giofranchi

txitxo, my greatest contention with the whole Euro project is that FIRST you do what you have written, then, IF AND ONLY IF you have been successful in doing so, you establish a common currency. A common currency is the easy part, all the rest is what really matters and what is really difficult to implement. Start with the easy part, in the hope that the hard part will follow?!?! So much (southern) European… And never a good idea!! As far as Mr. Charles Gave is concerned, I think his thesis has merits. He affirms that France will be the last domino to fall, and also the one most dangerous to the Euro survival. Why disagree? France is actually in very bad shape and is behaving like a socialistic country of the past, scaring businesses away. If you find yourself in a hole, stop digging?! Well, it seems in France they have decided to do the exact opposite! It gets worse: the IMF forecasts Debt/GDP for France exceeding 200% by 2040, even assuming “radical restructurings”. Radical restructurings that won’t occur, unless a crisis unfolds… giofranchi

"The Grand Disconnect between slipping global economies and robust equities, driven by never-ending monetary and fiscal stimuli, is profoundly unhealthy— and a reconnection is inevitable. Of course, there is that slim, remote, inconsequential, trivial probability that our forecast of deleveraging, of continuing global economic weakness and of recession is dead wrong, and that all the government stimuli and other forces will revive economies enough to justify current investor enthusiasm. We doubt it, however, as a review of the current state of worldwide economic affairs suggests." Gary Shilling, October 2012 giofranchi insight-1012b.pdf

For anyone who might be interested. giofranchi Daily+10.8.12.pdf

L is a holding of mine. And I find the interview with Jim Tisch and Joe Rosenberg to be a good one. So, thank you for posting! giofranchi

S&P500 Shiller P/E at 23, with all the western world engulfed in debt, just because Central Banks are printing money as never before… I think that, if we go back in history, very few times the markets had been less efficient than they are today. Time will tell. giofranchi

Thorp’s original fund, Princeton Newport Partners, ran for 19 years (November 1969 to December 1988) and had an average annualized compounded gross return of 19.1 percent (15.1 percent after fees). It is not return, but rather the extraordinary consistency of return, that sets Thorp apart. Princeton Newport Partners compiled a track record of 227 winning months and only 3 losing months (all under 1 percent) – an extraordinary 98.7 percent winning percentage. To calculate the probability of this achievement if markets were efficient, we make the simplifying assumption that the average win and average loss were equal. (This is a very conservative assumption since, in fact, Thorp’s average win was significantly higher, which implies that the probability of Thorp achieving his win percentage by chance will be even lower than the estimate we derive.) Given the assumption that the average win and loss are about equal, the probability of any single trader achieving 227 winning months (or better) out of 230 is equivalent to the probability of getting 227 or more heads in 230 coin tosses, which is approximately equal to an infinitesimally small 1 out of 1 x e63. Even if we assume 1 billion traders, which is a deliberate exaggeration, the odds of getting at least one track record equivalent to or better than Thorp’s would still be less than 1 out of 1 x e62. To put this in context, the odds of randomly selecting a specific atom in the earth would be about a trillion times better. (The estimated number of atoms in the earth is 1 x e50) There are two ways of looking at these results: 1. Boy, Thorp was unbelievably lucky! 2. The efficient market hypothesis is wrong. “Hedge Fund Market Wizards” by Jack D. Schwager giofranchi

Not at all! In 2007 I got worried and I shifted my firm’s investment into 4 stocks: KO, PG, JNJ and XOM. In 2008 they performed better than the market, but they were down nonetheless. One of the lessons of 2008 for me is that “macro” (and I want to stress the fact that all I am trying to assess is the level of market risk to which my investments are exposed, nothing more), instead of being useless 100% of the time, is useless 90% of the time. The rest 10% of the time, and precisely during a secular bear market in stocks when general prices are artificially inflated, I prefer to be aware of market risk, than to ignore it altogether. I think the only problem with a lot of good value investors in 2008 (Mr. Bill Miller, Mr. Richard Pzena, etc.) was that they went on STUBBORNLY IGNORING market risk. Even Mr. Buffett made a mistake, investing in COP. As he has openly admitted! I don’t think some very deep knowledge of macro facts is needed. All is needed can be found in the Wall Street Journal or in the Financial Times. It is just that most people choose to completely ignore it! Imo, they are right 90% of the time, but wrong the rest 10%. giofranchi

If only for the quotes from Epictetus, imo it is a worthwhile reading! giofranchi TheRoom_TheNewStoics.pdf

For anyone who might be interested. giofranchi 552_eva10.5.12na.pdf

Guess we all share the same problem… As I have already pointed out in a previous thread (started by tombgrt), I have found audiobooks to be very helpful! I guess I will never again read a textbook, while sitting at my desk! Because now I can do it while driving, walking, exercising at the gym, etc.. It is amazing how fast I can finish a book today! So, at work I can concentrate on 10-ks, 10-qs, documents published by the companies I follow, various papers, etc.. giofranchi

