"Macro" Musings

[giofranchi]

I've read margin of safety.

 

I know! That's why I have written:

 

if you read again “Margin of Safety

 

;)

 

Gio

[giofranchi]

Anyway, this is redundant, we've already said all this before. Let's drop it.

 

Ok! You are right! :)

 

Gio

[Liberty]

I've read margin of safety.

 

I know! That's why I have written:

 

if you read again “Margin of Safety

 

;)

 

Gio

 

I saw that, I just thought it was kind of a condescending phrasing, as if all I needed to do was read it again, because I didn't understand it the first time, and then I'd of course agree with you...  ;)

[giofranchi]

I saw that, I just thought it was kind of a condescending phrasing, as if all I needed to do was read it again, because I didn't understand it the first time, and then I'd of course agree with you...  ;)

 

Ah!... But that would have been impolite and presumptuous! Far from me!

 

Cheers,

 

Gio

 

[Liberty]

I saw that, I just thought it was kind of a condescending phrasing, as if all I needed to do was read it again, because I didn't understand it the first time, and then I'd of course agree with you...  ;)

 

Ah!... But that would have been impolite and presumptuous! Far from me!

 

I know, that's why I said I thought the phrasing was problematic, and I ignored it the first time. I figured it wasn't what you meant, but then you specifically asked about it so I explained :)

 

I know I said we should drop this, but there's one of the many things that I said that I'm really curious to hear your opinion on. What do you think of this: "If Buffett or Watsa or Munger or Klarman was running single-digit millions, do you think they'd be fully invested [if they saw enough things that met their criteria] or do you think they'd hold cash based on market-timing/macro factors?"

 

Cheers!

[giofranchi]

I know I said we should drop this, but there's one of the many things that I said that I'm really curious to hear your opinion on. What do you think of this: "If Buffett or Watsa or Munger or Klarman was running single-digit millions, do you think they'd be fully invested [if they saw enough things that met their criteria] or do you think they'd hold cash based on market-timing/macro factors?"

 

Cheers!

 

Ah!... Very difficult to say! Anyway, they are the best investors out there… Let me answer with Marks’ tennis analogy: the professional wins by being aggressive, the amateur wins by being defensive…

 

One thing I am sure about: neither Buffett nor Watsa nor Munger nor Klarman would ever put themselves in the situation of being forced to sell their investments… Because imo the ability to hold on to your investments for as long as you please is key to investment success… Life might be strange and full of surprises… I remember Munger saying: “We have already been cash-strapped… And we don’t ever intend to go there again!”

 

As far as “opportunities meeting their criteria” are concerned, I think it is not that easy: because position sizing matters too. If I hadn’t a very large investment in FFH, I would be buying it today. Instead, I am waiting for some price correction to add to my already large position.

 

Gio

 

[Liberty]

Thanks for giving me your answer to that question.

[mcliu]

Hi Gio, just curious to know, is there a point at which would you become fully invested? Or is a large cash balance a permanent fixture?

 

For example, I think you mentioned that FFH is a large % of your portfolio, so clearly you believe that it's undervalued relative to its opportunities. Given that, why not invest the remainder of your cash into FFH, rather than hold it in cash?

 

Or is the alternative, holding cash and waiting for opportunities like waiting for FFH to drop below BV and purchasing it then? Assuming that does happen, when FFH moves below BV and you put all your remaining cash balance into it, do you sell to recover your cash balance when the stock price moves higher than BV?

[giofranchi]

Or is the alternative, holding cash and waiting for opportunities like waiting for FFH to drop below BV and purchasing it then? Assuming that does happen, when FFH moves below BV and you put all your remaining cash balance into it, do you sell to recover your cash balance when the stock price moves higher than BV?

 

Yes! Probably I would do something like you suggest! But I wouldn’t wait for a price below BVPS… I would start using a part of my cash reserve at 1.15 x BVPS, and keep buying as the price trends down… If the price recovers swiftly, instead, I will sell some…

 

Gio

 

[giofranchi]

Life might be strange and full of surprises…

 

For instance, I think I have recently found a wonderful piece of real estate downtown Milan, which might serve me very well for many years to come, both as a new better house for me and my family and as my own private office. The price is a true bargain because the counterpart is currently distressed and therefore a forced seller. I am positive it is a purchase that will both enhance the quality of my life and my family’s and turn out to be a reasonably good financial investment.

 

Now, you can plan as much as you want… But to foresee when such an opportunity might arrive imo is almost impossible… Instead, you must be ready to act promptly and seize it. If I were fully invested and the price of my stocks were depressed, I would be faced with a dilemma I don’t want to face: should I sell my stock investments at the worst time possible… Or should I let the real estate opportunity go?

 

This is just an example of what might happen… because it is actually happening to me right now! ;)

Unfortunately, I guess we all know worst things than this might happen… :(

 

Gio

 

[Vish_ram]

Paulsen's perspectives

 

http://www.wellscap.com/docs/emp/20150108.pdf

 

The median P/E chart is scary. It looks like low interest rates have lifted all boats.

[randomep]

 

 

 

If you don't see opportunities, by all means hold cash. But realize what opportunity cost it has. If Buffett or Watsa or Munger or Klarman was running single-digit millions, do you think they'd be fully invested or do you think they'd hold cash based on market-timing/macro factors?

 

As I recall, Buffett said if he ran one million he'd find opportunities like a bachelor in a harem and therefore would be 100% invested.

