giofranchi

Yeah! I agree with you 100%. But this faith in human ingenuity shouldn’t prevent you from seeing the truth. Einstein once said: So, let me ask you: How is all this printing of money and increasing of public debt supposed to solve a debt accumulation problem that started 60 years ago? In other words, to solve a debt problem with even more debt is all that human ingenuity can conceive? ??? Gio

+1! ;) Thank you for posting! Gio

I think Einhorn is more entrepreneurial than you seem to believe. And now at the helm of Greenlight Re he is trying to build a sound reinsurance company. Not many of the fund managers who have quitted the game after 10-20 years have done that! ;) Gio

Mmm... I guess then I have chosen the wrong thread! ;D Gio

If Brindle is gone, I am gone! ;) Gio

I absolutely agree! In my last post I have written: if Einhorn is gone, I am gone… ;) Gio

Hi Pete, we are all here talking about Buffett, Malone, Munger, Gates, Walton, Watsa, the Google Guys, Dalio, Marks, Jobs, the greats of the past, etc., and we discuss, we try hard to understand their methods, what has set them apart from the crowd, and how we could somehow emulate them… But in my experience the simple truth is you cannot know for sure… Why are they so successful? Short answer: no one really knows. Of course, you might study what they are doing and decide if their processes are something you understand and approve… but to replicate them and expect the same results…? Better not to fool ourselves... This is basically the reason why I look for those entrepreneurs who imo are the most successful out there, who are doing something I can understand and think can be replicated for a long time in the future, and then I just try to keep in their company (always making sure I pay a fair price!). The problem I have with teams is that I think “democracy” is usually not good for business. Even in my small organization I can see this: if I had to convince other people that what I want to do is the right way to go, I would be stuck going nowhere most of the times. Of course, there might be exceptions, and a team like the one of Markel surely is extremely good. But it gets very difficult for me to judge. For instance: if Einhorn is gone, I am gone. When, instead, could I decide I don’t like the Markel team anymore? Though Gayner is young, there are many people in the Markel team today who are much closer to retirement. Should one of them decide to leave the management of the company, and be replaced by someone new, how am I supposed to judge: 1) The quality of the new member in the Markel team, 2) His/Her effect on the rest of the group? The Markel team might evolve in a way which loses the alchemy that has rendered the team so good and effective until now, without me ever noticing… So, to sum up, I guess two are my problems with teams: a) Successful teams are much rarer than successful entrepreneurs, b) Successful teams are much more unpredictable than successful entrepreneurs (if Einhorn gets bored and retires, I am pretty sure I won’t miss the news, and I will act accordingly!). Gio

Me neither... ::) Gio

You are perfectly right, and I think MKL might be a wonderful choice! ;) The only thing I can tell you is I have a great deal of respect for Einhorn. On the contrary, I cannot muster the same confidence in anyone running MKL today. Of course, they might be a great team, instead of a great entrepreneur… but let's just say I think I understand great entrepreneurs better than I understand great teams! Regarding GLRE insurance underwriting I think they are very conservative. They write almost only high frequency – low severity contracts, and rarely get involved in writing catastrophe policies. They are building some float, but not in a hurry. And today are still very much unlevered. They have already proven to be able to reduce their business, when rates are not satisfactory enough. I also think that if Bart Hedges is good enough for Einhorn, he might be someone who deserves trust. :) Gio

How so? Total nonfinancial debt/GDP went from 344% to 350% in six months from 3Q13 to 1Q14 The number for aggregate debt in the US in the latest Hoisington market commentary is 334% GDP. While it reached a peak of 360% GDP. A long way to deleverage, but seemingly on the right track... Instead the EU and Japan are not on the right track: for the EU aggregate debt is 460% GDP, and for Japan it is 655% GDP. ::) Gio

