giofranchi

That’s precisely why I said I am well aware of the fact OAK might trade around $40 again! But my goal is to be well prepared and know exactly what to do if and when such an occurrence materializes: should I buy more, or simply wait and ride out the storm? ;) Gio

This is why central banks have been successful to prevent a distressed financial environment until now… But it doesn’t mean they will be able to do so indefinitely… Ok… but this imo proves more the fact the present environment is devoid of opportunities for a manager like OAK, than the fact in a distressed financial environment new opportunities won’t present themselves and won’t be seized by OAK… Blackstone was able to outbid OAK because we have been in a “buy the dip” environment since 2009… It might be very different if and when a true financial scare comes upon us once again. I don’t see why: OAK’s stock price appreciated in 2012 and 2013 because they were still reaping the rewards of investments made in 2008-2009… The fact also 30yr-US gov. bonds yield went up might just be a coincidence… Logically I still think that makes more sense what’s happening now: that 30yr-US gov. bonds yield and OAK stock price diverge. Gio

Well, if this is true, it implies they have been greatly aided by the secular bull market in bonds that’s coming to an end. But I suspect if you ask Marks he would say he doesn’t agree with that view completely. I think his answer would be: we believe that excellence in investing exists and could be achieved, and we will go on finding good value propositions just like we have done in the past. The market of government bonds is very different from the market they usually find their greatest bargains in. Actually, I would almost say they move in opposite directions: the market of government bonds does very well in a risk-off environment, instead the market of high yield bonds does very well in a risk-on scenario. I wouldn’t be surprised to see distressed-debt spike upward and at the same time to see government bonds yields setting new lows! Therefore, OAK will have a large opportunity to deploy huge amounts of capital at high rates of return, even if government bonds around the world keep yielding less and less. Here I might agree with you… Yet, who really knows? The stock market is a discounting machine: in a crash everything gets turned into a relative game, and everyone is looking for a safe place to park his/her money. A money manager which is rapidly increasing its asset under management might not be perceived as a bad risk/reward proposition after all… Even if actual results might be some quarters away… Especially if compared to a lot of other businesses which, instead of growing, must shrink their operations! Gio

Another reason why I am very interested to know if someone has a convincing bear thesis for OAK’s long term prospects is that I am absolutely aware it could fall back to the $40 level… Then, what should I do? If long term prospects are bright, like I think today, I would be buying a lot, averaging down aggressively. Otherwise, I would probably just hold my investment and wait for a better price to sell it. I might be missing something about OAK’s long term prospects, and therefore I would gladly hear and evaluate the thesis of anyone who is bearish about them. Thank you! Gio

I would also add that I think I am extremely transparent and clear about my way of investing and about my results. Everybody who reads my posts knows exactly the companies I am invested in, probably also the percentages I have in each of them, the amount of cash I hold, and therefore could verify the returns by him/herself. I think this might be very useful: I am not just another smart talking guy... Instead I provide anyone with the means to judge if my words are backed by actual results! I’d guess this is not very common on a public online board. ;) Gio

writser, I have nothing against the idea that bragging about investment returns isn’t healthy. Actually I agree with that 100%! My idea was simply to point out what I still consider an “anomaly” in the field of stock market investing… Saying it doesn’t mean a thing and is not repeatable exactly because I didn’t want to foster greedy behavior! Yet, I do agree with your idea… The problem is the way you and tombgrt express your thoughts! The tone you use and the words you choose are the ones of: 1) Either a very ill-behaved person, or 2) A deeply insecure one If on the other hand it is just the content of my posts that brings out the worst of you both, could you please simply ignore them from now on? ;) Thank you! Gio

I ask this because imo it is always dangerous to short a stock whose underlying business has great prospects for the long run. Even if it is intended to be only a short term trade. Look at Fairfax, for instance: until the end of last year it was making no money, or worse still in 2013 it actually lost money… Then, all of a sudden it experienced a very profitable year in 2014! Who would have predicted such a good 2014 at the end of 2013? Almost nobody… Yet, those who decided to short Fairfax at the end of a bad year (2013) clearly made the wrong decision. Gio

But this is actually something I like for the long run: the less AUM are entitled to carry now, the more opportunities to grow them in the future. At least that's how I see it! I would like to know if there is something you worry about for the long run in OAK's kind of business... In other words, money management has been until now a great business in general, and OAK has been among the most profitable in the industry. Do you see those two things change in the future? If yes, why? Thank you! Gio

Most of all because I would actually welcome a stock market crash!... Anyone who knows and cares about what I am doing knows this! I understand tombgrt and investor-man are the true gods of investing... Ahahah!!!!... But for the rest of us, mere mortals, an 11% in less than a month is an anomaly, a rare event... Nothing but a curiosity... And as a simple curiosity intelligent people would have read my post! Cheers, Gio

Thank you, Picasso! I would really like to know your thesis about OAK. I mean: are you shorting it only on the basis of valuation, due to some short term concerns, or do you think the business has some serious flaws and tailwinds for the long term? Because, given the environment we seem to be heading into, to me it seems very few are positioned to prosper as much as OAK. Of course, in the short run everything might happen... And OAK's stock price might trade closer to $40-$45 like you have said! Cheers, Gio

