giofranchi

I agree, and 28.5% of my firm’s portfolio is in FFH right now. Christopher1 has reminded me of a wonderful quote by Mr. Buffett this morning: Mr. Watsa has built the strongest ark I know of. PS Thank you Cristopher1! “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.” - John Maynard Keynes

original mungerville, it is a pleasure to suffer alongside with you and Mr. Watsa! ;D Though, to tell the truth, I don’t understand what’s really different now from a year ago… the market that is 15% higher? Well, it is just 7% higher than where it was last march… That cannot be the true reason! Probably, I am not sophisticated enough! My firm’s portfolio changed dramatically at the end of 2010, when it was 100% long. Then it has almost stayed the same: very cautious and conservative. 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.” - John Maynard Keynes

There hasn't been a period of time in my last 16 years of investing, where I sweated even one night about the market leaving me behind and not being able to deploy capital. Cash has never burned a hole in my pocket. Cheers! Agree 100% 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.” - John Maynard Keynes

Via the Distressed Debt Investing Blog: http://www.distressed-debt-investing.com/2013/02/my-three-favorite-quotes-from-bauposts.html 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.” - John Maynard Keynes

+1 :) 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.” - John Maynard Keynes

Yesterday Markel announced a 2012 year end BV per share of $403.85… I missed a little, but not much!! ;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.” - John Maynard Keynes Markel_Reports_2012_Financial_Results.pdf

That is one of the very few dangerous sentences I heard Mr. Buffett say… Not because it is false, but because it is deceiving for anyone else except Mr. Buffett himself! If you know how to pick investments that will always go up, irrespective of what the markets will do, you should follow his suggestion to be always fully invested. In fact, he probably really is that unique investor! But, if you are a lesser investor, you better acknowledge your “limitations”, and start behaving like a shrewd and opportunistic businessman. The universe of investments we “mere mortals” really know is limited. And I am sure the stock of every company “I know something about and in the management of which I thoroughly believe” will decline, if the market declines. No doubt about that. So, I will invest at this point, but conservatively and cautiously. Once again, if you are a trader, in and out of stocks, it is a whole different story. 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.” - John Maynard Keynes

This I don’t believe is correct. Also Markel is an insurance company, with a stock portfolio which is grater as a percentage of equity than Fairfax’s, and yet they never hedge. What makes sense from a business perspective is to be cautious and conservative when the sea is flat, and to grow by leaps and bounds when the storm brings outstanding opportunities. Investing is the same. That is what Mr. Mellon did, that is what Mr. Buffett did (when a great opportunity came his way he always had the cash available to take advantage of it, always!), and that is also what Mr. Watsa is doing right now. Of course, trading might be different. And maybe a lot of trading opportunities are available now, special situations, arbitrage, deep value cigar butt stocks with a catalyst for the last puff, etc. 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.” - John Maynard Keynes

Well, with all the available cash he has at hand, let's hope he really does! :) 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.” - John Maynard Keynes

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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.” - John Maynard Keynes The post 1929 crash US bear market low in 1949 came after one of the most inflationary periods in US history. The CPI rose from 14.000 in 1941 to 24.500 in late 1948 as the back of post war inflation was finally broken as it was in the 1970's through early 1980's inflation under Volker. Yes, of course war times are inflationary. But what about the 50s? If I were living in 1949 I would be worried about what inflation would be in the 50s, not what inflation had been during the war. My real earning yield would depend on future inflation, not past inflation, right? Do you think we will see inflation or deflation in the years ahead? If we have inflation, like almost anybody now believes, interest rates will have to rise. And when interest rates rise, the prices of every asset class fall. Vice versa, if we have deflation, stocks will fall. The fact, I think, is simply that secular bears in stocks end when stocks are very cheap anyway you look at them. Forecasting what future inflation will be is not something people do easily. Secular bears in stocks end when it is very safe to invest aggressively again. Today I simply don’t know of anybody else who could recognize one of those time better than Mr. Watsa. And he is clearly warning that we are not there yet. 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.” - John Maynard Keynes

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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.” - John Maynard Keynes I would keep it easier still: when Mr. Watsa says Prem Watsa, FFH Conference Call Q3 2012 It is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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.” - John Maynard Keynes

Thank you for posting the link. Actually, there is a thread on GLRE. So, you can find more information over there! :) 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.” - John Maynard Keynes

