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Thank you Norm. I may have more questions than in previous years but both Francis and Tim McElvaine have at least a few decades more experience in value investing and will probably provide better answers. Both have been great in answering all questions in past years even late into the night. Packer

However, the Formula US finds were some of the best performing Formula funds. Packer

This true if interest rates are higher but if they are where the are now are folks going to dump there stocks to jump into 2.5% yielding bonds or 0% yielding T-bills for long? Also, the flows into equities has been tepid at best over the past few months after a large outflow over the past few years. The normal magnet of higher interest rate pulling dollars from stocks is less with current rates. I agree with Marks in theory but we may be seeing the beginning of the practice with flow of asset to equities. Packer Packer

The boards advice and feedback on all of my ideas and ideas from others have had a huge impact on this performance. Thanks to all. Packer

An interesting graph about delevering. I think we are half-way or more to delevering point. http://research.stlouisfed.org/fred2/series/HDTGPDUSQ163N?cid=32267 Packer

I think one aspect of the recovery versus previous upturns is the lack of sub-prime financing as banks have stopped this type of lending. The void is being filled by other capital providers just now so we may have a way to go until this financing becomes more fully tapped out. In addition, with the disinflationary environment we are in, I think an above average multiple is appropriate because the alternative investments have such low yields. Packer

At some point he will be wrong and you hope he has not bet too much on being right. The macro is too complicated to figure out. There are so many factors beyond anyones control that its only a matter of time until you are wrong. Packer

I am sure Mr. Hussman is smart man but his performance in trying to turn his insights into dollars for clients is worse than an index fund. Just look at his mutual fund returns versus the Vanguard index fund. From this we can state that even though he has good insight even he cannot turn that into excess returns. He is not alone look at Fairfax and for that matter any macro guys I know (Richard Bernstein). What I take from this is making investment decisions on macro factors is like buying LEAPs, it is deceptively easy but about impossible to beat the index let alone some of your compounders or other's value oriented picks. Macro provides some nice intellectual conversations which can prevents us from over trading (a hopefully not destructive distraction like CNBC) . I think we just can't take the results of the conversation into our portfolios too seriously or it will seriously hurt our long-term performance. Packer

You are correct but I think the difference lies in the amount of overvaluation at this point. Siegel think little or non while Schiller thinks there is quite a bit. Packer

The other point he made is the historical average includes periods of high interest rates. These rates acted as magnets whenever stocks got too expense as the opportunity cost of cash/bonds was low. Now it is much lower and if you exclude periods where IR are greater than 8% then the average forward looking PE increases to 18.9 versus 15 now. I think his point was that the talk of bubbles now is premature based upon valuation. Packer

Have any of you guys seen Jeremy Segal's rebuttal for the use of CAPE? I saw it today at the CFA conference and it was pretty convincing. The main issue is the use of reported S&P earning which include goodwill and asset write-downs over the past 10 years that were not included in the data before 10 years ago. If you adjust the data for these reporting differences the CAPE is at or below its historic average. Packer

I think you need to be careful on sources. The investor intelligence numbers are based upon newsletter sentiment, an indirect measure at best. The AAII poll is a more direct measure. Packer

I think bubbles probably do not exist if it is the consensus. That does not mean that there is a short term amount of over-confidence. Confidence is very volatile (see AAII sentiment indicator) so I would rely more on other indications (fund flows, % allocation to cash and "bubble" talk for example) for longer term sentiment trends. Packer

Sentiment does not tell you if there is pent-up demand. It tells you short-term oversold/overbought conditions. The % of investors assets in cash is a better measure of pent up demand. The interesting thing about this market is that wealthy folks know stocks provide the best returns and have allocated a good amount of stocks. The middle class investor is missing from this market and can provide some pent up demand. Packer

Look at his annual presentations. There is something in one of the more recent ones. Packer

We will all lose at some point and I learn more from mistakes than successes. That is why I really appreciate a guy like Tim McElvaine who has made some great calls but has shared some details on his losses and the reasons why. You don't see that often and for me provides the greatest opportunity for learning. Packer

In terms of weighting I adjust to undervaluation level. As they approach fair value I sell them. I guess I am like Kraven anything in my store is for sale at a reasonable price. In terms of volatility it is still there. I was down 51% in 2008 but up 109% in 2009 and YTD up 140% but who knows how I will end up. I don't go on margin so I start and end unlevered and since most of my finds are in IRAs, I am not sensitive to taxes. I guess I just live with volatility because it is there. I do notice if stock has run up and is still undervalued it has a larger impact on the returns. If you have any ideas to reduce volatility and not sacrafice upside, I would like to know. Packer

I am fully invested but I would agree with UPL. In addition I would add AIQ, which has declined recently and has an almost 23% FCF yield, GNCMA, TI-A and FIATY. I think the AIQ decline has to do with the botched healthcare roll-out/implementation. Packer

That is the rub - there are not that may stocks out there with good risk/reward. It is sort of counterintuitive that at market bottoms you can be diversified because you can find a lot of securities with high reward/risk ratios but as markets advance the number of securities declines and using the Kelly at least provides some guidance on how concentrated you can get before you get into trouble from overbetting. Packer

Thanks for sharing SD. That is a great way to us the Kelly. Even though the events are not totally independent I use the Kelly as tool to reduce risk by providing me with some indications of how much to sell to prevent me from over allocation when a stock appreciates in value. I use conservative win/loss ratios (typically 50%). So I will give you an example. Right now I own and have liked AIQ. At this point, I estimate its upside in 116%. So putting this in the Kelly gives you an allocation of (.5*(2.16 + 1)-1)/2.16 = 27%. So when AIQ approaches this percentage I will sell and invest more in one of my most undervalued names. I use it as guideline which allows me to concentrate but puts a limit on how much in one security to reduce the chance of risk of ruin. Packer

Congrats Jeff. Let us know if you and Sitestar need capital to purchase some undevalued assets, I think there would be some folks here interested in participating. Packer

I use it as a maximum allocation. So for instance, if a buy a stock and it appreciates but I think it still has a ways to go in terms of upside I would sell when the weighting goes above the Kelly fraction. Packer

How do you weight the stocks is your portfolio any why? I have value weight my positions based upon discount from intrinsic value and losely use the Kelly Formula to set maximum percentage allocation. I will re-balance if stock rallies. Packer

The US ticker is MOAT it is called the Market Vectors Wide Moat ETF. Packer

You can start with an ETF like MOAT which has a value oriented moat strategy that has a pretty good track record. Packer