giofranchi

Moreover, I don't know if it makes sense for FFH to go on hedging their stocks portfolio... But it surely is very useful for me! At this point in the market cycle I am very happy to have half of my portfolio in businesses that will do very well, if the market goes on undisturbed... And the other half invested in FFH that will do very well if the market starts going south... In other words, I don't want FFH to only be "protected"... I want it to actually make lots of money in a market crash! And imo that's exactly how FFH is positioned today: it will make some money as long as the market keeps going up, and it will make much more when the market starts to turn down. Gio

Twacowfca, Have you read [amazonsearch]Brain Grain[/amazonsearch] by doctor Perlmutter? If so, what's your thought on it? Thank you! Gio

I also think that in retrospect equity hedges will be seen as a big mistake... This doesn't mean it makes sense to take them away now, in the 7th year of a spectacular bull market for stocks, with global deleveraging that still has to begin, economies burdened by massive debts, and the Shiller PE of the S&P500 fast approaching 28... Gio

He is the Gandalf of modern finance! ;D ;D ;D ;) Gio

I am reading [amazonsearch]The Hard Thing About Hard Things[/amazonsearch] by Ben Horowitz. A useful book for entrepreneurs, businessmen, and investors alike. Highly recommended! :) Cheers, Gio

Thank you! ;) Gio

I doubt that anyone discusses specific ideas in his/her letters… As for the techniques I think Packer (if I am not wrong) once suggested a book he thought was very useful on the subject… Though I cannot remember its title right now… Gio

Howard Marks...?? ;) Gio

I don’t think it is right to compare BRK to other P&C insurance companies: BRK can make investments no other P&C insurance company could think of, because its streams of earnings are way much larger and more diversified than those of any other P&C insurance company in the world. --WB 2014 AL Of course, at Fairfax we are not there yet… But working hard on it! ;) Cheers, Gio

Of course I don’t have a clue about such a huge organization as BRK has become these days… But, if I am to vote, I will do so sticking to my experience as a businessman: any business I know is the brainchild of one person only. Cheers, Gio

Martin Capital Management 2014 Annual Letter Gio Martin-Capital-Management-2014AL.pdf

Maybe you are right… But the math remains clear imo: 7% annual (instead of 8.9% historically) return on their portfolio of investments and FFH will compound BVPS at 15% annual. Selling today at 1.3 x BVPS, if in 10 years FFH still sells for 1.3 x BVPS, my return will be 15% compounded annual. Gio

Imo hurdle rate and discount rate are two different things… I look for businesses that have at least the possibility to return 15% annual compounded, and that’s my hurdle rate. But I use 9%-10% as a discount rate, whenever I try to perform a DCF analysis. In other words, I use 9%-10% to calculate IV, then I try to buy with a sufficient gap between price and IV in order to achieve a compounded annual return of 15%. Gio

I take the CAGR for the S&P500 that I find on the front page of the last Berkshire Letter to Shareholders, and simply use that number as my discount rate. :) Cheers, Gio

Paul, you know very well that “a pretty strong investment environment” doesn’t mean it has been a “safe nor easy investment environment”. And those companies don’t reach for yield in an investment environment that is “strong” only because of unbelievable money printing… Have they been too conservative? Of course they have! Have they made a mistake? Of course they have! Was it an easy situation? Not at all! ;) Gio

I don’t know if this has already been mentioned, but I really like the fact they have added the “in Per-Share Market Value of Berkshire” column in the front page. :) Gio

I would reommend reading [amazonsearch]Accounting for value[/amazonsearch] by Prof. Stephen Penman. Cheers, Gio

LOL. Maybe you guys can ask him how can he lead a fairly stress free life while running one of the largest companies in USA and periodically running into near-death corporate situations (Washington Post strike in 70s, SEC investigation in 70s, Salomon Brothers debacle, Gen Re debacle, Net Jets debacle, death of all the "made in America" brands he bought, Lubrizol and Sokol, etc.). I would have killed myself multiple times during his career. "Stress free" my a** ??? ::) :-X :'( :o I don’t agree. I think he is smart enough not to take himself nor Berkshire too seriously. He enjoys what he does very much, and would certainly like to do it as long as possible, as well as possible. But imo he won’t yield to pressures he doesn’t like, simply to add some percentage points to Berkshire’s returns. And that’s basically all that stress is about: the need to yield to something we don’t like to do, think, nor feel. In other words I believe he is in a position to say NO to whoever he wants, to whatever he wants, whenever he wants, and still go on doing what he loves practically undisturbed: and that’s my definition of being stress free! Cheers, Gio

http://www.marketwatch.com/story/consumer-inflation-trend-turns-negative-for-first-time-since-2009-2015-02-26 Gio

Why not to look for an entrepreneurial lawyer, who is willing to invest alongside you in this business opportunity? Your capital + his work for free, then you share the earnings, if and when earnings come. I have done so many a time and, though certainly not easy, it is possible to find people interested in a sound business opportunity. ;) Cheers, Gio

Yes! Wonderful! Imo the market is really undervaluing this deal… Gio

+1! :) Gio

Well, it seems I was not too far off: from the 2014 AR in attachment tangible assets per share at the end of the year were 194 pps, therefore the multiple paid is: 305 / 194 = 1.57. Cheers, Gio 2014_Annual_Report.pdf

Don't we all! By the way Pete, small shareholders without cash could always sell their rights in the market and receive a sort of special dividend… It is true they get diluted, but is also true they somehow get compensated for that. Cheers, Gio

Well, if you participate fully, I think it does! Because you get the chance of buying at a price that might be well below BVPS after all the rights have been exercised, and therefore after all the new shares have been issued. If you then exercise your oversubscription rights too, it gets even more interesting! ;) Gio