giofranchi

Back in April you mentioned you suddenly had a boatload of cash and no good ideas. You also said that you wouldn't buy back Lancashire at that point - regardless of price. As far as I am concerned that is not "finding a better place for your capital". It is also not a case of "why accepting only 2) when you can get 1) and 2) somewhere else". I would call that "dumping a huge position at any price". Almost the very same day I sold LRE, I also bought LMCA, GLRE, TPRE, and more ALS. ;) They might not have been great ideas, because 3) was not truly a bargain price… Yet, I preferred GLRE at 1.2 x BVPS with Einhorn to LRE at 1.4 x BVPS without Brindle… Is that so difficult to understand? ??? Gio

writser, the problem is you are judging a thought process… without knowing it! So, now let me try to summarize it as best as I can: I buy businesses to hold them as long as possible. I run two businesses every day. This activity doesn’t let me jump in and out of stocks frequently. I wouldn’t be able to muster the required confidence, and therefore I would make many mistakes. If you buy and hold, to get satisfactory results, you must choose well. JNJ, KO, WMT, etc. most probably won’t do. My idea of choosing well is small to medium caps, with still great potential for growth. They are risky: LRE is no JNJ, KO, WMT… LRE was founded the year I founded my company… Then, how to reduce the risk? Two ways: a) To be always very conscious about the price I pay b) To require also an outstanding owner/manager In fact, I require 1), 2), and 3): an outstanding owner/manger, steady and safe fcf, a good price. If I’d invest in JNJ, KO, WMT, 1) would clearly not be a requisite. Adding that requisite, and concentrating on small to medium caps, which are inherently riskier, I hope to achieve better results, running almost the same level of risk. I am not saying my thought process is good for you, or anyone else. There are plenty of ways you certainly might do much better! And, probably, if I quit running my businesses, and I concentrate only on trading, I might become richer, faster!… But I love what I do. Some additional percentage points at the end of the year are no good reasons for a change… Gio

writser, it clearly is not so… I simply found a better place for my capital… what I think might turn out to be a better place… As I have always said, I might be wrong! I ask you the same question I have asked Tom: Of course my past results are not irrelevant at all… because my thought process hasn’t changed! ;) Well, not only I read every post by detractors… if you have noticed, I also try to answer as many as I can… because the process of writing the answers to those posts helps me very much to understand if they are prophesizing an asteroid, or are true warnings about rotten foundations… I hope this answer is plain enough to let you understand which conclusion I have reached till now. ;) Gio

If I say I have no idea what you are talking about… sounds like another platitude? ;D ;D Gio

Remember that I average down… You don’t know my cost… And yet you judge… I am not saying I didn’t lose money. I have always admitted I lost money. I am up 11% this year. After compounding my firm’s equity at a CAGR of 20% for the last three years. Despite the fact I write platitudes, results are not that bad… ;) Gio

Maybe… But the simple fact is that I am not sure… I run two businesses… And my idea of the difference I make in their performances is much more than… 30%… Unless, of course, you meant 30%… annual!! ;D ;D You surely know Lancashire much better than I do, and you might be positive about what you have just said… Let’s say that, when I invest in businesses through the stock market, I like to be redundant in the quality of what I look for: why should I accept only 2), if I can get somewhere else both 1) and 2)? Of course, answer my question only if it is not too big a platitude for you!! ;) Gio

Tom, I don’t understand… You have already expressed very well your thoughts about what I write in my posts… I guess everyone on this board already knows that you think I write platitudes… Why do you go on repeating and underlying that concept? Probably, but it is only a guess, you do so because you care to let also new members know…?! ;D ;D Gio

Once again, this is not rational. I have repeated over and over again that I look for 2 things: 1) a great entrepreneur 2) a business that gives him/her steady and safe fcf And I have always said that I require BOTH. When Brindle resigned, Lancashire was no longer what I look for. Period. The real take away, that evidently you have missed, is this one: Notwithstanding all the work and hours I had put into the effort of understanding Lancashire, as soon as it was no longer what I look for, I sold. I never said my judgment is infallible… Far from me! But the truth is this: if I have 7 Lancashire, in which my judgment proves to be flawed and each time I lose the money I lost in Lancashire, then I have 3 investments in which, instead, my judgment proves to be right, results overall will be very satisfactory indeed. Now, tell me of another thread where an investment is more attacked than BH… Not easy to find, right? The reason I read every post of detractors’ is exactly because I want to be aware of every possible risk! Then, let’s put it this way: if you find the home of your dreams, in the neighborhood of your dreams, in the city of your dreams… and someone shouts: “Move away… because 10 years, 3 months, 2 weeks, and 3 days from now an asteroid is destined to hit you!!”… and you don’t decide to move to a home that you like far less, in a neighborhood that you like far less, in a city that you like far less… who is behaving irrationally? Gio

Guys, We could go on talking about ethics, about psychology, about cognitive dissonance (you like that, don’t you? Sounds very intellectual!),… if you’d like, we could also talk about religion and astrology (maybe Biglari’s horoscope isn’t that favorable after all!)… In the end what matters in business is our willingness to be rational. Period. And, when someone has a great business, honesty is always the best policy. To be a thief and a liar, like detractors call Biglari, would be a stupid behavior, would be bad investing, would be seriously limiting his own long term wealth. Do you have any doubt Biglari is not stupid? Do you have any doubt Biglari is a great investor? Do you have any doubt Biglari knows how to maximize his own long term wealth? And don’t be mistaken: Biglari has a wonderful business! If you have any doubt about this, read link01’s post again and again. Listen, Have you seen what I did with Lancashire? When I say I don’t fall in love with a business, I really mean it: Lancashire was a much bigger investment for me, than BH is today. This notwithstanding, as soon as Lancashire ceased to be what I thought it to really be, I sold my whole position. I disposed of a 25% position the very same day Lancashire announced Brindle’s retirement. When the facts change, I change my mind. Gio