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. 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.” - John Maynard Keynes

"Towards Government Sponsored Bubbles" by Charles Gave 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.” - John Maynard Keynes Daily+2.1.13.pdf

The Liscio Report, Janaury 2013: A long-term decline in start-ups: the culprit? 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.” - John Maynard Keynes TLR_1_31_13.pdf

Ineichen Research, 01 February 2013 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.” - John Maynard Keynes RMR_2013_Feb_1.pdf

Already up 6% for the first month of 2013. Not bad! 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.” - John Maynard Keynes 2013-02-01-Estimated_NAV_Announcement.pdf

Just curious, would you mind breaking down your "48.5% Owner-operators" a bit? Yes, of course, no problem! 9.5% Oaktree Capital 6% Lancashire Holdings 6% Brookfield Asset Management 6% Liberty Media 5.5% Third Point Offshore 5.5% GreenlightRe 4.5% Markel Corp. 4.5% Biglari Holdings 1% Dish Network 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.” - John Maynard Keynes

28.5% FFH 48.5% Owner-operators 13% Short positions 6.5% Gold 3.5% Silver All equity, no use of leverage. And I expect to receive a 10% fcf from my operating businesses through this year. Actually, not much changed from last year. I clearly don’t understand all the small nuances of the markets, so I guess I will have to wait for some “big change”. When that happens (and it will happen, as it always does), I think I will have the wherewithal to take advantage of it. 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.” - John Maynard Keynes

Hi txitxo! If what you have so obviously pointed out is true for Spain, try to imagine how reliable China’s GDP growth might be!! ;D ;D ;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.” - John Maynard Keynes

War Games. 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.” - John Maynard Keynes Jan_29_2013_TTMYGH.pdf

Fisher Says Fed Constantly Reassessing Stimulus: http://www.ritholtz.com/blog/2013/01/fisher-says-fed-constantly-reassessing-stimulus/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29 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.” - John Maynard Keynes

Morgan, This is what I was thinking as well. I'm currently a owner/operator in a wellness office. It does well but, it requires me to be there all the time. I was looking to get into something more passive. The wellness office requires me to sell a lot and always be on "stage". I literally have to be "on" every moment to gain the trust and rapport with my clients. Also its not really a scalable business. Reading everyone's messages it seems the only way to make this work is to do it the patel way. Going all in and using the cash flow from the property to put a down payment in other ones. Keep rinse and repeating. I don't have the network that patels have like their family and relatives. Only way to make this work would be to use management services which would give me a rate of return of about 6 percent :(. Thank you for all the suggestions guys! This board is awesome! I was attracted to your comment of looking for a passive investment. I can't think of any better passive investments with more stable long term attributes for putting $1000000.00 than BRK, FRFHF,LUK,BDVSY, or maybe a few others mentioned on this board. Or hire an honest, shareholder oriented manager to run your money. I think maybe the founder of this board, or Francis Chou,or a few others. I think you'd sleep better, worry less, and profit pretty decently. I agree 100%. Though I also like to have a fcf generating machine that I can control. The reason is that a (more or less) predictable stream of cash helps very much reducing what Mr. Klarman in “Margin of Safety” calls “the opportunity cost”. Of course, it could also be reduced through special situation investing, or through high-yield bonds investing. But I find the nitty-gritty of business management and decision making to be much more fun! :) 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.” - John Maynard Keynes

Hi Ron! Now I must leave in a hurry... but I will answer your question as soon as possible! :) 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.” - John Maynard Keynes Ron, that 20% is what I make for me and my partners out of our firm’s operations. The professionals who work with us have no rights on that 20%. In other words, they are no partners of mine, they are just collaborators, and therefore they have no claim on the firm’s equity. Instead, if a partner chooses to leave, that’s another story. Until now it has never happened, and, as I said before, I have no perfect plan: I guess somehow I will have to deal with it, when that eventuality might come to pass. Sincerely, I still hope it will never be necessary to think about it! Anyway, though I clearly don’t like it, the easiest way would be to sell a portion of my firm’s investments and distribute the proceeds to the leaving partner, in proportion to his/her stake in the firm’s equity. 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.” - John Maynard Keynes

Hi Ron! Now I must leave in a hurry... but I will answer your question as soon as possible! :) 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.” - John Maynard Keynes