 

 

[meiroy]

My macro call for the year:

 

1. Interest rates will rise by the end of the year. 

2. Oil prices will rise by the end of the year (my random number is 60 to 70).

 

Once everyone realizes just how well the US economy is doing compared to the current gloom and doom, it is just going to shoot up with all the funds fearing to miss again like last year. Hence this is possibly the last or one of the last (cough) opportunities to get on the financials bandwagon, because once it gets going it ain't gonna stop (until it does).

 

* I manage my own money and can state any senseless statement that I want. Do not trade on it.

[randomep]

My macro call for the year:

 

1. Interest rates will rise by the end of the year. 

2. Oil prices will rise by the end of the year (my random number is 60 to 70).

 

Once everyone realizes just how well the US economy is doing compared to the current gloom and doom, it is just going to shoot up with all the funds fearing to miss again like last year. Hence this is possibly the last or one of the last (cough) opportunities to get on the financials bandwagon, because once it gets going it ain't gonna stop (until it does).

 

* I manage my own money and can state any senseless statement that I want. Do not trade on it.

 

meiroy, I am really puzzled by what your saying "once everyone realizes how well the US economy is doing......"

m

Everyone is talking about how the US is the only market to invest right now! even my doctor...... if my doctor isn't a contrarian indicator I don't know what is.....

 

I hate making macro calls, but I will say this, it wouldn't surprise me if the US stockmarket disappoints this year, Gundlach's talks reveal some very ominous signs:

 

1. US stock market has never gone up 7 yrs in a row, and we had 6 yrs of up markets

2. I think he said all the US job gains in the last six years is due to US oil revival........

 

I am very very concerned for the US

 

 

[giofranchi]

Hosington Q4 2014 Market Commentary

 

 

Gio

HIM2014Q4NP.pdf

[Valuebo]

This euro devaluation versus the USD is brutal. If this and cheaper oil don't boost economic growth in the EU, I don't know what will.

[mcliu]

What kind of impact will a devalued Euro have on US growth?

[obtuse_investor]

What kind of impact will a devalued Euro have on US growth?

 

Where is the US decoupling banter in the media?

[treasurehunt]

Alan Greenspan thinks a Greek exit from the Eurozone is inevitable: http://www.bbc.co.uk/programmes/p02jkn9f

 

Greenspan sounds sharp and alert for a guy who is 88. In the interview he basically predicts that all the Southern European countries will eventually leave the Eurozone.

[ni-co]

What kind of impact will a devalued Euro have on US growth?

 

Most probable is that it's going to force down US production. This should mean either higher unemployment or higher debt in the mid term.

[wisdom]

http://www.ft.com/intl/cms/s/0/ca01eaee-b2da-11e4-b0d2-00144feab7de.html?siteedition=intl#axzz3RdV3q1hq

 

negative rates in Sweden and BOoE opening the door to lower rates.

[ni-co]

http://www.ft.com/intl/cms/s/0/ca01eaee-b2da-11e4-b0d2-00144feab7de.html?siteedition=intl#axzz3RdV3q1hq

 

negative rates in Sweden and BOoE opening the door to lower rates.

 

Australia is easing, too. We're slowly coming to the point where the whole world has zero interest rates and QE, and then it has to lose its effectiveness.

[wisdom]

You know when high inflation emerging markets lke India have infaltion under control - this is not something I have seen in my lifetime.

 

This was even before oil's drop has fed through the global economy. It will be interesting to see how this works out - we have slow growth in the developed world. China keeps adding capacity while it is slowing. Check out recent interviews by Chinese individuals involved in real estate such as Soho, etc.

 

According to Zhang - Chinese government will manage the slow down because they have always managed it in the past. I would not have as much faith in anyone to manage the enromous increase in debt they have experienced over the last 6 years.

[ni-co]

You know when high inflation emerging markets lke India have infaltion under control - this is not something I have seen in my lifetime.

 

This was even before oil's drop has fed through the global economy. It will be interesting to see how this works out - we have slow growth in the developed world. China keeps adding capacity while it is slowing. Check out recent interviews by Chinese individuals involved in real estate such as Soho, etc.

 

According to Zhang - Chinese government will manage the slow down because they have always managed it in the past. I would not have as much faith in anyone to manage the enromous increase in debt they have experienced over the last 6 years.

 

I spent quite a lot of time with reading Michael Pettis' excellent books and blog on that subject. This clearly has to end – it's already ending. Commodity rich countries will have a very hard time after they will have been through their monetary firepower.

[ni-co]

Inflation is dead: It’s below 1 percent in the U.S., U.K., Europe, China, and Japan

 

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/13/inflation-is-dead-its-below-1-percent-in-the-u-s-u-k-europe-china-and-japan/

 

There's an argument to be made that we are still in the 2009 financial crisis, because deleveraging is still going on. What we're seeing in the commodity markets is what we should have seen in 2009: China slowing down. But last time China prevented it by inducing a domestic investment spree like there had never been one before. I think we are only beginning to realize that this time we will have a second Great Depression, because neither the US nor China won't be able to step in. There simply are no countries left that have enough monetary firepower to prevent a breakdown of the global economy. What makes me doubt my reason and my mind is that nobody (i.e. equity markets around the world) seems to care about it. Markets are acting as if it were a minor inconvenience. This is exactly what Ray Dalio has been talking about when being asked what kept him up at night.