For anyone who might be interested. giofranchi Popular_Delusions.pdf

+1 giofranchi Ah! Almost forgot! Mr. Keynes had expressed exactly the same thought in a letter to the Chairman of Provincial Insurance, dated February 6, 1942: “To suppose that safety-first consists in having a small gamble in a large number of different direction…, as compared with a substantial stake in a company where one’s information is adequate, strikes me as a travesty of investment policy.” "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." (emphasis mine) giofranchi

+1 giofranchi

Mr. Burbank on CNBC: "It is a good time to be long high quality stocks, and to be short speculative, non dividend paying stocks" http://www.valueinvestingworld.com/2012/10/john-burbank-on-cnbc.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ValueInvestingWorld+%28Value+Investing+World%29 giofranchi

Today on the Value Investing World blog: http://www.valueinvestingworld.com/2012/10/the-best-of-charlie-munger-1994-2011.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ValueInvestingWorld+%28Value+Investing+World%29 giofranchi

http://www.zerohedge.com/news/2012-10-03/jim-grant-asks-phd-standard-allow-markets-finally-clear Mr. Mellon’s advice to President Hoover: “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate” Mr. Zell's advice today: "clear the market" Mr. Grant's advice today: "allow markets to finally clear" giofranchi

berkshiremystery, thank you for posting! We had already talked about Third Point’s investment in AIG, do you remember? It has been a few days since your last post… where have you been?! Don’t leave us without your thoughtful ideas! ;) giofranchi

Mr. Zell might be very well wrong about the economy. Many outstanding investors have been wrong about the economy before, and will be wrong again in the future. What they generally excel at is recognizing when too much (dumb) capital is chasing too few good ideas. That is what they are almost invariably right about. giofranchi

+1 giofranchi

I agree with you 100%. Now what? giofranchi Well, I guess Mr. Zell offered an answer: "The market should be 9000, not 14000..." giofranchi

I agree with you 100%. Now what? giofranchi

Mr. Mellon’s advice to President Hoover: “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate” Mr. Zell's advice today: "clear the market" The more things change... giofranchi

I know moore_capital54 couldn’t care less… but I agree with him anyway!! ;D Mr. Zell is just great! giofranchi

stahleyp, actually, I think that a 10-year timeframe comprises 1 and a half market cycles: 1 bull phase during 2003-first half of 2007, 1 bear phase during second half of 2007-first half of 2009, and another bull phase during second half of 2009-2012. Instead, the timeframe since inception comprises two full market cycles, so I think it is more meaningful. Having said that, I don’t invest with Mr. Hussman, while I invest with Mr. Watsa! Just because I quoted Mr. Hussman, doesn’t mean that I agree with everything he does… In particular, I clearly don’t share his basket approach of investing in equities. My firm’s portfolio is very concentrated, and I like to put meaningful amounts of money in my best ideas. Vice versa, just because I don’t share his basket approach of investing in equities, doesn’t mean that there is nothing useful in his work… In particular, I like the idea that public companies are subject to market risk. Remember Mr. Buffett’s comments on BRK’s investment in COP: even though he was sure that COP in the future would be worth much more than he paid for, BRK had lost billions for its shareholders anyway. Because the capital invested in COP in 2007 could have been put to much better use a year later. Just because I think the idea of market risk might be useful, doesn’t mean that I think it is always useful… For instance, I wouldn’t worry about market risk in a secular bull market, and I wouldn’t worry about market risk even during a secular bear market at market cycle bottoms… but I would be careful during a secular bear market at market cycle tops! Many talk about “macro” as impossible to do: I don’t think that recognizing a secular bear market in equities, and recognizing that market prices are expensive, is impossible to do. I agree that a lot of things about “macro” are impossible to forecast correctly and consistently. But to say that EVERYTHING is impossible, and so that EVERYTHING should be overlooked, is to take a good idea to its extreme consequences… Always something very dangerous to do! giofranchi

stahleyp, I don’t think you should judge Mr. Hussman’s return the way Morningstar suggests. First of all a 3-year timeframe is completely meaningless and deceiving. Second, they say the risk he runs is average. Vice versa, I think that the risk he runs, I mean the probability of incurring a permanent loss of capital, is extremely low. Think of it this way: if, investing in public companies, the two most significant risks are 1) business specific risk, and 2) market risk, he is very successful in minimizing both. 1) He employs a basket approach of investing in equities, so he puts a very small amount of capital in each idea, thus minimizing business specific risk. Anyway, the basket of equities he chooses has always beaten the S&P500 by an appreciable margin, so he also shows some business acumen! 2) He is very effective in controlling market risk through his options strategy. I find it interesting that both Mr. Hussman and Mr. Watsa went 100% market neutral together in April/May 2010. So, as far as I can see, since inception Mr. Hussman has trounced the S&P500 (he has also beaten the Russell2000, albeit by a smaller amount), with a strategy that allows him (and his shareholders) to run almost no risk. So, if we agree that the true measure of performance is return/risk (beware, I don’t mean return/volatility!!), than Mr. Hussman is very good indeed! giofranchi