giofranchi

Find in attachment the HDGE ETF Market Commentary for March 2013. 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 HDGE_PMCommentary_032013.pdf

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 130326_3_TFTF.pdf Cyprus_-_Telegraph.pdf

I agree with the whole LongTerm’s analysis. He will pretty soon know and understand Italy far better than I do!! :) 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

I agree 100%! Very good business indeed! Though I don’t know if the family is interested in selling… I have never heard of it… Anyway, I guess it is on Mr. Buffett’s elephants list! And he knows it much better than I do! I am such a boring guy, who always eats healthy food, stays away from bad habits, etc. I have read in “The Longevity Project”, a book I highly recommend, that the most common behavioral trait, among those who live long and productive until the end lives, is that they are “prudent and persistent”… So, I generally don’t enjoy Ferrero’s products very much! But I know that it is only me! To all the girls on the board: don’t believe for a second that I am so boring as I have described myself! To tell the truth, I am amazingly bold and reckless, you won’t believe it!! Incredibly cool and handsome!! ;D ;D ;D ;D 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

If we had a United States of Europe, with a banking, a political, and a fiscal union, the Euro imo would be slightly overvalued relative to the USD: PPP is around 1.15, and it simply doesn’t make any sense to me that the cost of living in the “United States of Europe” should be higher than the cost of living in the USA. After all, the USA economy is much more vibrant than its European counterpart, right? Of course, the “United States of Europe” are a distant dream… the reality, instead, is very simple: the Euro today is unbearably high for nations like Italy, Spain, and even France. 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

Is Divorcing An Abusive Spouse Ever Too Expensive? 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 Daily+3.28.13.pdf

twacowfca, whenever you write something, I always reply “I couldn’t agree more!” … I know, I am extremely boring!! … Maybe, someone on the board is even beginning to think that we have stricken some sort of economic deal… Well, it wouldn’t be illegal, would it?! ;D ;D ;D Jokes aside, if the southern European countries are not able to actually have that adult conversation and actually take the bad tasting medicine, it doesn’t mean we could go on enduring the damages a way overvalued currency is imposing on us! Prices in economics are as important as fundamental values, and MUST make sense. When prices do not make sense for too long a time, depression is the most common result. Keynes understood this very well, and we should learn from experience and from history. So, please, first give us “southerner spoiled kids” a currency that makes sense. Then, maybe, we will shock the whole world and start behaving as grown-ups! Until our currency doesn’t make any economic sense at all, we will keep whining and complaining… 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

Thank you, twacowfca! Very good news. :) 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

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 buffetts-career-in-less-than-1000-words.pdf

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

That’s why I am always in the game. I just try and let the prudence with which I do business grow, as the prudence with which others do business shrinks. And vice versa. :) 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

Mr. Hussman’s reply to Mr. Marks: sorry to say this, but I am with Mr. Hussman! 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 wmc130325.pdf

I agree with Giofranchi having lived through an almost exact scenario in the 2008-2009 crisis. I went into the 2008-2009 crisis with about 70% cash and I had been able to take advantage of the market behaviour in that period nearly perfectly buy a lot in Oct/Nov 2008, trim a bit in Dec, load up in Feb/March 2009. The one thing I have not been able to do however is sell BRK at the lows in 2009 to buy other more attractive stocks. I was able to do it with cash I had, but for the life of me I cannot pull the trigger to sell BRK when you know with a near certanity it is less than 50% of IV and buy other stocks that are at 20-25% of IV. This is my one regret from that period but even going forward I doubt if I would be able to pull this off. Vinod Vinod, I really couldn’t have said it better! Thank you very much for your crystal clear thoughts! :) 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

;D ;D ;D ;D 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

Imo, what you have written makes a lot of sense, and I think anyone who follows your example, including having an effective mean to constantly replenish his cash, is on his way to beat the market handsomely. My perspective, though, is a little bit different. And it stems from my deeply ingrained skepticism about being truly able to understand a business and to forecast its future results. Let me make this very simplified example: suppose for a moment that the whole market is composed by only two companies: Berkshire Hathaway and Wells Fargo, equally weighted. Now, the market plunges -40%. And it plunges this way: -30% for BRK stock price, -50% for WFC stock price. Before the plunge you were fully invested in BRK, and now you are saying: “Ok, my currency depreciated by -30%, but now I have the opportunity to purchase WFC, which is down -50%! Very good bargain!!” That’s exactly when my skepticism comes in, playing the role of the joy killer… What do I really know about WFC, that other people don’t?! …Well, nothing…!! And that is it for me… I cannot invest… Beware: this is just me… It is just how I am done… Probably, it is a deep flaw of mine! And it shouldn’t apply to anybody else! You see? My “fat pitch” is different from yours: my fat pitch is BRK that has come down -30%. After all, by now I must have spent thousands of hours studying BRK, and almost nothing studying WFC… So, how could I swing to that perfect pitch, without any dry powder left? 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

--http://apod.nasa.gov/apod/ap130306.html ;D ;D ;D ;D 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

Well, a business is always risky. Mr. Watsa and his team start investing in overvalued stocks, and FFH will suffer much. The insurance companies overseen by Mr. Barnard start writing contracts which make no sense, and FFH will suffer much. I see much more operating risks, than strategic ones. 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

