giofranchi

Eric, tell me: do you really think I am the “average engineer”? Do you think the average engineer, the one interested in complying with ISO9000, behaves like I do? I you think so, I guess you don’t know many engineers! ;) Gio

Well, if it really is like you say, Mr. Brindle is an idiot (sorry, Mr. Brindle, forgive me, because I clearly don’t know what I am saying! :-[ )… and I have invested 20% of my firm’s capital with an idiot! >:( Gio

In truth, this is not fair: not much of what Mr. Buffett does is very relevant to any of us… Ok, I admit that! Yet, an entrepreneur is content to be “vaguely right”… When he finds a good business, he sticks with it, unless its future prospects go irremediably south, or he is offered an obscene price. And the reasons are very clear to me: 1) the knowledge and the experience of everyone are definitely limited, 2) valuation is not an exact science. And in the long-run I think it is far better to hold a slightly overvalued share, which you know in the end will take you where you want to go!, than to constantly run the risk of making very costly mistakes. But the fact that I might be willing to hold a slightly overvalued share doesn’t mean I would be buying more at those prices, or that I would like management to do that in my stead. Gio

;D ;D ;D So, Eric, you don’t see a situation in which you hold a stock, without adding to that position as soon as you have cash available? Maybe, you are right... The problem though is the difference between theory and practice: in practice almost no one behaves like you are suggesting. So trying to be practical, and engineers are always practical! ;D, I will be content enough and even very pleased, if management buys back shares when they are undervalued, and refrains from buying back shares when they are overvalued… ;) Mr. Buffett buys back under 1.2 x BVPS, and yet doesn’t sell one share of his, even when the stock trades above that price. Does he? And he is not an engineer! ;D ;D ;D Gio

This is a really strange way to look at it… It is as if, instead of thinking how to use the new free cash my businesses generate, I would be constantly looking for someone who might be willing to buy those businesses from me… Yes, I might consider to sell a business… but only if it becomes extremely overvalued! This certainly doesn’t mean that I am going to put all the free cash generated by that business back into it! This is clear, isn’t it? I have never done so, and I will never do it… yet, I don’t sell my businesses! Exactly like it is for my businesses, also for a stock that I bought at BV and that can compound at high rates for many years into the future, I am willing to stick with that business through all the ups and downs. (Unless, of course, it becomes extremely overvalued!) This doesn’t mean I will add to my holdings on the ups… right? Gio

Thank you, David! Cheers, Gio

Well Eric, I think you are right. But only if you don’t look at cash as a strategic asset… There are not many people out there I trust to invest my free cash flow in my stead… And those whom I trust do not buy back shares at these prices… So, if someone instead is buying back shares at these prices, I don’t trust his judgment and I would much rather have the money to invest myself… Even if this means starting with 67% of the original money (assuming a tax rate of 33%). Do stupid things with $1, or do smart things with $0.67… which would you prefer? :) Gio I would prefer starting with the $1 rather than with the systematic destruction of 33% of value. Especially since it's the democratic way. People like you who don't want the stock buyback can just sell an offsetting amount of shares -- quite possibly tax-free if your cost basis is at or above where you are selling the stock. So everybody wins. Eric, this how I see it: 1) If you see good opportunities, do not distribute any dividend and seize them. 2) If you don’t see or expect in the future good opportunities, and your stock is undervalued, do not distribute any dividend and buyback your own stock. 3) If you don’t see or expect in the future good opportunities, and your stock is overvalued, do distribute a dividend. In 3), if you keep the capital inside the company, you are almost surely going to do something stupid… your shareholders, on the other hand, might find a better use for those funds. Ok, they will pay taxes, but when you do something stupid, you might end up destroying value very quickly! I understand your idea of a “democratic way”… But I don’t necessarily endorse nor want democracy, if and when it behaves stupidly! ;) Gio

;D ;D Maybe... but the fact is I don’t think you really have to win a proxy context, for your investment thesis to prove successful… Usually, it is a win-win situation: either you win the proxy context and get control, or you force changes. In both outcomes you will witness a significant stock price appreciation. Yahoo has been a huge winner for Loeb! What you really have to watch out for are your costs (legal and others), which in some instances can be very high! But I guess Mr. Loeb knows his game very well. ;) Gio

