giofranchi

I don’t think those shares should be cancelled… They are shares held by the partnerships, not by BH. Then, of course, BH owns a percentage of those partnerships. Gio

Very interesting! Thanks for sharing! :) Gio

I have just bought more... Don't really care if it is selling slightly above or slightly below BVPS... Gio

Good luck, my friend! :) I am sure you will be wildly successful! Gio

I agree 100%. And I am always present at key customer meetings with important (and also less important) clients. But in my business I also have a person who practically does nothing else than talking on the phone and sending e-mails all day long. He also enjoys what he does very much! :) It is that kind of activity I was referring to. Though it certainly is necessary, no doubt about that, I have never felt comfortable doing it myself… I am not saying it wouldn’t be better if I performed that task too. All I am suggesting is, if your own personality doesn’t fit well with some necessary activity, you can find a solution. The true danger imo is the tendency to believe that what we don’t like to do ourselves could therefore be superfluous… If we don’t fall victim to such a wrong and misleading assumption, a solution can be found. A solution that, though maybe not the best and most effective one, might still be good enough. Gio

Well, if we calculate shares outstanding differently, we certainly get to different results… For the shares outstanding on July the 2nd I used the number on the last line of the first page of the 10q-Q3-2014 filing. For the shares newly issued I used the number on page 1 of the following document: http://www.sec.gov/Archives/edgar/data/93859/000092189514001793/form424b307428035_08132014.htm Under the title “Common Stock Outstanding after Right Offerings”. Why do our numbers differ? Gio

original mungerville, are you starting an investment management business? ;) Gio

If that turns out to be the case, my idea of keeping all the cash in USD will be proven not so dumb after all… Gio

--Bob Goldfarb Well, exactly! ;) Gio

I agree. And thank you for the book tip. I think you could also hire good sales and marketing people. In my experience you should enjoy the process of selling… If you don’t, because you find it time consuming, time you’d like to devote to other activities, a good enough alternative solution is to hire someone who truly likes selling. ;) Gio

Yes. And besides the number of employees I would also care much about the “kind” of employees a business requires. Generally, I prefer a business which doesn’t require highly skilled employees. The less skilled employees are, the easier it is to replace them… should it become necessary to do so! Gio

Thank you! Always a good read. :) Gio

I think GDP is also a measure of how broad the economy you are operating in actually is. And I guess the basic idea follows: the broader the economy you are operating in, the more opportunities you get to accumulate wealth. Therefore you cannot compare Rockefeller’s $1 billion wealth with Buffett’s $63 billion wealth, unless you have some measure to put those two numbers in their respective right contexts. You might argue the net worth of a nation should be used as a more accurate measure… but I guess the net worth of the US is simply much more difficult to assess with the same level of accuracy than its GDP. Finally, you can also look at it through the P/S ratio lens: we are used to value the net worth of a company as a multiple of its sales. The same logic could therefore be applied to the net worth of a nation. But, being a relative comparison, of course the multiple could be ignored: you are then left with sales only, in other words GDP. ;) Gio

+1! ;) I really like their continued focus on buying wholly owned insurance companies. Imo it is the best place to invest new capital these days. And a strategy that will shine over anything else should a serious market correction come. It is exactly what I would be doing if I were in their shoes! Cheers, Gio

Though I certainly agree, I rarely reason about business that way. I do only things that I think I understand, and of course that I like. Both in business and in investments. I am very well aware of the fact that “to think to understand” is not the same thing as “to actually understand”. But I don’t need to be right all the times. Listen: I know what I like and look for in a business. If I don’t see what I like, price matters little to me. If I see what I like, I wait for a good price. If I see what I like and I get a good price, I purchase a lot. How much is “a lot”? Between 5 and 10 companies (or more) at any time. Because I know I will make mistakes. This is all I do. Gio

+1! Very interestig! :) Gio

Thank you SD! I understand. But, though I can easily say I agree with you on ALS, I tend to withhold any judgment about an investment in BAC. Of course I understand Dazel’s thesis on BAC, and I might also think it sounds very convincing. But, just like I have said in my previous post, I stick to “what I think I know”. And almost by definition I cannot say if “what I think I don’t know” is fragile or otherwise. Nor I need to! All I need to do is to fight the urge to dabble with “what I think I don’t know”. ;) Gio