My guess is that he will continue to do rights offerings so he can get more of the company when he has the capital at a lower price. Makes perfect sense - IMO. Well, to calculate BVPS I simply use the number of shares in the first page of the 10-K filing. Just like Biglari himself has suggested to do. That number has increased from 2010 to 2013, and, if Biglari keeps making use of these rights offerings, it will get larger and larger. Gio

What I meant is this: until CBRL stock price began to slightly decline (or at least stopped appreciating fast), and until it became obvious that Biglari is facing a long battle with CBRL’s management, the P/B ratio the market was willing to accord to BH was in line with the one of other companies which are expected to grow BVPS at a handsome CAGR for many years to come. Gio

No. At the end of 2013 BH stock price reached $520. Do you think the market changed opinion about Biglari in 6 months? ??? Gio

Q2 2014 Letter http://www.scribd.com/doc/235091729/Greenlight-Capital-Q2-2014 Gio

And it is the reason I have a large position. :) Gio

No, I don’t. And I don’t care either. This whole thing about compensation cannot be really serious… I thought my tone had always been sarcastic enough! ;) What’s serious, instead, is the opportunity we have in BH today. Its shares are constantly put under pressure for a reason that’s very clear to me: BH is stuck with the CBRL investment today. That is exactly the kind of reason for undervaluation I like: because I can be sure it is only temporary. How many times do you find something that not only looks undervalued, but that you also know why it is undervalued, and you have great confidence it is only for a temporary reason too? Not very often, right?! And, when you do, you immediately recognize it as one of the best investment opportunity you have come across in a while. That’s what BH around $400 is today! Gio

[amazonsearch]I, Claudius[/amazonsearch] [amazonsearch]Claudius The God[/amazonsearch] Not only the biography of a great man and one of the best pieces of historic literature, but also as fine and compelling and ironic an account of human nature as you are likely to come across ever. Cannot recommend them both highly enough! Cheers, Gio

How And When To Short French Bonds by Charles Gave Gio How_And_When_To_Short_French_Bonds.pdf

+1 ;) Gio

Richard, I think this is not exactly right: I cannot judge Biglari’s integrity based on the fact he changed the Stake ‘N Shake name into Biglari Holdings, based on the compensation plan he devised for himself, and based on the mistake he made of promising to work for free… Call me “emotional”, if that makes you feel good, but I am pretty sure you cannot judge Biglari’s integrity based on those facts as well. Because no one can! Yet, those are the same things I keep hearing again and again… Nothing else! I will take the evidence as it comes: when Biglari’s “unethical behavior” starts causing him to make serious business mistakes, BH’s BVPS will inevitably stop growing at the fast rate it has grown for the last 3 years. That will definitely make me revaluate my thesis about BH. With all due respect, that evidence will be much more convincing than your arguments, Parsad’s, or those of any other detractor on the board. Gio

Well… Instead, I would! Actually, 1 reminds me of Mrs. B!! ;) And I don’t think Buffett ever spoke about Mrs. B’s competing habits as extremely unethical… My point: business is business… so many shades of grey… if you want something completely white, look for it somewhere else! Cheers, Gio

You could have said the same exact thing about Carl Icahn… And don’t tell me to overlook Icahn, because he is a one of a kind wonder… He surely is! But Buffett is even more exceptional! ;) Therefore, do you think activism works, or do you think it doesn’t? All activist investors I know of face the same problems Biglari is facing. The reason they might end up with different results is because they have different potential... And I agree with you that Biglari has much potential! :) Gio

A severance package of $11 million is not bad… for someone who could be thought of letting his shareholders down… with just a 1 month notice period… Isn’t it?! Still, my own answers to both questions I have asked don’t change. Gio

Sold all his shares?? Really?? Ok… So, I have a question for all of you who go on repeating Biglari is unethical: how do you judge Mr. Brindle's behavior? No… actually I have two questions for you. And the second one is: would you invest with Mr. Brindle in a new company, were he to found one in the not too distant future? My answer to the first question is: I don’t judge Mr. Brindle’s behavior. My answer to the second question is: of course I would, if I think I understand how and why he will be successful with his new company, like he has been in the past. Cheers, Gio

Well, you are right… It doesn’t certainly seem to be a sound investment. ;) Once again, I try not to judge every single investment decision… Some will be good, others will be poor… Overall I think results will be satisfactory. Instead, as I have already said, I would be quite disappointed if that corporate jet were used for personal reasons. Gio

Well, I know Mr. Biglari Sardar ;D is trying to expand the franchise abroad. For this reason the ownership of a jet might be a sound investment… We will see! My hope is he doesn’t use the jet for personal reasons… That would truly be an unjustified waste of shareholders’ money! (As if I didn’t know lots of CEOs who use the corporate jet for personal reasons… ::) ) I don't think this is true: shareholders always have options. They simply can cash in, selling the rights they receive and using the proceeds elsewhere. Gio