giofranchi

Maybe! But with LMCA today we already have a 12% discount, right? Not bad! ;) Gio

--AL2014 When you are devoted to cutting costs relentlessly, you might happen to make a few enemies… But Biglari is not stupid, and imo he won’t run the risk of marring prematurely 239 contracts already signed! ;) Gio

My point of view is very simple and straightforward: in the last 100 years the Shiller PE of the S&P500 has reached 30 only twice, and both times with dreadful consequences… If you don’t play it safe with a S&P500 Shiller PE of 30, imo you will never play it safe… Nothing wrong with that, of course! It is just not a style I am comfortable with. Gio

+1 ;) Gio

Jay, for what I can see that $1 billion in fcf is growing quickly and steadily. EBITDA is higher: I think SIRI long term debt is circa 3 times EBITDA (maybe a bit more), which is not too aggressive imo. Furthermore, we are at a S&P500 Shiller PE of 27, while I said I would call a bubble when it reaches 29-30… I am not positioning my whole portfolio as if a crash would be just around the next corner!... I must be prepared to see a S&P500 Shiller PE of 32-33, because you never know when a bubble is going to finally burst, right? Another year… Maybe even two… Who really knows? And given how it is priced today, I think LMCA might perform very well during the next two years… If the bubble doesn’t burst! Later, LMCA might have become something completely different… Maybe SIRI will have been acquired and spun-off… And Malone might be onto something completely different! My point is this: if the S&P500 Shiller PE goes from 27 to 32, before the bubble finally burst, I need something to keep making money: cash won’t be useful, Fairfax might be, but with obvious limitations we all know… BH and LMCA must really do the job! ;) Gio

Well, they have $0.5 billion of net debt, with a NAV of $13.7 billion… Doesn’t seem levered at all to me… But it is also a growing cash machine, isn’t it? ;) Gio

I have purchased this book, and it is definitely on my reading list! :) Gio

Hi original mungerville, well... "cash" that has appreciated more than 30% this year and which pays dividends! Not bad, right? ;) Gio

Well, if you truly believe Biglari’s pre-CBRL results are “very so so”… I guess you simply should devote more time studying his track record… As far as the rights offerings are concerned, I agree with muscleman, but I would also add: 1) Shares are offered at a price far below BVPS after the rights offerings have been subscribed, so I think these rights offerings are a very good way to increase my investment in BH at a great price, and thus lowering my entry price; 2) It is not true I don’t have more of the company, as long as I exercise also my oversubscription right. Which I have done both times, and each time I received 7-8% more shares through these over allotments; 3) Finally, BH has been sucking up lots of cash in the last two years building the necessary network to make Stake and Shake a successful franchiser worldwide. The CBRL investment is a work in progress, and I don’t think Biglari wants to sell it right now. Therefore, it is inevitable that too few cash is left for other stock market opportunities he might see. Hence, the usefulness of the rights offerings. Gio

Well, of course leverage in the wrong hands can wreak havoc… just as in good hands it can be very valuable! ;) Safe, free, and abundant leverage in good hands is one of the main reasons I invest in Fairfax. Gio

Thank you for posting the article! :) Gio

Yes, of course! But in that case I have 70% of my capital invested in three businesses that might do very well (Fairfax might do very well, even if the stock market doesn’t crash, like it has proven so far this year!) Gio

That’s why I hold lots of cash! ;) Anyway, I don’t know of anyone better than Malone at taking advantage of any market crash that might await us. I will be much more willing to double down in the Liberty family of businesses than in any other company, because I know Malone is working on some incredible bargain. And don’t forget LMCA today is almost debt free! In 2008 it was not so, and that could be a great advantage this time around. As far as Biglari is concerned, the fast food industry generally behaves much better than the general market in a downturn. Furthermore, he hold lots of cash, which could be deployed opportunistically. And he surely knows how to do that! Last but not least, both LMCA and BH are among the cheapest stocks I know today (at least in the North American stock market). Gio

If the Shiller P/E of the S&P500 gets to 29-30, I truly think we will be in the midst of a stock market bubble… Today the Shiller P/E is slightly above 27. As it seems we are slowly but inexorably going into a stock market bubble, I have decided to concentrate my capital in the hands of 3 people: - Prem Watsa: 36% of my capital - John Malone: 17% of my capital - Sardar Biglari: 17% of my capital With cash at 30% of my capital. And more cash coming in every month through my own businesses. To weather the consequences of what inevitably follows a stock market bubble, I want to be very concentrated, and to hold a significant amount of cash. Gio

As always in business, things might look separate, but they are actually joined at the hip… With invested assets = 130% of capital, and earned premium = 52% of capital, and a combined ratio of 100%, Einhorn has to return 15% on GLRE portfolio of investments, to increase capital at 20% annual. Think what would happen if invested assets got closer to 200% of capital (which I think they might), earned premium got closer to 100% of capital, and they began underwriting profitably: to increase capital at 20% annual, a 10-12% return on investments would be enough. Biglari, on the contrary, has to achieve a 20% return on his investments, to increase capital at 20% annual… at least for now… A 10-12% return after fees is surely not easy, but at least conceivable… a 20% return after fees, and sustained for many years, is almost out of this world… This being said, I am not too worried about it, because I think Biglari understands the importance of float very well, and he will do all he can to start growing it for BH as soon as possible. :) As an aside, Buffett has often said that for an insurance company, which is capable of both growing float and underwriting profitably, float is at least as valuable as equity, if not more valuable! Therefore, it is plain to see how growing float profitably adds much value to a business irrespective of investments results. Gio

GLRE and TPRE are building float, which, if done prudently enough, is a huge advantage imo. BH has not begun yet. I think Biglari understands the importance of float, and will stir the boat that way… but of course there is no way to know for sure if he will be successful. I hope so! We will see. ;) Gio

I have liked the letter very much: - the numbers are crystal clear, as usual - the results of Steak n Shake are impressive - the future prospects of Steak n Shake through franchising, licensing, and further costs reduction are great - the 79.1% combined ratio of First Guard is very promising, as earnings will grow in coming years - the turnaround of Maxim is far from a sure thing, but Biglari’s licensing strategy imo makes sense - the $19 million dividend BH receives each year from Cracker Barrel is lots of money - $124.3 million in cash are a very useful hedge against any market turmoil that might come our way, and in a correction will surely be put to very good use Next Monday I am buying more. ;) Gio

Maybe gokou3 knows how to solve this problem! ;D Gio

Evergreen / Gavekal Monthly Chartbook November 2014 Gio EVA+11.21.2014_NA.pdf

Again I must say that I disagree… In my experience business success is all about capital allocation, and has very little to do with the perception of the general public… Or put it differently, if you find a young Malone or a young Icahn, don’t worry too much about the fact they might not be perceived by the general public as young Buffetts… Just invest with them and become rich! This of course doesn’t mean Biglari is a young Malone or a young Icahn… That is the only relevant judgment each of us should make and worry about! ;) Gio

Yesterday the Shiller PE of the S&P500 reached 27… On our way to 29-30?… Like 1929?... That's when I will call a bubble in stocks! We will see… ;) Gio

+1 Thank you very much for posting this pdf! ... True financial brilliance! :) Gio

Thank you for posting! :) Robert Rodriguez is definitely among my favourite thinkers about the markets. Gio

Thank you, Liberty! That is great! :) Gio

http://seekingalpha.com/article/2698425-fast-growing-reinsurance-firm-managed-by-david-einhorn?uprof=25 Gio