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Based upon the information I have heard and observed, the small business guy and entreprenuer cannot get a loan or the rates are very high (VC rates). So QE has done little for these folks. The folks who can get loans are the large corporations who in fact have so much credit that many are practicing credit arbitrage to take advantage of the spread. I think another unanticipated consequence has been the increased capital requirements on the banks. This is what has cause this cheap rates to large customers and huge rates to smaller ones. Now if this changes then QE will have an effect on growth in small business. The other constipating factor is the emerging markets. In theory, the money from developed markets should flow to emerging markets to facilitate thier growth. However, the property laws and practices in those countries do not provide assurances like in the developed markets. As a matter of fact you get a negative flow to the developed world from the emerging markets. This leads to a huge amount of money available to developed and a shortage in the emerging markets. I think one secondary affect, the R&R paper illustrates and you see it in Japan is the market knows the debt is going to be paid back (that is why the rates are so low) and correctly assumes the interest payments will come from future economic growth and thus the net available return to investment will be lower (because the future income has a claim against it). This leads to a downward spiral situation like what we see in Japan. The only way to get out is via financial repression (as long as the real negative interest rate is in excess of the increase in debt), lowering the growth rate of debt below GDP growth (which is what Romeny/Ryan does), default of debt or inflation. Packer

I think many of your winners (business owners, entrepreneurs, the unemployed) are only winners if they can borrow at the low rates and they cannot. The indebted can only do better if they can refinance and the smaller borrowers with underwater mortgages cannot. So a majority of the winners are wealthy folks who can refinance. You conclusion is correct if all could take advantage of low rates but they cannot. Who loses. The small savers. So in effect you are fleecing the old and poor and giving it those who can borrow. Which to date has only included the wealthy. That is why the lower rates have had little effect. Packer

My 3 include TVL, AIQ and SD. See other discussions on these names for rationale. Packer

Who gets hurt most by financial repression? The small saver who does not have the means or insight to buy other assets. Who gains the most? The wealthy who can move to higher yielding assets or hire someone who can for them. The major question I have is what is the alternative? I think the key is to do something similar to Ryan's plan and go after future benefits in conjunction with eliminating deductions. I don't see any other viable path. Unfortunately, the only good plan out there is getting alot of bad press. I think the best way to view the QEs is transfer of wealth from savers to borrowers and in most cases borrowers are folks of wealth not the middle and lower class. Just my 2 cents. Packer

Great reads especially the R&R article. It puts to rest the monetary free lunch concept that many have been espousing. Packer

So do you mean if we doubled over that time would it be 100% or 7% (compounded over 10 years)? Packer

I think the issue of averages is that there are values not just on average. Similar to the 6 foot man who drowned in a stream that on average was 3 feet deep. Packer

I would look at what value investors have done (a number are fully invested showing that bargains are out there) versus using one indicator to say the market is overvalued. Packer

Mr. Hussman's quotes sound like a macro guess based upon alot of macro indicators. Mr. Marks assessment is based upon sentiment. He has a unique perspective as investing in both equity and high yield. As one indicator look at Berkshire's Porfolio now versus 1999. Berkshire has been able to find plenty of investments. I love Mr. Marks statement on macro statements, namely (1) I don't know, (2) nobdody knows and (3) if you ask an expert for advice and follow it, you'll probably be making a mistake. Packer

One way some PE funds handle this is to calculate fees on sold illiquid positions. The other alternative is clawback but that is not as clean. Packer

I think the evidence against value investing (for efficient markets) is the mutual fund records of value investors, esp large cap managers. Even the masters, Longleaf and Sequoia have had worse or only marginally better records than index funds. I think inefficiencies exist but I am really skeptical about large cap values. Packer

I think they are cheap because GM is a disliked stock branded as "government motors". However, GM has reduced pension liabilities, have an overcapitalized finance sub and nice WW operations (China is dividending $1B per year). I think the warrants are mispriced for the same reason the BAC warrants are misvalued (they are long-term and given the size of the offering the large equity players are not in the market). Packer

I own some GM warrants. Pabrai also owns some GM. See the GM thread for some discussion about GM. Packer

Can you provide some of the 100x insurance co increase during that time? Thx. Packer

Yes that is it Packer

What has helped me is to understand what makes a good high yield investment for those firms who have a good amount of debt. The book How to Make Money in High Yield Bonds by Levin provides a nice framework. Packer

