will stay in the US; if this market keeps roaring upward, forcing me to sell my investments, I will accumulate USD and an ever increasing stake in FFH. giofranchi

My experience with the businesses I know of in Italy unfortunately is quite different… The cost of doing business in Italy is not higher than in Germany, because German entrepreneurs are smarter or harder working that their counterparts in Italy… The cost of doing business in Italy is higher, because Italy as a society wastes a lot more resources than the German society does… That’s it! Italian entrepreneurs are among the most capable and brilliant that I know of! The austerity that was imposed on them last year with Mario Monti’s government did nothing but put them out of business… The combination of an overvalued currency and a fiscal pressure among the highest in Europe (that is to say among the highest all over the world!) is a killing formula for every private initiative, because they tend to shrink net margins to almost zero… Well, as if it weren’t enough, Mr. Monti last year decided that the right move was to increase the fiscal pressure even more… ::) And now, businesses should decrease prices by 20+%?! ??? You say that also costs could come down by 20+%… but that is as far from the reality I must live with everyday as it could get… No cost of my firm’s has basically come down… not electricity, not gas, not software or hardware costs, not labor: please, if anyone would like to explain to syndicates in Italy that the cost of labor must come down, you are very welcome!! Because everyone who has tried until today has miserably failed… Ah, I almost forgot… taxes: they have increased and are still increasing! VAT is going to 22% from 21% by next July… And the reason is we are not the German society… if we were, our costs would be as low as the Germans’ and Italy would deserve a currency as strong as the Deutsche Mark! We have not been Germany for centuries… Would you now bet on the fact that we will start behaving like Germany in the next 10 years, and reduce our costs accordingly?! Because, with a common currency, if we do not achieve that goal, there will be no one left to do business in Italy 10 years from now… :( giofranchi

Yes! You might be right! I always look at things from an economic point of view and forget that economics is not all that matters… unfortunately, I am allergic to politics!! ;) So, here we must make a distinction: on the one hand we have the pure economic cost, on the other hand we have a more general and complete cost (economic + political + societal + etc.). Maybe, as you say, the general cost of leaving the Euro is higher than the general cost of keeping a currency that makes no economic sense. But the pure economic cost of depriving not only one, but many nations of currencies that make economic sense will in the end prove to be much higher than the pure economic cost of leaving the Euro. And, while I see how the Euro can be saved and somehow kept from being an economic tragedy… I still don’t see how the Euro could make any economic sense… that is, of course, without a White House in Berlin. If this is truly the case: cannot get rid of the Euro, because the general cost would be too high, but in the meantime the Euro will go on making no economic sense, then… well, put all your assets in the US, and very quickly!! ;D giofranchi

http://seekingalpha.com/article/1377541-why-yahoo-is-worth-34 giofranchi