giofranchi

Well, of course imo you cannot! All you might try to guess is the quality of the management who chooses those assets… But this way we go back to my game: owner-operators! ;) giofranchi

Sunrider, yours is a very good explanation! Thank you very much! :) But, please, tell me: when you have total assets that are $2 trillion and 10 times equity, how could you really be sure about your judgment of their quality? And you must be sure practically about all of them! Because they are so much larger than your capital. In the case you are not sure, you are left only with the assumption (hope?) they won’t default. Do I understand this correctly? I ask, because I am well aware it is not my game! giofranchi

Ok, you have succeeded in forcing me to look for the first time in my life at BAC! ;D I think what Mr. Tyler Durden is pointing out is that earnings, if not reported MTM, may give a false sense of prosperity… BAC reported a loss of (2,238) billion in 2010, a profit of 1,446 billion in 2011, and a profit of 4,188 billion in 2012. WOW! If BAC is improving so much, so fast, everything should be all right! Shouldn’t it? Unfortunately, BVPS went down from $20.99 in 2010 to $20.24 in 2012… So I think this is what he really means: apparently, a lot of wealth has been created, but in truth it is not so. Despite all the earnings declared, each shareholder owned more at the end of 2010 than he owned at the end of 2012. Is this completely wrong? giofranchi

Ok, that is fine with me! So, let me be sure I have understood well: the change reported by BAC in BV since Q4 2011 already takes into consideration those $7.6 billion decrease in AFS and marketable equity securities? Have I understood it correctly? Thank you, giofranchi

Sorry jay, I don’t understand: people look at increase or decrease in book value, increase or decrease in earnings. I am perfectly fine with a long term investment that doesn’t affect quarterly or even yearly earnings. But it surely should affect book value. Otherwise, how are you supposed to know what you own? I repeat, I don’t follow BAC, so probably I am missing something here… even though this is far more general, and goes well beyond the BAC case. giofranchi

The wheels are coming off the whole of southern Europe giofranchi The_wheels_are_coming_off_the_whole_of_southern_Europe_-_Telegraph.pdf

Thank you Parsad! And I understand what you mean. Yet… imo very complicated stuff…! Volatility until now hasn't been able to destabilize FFH's balance sheet, even if FFH uses marked to market accounting. And this makes me sleep very soundly at night! :) giofranchi

I don't follow BAC, so I beg your pardon for what might be a silly question... Anyway, someone can tell me why FFH reports mark-to-market, while practically no major bank in the world does so? Can someone comment on Mr. Tyler Durden's article in attachment? Thank you, giofranchi Bank_Of_America_From_Loss_To_Profit_Thanks_To_Mark-To-Unicorn.pdf

My pleasure! :) giofranchi

'The Mirror Cracks' by Michael E. Lewitt giofranchi 2013_07_17_OTB.pdf

The Growing Trend of Hedge Funds Starting Reinsurers: http://www.marketfolly.com/2013/07/the-trend-of-hedge-funds-starting.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+MarketFolly+%28Market+Folly%29 giofranchi

Cheers! giofranchi Confessions_Of_An_Owner-Manager.pdf

Hi Al! Thank you very much, and don’t worry: I have gone nowhere! ;D ;D I just heeded Cardboard’s suggestion and read about a company I didn’t know very well: SPLP – Steel Partners Holdings. It is a small-cap, led by a very shrewd capital allocator, who is an activist value investor, with an excellent track-record as hedge fund manager (+20% annualized sustained for 18 years), and who is still young. He has already been able to increase Diluted Normalized EPS for SPLP as follows: 2009 ($0.3), 2010 $0.6, 2011 $0.97, 2012 $1.22, and there is a lot more growth to come in future years. What do you have to pay to partner with him today? 0.8 x BVPS. So, I have posted some thoughts and articles on the SPLP thread. Cheers! Gio

Damn!! It is clear by now I have the very annoying tendency to fall for big liars…!! ;D ;D ;D giofranchi

Great! Thank you very much! :) Gio

2013 letter to unitholders + a recent article. It is selling for 0.8 x BVPS, Mr. Lichtenstein is still very young (47), and his company is still relatively small. Imo, it is very interesting: a lot of room to grow and a very good price! giofranchi Steel-Partners-Holdings-L_P_Investor-Letter_2013.pdf steel-partners-holdings-july152013.pdf

Thank you, David! Very interesting! In fact, I was wondering when it would happen. The article doesn’t specify the date TPRE will start trading on the NYSE. Do you have any clue? giofranchi

That’s precisely why I never invest in this kind of things… price is wonderful and the business is without any doubt profitable… But, although I live in Milan, Telecom Italia remains as far from me as it is from you! Of course, I am sure that a widely diversified portfolio of “black boxes”, selling for less than 50% BV, and which are businesses with a long history of profitability, will never cease to perform very well. So, I guess a 3-5% investment in Telecom Italia makes a lot of sense! ;) giofranchi

If it is selling for less than 50% of book value, it is extremely cheap… Its business seems to be very predictable, and it should be almost completely unaffected by the debt crisis in Europe… I cannot see why it should fail to earn a profit, albeit small, each year… And, if a business doesn’t record losses, why should it trade below book value? It makes no sense… Packer, have you checked its earnings history? Has it ever declared losses in the past? If it hasn’t, like I imagine, to be paid a 8% dividend, while waiting for the price to close the gap with book value, is a good bargain imo. A warning: if I were in the US, before investing in Italy, I would factor in a 30% forex loss. I don’t know what will happen to the Euro, but I strongly believe prices in Italy today are way too high. We need a currency that makes economic sense: either we go back to a weaker currency, or the Euro has to depreciate. So, invest in Italy only if, after factoring in a 30% forex loss, the investment still makes sense. giofranchi

Growth since 2008... ;D ;D ;D giofranchi

Interesting observation. I agree. I enjoy gio's posts very much. I hope he continues to kick the tires of ffh & his stalwart belief in its mngt every which way from sunday for as long as it remains controversial & polarizing in the current frothy investment regime. its not like he's having a conversation with only himself, belching out stillborn musings into the silent void. there's a whole lot of different opinions piping up at every turn. in a public forum an engaging thread is likely a long thread. LOL! I agree. I suspect he talks about Fairfax because he's very comfortable with it, the long-term prospects and isn't interested in swinging for 15%+, when Fairfax can do 15% and no tax consequences. Other than a handful of people on here, virtually no one has come close to Prem's 24% compounded since inception (over 25 years), so let's not shoot the goose until you've all laid your golden eggs! ;D Keep talking about Fairfax and Berkshire Gio, because that's why this board is called "The Corner of Berkshire & Fairfax"! Cheers! Thank you, link01 and Parsad! Very nice words! :) giofranchi

Cardboard, I understand your point, and thanks for your question. I will try to explain. First of all I think about myself as a businessman: I started my company in December 2004 with an initial capital of 25.000 Euros, and as of yesterday its equity is up to 1,530,830.46 Euros: a 62.25% CAGR in BV… ;D ;D ;D Of course, given my limited skills as an investor, the great majority of those earnings are operating earnings… thanks God I am clearly a better businessman than an investor! ;D I soon realized that a service company like mine suffers from two great weaknesses: 1) It soon gets to a point where, to keep growing, politics is needed: maybe in the US or Canada things are different, but in Italy the construction business is deeply linked and influenced by politics… And, unfortunately, I hate politics… 2) It almost doesn’t need new capital, so what was I supposed to do with its earnings? The solution to both weakness n.1 and weakness n.2 was immediately clear to me: diversify away from construction engineering services, purchasing other businesses. So, paraphrasing Mr. Buffett, I literally began extracting cash from a poor business, to put it into high-quality assets. But I still view myself as a businessman, a business owner, I am interested in owning assets that will grow for a long time, creating much wealth along the way. I am not interested in trading in deeply undervalued stock, and out of them as soon as they reach IV… It simply is not the way I want to live the 12 hours I work each day! Passion + 10-15%, or boredom + 15-20%? I guess we all agree on the right answer! Second, it is true I have some time to completely devote to investing and strategic thinking: both in the management of our engineering services and higher education services I am very thankful to a group of talented and motivated engineers, who constantly help me and without whom I would be lost! But, out of my 12 working hours, only 50% are devoted to investing and strategic thinking, the rest I still must commit to supervise operations and to some PR (which basically is politics to me, so I cannot stand it! ;D). Clearly, another weakness in my organization is that I don’t have a partner, who could be a COO I trust completely, and who could take off my shoulders the not so light burden to be constantly involved with operations. So, though 6 hours a day are not that bad, I am reluctant to push for the highly coveted 20%… When I know other very smart and talented people spend 12 hours each day, just to achieve that same goal! Finally, though I cannot be sure about it, I guess I spend an amount of time, writing about each company that I own, which is proportional to their weight in my firm’s portfolio! I do that for three reasons: 1) the larger a position gets to be in my portfolio, the more time I want to think about it, 2) to write helps me to clarify my thinking like nothing else, 3) to post my thinking on the board gives me the very much appreciated and useful feedback of other great investors: I seek confrontation, the more people disagree with me, the more warnings I get, the better! -- John Maynard Keynes He liked to state, though who knows if it’s true, that he spent no more than one day per week thinking about his investments. ;) giofranchi

I have just reread this article from 2010, and I have found it to be more up-to-date than ever. :) giofranchi Be_like_Prem.pdf

Thanks twacowfca. I have been trying to say that. He does have a track record people can look to get comfortable and you shouldn't need to wait to see him prove himself (imo he already has). He has done a fantastic job with Knight, FMG, and stock and debt buybacks. twacowfca and jay, it is not about Mr. Handler at all! …It is about me! I need time to get comfortable with any person, even with someone who has an outstanding track-record like Mr. Handler’s. The more information I can get about him/her, the quicker that process is. With Mr. Brindle, for instance, it was amazingly quick by my standards! Thanks to twacowfca, who has written extensively about him on this thread. Instead, information about Mr. Handler are much harder to find… Look at it this way: when I interview someone for my businesses, and he/she has a fantastic résumé, I nonetheless refrain from assigning him/her great responsibilities, until I have come to know him/her much better. It just takes some time! I seldom invest differently. giofranchi

Al, I am sure they will go that way. But not in a hurry! Never in a hurry, otherwise you will make mistakes. And we all know the game is not how many great things you do, but how many errors you are able to avoid… For now, as I have shown, equity investing if performing very satisfactorily… of course, if you don’t count equity hedges! :) giofranchi