Well Eric, I think you are right. But only if you don’t look at cash as a strategic asset… There are not many people out there I trust to invest my free cash flow in my stead… And those whom I trust do not buy back shares at these prices… So, if someone instead is buying back shares at these prices, I don’t trust his judgment and I would much rather have the money to invest myself… Even if this means starting with 67% of the original money (assuming a tax rate of 33%). Do stupid things with $1, or do smart things with $0.67… which would you prefer? :) Gio

Well, cannot be sure… But, if companies are buying back shares at these prices, they are not compensating shareholders by returning back capital… They are destroying value. At these general prices I’d rather receive a dividend than see my company buying back its shares… This I think is true, only if my company is an average S&P500 or Russell2000 company. Of course, there might still be value somewhere… and for those companies, with a stock that still is cheap, a buyback program might continue to make sense. :) Gio

Yes! Of course I like it. Yet, my investment in TPRE is still very small... Just interested in watching for a while what they do and how they will perform! :) Gio

Q3 2013 Results: http://www.thirdpointre.com/investors/financial-information/press-releases/press-release-details/2013/Third-Point-Re-Reports-Third-Quarter-2013-Earnings-Results/default.aspx Gio

Basically, I think the most important thing is to know the person very well… To know who she really is, and what she really wants… I mean, is all that debt just a “one-time mistake”? Or, if freed from her debt, is she destined to make the same mistake over and over again? I am financially independent and could easily enough free her from her debt and make her financially independent too… Yet, it is not clearly a matter of what I could or couldn’t do for her… Instead, it is a matter of what she can do for herself! Besides, I am such a cheapskate that how would I be supposed to get along well and enjoy my relationship with a woman who constantly fall into debt?!?! It would be torture both for me and for her! Here is an nice and funny anecdote: biaggio came to visit me in Milan a few weeks ago, and I tried to be a good host… Of course, I invited him to a restaurant and offered him a good lunch… But, when it finally came the time to pay for our delicious meal, biaggio noted that Mr. Buffett and I have one thing in common (Alas! One and only one! ::))… I had a terrible time trying to take my wallet out of the pocket in my overcoat!! ;D ;D ;D So, my advice would be: try and get to know who she really is. If she has recognized her mistake, wants to change and behave like you do, and truly desire a productive life and to build wealth with you, I’d give her a chance and even help her. Chances are she would be grateful to you for the rest of her life. If, on the other hand, debt is just “the way” she is, and you understand she has no serious intention of making any change, then there is nothing you can really do. Cheers! Gio

CAPD showing even more overvaluation than CAPE: http://www.mebanefaber.com/2013/11/07/are-stocks-overvalued-cape-vs-dividends/ Gio

--Russell Sage Gio

"Stocks As A Lagging Indicator" by Mr. Charles Gave Gio EVA+11.8.2013+NA.pdf

Gio

twacowfca, this is the reason why we all on the board not only respect you deeply, but also have a feeling of genuine love for you! At least, it is so for me. Your profound knowledge in all that is human is no less important and admired than your investment acumen. :) Parsad, please, make sure twacowfca never leaves the board! You’d risk losing one of your greatest assets! ;D Cheers! Gio

twacowfca, your wisdom is a blessing to all the board members in so many fields! :) Actually, I have already followed your advice: yesterday morning we played tennis and afterwards we had lunch together… I also showed her my office… Do you remember the pictures of my office I posted some time ago? … Maybe that was not so shrewd a move… ;D ;D ;D Gio

Given the title of this thread, I just wanted to end it with a thought that, although obvious, is worth repeating over and over again: ALL YOU NEED IS LOVE Cheers! :) Gio

Thank you, Parsad! And great story! :) Cheers! Gio

You are very welcomed! It has been my great pleasure!! :) Gio

Thank you, ragu! :) Cheers, Gio

Ouch!! Kraven, you had to warn me and remind it to me: “Watch Swingers again, before you go and meet her!” … How could you forget this all important piece of advice?!?! Guess also gurus sometimes forget things… ;D ;D ;D Gio

I am a “milanista”… much suffering these days… :( Gio