giofranchi

Well, I don’t know, yet the last time I checked, MKL had a common stock portfolio worth 62% of shareholder’s equity, without any hedges in place. So, I guess FFH has much room to get more aggressive in common stocks. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Yup. Adams was no dummy, but a big reason he was successful was that he listened to Abigail, at least some of the time. :) I am skeptical… Europe IS NOT the US. It has never been, and I don’t understand why it should ever become to resemble the US… Like Mrs. Thatcher was used to saying: “In my lifetime all the problems have come from continental Europe, and all the solutions have come from outside continental Europe.” Eurobonds without giving up state sovereignty? Wouldn’t it be for Germany like assuming all the duties without any right attached? Why should they accept? If I give you money, I also want some control on how you spend money, right? Mr. Hamilton founded a Treasury, right? Which would decide how to allocate capital for the whole nation, right? Then, of course, you can decide to give money to indebted states. Because you know you have at least some control. Even without a Treasury, imo, it could be done… provided that there really is the will to become a true nation! I can trust you, if I am sure we want the same thing, and we are striving together towards that goal: to give up in time each single state sovereignty, in the name of a truly new and united nation. Unfortunately, I don’t see that happen. A single nation with 20+ different languages…?!? C’mon!! It really is as simple as that! I don’t see a United States of Europe without Germany either. If Germany leaves, the rest of the north will follow suit… what would then be the point of keeping France, Italy, Spain, and Greece together? I don’t understand. As always, paraphrasing Mr. Keynes, when the facts change, I will change my mind. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

I think a sum of the parts analysis might be the best way to value OAK. The Brooklin Investor gets to a fair value of $66 per unit, while Broyhill Asset Management gets to $56 per unit. Please, find both analysis in attachment. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes Solid-As-An-OAK.pdf solid-results-at-oak-but.pdf

I knew I shouldn’t have asked… now I MUST establish a full position!! ;D Thank you very much, giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Carl Icahn Guest Lecture At Yale University: http://www.gurufocus.com/news/216383/carl-icahn-guest-lecture-at-yale-university giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

I couldn't agree more!! ;) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Don’t ask me! It befuddles me as well!! ::) And welcome to the board! :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Agreed on both. Don't see any reason why gold fundamentals have changed. On the contrary we see Soros, Societe, Goldman inducing speculative shorts in gold while hot money exits to chase equities. The biggest story right now in my humble opinion is that central banks will soon have to come clean that there is no exit strategy. QE will be integral to the economy from here on out. The problem market participants have yet to factor that in. Again - in our view there is no exit strategy. Moore, I established a 10% position on Gold & Silver for my firm. I guess many investors on the board, me included, are not really interested in either Gold or Silver as investments. Instead, they just view Gold & Silver as a “mean to protect and maintain the purchasing power of our capital”. Purchasing power that we want to keep as intact as possible, waiting for the right opportunity to buy the businesses we understand and admire the best. Now, my question to you is the following: if the price of Gold & Silver could be so easily manipulated by Soros, Societe, Goldman, etc., how could we still believe it can effectively “protect and maintain the purchasing power of our capital”? In other words, have we been too naïve, and committed a serious mistake? I genuinely think a lot of people on this board would like to know your thought on this. Thank you very much, giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

twacowfca, your posts are always “troubling” to me… Let me explain: I really love Mr. Brindle and what he is accomplishing at Lancashire. I also think LRE today is a good bargain… but I am not sure it is a “fantastic” bargain (maybe, a little too pricey to really be a fantastic bargain?). So I have invested 7% of my firm’s capital in LRE, hoping to get the chance to average down in the future and move to a 15% position. This is what I have also done with any other investment, with the only exception of FFH, in which I have already established a full position. Now, I must admit I am having an hard time with LRE… I am aware I shouldn’t ask, but I am always curious to know your thought: do you think I should establish right away a full position in LRE, and who cares about averaging down?! I am a great believer in averaging down, even with the companies that I understand and admire the best, but LRE might be the rarest of exceptions! :) Thank you very much, giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Would you define the process of finding business in which you could “feel yourself entitled to put full confidence” an easy thing to do?! Then, your experience is much different from mine! ;) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Well, that is not consistent with past returns. Take, for instance TPOU: in the file attached you see it returned 17.9% since inception vs. a 6.5% annual return achieved by the S&P500. Ok, I know that “past results are not indicative of future performance”… But, if nothing of significance has really changed, the fact the future is always unknown and unknowable doesn’t bother me much! :) If the companies you know well and in which “you feel yourself entitled to put full confidence” get to be too pricey, you are left with only two options: 1) to find other companies in which in time you come to “feel yourself entitled to put full confidence”, and which are much more undervalued, 2) to hoard cash. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes 2013-3-March-Monthly-Report-TPOI.pdf

Well, I personally much prefer little and sweet, than very tall and slender, in impossibly high heeled shoes and with the twisted ankles!! ;D ;D Cheers! giofranchi

