"Macro" Musings

[Guest Dazel]

http://www.raymondjames.com/inv_strat.htm

 

 

Jeff Saut while virtually unknown has been uncannily correct since 2000....he called the 2009 bottom but has not been praised in the public like Marc Faber et all....and more importantly he stuck to his guns the entire bull market so far. The only others I have seen do this: Warren Buffett and Lazlo Biriyni.

 

His convictions have proved correct...I read his weekly commentary...

 

Dazel.

[Guest valueInv]

Interesting, I would have expected the graphs to be reversed:

 

http://www.calculatedriskblog.com/2013/04/public-and-private-sector-payroll-jobs.html

[giofranchi]

Mr. Charles Gave on "Implied Assumptions"

 

giofranchi

Daily+5.1.13.pdf

[giofranchi]

gio,

 

I enjoyed both of those.  I have always enjoyed Crestmont's research.  I'm looking forward to attending Mauldin's conference in a few weeks since many of the people we mention on this thread will be presenting.

 

Take care,

David

 

Hi David!

So, how was the conference? Any thought to share with the board?

Thank you very much and take care  :)

 

giofranchi

 

[dcollon]

gio,

 

The conference was a lot of fun.  There are always great speakers with thoughtful presentations.  I don't want to criticize any of the presenters, but I found the best ones to be Niall Ferguson, Jeff Gundlach, David Rosenberg, Charles Gave and Kyle Bass.  I had a chance to spend some time with Kyle Bass and would tell you that he is a really funny and humble (though high conviction) guy.

 

The biggest take away is that almost everyone there is short the yen and thinks Japan is on the brink of disaster (nothing new to the board members here).  They flip side is that some of them were playing the Japanese equity markets on the long side.  Kyle obviously thinks that's a bad idea.  There were also a few people who continue to view 30 year treasuries as compelling.  Gundlach, spent time talking about other credit as being interesting.  One suggestion was to own 30 year zero's, since if Japan "defaults/restructures" US treasuries will likely go much lower and again in Kyle's view for "not the right reason".  Rosenberg has been a treasury bull for a long time and he came out and said he is no longer a bull on treasuries.  He spent his presentation arguing why he thinks yields will not go down anymore and most likely go up.  He obviously on his own with this view.

 

Overall, much of what was said has been posted in speeches and commentary on this board.  It was fun being able to have some individual discussions with them and it was great to spend some time in Southern California.  The weather was fantastic.  I went from 82 degrees and sunshine, with a very pessimistic group to 40 degrees and sleet/rain with a very happy group (Omaha).  Kind of funny if I think about it.

 

 

[giofranchi]

gio,

 

The conference was a lot of fun.  There are always great speakers with thoughtful presentations.  I don't want to criticize any of the presenters, but I found the best ones to be Niall Ferguson, Jeff Gundlach, David Rosenberg, Charles Gave and Kyle Bass.  I had a chance to spend some time with Kyle Bass and would tell you that he is a really funny and humble (though high conviction) guy.

 

The biggest take away is that almost everyone there is short the yen and thinks Japan is on the brink of disaster (nothing new to the board members here).  They flip side is that some of them were playing the Japanese equity markets on the long side.  Kyle obviously thinks that's a bad idea.  There were also a few people who continue to view 30 year treasuries as compelling.  Gundlach, spent time talking about other credit as being interesting.  One suggestion was to own 30 year zero's, since if Japan "defaults/restructures" US treasuries will likely go much lower and again in Kyle's view for "not the right reason".  Rosenberg has been a treasury bull for a long time and he came out and said he is no longer a bull on treasuries.  He spent his presentation arguing why he thinks yields will not go down anymore and most likely go up.  He obviously on his own with this view.

 

Overall, much of what was said has been posted in speeches and commentary on this board.  It was fun being able to have some individual discussions with them and it was great to spend some time in Southern California.  The weather was fantastic.  I went from 82 degrees and sunshine, with a very pessimistic group to 40 degrees and sleet/rain with a very happy group (Omaha).  Kind of funny if I think about it.

 

Yours has surely been the most exciting and thrilling of week-ends!! I envy your chat with Mr. Kyle Bass, I envy the Southern California sunshine… I also envy the sleet and rain in Omaha!!  ;D

And your joke about the different weathers and the different moods is great fun!

Cheers!

Gio

 

[Guest hellsten]

Q1 2013 European Quarterly Update:

Peripheral Eurozone markets suffered from a chaotic attempt to resolve troubles in the Cypriot banking sector. With respect to the strategy’s Eurozone bank holdings,

the direct impact will likely be minimal. A more significant impact on the strategy was felt as Italian stocks wilted under the uncertainty created by February’s

inconclusive elections. The Italian stock market is the cheapest in the developed markets and trades at a price to normal earnings ratio of just 7.9 at the end of March.

 

While European value stocks were lagging, U.S. value stocks outperformed. As a result, the valuation differential between value stocks in the U.S. and other markets

stands at its widest in at least 25 years, and we are increasingly comfortable with the positioning of the portfolio away from “traditional value stocks” in the U.S. towards

attractively priced high quality companies.

 

https://www.gmo.com/Europe/CMSAttachmentDownload.aspx?target=JUBRxi51IIDURjOYEQRkIdFaGH90UbgGSxHYr%2fyv1tGFdBbWWURUDqu38rSXstbMD03j88NqKvf4n%2bIwiLouvdLWhP5f2b7a%2b5TLM%2fdDAHo%3d

 

What if anything have people here been buying in Italy? I have added FIATY. I was also looking at Exor, and Telefonica, Semapa and Santander on the Iberian front…

 

Gio, are there any good value investors in Italy other than you :), similar to Bestinver in Spain? I would like to research Italy in more detail and since I'm a coattail investor the first step would be to look at what other value investors are doing.

 

I found Ciccio Azzollini via:

http://www.valueinvestingseminar.it/content_/relatori.asp?lan=ita&anno=2013

http://www.consulenzafinanziariaindipendente.org/Filosofia.html

http://www.ircri.it/?page_id=1338

 

Video of Ciccio:

http://www.valueconferences.com/people/instructors/ciccio-azzollini/

[giofranchi]

Hi hellsten,

unfortunately I think I cannot help you… I have no interest to invest in the Italian stock market… I know it is very cheap, and I might be missing a very good opportunity… but I don’t know of any public company that really interests me, in which I would invest for the long-term. As strange as it sounds, I consider the Italian stock market to be “outside my circle of competence”… ???

 

giofranchi

 

[Guest hellsten]

Hi hellsten,

unfortunately I think I cannot help you… I have no interest to invest in the Italian stock market… I know it is very cheap, and I might be missing a very good opportunity… but I don’t know of any public company that really interests me, in which I would invest for the long-term. As strange as it sounds, I consider the Italian stock market to be “outside my circle of competence”… ???

 

giofranchi

 

Thank you. There are not many value investors in Europe, or at least they are not as open about it as in the US. It's also difficult to find information about European companies because the information is in a lot of different languages. It's also difficult to trust management.

 

Here are a few companies from Southern Europe that seem to be value oriented:

Exor - Italy

Sonae - Portugal (fans of Warren Buffett: http://www.bottomupanalysis.com/2011/08/30/8th-annual-value-investing-seminar-in-trani-italy/)

Corporación Financiera Alba - Spain (not so sure about this one)

 

Bestinver owns all three.

[Guest hellsten]

Tweedy Q1 commentary:

While it is inaccurate in our opinion to say that equity markets have reached bubble-like conditions, the

bulk of our portfolio holdings are today trading at or near fair value. New idea flow has slowed, and cash

reserves have been building slowly at the margin in our Funds. While equities may indeed be the new default

investment particularly in light of bond valuations, for professional and amateur investors alike, it is no time

for complacency.

 

http://www.tweedy.com/resources/library_docs/quarterly/FundCommentary%20Q1%202013%20-%20Final.pdf

[giofranchi]

Eclectica Q1 Review, 2013

 

giofranchi

Q1-Review-2013-Hendry1.pdf

[giofranchi]

The only thing we have to fear is the lack of fear itself.

 

giofranchi

The-Only-Thing-We-Have-To-Fear-Is-The-Lack-Of-Fear-Itself.pdf

[giofranchi]

Imo, this week missive is one of Mr. Hussman’s best. Not to be missed!

 

The perception that investors are “forced” to hold stocks is driven by a growing inattention to risk. But Investors are not simply choosing between a 3.2% prospective 10-year return in stocks versus a zero return on cash. They are also choosing between an exposure to 30-50% interim losses in stocks versus an exposure to zero loss in cash. They aren’t focused on the “risk” aspect of the tradeoff, either because they assume that downside risk has been eliminated, or because they believe that they will somehow be able to exit stocks before the tens of millions of other investors who hold an identical expectation that they can do so.

 

Though the discipline to “sit by quietly while the mob has its day” can be nearly excruciating in the excitement of late-stage bull markets, as the market registers multi-year highs amid rich valuations and heavily optimistic sentiment, it’s worth remembering that the 2000-2002 bear market wiped out the entire total return of the S&P 500 in excess of Treasury bills all the way back to May 1996. Assuming that investors stuck it out to finally regain and surpass the market’s 2000 peak in 2007, the 2007-2009 bear market then wiped out the total return of the S&P 500 in excess of Treasury bills all the way back to June 1995.

