Howard Marks - The outlook for equities

Thinking of the big picture forces me to read Marks' comments. In his last memo, he goes on generalization issues; extrapolation risks which we oftentimes incur but shouldn't; the role of PRICE as a proxy of risk, despite the asset class - for example, bonds today seem way riskier than equities; the concept of ERP - the one he likes the most is "the margin by which equity returns will exceed the risk-free rate in the future" and that can't be read anyplace; three psychology-descriptive stages of bull and bear markets and so on.

Bottom line he is constructive on equities, since "A move upward can be powered by a switch from the fear of losing money to the fear of missing opportunity. When attitudes are moderate & allocations are low, it doesn't take much."

Howard Marks makes his point about what puzzles him the most in investing saying "Many of the important things in investing are counter intuitive." and as Einstein has said once: "Not everything that counts can be counted, and not everything that can be counted counts."

Berkshire 2012 Letter

Another insightful thoughts from Warren Buffett in his last letter to Berkshire`s shareholders:

(i) he analyzes Berkshire performance in a rolling 5 year window against the S&P;
(ii) highlights the importance of brilliant people at management/board level;
(iii) little lesson on accounting of intangibles;
(iv) recent newspapers acquisitions rationale;
(v) the role of capital allocator and its options: reinvest, distribute dividends & share repurchases.

Charlie Munger on The Daily Journal Meeting

It`s proved that we only learn when we are able to make connections between things. Moreover, metaphors can help us out in order to understand what we could not comprehend at first sight. That said, Buffett`s partner is a intriguing mind. Charlie Munger has thought us how to be a fox, learning the basic principles from many relevant areas of study and developing our own mental models.

So here is the last speech available from Charlie Munger. Hope you learn from this brilliant mind.

Graham & Doddsville Newsletter

Columbia Business School recently released the new G&D Investment newsletter. Hope if you find good use with the interviews with JANA Partners & other relevant investors.

FPA`s Steve Romick & Bob Rodriguez 4Q 2012 Letters

Both letters have nice macro insights - speacially for those daily focused on bottom up analysis - and a cautious tone towards the investing environment. Even with equity risk premium at or near all time high, investors have a good amount of cash. But one may notice some portfolio managers are being pressured to be fully invested. I don`t want to sound like a perma-bear but we know this story ends.

We may find good business models with nice returns but the missing part of the mosaic is the right price - and we know that without the right price, one underperfoms and may lose capital permanently.

I will leave it up to you reading these two insightful letters.

FPA Capital - Bob Rodriguez

FPA Crescent - Steve Romick