This is much pessimistic! I have really an hard time imagining a year in which FFH might be more out of sync with the market than 2012. Well, in such a difficult environment and terrible year FFH still returned 6.5%. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Well, it obviously depends on the price you pay. My list of companies was just an example… I own some of them today. Others I don’t. But, as a rule of thumb, if you can partner at or below BV per share with people who have showed for many years, through many business cycles, to be able to compound capital at 15% per annum, who are still relatively young, who manage a business that is not subject to obsolescence or rapid change, and hasn’t grown too large yet , well, then it is up to you to prove why the future will be different from the past! ;) Moreover, practically every company in my list compounded capital at a higher rate than 15% per annum in the past. No, really: if you could find a great business, led by an outstanding capital allocator, I would not part ways with it (unless, of course, it starts selling for way too much!). :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Thank you, Jack, for your note. :) +1 Unfortunately, it is not easy for me to travel to Toronto each year, but I have done it a couple of times and I have always enjoyed the experience very much! :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Last time I posted a presentation by Mr. Raoul Pal, someone wrote me back, saying he thought this board was a high quality and a serious one… :( It seems I never learn from experience! ;D giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes Global_Macro_Investor_-_April_2013.pdf

Interview with Mr. Paul A. Volcker. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes Dangerous_Economic_Territory.pdf

Interview with Professor Carmen Reinhart. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes Harvard_Economist_The_Crisis_Isnt_Over_in_the_US_or_Europe.pdf

Mr. Charles Gave on "The Social Purpose Of Tax Heaven". giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes Daily+4.11.13.pdf

Well, I am still reading it, but I have yet to find a theological debate. So far it is just very complicated physics explained in plain English with extreme clarity! I have understood that a “flat” universe, which is expanding at an ever increasing speed, instead of slowing down, like it was previously thought, requires energy far superior to the one that can be contained in its observable mass, and therefore circa 70% of that energy should be contained in empty space - the so-called “dark energy” our friend txitxo is a renowned expert about - yet I still have a lot of trouble trying to grasp what “dark energy” exactly is supposed to be… Maybe, as I go on reading, it will become clearer! :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

Well, obviously that depends on where you are aiming at! Take, for instance, the thread racemize started a few days ago: “Absolute Investment Targets”. He points out Mr. Pabrai’s minimum requirement is expectation of 2-3x in 2-3 years, or 26% per annum. And that would rule out investments in such companies as BRK, FFH, LRE, OAK, MKL, LMCA, BAM, LUK, GLRE, TPOU, BH, IEP. Viceversa, I argued that exact portfolio, aided by some cash generating sources, gives you a very high probability of compounding capital at 15% per annum for many years to come. I said that the only true risk I see is the so-called “man at the helm risk”, but spreading it among 12 different companies, significantly mitigates that risk, leading to a very high probability of achieving the 15% per annum hurdle rate of compounded return. Now, please, follow my reasoning: provided I am not a complete fool, it should be obvious that I think expected value to be the same in both cases. Otherwise, I would certainly switch to Mr. Pabrai’s strategy, with its 26% expected annual return! But, I also said that, starting with a capital of $1 million, and compounding capital for 50 years, you might reach $1 billion by the end of your career and productive life. Let’s suppose the USD depreciates by a factor of 5 during the next 50 years: your $1 billion then would be the equivalent of $200 million today. Very rich by any standard, but not even close to be in the Forbes 400. On the contrary, if by chance you’d really succeed in compounding capital at the rate Mr. Pabrai is suggesting, you would be worth not $1 billion, at the end of the aforementioned 50 years period, but $104 billion!! Which would be the equivalent of $21 billion today! Definitely among the richest persons in the US and on earth! So, you see? If you are aiming at being included into the Forbes 400, you have no choice except embracing Mr. Pabrai’s strategy and expected annual return. You talked about people with a gambling addiction… well, I don’t know about the US, but in Europe extremely successful entrepreneurs are seen by the great majority of people EXACTELY THAT WAY! And that is what Mr. Gladwell tried to disprove with his article. Not only successful entrepreneurs are very rational, but, if asked to choose between “to do what they love doing” and the Forbes 400 list, they have no doubt and show no hesitation. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

If, among 3 choices with exactly the same expected value (future profit x chance of success), the great majority of entrepreneurs expressed the same preference (business n.3), it really might follow that something other than pure algebra, and therefore rationality, is at work here. I generally agree with Mr. Gladwell that a higher chance “to do what they love doing” is important for most entrepreneurs. I myself would have chosen business n.3 without hesitation. ;) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

--Malcom Gladwell Mr. Gladwell definition of a “predator” is exactly what I have in mind when I refer to “outstanding capital allocators”. Why on earth wouldn’t you partner with people like that? :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes surething.pdf

twacowfca, thank you very much for the good news! And for the thoughtful comment on why LRE has managed to do better than its peers after major catastrophes. May I ask how you always come to know all these things about LRE?! :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

You are welcome! I know that activists are looked at with suspicion on the board… so, it is fine to know that at least someone is interested in TPOU! ;) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes