giofranchi

I do agree but: Of course FFH’s assets are not 100% in the US. Yet, cwericb’s example shows an exact correlation between the difference in FFH USD denominated share price and FFH CAD denominated share price, and the USDCAD exchange rate. How is it so? Thank you! Gio

https://fundooprofessor.wordpress.com/2015/06/11/what-is-staying-power/ Gio

Thank you! :) Cheers, Gio

A great novel! :) Thank you very much, Gio

Ok! Nothing to argue with that! Cheers, Gio

+1! That's what I meant too. Cheers, Gio

1) I have great businesses that will do very well in a muddle through scenario or in an inflationary scenario, and will behave satisfactorily in a deflationary scenario; 2) I have at least one great business that will do very well in a deflationary scenario, and will behave satisfactorily in a muddle through scenario (like the last 5 years during which I have made enough money in FFH!). To acknowledge the possibility of a deflationary scenario with financial assets that might deflate in the future is as much macro as not acknowledging such a possibility. But imo it is much more cautious! While: Is simply wishful thinking... if you ask me! ;) Gio

I wouldn’t call it “a very specific view of the future”… That imo is a fact! ;) Instead, how big banks are going to do very fine, if interest rates stay low and asset prices deflate, is more difficult for me to understand… But I admit I don’t follow them closely, and therefore I might be missing something important. Cheers, Gio

+1! :) Gio

Fortunately, we can put together a “portfolio” of investments… And certainly I am not saying FFH is my only investment! But I disagree with your base scenario “because you don’t have any particular view of the world”… Instead, to be invested in big banks you must have a very clear view of how the world is going to be 10 years from now… Because in a deflationary environment big banks will suffer much! I on the contrary own both investments that I think will do well if a muddle through scenario goes on, and an investment in FFH that will do well in case of deflation. In other words, I believe FFH has a place especially in the portfolios of those who claim not to have “any particular view of the world”! ;) Cheers, Gio

Ah!... I thought those that are good are also the ones who position themselves to ride favorable industry tailwinds! ;) Gio

Interesting! I'll take a serious look at PSG Group! ;) Cheers, Gio

Very good thread! :) Could you please also specify the name of the companies? Instead of their symbol only? Thank you, Gio

So, why aren't you a shareholder of CSU? Too expensive right now? Thank you, Gio

Hi Vinod, Imo those are the things anyone can plainly see and agree on. As I have already told you, I think FFH’s overall strategy might be a little less evident: as asset prices will probably deflate at one time during the next 3-5 years, FFH will be best positioned to purchase productive assets very cheaply. Better positioned than anyone else I know of, actually! That might be the beginning of a transformation into a much more diversified conglomerate of high quality businesses, which will more closely resemble what Berkshire is today. If successful, certainly FFH’s stock price doesn’t reflect such a scenario. And personally I don’t know of many businesses with higher opportunities of compounding capital over the next 5-10 years (if the scenario I have described comes to pass, the best case for FFH), nor with a lower risk of permanent loss of capital (if the scenario I have described never materializes, the worst case for FFH). But, please, let me know which businesses you are investing in! So that I might look at them, and better understand what you mean! If I like them, as I have always said, I might decide to sell some FFH to buy those businesses. ;) Cheers, Gio

Of course I can only speak for myself: imo that question is very much business related, and anything that's business related is also related to invetments. Thinking about business related topics might always be useful, even if those topics are a bit far from what you happen to be interested in at the moment. Cheers, Gio

That would be very effective indeed, and it is exactly what we do in Italy. Though, it takes time to create that kind of contacts… And November 2015 is just few months away… We’ll surely do that for the second edition of this MS, but for the first one we are already too late! Thank you! Gio

Both university professors (30%) and professionals (70%). 300 hours of lessons + 500 hours of internship: you are right, this should be added on the leaflet! Thank you! ;) Yes, of course we have thought about that, but unfortunately they are not exactly “cheap”… Cheers, Gio