Another intresting observation is sampling for the current set of polls. All of the pollsters (except Rassumutan) are sampling the ratio of Dems/Repubs at or greater than the margin by which Obama beat McCain. Based upon the latest polling from Ras the current party ID numbers are closer to 37 R/33 D. Using the same methodology in 2008, the numbers were 41 D/ 34 R. Since we have a polarized electorate, this would imply a bias in the non-Ras polls of about 5% for Mr. Obama. Surprised no one has picked up on this. As for marathon runners, George W Bush was the fastest followed by Sarah Palin. Interesting. Packer

So gold is a disaster hedge not a call on gold. I have heard that others including Martin Capital Managment have purchased 2 to 3 year puts for the same type of protection Fairfax and others obtained for equity market protection. I guess it also becomes a good bet if the position is unwound at the bottom like FFH's unwinding in March 2009. With the VIX so low puts may be a good way to play a potential decline. Packer

Have you had long-term success with gold or gold related equities? I have found oil & gas to have similar characteristics as gold (store of value) and easier to assess in terms of cash flow. Packer

Since you are located in Italy, do you see any bargains in that part of the world. It certainly is depressed and from what I see it appears Italy will stay in the Euro. TIA. Packer

Shorting is out of my circle of competence and has a timing component and technical component (borrowing shares) that I have not done well with in the past. I am willing to buy a long-term warrant as it cuts off my downside and issue of borrowing share is removed. So I guess I am stuck with long asset selection. I have always had a hard time with long/short strategies as there few undervalued and overvalued assets at a given time, the possibility of error is doubled and the markets have an upward bias. I have a hard enough time with long only. The one note on Templeton's internet strategy was that he would take advantage of removal of lock-ups as a timing factor in going short (he went short when the lock-ups expired) and thus removed a portion of the time uncertainty component of shorting. Given the pre-IPO markets that exist today, I am not sure this shorting strategy would work today. Packer

The forecast may be accurate but what are we to do with this? I am not constrained to investing in asset class indexes and as far as I can see asset class switching has not been a very good way to outperform. There is much more outperformance in stock selection. I was invested in A GMO fund for over 7 years and was disappointed by the poor relative and absolute performance. What he provides are some nice aggregate statistics but I would use bottoms up valuation as better indicator of investment opportunities. I also think funds provide the acid test of philosophy and although Berkowitz stumbled in 2011, I think he will more than make up for it goig forward. Packer

Some of Mr. Grantham's observations are interesting as far as see he has failed to make any money on them other than gathering assets and charging a fee. He has some great thinkers who work for him but as far as I can see from his fund performance it has been average. His largest allocation has been to timber which has been a dud in my opinion and has totally missed the micro story of declining book/magazine demand. Mr. Marks on the other hand has done outstanding. The other question I ask is the data or observation unique. The data GMO presents is not. If this was the way to obtain excess returns you would see it in their returns. The data they provide is an average (similar to the Mark's observation that a man drowned crossing a stream that on average was half his height). Marty Whitman has the same observations about bear markets being industry specific and overall market bear markets are a sum of those markets. I think what you are seeing on this board is the indentification of industry bear markets and based upon Mark's framework of the company/security parameters being much more predictable than aggregate data. Packer

I think alot of the macro stuff is predicting the unpredicatble. There have been very smart folks over the past 100 years trying to do this to no avail. If you look at some of the best performing macro guys (Soros) they made money by betting big on trades that started going there way. Dalia, Paulson and others who try to play the macro game in my mind will be disappointed. I think the focus should be on the knowable: companies, industries and securities and let other spend time speculating on the macro. Where some of these factors can help is to gauge where we are. Marks (who is a great value investor) thinks we are in a middle ground. His indicators (on page 131 of his book) include debt, equity, fund and sentiment. The debt indicators are bullish in that there is very little speculative lending and the return for HY bonds is good for the risks taken. The equity indicators and neutral, the valuations are high based upon past metrics but modest based upon current metrics (it depends upon you view on profit margins). I think a better way to think about equity is by sector and you can find undervalued sectors (banks, life insurance, computer devices, radio and TV) and some overvalued sectors but the average is just an average of overvalued and undervalued sectors. Fund indicators are bullish in that new funds are not being raised and those that are don't have folks running over themselves to get in. Sentiment is inline with economic performance which is weak. Packer

Did you guys notice FFH purchased a Greek REIT? The REIT is Eurobank properties and has more cash then debt and has FFO yield of 18% once the cash is pulled out. Packer