Monthly Letter August 2014

Donald Rumsfeld’s quote about known knowns, known unknowns and unknown un- knowns is very applicable to the nancial market. When something happens that we have been expec ng we start thinking that we are just seeing what the rest of the mar- ket is seeing (the known knowns) and that it is already in the price. On the other hand when we are hit by a true curveball that no one in the market has seen coming (disre- gard the eternal bulls and the perma bears who refuse to see any change to their world order) then we know it was an unknown unknown. As we write this le er we believe that the European equity market has been hit (in a good way) by a known known.

The ECB focus on managing the Euro currency downwards vs. the other major currencies has started to pay o . This is something we thought would happen at the end of last year and we de nitely thought it would start to happen a er the ECB mee ng in February. Some changes take longer than expected before they lter through to changes in asset prices. We believe that the current weakening of the Euro is very good for the European economy in general and the European equity market in par cular.

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