Hoisington Quarterly Review Q3 2014 Gio HIM2014Q3NP.pdf

Q3 2014 Commentary Gio Q3_2014_Commentary_FINAL.pdf

My 4 investments, of course ;): Fairfax Financial Biglari Holdings Liberty Media Greenlight Re Good entrepreneurs (I would say great entrepreneurs) at the helm of good businesses, purchased at good prices. The caliber of those people (hopefully, they all have at least a 10 years working horizon in front of them, even Malone) and the nature of their businesses make me believe they will be flexible enough and adjust successfully to any kind of storm that might come our way. Gio

That is because probably what you are watching is not counting the new shares issued through the rights offering yet. True market cap is $665 million. At the end of Q2 2014 BH had $215 million in long-term debt on the balance sheet with $112 million of cash. After the rights offering cash is around $200 million. Gio

I have just bought more FFH today. Gio

So they've been dead wrong for the last 6 years, but the market declines over a week & 1/2 period, and now they're right? This thread is ridiculous. I know you don’t like how Fairfax operates. And that’s fine! But let me ask you a question: if the market stays in some kind of turmoil for a while (a few months), if US government bond yields keep going down, and if Fairfax share price declines with the overall market, don’t you think it could be worth buying at least some shares before they announce 2014 year end results? Gio

Today BH has a market cap of $665 million. Its investment in CBRL alone is worth $500 million. ??? Gio

He wishes. Gio owns a couple of businesses. He's talking about his own FCF. Yes! That was not clear... Thank you, Liberty! ;) Gio

Of course, investing with Malone, I welcome any kind of market correction. For 3 reasons: 1) Malone is a true master of taking advantage of market turmoil: if the market crashes now, Liberty Media prospects for future growth only get better; 2) 30% of my portfolio is in cash: I will be able to buy more Liberty at wonderful prices; 3) At the end of every month I get more cash. Gio

True. Usually wars were needed to restructure debts, bringing them down to acceptable levels and starting a new expansion cycle. Absent a war? Like we all hope is the case this time? Well, total debts in western countries might come to be as large as in Japan… I highly doubt with different results: deflation anyway. Gio

I invested in Liberty Media well before the STRZA spin-off (in which btw I have made a lot of money ;)). But I cannot help you... Because I don't keep a track record for such statistics. Gio

Actually, I am not “amazed”… rather, I am quite “annoyed”… For once that I have tried to time the market, I am getting immediately punished… I invested heavily in Liberty Media hoping the market would hold tight at least until the spin-off event… it was a matter of a few months, after the market had steadily climbed for more than 5 years… Of course, the market was destined to become fearful just before the spin-off! It would be hilarious, if not so vexing!! Gio

Why not? It is either restructuring of the debt or (hyper)inflating it away. Inflation is not an option because you simply cannot inflate away so much debt. Instead, when you restructure debt, deflation just follows. Gio

I wouldn’t presume to have any clue about what’s coming after the developed countries debt problem is finally solved… But, until it is solved I see only two possibilities: deflation or hyper-inflation. Gio

China accounted for 40% of world money creation 2009-12. Since 2012, PPI has fallen for 31 consecutive months. Not saying you're wrong, but I'm not sure that monetary inflation necessarily ends up in PPI or CPI. It ends up in assets. The end of a debt super-cycle is reached in two ways that I know of: deflation or hyper-inflation. Anything else just kicks the can down the road. The debt super-cycle we have lived through until now is the largest accumulation of debt in human history. Therefore, it is only logical that its consequences will be at least as extreme as in the past. Imo the question here is not if inflation is a monetary phenomenon, the question is if hyper-inflation is a monetary phenomenon… And the answer is: yes, surely! Those people who will be in charge of monetary policies in western developed countries might have only two choices in the near future: either accept a deflationary scenario, or destroy paper currencies. After all that’s what Von Mises said, isn’t it? No need to invent anything new. I don’t think they will decide to render paper currency totally worthless, and that’s why I think a deflationary scare might be the most likely outcome. Gio