This is an excellent letter. Talks about Tweedy’s holdings internationally and domestically, their thoughts on the market, gold, debt etc. Bookmark the letter and read it when you get a chance. Although I post many shareholder letters, Tweedy has probably the best and most comprehensive ones of any fund family. The 2010 letter is no exception. Below are some brief excerpts followed by the full letter in scribd:
The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should betempered and controlled, and the assistance to foreign lands shouldbe curtailed lest Rome become bankrupt.- Cicero, 55 B.C.
To Our Shareholders:
Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”
It has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More
The more things change, the more they seem to stay thesame. This certainly appears to be true in politics and capitalmarkets. Two years from the bottom of perhaps the most seriousfinancial crisis since the Great Depression, the above reputedadmonition of Cicero seems to have taken hold in the bodypolitic around the globe, and with good reason. Perhaps this iswhy global equity markets displayed unusual resiliency in 2010,shrugging off a multitude of worries, including a massive andgrowing fiscal deficit here in the U.S., the BP oil spill, the flashcrash, the financial crisis in Southern Europe, continuedsluggishness in employment and housing, and, at our fiscalyear-end, increasing violence in Northern Africa and theMiddle East together with the disastrous earthquake andtsunami in Japan, to once again finish the year on a high note.
Despite persistent macroeconomic uncertainty, businessesaround the globe have continued to adjust quickly to the neweconomic realities, rationalizing assets, both fixed and human,carefully managing working capital and strengthening balancesheets. Corporate earnings in general are once again quitestrong, and corporate cash reserves remain at or near recordlevels. Equity markets have responded in kind around theglobe, rising like a veritable phoenix over the last two yearsfrom the depths of the Great Recession, and the performanceof the Tweedy, Browne mutual Funds have also responded favorably. 2010 was another good year for our shareholders.
The Specter of Inflation Concern over the prospects for inflation seem increasinglywidespread today, with the notable exception of our Federal Reserve, where Ben Bernanke continues to print dollars in aneffort to boost what has been, to date, a rather sluggish recovery. In fact, Bernanke has suggested on more than oneoccasion that we have too little inflation. On the other side ofthe table, Paul Ryan, the Ranking Member of the HouseBudget Committee, said recently, “The inflation dynamic canbe quick to materialize and painful to eradicate once it takeshold. It’s hard to overstate the consequences of getting thiswrong.” Echoing Ryan’s concerns, the European Central Bank(ECB), the Chinese, and even countries such as Brazil, havebegun to raise their interest rates in an attempt to dampen thisthreat to purchasing power.
To that end, last Fall in our Semi-Annual Report, we wentto great pains to point out the impact that even modest levelsof inflation can have on purchasing power over time. As youwill recall, assuming an annual inflation rate of 4% and a tenyear time horizon, $1,000 today would have purchasing powerof approximately $664.83 in ten years time, representing adecline in purchasing power of 33.5%.
While inflation has remained at relatively low levels formany years now, we have had plenty of inflation in the past andwe think that given our country’s increasing fiscal deficits andaggressive monetary policies, the probabilities that it couldonce again raise its ugly head have increased of late. The lastserious bout of inflation that we faced was back in the 1970s.As we pointed out in our Semi-Annual Report, Ibbotson Sinquefield data indicates that for the ten-year period 1973 to1982, inflation was running at an average annual rate of 8.7%per year. From 1977 to 1981 inflation increased at 10.1% peryear. Prices more than doubled over this ten-year period,effectively wiping out much of our dollar’s purchasing power.Our country has had other periods of hyper-inflation, includingduring both the Revolutionary and Civil Wars and, accordingto Jason Zweig, we have not been alone:
Since 1960, 69% of the world’s market-orientedcountries have suffered at least one year in whichinflation ran at an annualized rate of 25% or more. Onaverage, those inflationary periods destroyed 53% of an investor’s purchasing power. Today, there is increasing evidence that inflation may beheaded our way.
Inflation rates are climbing all over the world,particularly in the emerging markets, fueled in large part bysurging commodity and food prices.