Well, if I sell my apartment tomorrow, I will find someone willing to give 7,000 - 8,000 Euros per square meter. It might certainly be only a false impression of mine... But my feeling is I won't be able to find many people willing to pay that sum and sleep in the cold hard ground... Sometime, when you are selling an apartment, you are actually selling opportunities and a way of living. For that the building is as necessary as the land underneath. Gio PS Btw, it is not an impression of mine... We have just worked for a real-estate developer in a not far location, and for the land he paid 2,000 Euros per square meter. ;)

Great point. Pro-cyclicality is exactly what I meant by "volatile earnings". Yeah! Great point... Except you have not understood I am not suggesting what to do! I don’t care. All I am saying is: know the true value of what you own… because sometimes numbers on the Balance Sheet might not make much sense… That’s all! Gio Ok. Then I really misunderstood you, sorry. I have referred to IFRS only as an example of a standard that requires securities to be marked to market... But I don’t agree, nor disagree with it either… For instance, also mark to market might cause discrepancies between numbers on the Balance Sheet and true values, should the securities you own be much overvalued or vice versa undervalued... In this case also you should be on the look-out for numbers that make little sense! Gio

Great point. Pro-cyclicality is exactly what I meant by "volatile earnings". Yeah! Great point... Except you have not understood I am not suggesting what to do! I don’t care. All I am saying is: know the true value of what you own… because sometimes numbers on the Balance Sheet might not make much sense… That’s all! Gio

I thought it was obvious I was referring to discrepancies between recorded values and true values that sometimes become meaningful… Be sure everything that could be overlooked I overlook! If in your experience discrepancies never get to be meaningful, well then we have different experiences. No. You are implying it. The fact I think rigid accounting rules might lead to meaningful discrepancies between recorded values and true values, does not mean I think buildings are enduring assets. Gio

I have never said it is practical… But when the Balance Sheet doesn’t tell you the true value of what you own, you should take notice. I have never said that buildings are enduring assets. Gio

I have never bought a whole business. Until my two businesses keep giving me free cash that is a meaningful percentage of the capital I manage, I don’t feel the need to add a third business. The capital I manage though is growing faster than how my two businesses are growing their free cash. And if I want to keep new cash coming in as a meaningful percentage of the capital I manage, sooner or later I will have to look around for a third business. My experience with the first two leads me to the following conclusion. I want the third business to be: 1) Very low in capital requirements. It doesn’t necessarily need to possess high margins, but I should be able to take out of the business practically all its earnings. The freedom to reinvest them in the same business, or somewhere else is invaluable. Furthermore, a business that doesn’t require much capital is easier to grow or shrink as necessities require. You never know what might happen, so flexibility is a huge advantage. 2) On “autopilot”, or almost… It is not realistic a business won’t require your continuous attention, but you should be able to confine your duties basically to: a) strategic decisions (which goals to pursue, and how to evolve), b) watchful control. Your second duty should help mitigate what has been called the “key man” risk… But whever you hire someone, that risk cannot be eliminated! Therefore, first of all you must choose who will be in charge of operations, and you must choose wisely! ;) Gio

Maybe… But let me give you an example: let’s suppose you own an office building, and after 10 years by a stroke of good luck you get the chance to change its use into a residential property… wouldn’t you say the value of your building is higher now than it was 10 years before? What I mean is that during the life of a building many things might happen that are not strictly related to depreciation nor maintenance capex, things that might affect its value very much. Imo whenever those things are not reflected on the Balance Sheet, and therefore the value recorded differs significantly from the value given by the market, an opportunity arises. Gio

Because the Balance Sheet should be a picture at any given time of what we use (assets), of what we owe (liabilities), and of what we own (equity). This is the reason why IFRS require securities to be marked to market. Instead, land, buildings and equipment should be recorded at… what?? If my apartment were on the Balance Sheet of my company as an asset, initially recorded at cost, later depreciated over the course of 40 years, adding back all the maintenance capex required, it would still be recorded at a value little changed from its initial cost… At best its recorded value would have kept up with inflation, if maintenance capex were higher than depreciation charges. But what about the true economics of the city, the neighborhood, even the street where my apartment is located? What if Milan’s economy booms, what if a new subway is built not far from where I live, what if some very fashionable cafes are opened nearby? I am positive during the last 30 years the value of my apartment has appreciated much faster than inflation. If such an appreciation in value is not reflected on the Balance Sheet, that document ceases to be a reliable picture of what I truly own today. Gio