giofranchi

I am certainly not married to FFH, or any other company that I hold. I constantly look at my holdings and ask myself if they make strategic sense in my organization. They are only a part of it, so they must fit strategically. If they no longer do, I sell them. I simply don’t think that a very bad quarter means FFH doesn’t fit anymore… For instance, I got much more worried when the piece of news about the consortium for taking BBRY private came out, because I thought that investing more capital in BBRY now was strategically flawed… Until I knew that Mr. Watsa actually had no intention to use new capital that way! :) giofranchi

No Al, I am certainly not macro investing. Comparing prices with real earnings is not macro investing… even if you use a bunch of 2000 companies, instead of 10-15… It might be less precise, of course… but it is not macro investing. And at the end of Q2 2013, as you can see in attachment, US small caps were already priced to deliver negative returns on a 7-years time horizon… giofranchi GMO_7-Year_Asset_Class_Real_Return_Forecasts_June_2013.pdf

Investment Results October 2013: October: +1.1% YTD 2013: +18.2% giofranchi TPRE_Investment_Results_October_2013.pdf

YTD FFH has declared ($1,234.9) million losses, all of which are unrealized. If it were reporting earnings like banks are, it would have declared practically no losses. Though this has clearly no impact on BVPS, earnings do exert a great influence on the multiple the market is willing to put on any stock: it is much easier to pay 1.3 x BVPS for a company that seems to be profitable, than for a company that seems to be losing money. Needless to say, I am very glad FFH reports earnings the way it does! :) giofranchi FASB-changes-FAS-157.bmp

How many percentage points FFH closes down today might be one of the best “stock market barometer” I can think of: If FFH stock price closes down more than 10%, this bull market might still march on undisturbed for a long time; if, on the other hand, FFH stock prices closes down less than 5%, that would be a serious warning sign for the health of the market. If this bull market marches on undisturbed for a long time, I will make money; if a serious correction comes, I will make a ton of money. ;D ;D ;D giofranchi

I cannot agree. --John Maynard Keynes I myself have written a few days ago that a correction of the stock price was very likely. Yet, I also said I haven’t sold a single share. Because long-term prospects for FFH are better today than they were yesterday: underwriting performance is really starting to provide better than free float! That’s what a long-term investor and an entrepreneur should be focused on. As far as valuation is concerned, ask Mr. Tom Gayner what he thinks MKL is worth, based on its long-term business prospects: he will answer in between 1.7 and 2 x BVPS. The same imo applies to FFH. Now, FFH yesterday closed at $436, and its BVPS is $334: it is selling for 1.3 x BVPS. Furthermore, and this is very important, today’s BVPS for FFH is very conservative: after remaining flat for 3 years, now we have this quarter in which the Russell2000 increased 10%… and the following drop in BVPS for FFH. (Think of it: 10% in 3 months… not from a deeply undervalued company, but from a whole market index, that four months ago already was way overvalued! Talk about stock market bubble…!). So, not only FFH is clearly not overvalued, it is not even fairly valued… instead, it is still undervalued. Of course, this is true, only if you consider its long-term business prospects. Instead, if you are able to jump in and out of FFH, like many on the board seem able to do, very good for you! You have foreseen correctly this terrible quarter and will be able to take advantage of the big drop, when the market opens today! Simply put: it is just not my game. :) giofranchi

They have been shorting the Yen for some time now… but probably you already knew that! I am not aware of what other FX positions they might be holding right now… Sorry, cannot be of much help! giofranchi

Q3 2013 Results giofranchi Press_Release_-_Q3_2013__FINAL.pdf

Q3 2013 Results: http://ir.valeant.com/investor-relations/news-releases/news-release-details/2013/Valeant-Pharmaceuticals-Reports-2013-Third-Quarter-Financial-Results/default.aspx giofranchi

As always, very good description by The Brooklyn Investor: http://brooklyninvestor.blogspot.it/2013/10/frmo-corp-frmo.html giofranchi

Thank you ragu, for posting the presentation. :) Yesterday I sold some investments of mine, which had appreciated in price, and increased my firm’s investment in BH by 10%. giofranchi

I agree. Either the “smart money” is starting to smell something rotten in the air and piling on FFH, or stock price appreciation will soon be reversed. This doesn’t mean that I think FFH at 1.2xBV is expensive, because I think it is not, or that I am going to sell a single share, because I won’t. :) --John D. Rockefeller, Sr. giofranchi

giofranchi

For what it is worth, I agree with Mr. McLean. I know he couldn’t care less… but I agree with him anyway! :) Thank you for posting the article! giofranchi

Sad sad sad piece of news… His music will stay with me for the rest of my life. giofranchi

Is there already a thread about POST? If not, why don’t you start one? I would follow it with much curiosity and attention! :) giofranchi

Jay, great quote indeed! But I haven’t got to that one yet… I bought this book some years ago, after finishing “Poor Charlie’s Almanack”, but without the aid of an audiobook, I had always postponed its reading. Now that the audiobook is finally available, I am literally devouring it! And I am just quoting the most interesting ideas I encounter as the audiobook proceeds. Hope some people might find those ideas as useful as they are for me! :) giofranchi

On a micro level I agree: if you have a great idea, now is a good time to borrow! But on a macro level, I am not so sure… How is it possible that everyone has some good idea?! Anyway, I guess margin debt is just a way to judge how much complacency there is in the stock market right now. Therefore, I think it is useful as a comparison between market tops and bottoms. Of course, every time things are a little bit different… And there is always some apparently good rationale to believe this time things will work out better… But... let’s just say that it made me think nonetheless! :) giofranchi

Thank you for the very useful feedback! :) giofranchi

Maybe… Anyway, I wouldn’t define 2007 as the end of “5 years of conservatism and prudent behavior”… And margin debt today is higher than it was in 2007… It might not be too big of a deal, but it makes me think nonetheless! giofranchi

I would like to know what people on the board think about Colfax Corporation http://brooklyninvestor.blogspot.it/2013/10/colfax-corporation-cfx.html Thank you! :) giofranchi

1 picture is worth 1000 words, right? giofranchi

I agree. :) Cheers! giofranchi

giofranchi

It doesn’t look like they have really stagnated… Of course, they won’t keep growing at the rate they did during the very successful turnaround, but nobody should expect that! giofranchi BH-Customer-Traffic.bmp BH-Earnings-Per-Store.bmp