If you are referring to the CPI-linked securities, FFH has invested a total of $454 million and sees a cumulative loss of $335 million to date: -74%. Not much damage left for inflation to cause! This is how I see it: - Best case scenario: a lot of people will lose a lot of money, meanwhile FFH will earn a fortune. - Worst case scenario: 2012: a lot of people will earn 16%, meanwhile FFH will earn 6.5%. 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 I am referring to both the S&P hedge and the CPI-linked securities. Lets take a more plausible scenario. What happens to Fairfax's portfolio if say: 1, The market returns say 12% over the next 4 years 2, And inflation spikes up to 5% in 2014 and stays there for the next 5 years? What happens if both those numbers are higher? Well, I guess somewhere in between my best and worst scenarios…? Of course, inflation can cause damage to an insurance company that goes well beyond its portfolio of investments. But it could also be the trigger that finally puts an end to the present soft market, and starts a new hard market in which FFH could expand significantly. Anyway, valueInv, I sincerely hope the S&P500 won’t return 12% for the next 4 years… because by then we will be living a stock market bubble that rivals 1999… and it will be almost a certainty that my generation ends up spending its entire productive life without any meaningful stock market appreciation… I don’t know if I can call it a tragedy, but surely it won’t be pleasant! Here is what I wrote a few days ago to my partners: Yesterday I finished reading "Lords of Finance - The Bankers who Broke the World" by Liaquat Ahamed, winner of the Pulitzer Prize in 2010 and business book of the year for The Financial Times and Goldman Sachs. It is the mirror image of "The Forgotten Man" by Amity Shlaes, and among the two you have the most complete and enjoyable compendium of Keynesian economics the modern reader might find. "Lords of Finance" shows the many strengths of Keynes's thoughts and ideas. "The Forgotten Man", on the other hand, shows its shortcomings. In essence, Mr. Keynes was right: in economics prices are as important as fundamental values. Mr. George Soros would later postulate his "Reflexivity Theory" on this same assumption in his book "The Alchemy of Finance". When prices reach unsustainable high levels, they not only tend to mean-revert, but they also shoot on the downside. That's why policy tools, like money printing (a monetary policy) and deficit spending (a fiscal policy), must be used to prop them up again. That's what happened in 2003, after the dot-com bubble burst, and in 2009, after the subprime and world financial crisis. The great blunder of central bankers in 1929 was precisely to delay policies aimed at sustaining prices for too long. 3 years had to pass, before Mr. Roosevelt initiated his "New Deal", 36 long months during which the vicious cycle of deflation reinforced itself ever more. On the other hand, when interest rates are kept very low for a protracted period of time and money printing goes on apparently without an end, prices might revert to unsustainably high levels once more. That's what happened in 1937, precipitating the world in another depression (the so-called depression inside a depression), and that's what we risk repeating now. So, Mr. Keynes was surely right, but to engineer the right balance between too high and too low prices is no small feat at all! Prices must make economic sense… anytime they are too low or too high, trouble is on our way. You can bet on it! And, please, look at the image in attachment: in 2009 we barely reverted to the mean growth trend… we came from 20 years of stock market returns above average growth trend, and now we are again well above it. 4 years from now, if the market really manages to achieve a 12% CAGR, we would be flirting with disaster… No, really, the further the market advances, the higher the percentage of my firm’s portfolio I will allocate to FFH… there will be almost nowhere else to hide… 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

Well, of course you can! But I would argue that the currency you use to take advantage of the fat pitch matters. And a currency that has depreciated by 30% is not a very good one… Anyway, I don’t believe in fixed schemes and rigid business plans… I just try to think strategically and act opportunistically. If you believe you won’t miss great opportunities, even though you are 100% invested all the times, and you are fine with that… well, then, very good for you!! ;) 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

Great book! Absolutely a must read! Ed is Ed Cooke, the eleventh best memorizer in the world. The fact the in school you never learn, or even hear of, “Rhetorica ad Herennium” remains a mystery to me! ::) Please, find it in attachment, and… start remembering everything! :) Enjoy! 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 Ad_Herennium_Passages_on_Memory.pdf

If you are referring to the CPI-linked securities, FFH has invested a total of $454 million and sees a cumulative loss of $335 million to date: -74%. Not much damage left for inflation to cause! This is how I see it: - Best case scenario: a lot of people will lose a lot of money, meanwhile FFH will earn a fortune. - Worst case scenario: 2012: a lot of people will earn 16%, meanwhile FFH will earn 6.5%. 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

What are these guys long term track records? Also, I looked at their first page and pretty much everything they show is negative. If one is honest, we have to look at both sides and not just the negative ones. How about they show valuations, balance sheet healht, or earnings growth? I also didn't care for about he was right about everything...just a bit early. How about he fesses up to his mistakes? stahleyp, I don’t know their long term track-record. Sincerely, I don’t care much… I just look out for information. Then I think and I decide which is the best course of action. I never rely on anybody else. So, I don’t really care about anybody else’s long term track-record… I don’t even care about the timing. I know many of you repeatedly talk about market timing… And how market timing is a fool’s game… But I don’t care about it at all! All I care about is to be opportunistic and to always have the means to act opportunistically. Great opportunities don’t come often, so you cannot run the risk to be forced to let them go by, without taking advantage of them. Maybe, if you are a great statistician and trader, you have figured out a way to take advantage of the few really outstanding opportunities that will come along, and to be always fully invested. The same might be true for a great investor. Anyway, I seriously doubt it, both from a trader’s and from an investor’s perspective… Maybe, only the magician’s perspective would convince me!! ;D And, if you aren’t a star, you better always keep a decent amount of cash with you! To let it grow, when others are greedy, and to let it shrink, when others are fearful. Mr. Buffett and Mr. Watsa always have lots of cash ready at hand. Who cares about market timing?! Instead, I agree with you about the quality of information: the sources of information must be of the highest quality possible. Anytime a piece of information is only partial, not complete, it is a pity and a shame! 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

On profit margins: --John Hussman 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

Efficient Frontier and where the highest risks really are today: --Charles Gave 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 EVA+3.22.2013+NA.pdf

The Market Is On Shaky Grouind - Comstock Partners, Inc. 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 The_Market_Is_On_Shaky_Grouind.pdf