giofranchi

TO SELL IS HUMAN, by Daniel H. Pink 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

Sorry, I have to disagree completely :). I think that you have to be completely rational and you should have all your facts straight: only then can you make an informed decision about price vs. value. My intuition can't tell the difference between Bear Stearns right before it collapsed and Bank of America when it was trading at $5. Only good research can. In time, all the effort you put in investing will probably result in a 'gut feeling' about investments in the future. That feeling might be right most of the time but it is the result of years and years of hard work and it should always be double checked. Grandmasters in chess also see the right move in 99% of the cases, but in a critical position they still revert to the hard work of calculating all variations to make sure they're right. I'm pretty sure Warren Buffett and Bruce Berkowitz do the same. writser, I agree with you and I am a true believer in “deliberate practice”. Yet, almost by definition, very few investors will be in the same league of Mr. Buffett and Mr. Watsa, right? What I think premfan is trying to say is that the secret to be in that league cannot be exactly… in plain sight!! What kind of secret would it then be?! That’s why study is important, research is important, hard work is important, though maybe they are not really sufficient… Remember that “deliberate practice” is not just… practice. Instead, it is to find and to deeply analyze your weaknesses, and then to devise exercises in order to eliminate those weaknesses, and to repeat those exercises from early in the morning to late in the night. To do over and over again what you are most uncomfortable in doing! As soon as you have been successful in eliminating one weakness, to concentrate on the following weakness. And to repeat the process as many times as possible. So, is it really a surprise to find that the path followed by every extremely successful person is very unique? I have long ago given up trying to fathom why someone is successful, and why others are not… Instead, I just stick with successful people. Both in the businesses that I control and in the businesses in which I invest. 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 have kept them. I think they are still cheap and a likely candidate to be bought out. Thank you very much for posting the link! 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, it is a even more fantastic reminder of why we should be slow to believe in OUR investment capabilities!! ;) It is easy to deceive ourselves into thinking that, just by emulating Mr. Buffett or Mr. Watsa, we will get outstanding investment results… when the truth is most probably we will never completely understand the true secret of their very personal success! Because every one of them is an original, even if they certainly share common beliefs and ideas. 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

New Gary Shilling Insight 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 insight-0213b.pdf

I agree, and 28.5% of my firm’s portfolio is in FFH right now. Christopher1 has reminded me of a wonderful quote by Mr. Buffett this morning: Mr. Watsa has built the strongest ark I know of. PS Thank you Cristopher1! “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

original mungerville, it is a pleasure to suffer alongside with you and Mr. Watsa! ;D Though, to tell the truth, I don’t understand what’s really different now from a year ago… the market that is 15% higher? Well, it is just 7% higher than where it was last march… That cannot be the true reason! Probably, I am not sophisticated enough! My firm’s portfolio changed dramatically at the end of 2010, when it was 100% long. Then it has almost stayed the same: very cautious and conservative. 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

There hasn't been a period of time in my last 16 years of investing, where I sweated even one night about the market leaving me behind and not being able to deploy capital. Cash has never burned a hole in my pocket. Cheers! Agree 100% 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

Via the Distressed Debt Investing Blog: http://www.distressed-debt-investing.com/2013/02/my-three-favorite-quotes-from-bauposts.html 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

+1 :) 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 is one of the very few dangerous sentences I heard Mr. Buffett say… Not because it is false, but because it is deceiving for anyone else except Mr. Buffett himself! If you know how to pick investments that will always go up, irrespective of what the markets will do, you should follow his suggestion to be always fully invested. In fact, he probably really is that unique investor! But, if you are a lesser investor, you better acknowledge your “limitations”, and start behaving like a shrewd and opportunistic businessman. The universe of investments we “mere mortals” really know is limited. And I am sure the stock of every company “I know something about and in the management of which I thoroughly believe” will decline, if the market declines. No doubt about that. So, I will invest at this point, but conservatively and cautiously. Once again, if you are a trader, in and out of stocks, it is a whole different story. 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

This I don’t believe is correct. Also Markel is an insurance company, with a stock portfolio which is grater as a percentage of equity than Fairfax’s, and yet they never hedge. What makes sense from a business perspective is to be cautious and conservative when the sea is flat, and to grow by leaps and bounds when the storm brings outstanding opportunities. Investing is the same. That is what Mr. Mellon did, that is what Mr. Buffett did (when a great opportunity came his way he always had the cash available to take advantage of it, always!), and that is also what Mr. Watsa is doing right now. Of course, trading might be different. And maybe a lot of trading opportunities are available now, special situations, arbitrage, deep value cigar butt stocks with a catalyst for the last puff, etc. 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, with all the available cash he has at hand, let's hope he really does! :) 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

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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 post 1929 crash US bear market low in 1949 came after one of the most inflationary periods in US history. The CPI rose from 14.000 in 1941 to 24.500 in late 1948 as the back of post war inflation was finally broken as it was in the 1970's through early 1980's inflation under Volker. Yes, of course war times are inflationary. But what about the 50s? If I were living in 1949 I would be worried about what inflation would be in the 50s, not what inflation had been during the war. My real earning yield would depend on future inflation, not past inflation, right? Do you think we will see inflation or deflation in the years ahead? If we have inflation, like almost anybody now believes, interest rates will have to rise. And when interest rates rise, the prices of every asset class fall. Vice versa, if we have deflation, stocks will fall. The fact, I think, is simply that secular bears in stocks end when stocks are very cheap anyway you look at them. Forecasting what future inflation will be is not something people do easily. Secular bears in stocks end when it is very safe to invest aggressively again. Today I simply don’t know of anybody else who could recognize one of those time better than Mr. Watsa. And he is clearly warning that we are not there yet. 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

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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 would keep it easier still: when Mr. Watsa says Prem Watsa, FFH Conference Call Q3 2012 It is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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 for posting the link. Actually, there is a thread on GLRE. So, you can find more information over there! :) 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

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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

"Towards Government Sponsored Bubbles" by 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 Daily+2.1.13.pdf

The Liscio Report, Janaury 2013: A long-term decline in start-ups: the culprit? 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 TLR_1_31_13.pdf

Ineichen Research, 01 February 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 RMR_2013_Feb_1.pdf

Already up 6% for the first month of 2013. Not bad! 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 2013-02-01-Estimated_NAV_Announcement.pdf

Just curious, would you mind breaking down your "48.5% Owner-operators" a bit? Yes, of course, no problem! 9.5% Oaktree Capital 6% Lancashire Holdings 6% Brookfield Asset Management 6% Liberty Media 5.5% Third Point Offshore 5.5% GreenlightRe 4.5% Markel Corp. 4.5% Biglari Holdings 1% Dish Network 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

28.5% FFH 48.5% Owner-operators 13% Short positions 6.5% Gold 3.5% Silver All equity, no use of leverage. And I expect to receive a 10% fcf from my operating businesses through this year. Actually, not much changed from last year. I clearly don’t understand all the small nuances of the markets, so I guess I will have to wait for some “big change”. When that happens (and it will happen, as it always does), I think I will have the wherewithal to take advantage of it. 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

Hi txitxo! If what you have so obviously pointed out is true for Spain, try to imagine how reliable China’s GDP growth might be!! ;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

War Games. 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 Jan_29_2013_TTMYGH.pdf