Thank you very much! Too kind of you! :) Cheers, Gio

My firm’s equity is up 11.33% for the first 24 days of 2015: 7% due to the EUR/USD movement, 4,33% due to my investments. It is the very first time I experience such a rapid and unexpected appreciation… therefore, I beg you to bear with me… and let me brag just a little bit! ;D ;D I am very well aware this won’t last and a sudden reversion to the mean is going to occur in the next few days! Cheers, Gio PS In fact, I do hope a reversion to the mean occurs very soon, especially in the EUR/USD exchange rate: I am really pissed off by the fact the Euros my firm will earn going forward have a much reduced buying power… especially because I use them to buy USD denominated assets! ;)

Hosington Q4 2014 Market Commentary Gio HIM2014Q4NP.pdf

Imo this is one of their best quarterly commentary in a while. Lucid and logical, well written and very clear. :) Gio

+1 Gio

Ahahahah!!!!... Hilarious! Truly funny! Except alas that this doesn’t seem to be a joke… ;) Swenson has written a letter the content of which is simply unacceptable for Biglari. Either Swenson loses, or Biglari is gone. If Biglari is gone, he will simply find another vehicle to shrewdly manage and to make grow. BH shareholders instead will remain poor. Of course, if Biglari is gone, I am gone too. Cheers, Gio

Paradoxically, this whole thing with Groveland strikes me as the perfect example of why Biglari’s strategies of entrenching himself make sense: with SNS Biglari has revealed a jewel, but a jewel he still cannot control simply trough direct ownership… and such a jewel might be sought after by many people! In such a situation those who want stability must think about defending themselves. Even if no attack should ever come. But I guess it is only when an attack, like the one Groveland is attempting right now, finally comes, that the usefulness of those defensive strategies is revealed. Basically two are the accusations moved against Biglari: 1) To entrench himself 2) To ask to be paid too much Imo Groveland has just shown that accusation n.1 has really no reason to exist. ;) Cheers, Gio

Q2 Conference Call Transcript: http://seekingalpha.com/article/2838846-frmo-corps-frmo-ceo-murray-stahl-on-q2-2015-results-earnings-call-transcript?source=email_rt_article_readmore&auth_param=7i5hb:1ac0h8b:6f8a0f191e30f8f0ad405d60c275fd9e&uprof=25 Gio

Gio

Yes! Maybe you are right… But I am in the camp of Mr. Munger when he says: “All I want to know is where I am going to die, so that I will never go there!” The EU situation is too difficult for me to judge and to get comfortable with… If I could never know exactly where I am going “to die”… At least I want to stir clear of all those places that might threaten my wellbeing! This being said, if I’d find a great entrepreneur in a predictable business at a good price in Italy, Spain, or Greece, I would gladly invest alongside him/her… Because imo those 11 bold words are the prescription for a long life in business! ;) Cheers, Gio

As I have said, the deleveraging in the US has already begun, in the EU it has not! It has not even stopped the piling up of new debt… Therefore, maybe the EU is only pretending to have realized to be drunk and is only pretending to have called for a taxi! After all in Europe we are very good at talking, less so at doing… Until I see a clear reversal in the full debt/GDP trend, I’ll remain a skeptic… Gio

In the latest numbers I saw there was no sign of deleveraging in the EU. On the contrary, overall debts vs GDP numbers kept increasing. And imo it all boils down to this: how will the EU cope with a debt which is 460% its GDP? Will it invert its trend towards the US level, 334% of GDP? Or will it proceed towards the Japan level, 655% of GDP? Until I don’t see enough evidence we are making good progress in this regard, I think any recovery will be based on very shaky fundamentals. Gio

Well, if you want to be original at all costs, just think the Euro will be valued 0.8 USD in 2 years, and there will be no Euro in 5 years! ;) Cheers, Gio

That's completely and utterly wrong. It's exactly the opposite. It is the US who started first to adjust and is doing better now while Europe hasn't even began to do what they should be doing. They CANNOT adjust under current system, that's the main issue. Especially as the surplus country Germany who should take upon itself higher unemployment and higher household consumption is not willing to do so something which is obviously very difficult politically to do. So they'll have years of high unemployment or maybe even some extreme political parties will rise to break it. The USA as a deficit country will get out of it faster anyhow compared to other surplus countries. But regardless, it's really the complete opposite. This European EQ or whatever is not going to help them. I agree 100% with meiroy: the European financial system is twice as levered as the US counterpart, and debts are still going up fast. Until we don’t see a reversal in this trend, I simply don’t understand how things could get better… But we don’t have the money to recapitalize our banks, therefore a trend reversal isn’t likely anytime soon… Of course, if a huge amount of money gets printed, that could help somehow… But it would also entail a further devaluation of the Euro… How should the rest of the world respond? Another EU crisis might be waiting just around the next corner! Gio

Well, as I have already said, it will be easy enough to watch Biglari closely: given his way of concentrating much capital in a few big ideas, each year I expect him to take just two or three truly meaningful decisions. There will always be plenty of time to ponder them thoroughly and carefully. I am very pleased about how he has dealt until now with this simply ridiculous nonsense by Groveland… I would have done the same! If and when another such attempt by someone larger should occur, I will watch Biglari’s actions, judge them, and act accordingly. And this is precisely the heart of the matter! You have written this as if it might be true for BH only. Instead, imo it is true always! You only have two possibilities in business: either things go well, or they go south. If things go well, you have two other possibilities: either the manager who makes things go well requires to be paid a lot, in which case you’ll end up making a lot of money, or the manager who makes things go well doesn’t require to be paid a lot, in which case you’ll end up making even more money! If things go south, you have only one possibility: to lose money! This is why I am much more interested in Biglari’s business acumen and capital allocation abilities than in how much I have to pay for them. The reason why I invest in BH is management, much more than valuation! ;) Cheers, Gio