Vinod was calculating the rate of book value growth. His estimate is 5-12%, with a base case of, call it, 7%. His base case calls for stock market returns of 5% (not unreasonable by any measure). His base case says Fairfax will grow at a greater rate than the market and is therefore "worth" at least book to "the market". What it is worth to frommi or Jurgis or vinod is an entirely different story. What something is worth to the market under reasonable assumptions under today's conditions is different than what something is worth to any one of us with an XX% hurdle. My takeaway from Vinod's thorough analysis is in order to own FFH today, you either must have higher compounding rate expectations (like Gio does, not trying to argue with you Gio, I just know you expect greater things from FFH than 5 or 7%) or pretty low return requirements. I have no strong opinions either way and have never owned FFH. This is exactly what I meant. Thanks for explaining it better than I could. Vinod As far as I am concerned, this goes well beyond my future expectations for FFH’s business results. It has lots to do with the business I am in, which is not buying and selling securities… Instead it is: 1) Generating cash; 2) Finding a business led by an owner/operator with a solid and long track record, a business that I understand and that is not subject to obsolescence; 3) Using the cash I generate to keep buying that business at fair/good prices; 4) Finding new ways to generate cash, should it become too small a fraction of my firm’s equity. Therefore, my perspective is not really “at which CAGR will FFH be able to compound BVPS in the future”, instead it is more like “which other business fits the description in 2) better than FFH, so that I could keep buying it instead of FFH with my cash”. As I have always said, show me a better alternative, and I will be very glad to take it into careful consideration! Because, irrespective of the CAGR I might think FFH could compound in the future, I am confident that, as long as I do sensible things (1, 2, 3, and 4), with the discipline to keep doing them for a long time, satisfactory outcomes should follow… with maybe some pleasant surprises along the way! ;) This being said, as I have already told Vinod, I think that simply saying “well, the indices have returned X for the past 30 years and FFH has returned Y… the indices are going to return X2 for the next 20 years, therefore FFH is going to return Y2” might be greatly misleading. Instead, to judge the future prospects for any business, you should think hard about what that business has been in the past, and about what that business could become in the future. And imo FFH is becoming a much better business than it has ever been. Cheers, Gio

Hi guys, In November 2015 we will inaugurate the first edition of our new Master “Leadership in glocal design”. As you can see on its leaflet in attachment, it adresses specifically engineers and/or architects living outside Italy, who are interested in making a formative experience working for Italian design firms. Germany is renowned for its engineering firms, England for its financial services firms, while Italy (hopefully) can still count on some of the best design firms in the world. And the 2015 Qs World University Ranking by Subjects puts the Politecnico of Milan at number 10 for Design. Not bad! Especially given its small financial resources compared to those of many other large universities worldwide. Now, though, our masters until now have always been offered basically to Italian students, therefore we have never truly made the effort to advertise them abroad… I know that many of you don’t believe in higher education, and judge it to be worse than useless… But the help I am asking for is strictly from a marketing point of view: what’s the best (and the cheapest! ;) ) way to advertise your product in foreign countries? TIA, any help would be greatly appreciated! :) Cheers, Gio Leadership_Glocal_Design.pdf

http://www.theguardian.com/news/2015/may/27/why-india-is-captured-by-carbon? Gio

Not easy… For what I know, they might even be able to compound at 15% annual… But, as soon as I express that view, people jump at me! ;) And 20 years is a very long time… You might try to assign a probability to each scenario, but don’t really expect it to be anything more than an educated guess! Gio

In such an environment imo the contribution from their equities + equity hedges portfolio will pale in comparison to the contribution from their bonds portfolio and their CPI linked contracts. I might be wrong, though... ;) Gio

Well, imo basically no valuation can be done without defining: 1) The minimum return you require for an investment in equity for the next let’s say 20 years 2) The rate FFH will compound equity for the next let’s say 20 years I tell you what I do: 1) The minimum return I require for an investment in equity for the next 20 years is 9% If FFH compounds equity at: a) 9% annual: its IV is at least BVPS = 395 USD b) 10% annual: its IV is at least 1.2 x BVPS = 474 USD c) 11% annual: its IV is at least 1.44 x BVPS = 569 USD d) 12% annual: its IV is at least 1.72 x BVPS = 679 USD e) 13% annual: its IV is at least 2.06 x BVPS = 814 USD What will be FFH's CAGR in BVPS for the next 20 years? No one knows. You pick your number! ;) Cheers, Gio

+1 A good article! :) Cheers, Gio