giofranchi

Well, that of course would be the best solution. Unfortunately Banca Intesa doesn’t allow me to have a USD account. Other banks give their clients such a possibility… But I am generally fine with Banca Intesa, and wouldn’t change it only for this reason. Gio

I am just curious to know how much people rely on their business judgment and knowledge, and how much on their margin of safety. I tend to rely more on my business judgment and knowledge, because only with good judgment and deep knowledge I find I can understand what my margin of safety truly is. Obviously, with BAC at $6 the margin of safety was so huge… that you could afford not knowing it very well! I agree. And I think also Buffett said he didn’t think BAC was as predictable as WFC, yet all BAC needed to do was to still be around 50 years from now… Very fine! But what about BAC at $16.5? I think the margin of safety has shrunk now, hasn’t it? Just curious… I know I am probably the least knowledgeable person about BAC on the board! ;) Gio

Great! Thank you! :) Gio

Ok, sorry! I just meant to ask if you guys were expecting a $16 billion settlement... somewhat lower... or maybe even higher... Thanks, Gio

+1!! :) Gio

Yes. This could very well become the greatest investment he has ever made (or at least we know of) – especially in absolute terms. Heck, maybe even in relative terms – which is absolutely amazing, when you think about it. When else do you get an opportunity to invest 5 bn at once with this kind of leverage and risk/reward ratio? Early 2009 comes to mind. Hi guys, Everyone seems to agree BAC stock price is shooting much higher very soon! I also think it will, but you know I don’t even make the effort to understand something like BAC truly well… therefore, though I have a small investment, I must resist the temptation to invest really big money (at least for me! ;)). I have a question: I think the penalty BAC has just agreed to pay amounts to 3 years of earnings… And I was wondering if anyone of you expected it to be that high, or lower, or even higher. Just curious! :) Gio

Ok! Thank you! And one more thing, if you don't mind: the weighted average maturity of SHV is 0.38 yrs. If I buy directly a treasury note with the same duration, it means that every 4.5 months it will be redeemed, won't it? Therefore, I'll need to buy a new one... Am I right? Gio

Yes I know, Paul! Thank you! Just let me ask you this: for what I see SHV has 19 holdings, with percentages that vary from more than 33% to less than 3%... Why? What do you think I should do? To put all the cash in the treasury note weighting 33% and forget about the rest? Or should I diversify a bit… like SHV does? I ask you because I am not familiar with bonds investing… And all I want is the easiest way to hold cash denominated in USD. I understand your warning, and it certainly is right! But (call me lazy!!) I think also the so-called “brain damage” should be considered… shouldn’t it? Gio

Have you looked at the 2014 IM Presentation? Please, find it in attachment. I think you'll find page 30 and page 31 particularly interesting. And those are the numbers with still very low leverage. Though, as I have said before, I don't see GLRE ever becoming as levered as other insurance / reinsurance companies, surely they might (and probably will) increase both Earned Premiums and Invested Assets as percentages of capital. Also I think you might find interesting the 2012 IM Presentation (in attachment), where on page 35 you might find the formula they use to calculate ROE, and on page 39 you see what happens to BVPS growth if Invested Assets were to become 175% of capital (like I think they will sooner or later). I hope this helps. ;) Gio GLRE-Investor-Meeting-Presentation-May-2014-final.pdf Greenlight_Re_2012_Investor_Meeting.pdf

Hi Ben, I haven’t said short term treasuries went up from August 2007 to March 2009… I have said SHV went up! I think I have understood what Paul said, but is there evidence SHV has ever detached from the underlying treasuries? In other words, do you think the treasury notes SHV was invested in from August 2007 to March 2009 might have gone up more than the amount SHV appreciated? Moreover, looking at SHV share price during the last 6 years, I don’t see any sudden and unexpected volatility… therefore, it doesn’t seem like SHV has ever detached from the underlying treasuries even for a short period of time. Of course, I cannot be sure… therefore, please correct me, if I am wrong! Thank you, Gio

Maybe… On the other hand, last time we had a crisis, from August 2007 until March 2009, SHV actually appreciated from $109.9 to $110.3… Usually, treasuries are seen as a “safe heaven” in a crisis, and I don’t see why SHV should behave differently… Of course there might be some interest rates risk, if the economy continues to improve and any deflation scare is finally put to rest… But with an effective duration of only 0.39 years also that risk is as low as can be. Anyway, I will surely ask my broker! ;) Thank you, Gio