 

Think about that. One literally could have sat in Treasury bills through 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, and into early 2009, and have done better than the S&P 500 did over that entire span of time. Moderate losses are frustrating, but deep, major losses from rich valuations are the ones that matter, because it is difficult to recover from them in a durable way. The recent advance is a gift in that regard. Consider that carefully now, not later.

 

giofranchi

wmc130513.pdf

[giofranchi]

Société Générale on US Energy Independence.

 

giofranchi

Econote17_US_energy_EN.pdf

[dcollon]

Not really "macro", but Jason Zweig comments on Markets and Memory Banks

Markets_and_Memory_Banks_-_Total_Return_-_WSJ.pdf

[giofranchi]

Coming soon: Europe's biggest economy will be U.K.

 

giofranchi

Coming_soon_Europe-s_biggest_economy_will_be_UK.pdf

[giofranchi]

Comstock Partners, Inc. - Why We Remain Bearish

 

giofranchi

Why_We_Remain_Bearish.pdf

[Palantir]

This is awesome....stocks just keep going up without rhyme or reason....yeah baby keep it coming.

[jberkshire01]

Great post and comments: http://www.viewfromtheblueridge.com/2013/05/17/dumb-dumber/

 

[giofranchi]

Very good piece by Mr. David Hay and his staff on Mr. Gundlach, Mr. Rosenberg, Mr. Ferguson, Mr. Bass, Mr. Shilling, Mr. Roubini, Mr. El-Erian, Mr. Louis Gave, and Mr. Charles Gave.

 

giofranchi

 

PS

For those who had the pleasure to attend Mr. Mauldin’s Strategic Conference, like David, of course this is old news. For those who couldn’t, myself included, it might be of some interest. :)

EVA+5.17.2013+NA.pdf

[giofranchi]

The latest speech by Mr. Fisher of the FED in Dallas.

 

giofranchi

Fiscal-Policy-Oy-130516.pdf

[ERICOPOLY]

Very good piece by Mr. David Hay and his staff on Mr. Gundlach, Mr. Rosenberg, Mr. Ferguson, Mr. Bass, Mr. Shilling, Mr. Roubini, Mr. El-Erian, Mr. Louis Gave, and Mr. Charles Gave.

 

giofranchi

 

PS

For those who had the pleasure to attend Mr. Mauldin’s Strategic Conference, like David, of course this is old news. For those who couldn’t, myself included, it might be of some interest. :)

 

I started to feel better when Mr. Shilling said he expects no US recession, continued 2% growth, stronger US dollar, and that a 27% correction in the stock market would bring stocks back to the appropriate levels.  A 27% correction doesn't set some of us back very far (unless of course we do worse than the market) -- about 1,200 on the S&P500 (well above the level that some started hedging).

 

 

And wow, Roubini sure thinks things are pretty darn good:

 

Regarding the US economy, Roubini was somewhat more optimistic. He feels that the housing recovery is legitimate. He does believe that there will be a manufacturing revival in the US due to lower energy costs and that the shale gas boom will be a massive tailwind for the US for many years to come. All of these together will lead to solid employment growth and should continue to strengthen the US recovery.

 

 

[merkhet]

Interesting reading from the Journal this weekend.

 

http://blogs.wsj.com/moneybeat/2013/05/17/earnings-are-a-margin-story-but-for-how-long/?mod=WSJ_hps_sections_markets

[valuecfa]

I've been trimming equities significantly lately in personal accts...and am reviewing my options for "wait and see mutual funds" in my 401k.

 

Anyone have any thoughts on how a DBLTX would perform under a 27% equity market correction (keeping interest rate assumptions neutral)?

BB, relatively high yields, but not corporates, mostly mortgaged backed.

 

I've got some 401k money in this and NELYX as I can't trade individual securities in that acct, and options are limited.

 

By the way, GMO just put out their updated 7yr forecast.

[giofranchi]

I started to feel better when Mr. Shilling said he expects no US recession, continued 2% growth, stronger US dollar, and that a 27% correction in the stock market would bring stocks back to the appropriate levels.  A 27% correction doesn't set some of us back very far (unless of course we do worse than the market) -- about 1,200 on the S&P500 (well above the level that some started hedging).

 

Eric,

with the only possible exception of 2009, have you ever seen things break down and then find support at “fair value”? I am not saying things will break down, what I am saying is just that, if things do actually break down, this time might be very different than back in 2009. That time the central banks around the world had their guns fully loaded, now interest rates are as low as they can be and money printing is as rampant as it can be… not many bullets left to shoot! What will keep this time the markets, if they do actually break down, from reaching fair value and proceeding downward? Mr. Shilling himself has often repeated that this secular bear in stocks will end with S&P500 earnings of 80 and a multiple of 10: S&P500 at 800.

 

giofranchi