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Friedberg 1Q 2013

Friedberg 1Q 2013

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Published by richardck61
Friedberg 1Q 2013
Friedberg 1Q 2013

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Published by: richardck61 on Apr 24, 2013
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Message to our Investors.............................2Friedberg Global-Macro Hedge Funds.................7Friedberg Asset Allocation Funds....................11Currency Fund......................................13Closed Funds ......................................14
All Statements made herein, while not guaranteed, are based on inormationconsidered reliable and are believed by us to be accurate.Futures and options trading is speculative and involves risk o loss.Past trading results are not indicative o uture profts.
Friedberg Mercantile Group | 2
It gives me great pleasure to report to you on the fnancial activities o our hedge unds orthe quarter ended March 31, 2013.The Global-Macro Hedge Fund managed to eke out a rail partial recovery rom last year’sloss, gaining 6.8% on the quarter. The 17.4% gain on a year ago, however, points to asignifcant stabilization o the portolio. The Friedberg Asset Allocation Fund continued itsslow but steady progress, gaining 0.6% or the quarter and showing a 3.2% gain on a yearago. It is worth noting that over the same time period the S&P 500 produced a total returno 13.96%. The comparison may not be quite as relevant as it seems, however. This maybecome more apparent below, when we discuss the themes, construction and goals o ourportolio
.For the past number o years we have elt, and have etensively so written, that the global recoveryrom the severe 2008 recession was bought with a bewildering multiplicity o ill-conceived ad hocmeasures, some proven historically to have been counterproductive and some simply eperimental,that, sadly, never addressed the very serious problems into which the global economy had sunk. Thecommon denominator o all government measures was their overriding desire to push any and allproblems orward, proverbially, to kick the can down the road, to a time that lies saely beyond theirmost immediate political horizon. This was true everywhere but most evident principally in Europe,and, in descending order, in China, India, Brazil (the great engines o the New World), in the UnitedStates, and now in Japan.What these governments missed are some elementary economic principles: 1. Overindebtednesscannot be cured with more debt. 2. Increasing taes is not the way to greater austerity; it onlyattens the scus. 3. Regulation is an economic cost and lots o regulation cannot only greatlyincrease costs, but it can also paralyze economic activity. 4. Condence is an asset that can bebought only with truth, transparency and careully considered policies that are ocused on the longterm. 5. Wealth cannot be created by quantitative easing (QE), a euphemism or simply printingmoney to nance, as in older times, the insatiable appetites o governments. 6. Bureaucrats willnever be able to manage risk just as they were never able to determine how many shoes to produceunder the 5-Year Plans o the old Soviet Union; only personal responsibility can (the corporateveil and directors’ insurance paid by the corporation must be replaced in the banking system by astructure where shareholders, or at least controlling shareholders, are unlimited partners).Because we strongly believed that it was only a matter o time beore the world ell into anothermajor nancial crisis, we were never comortable taking on risk without buying “protection.” Thisprotection took two orms.The milder orm we epressed by putting on short positions in (mostly) non-U.S. equity positions anda long position in U.S. Treasurys. The general upward drit o all equity markets, ueled by ubiquitousrefationary policy moves, made this an epensive stance.The more etreme orm involved buying protection in the event o a totally unusual occurrence (“tail
First Quarter Report

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