Some reasons: 1) I don’t know how to choose among short term treasuries. 2) I don’t even know if I could actually buy a short term treasury through my bank in Italy… 3) Most of all, imo cash is cash… and I don’t require it to yield anything. There are some businesses I like. When I have some cash and their prices are right, I buy them. Otherwise, I keep the cash, waiting for a good price. This is all I do, and usually it works just fine. At least, it has worked fine until now… The main risk of holding cash as a strategic asset that I see is a “currency risk”: all the businesses I like have assets denominated in USD (or CND). Keeping cash in SHV, I eliminate altogether that risk. Let’s suppose a market correction comes, which is accompanied by the EUR losing 30% against the USD… If I held cash in EUR, practically all my increase in purchasing power, given the bargain prices in a market correction, would be eliminated by a weaker currency… If, instead, opportunities like the BH or the Liberty rights offering, or the recent volatility in BH and ALS share prices, come my way, I am able to quickly sell SHV and buy those businesses that I like at good prices. Gio

I hold my whole cash reserve in SHV, and I am perfectly fine with that. ;) Gio

Charles Gave and "The Cantillon Effect" Gio The-Cantillon-Effect.pdf

Very good point! Probably, BV is even higher than my estimate. ;) Gio

I couldn’t agree with you more! And we see almost the same dynamic at play between Biglari and Cracker Barrel. People really do not see the difference between entrepreneurs and managers?!… This keeps baffling me… Gio

I have read the book some time ago, and I agree with you 100%. ;) Gio

I have added too. At this price practically all future growth is for free. ;) Gio

On the other hand, I think BH's real estate might be worth much more than what is stated on its Balance Sheet... Because of that, even considering deferred taxes, I believe BV might be close to my estimate... Gio

I think the only adjustment that should be made is the following: On June 30 the stock closed at $423. Therefore, the number of shares belonging to BH and held by investment parnerships must be: $65 million / $423 = 153,664. Biglari, on behalf of BH, will buy 153,664 / 5 = 30,733 shares at $250, using a total of: $7.68 million. In the end BH will own 153,664 + 30,733 = 184,397 of its own shares, held by investment partnerships. Which at today's price will be worth: $372 x 184,397 = $68.6 million. In other words, they will be worth $3.6 million more than at the end of Q2 2014, but Biglari will have used $7.68 million. Therefore, from the $704 million of equity I have calculated we should subtract $7.68 - $3.6 = $4.08 million. Let's say equity after the rights are exercised will be circa $700 million. BH market cap at $372 per share will be 2.065.411 x $372 = $768.3 million, and it will be selling for 768.3 / 700 = 1.098 x BV. Gio

Today it is trading at $375: 1.1 x BV. Gio

Well, "radical" might not be the right word... Call it as you please... Imo the evidence is clear enough: it is 20 years now that the whole pharma industry has been strugling in finding good returns on capital invested in R&D... Instead, now Pearson is levering up his company on the assumption his way of allocating capital will yield good returns... As I have said, this is a huge bet! And if he is right, the returns for shareholders will be spectacular. On the other hand, if he is wrong, all that debt might turn out to be dangerous indeed. Gio

Though I obviously agree, these also are example that are as far from my experience as the academic studies about statistically playing the stock market... Listen, my experience is simply this: I know a lot of very rich entrepreneurs, while I don't know a single person who got rich statistically playing the stock market. Period. And the fact I also know many would-be entrepreneurs who instead have failed, doesn't change my experience in the least... Usually, I can always find good reasons for failure, as I find good reasons for success! Well, I never said that to be right about business is easy... It certainly is not! But, the fact doesn't change: if you cannot muster enough confidence in your judgement, I think you'd much better find a safe, and possibly very well retributed, job, start saving a lot, and buy an index fund. Gio

Liberty, I don't even try to answer all those questions about Malone's companies... I simply believe Malone will go on doing what he does best: to shift capital from lower return assets to higher return assets. And I believe he knows the answers to all those questions much better than almost anyone else. You might say the same is true for Pearson. Well, I think it is. But you said TCI was pretty radical... Therefore, this is my perspective on VRX: As radical as TCI, and with the same unproven track record. The Liberty family of businesses instead are less radical and Malone has a much longer and more proven track record. And sincerely I don't know if I would have invested in TCI... Gio

The difference I find with Malone's businesses is that the Liberty family is not trying to "revolutionize" anything... Malone isn't trying to change how cable TV is done... Instead, what I think I am not able to judge is Pearson's true ability to change how money is spent and capital is allocated in the pharma industry... If you think of it, that is a HUGE bet!... If he truly is successful, he will be wildly so!!!... But what if he is wrong, instead? With all that debt? And a lot of people who have been working in the pharma industry for decades actually think he might be wrong... I don't know... Really... What I am sure about is, if he is proven right, VRX is trading at a "massive discount" to its IV! On the contrary, if he is wrong, VRX might be fairly valued (or even overvalued) today. Gio