ragnarisapirate

OH NO!!! Could it be that Farnam Street is actually putting up a book link that would help us understand Sardar Biglari a little bit better? Personally, I like to be able to look at the book links posted, figure out if it is good or not, and then make our decision based on my own analysis. Just because he stands to make a few quarters (if that) from my purchase doesn't necessarily make him il-intended. Plus, it isn't like it makes any body using the link pay more for the book. After all, this is a board where we post ideas that we have about stocks... Saying that he is trying to get a commission would be like saying any of the rest of us that throw out ideas on the board are trying to up the price so that we can make money. I think you will find that virtually all of us are simply here to exchange ideas and leran from one another. Getting back to BH... It does seem (based on historical allocations) that Biglari will be able to grow the investment portfolio value quicker than what he is paying on the interest from the cash he took out on the debt facility at SNS. If there is a liquidity crunch or interest rates soar, it will be interesting to see what happens to BH. I am quite impressed by how quickly he is growing the franchise base, and frankly, am envious of you New Yorkers that will get to eat at the new concept store in early/mid January... If any of you want to do a guest blog post on Ragnar of the new concept, let me know. Despite not presently owning any BH, I would love to see what you come up with just because I am interested to learn about the new concept store! As always, the letter was a good read. While some have ill-feelings towards Biglari, we can certainly learn something from him.

Not that I have kids, but, it isn't like I wasn't a kid all that long ago... So, here is some of the stuff that worked with me. Like others on here, I also got a chore based allowance, where I got paid for the amount of work I did; if I didn't feel like taking out the trash, that was fine, I lost however much money I was to be paid for that chore... I even remember recycling aluminum cans as a kid so that I could get more money; I probably would have gotten a job on my own accord if it weren't for those pesky child labor laws ;). At some point (maybe middle school), my parents opened up a checking account for me, and said "we will give you x amount to put in the account every 2 weeks. This money is for you to buy clothes with. You can buy whatever you want. But whatever you do, don't come to us to ask for more money if you have too good of taste in clothing..." That did a lot for me, as I quickly figured out that buying things on sale was a good thing to do. Coupons were good things to use. I certainly cared a lot more about what I got at that point, whereas, when they were buying everything for me without me knowing what they were spending things didn't work out as well... The great thing, is that from where I was being more efficient in my clothing purchasing, it saved them money, I ended up with stuff I actually liked, and any fights over typical teen/parent clothing issues were completely avoided. Looking back on it, my family would have been a real case study for labor economics, despite my parents both being teachers and probably not thinking too much about the economics of the whole situation...

I actually made a post about this a last week... http://ragnarisapirate.blogspot.com/2011/12/kids-birthdays-saving-for-college.html

and the rebuttal: http://www.enhancecrackerbarrel.com/pdfs/shareholderletter3.pdf

Really good points. Relative to what some other businesses do, like cigarrettes or even some soft drink makers, this isn't bad. In any case I'd love to see the reaction if a short seller, say Jim chanos, did the inverse of this. Say he shorted the stock of a company that had public bonds and wasn't filing financial statements for that period. Then he sued them, forcing default and profited from the equity short. Or something like that. I seriously doubt anyone would be saying "he's just enforcing contracts, guys." Well put, Hester. The guy is trying to make some money, and is doing so in a legal way... I don't know why we should be disparaging him. Plus, this does go with his philosophy of going where nobody else will to get nice returns. Certainly too icky for most, so, it can make for some fantastic returns.

All, I have been thinking on this for a few days now, and thought that I would post on here to get your thoughts... All of our favorite capital allocators have had a period where they preformed like shit. Berkowitz recently, Munger towards the end of his partnership, Lampert a few years ago etc. But, they all did incredibly well at the start of their careers. Are there any out there that did terribly when they started? Or, did they not survive because they started out in a bad manner, which biased everyone against them. If you have 5 years of great performance, erase a lot of it for 2, convince people to stay with you, it seems like you would be golden. Is this some sort of bias that we may have towards the more famous fund managers? Michael Burry is the only one that I can think of that might meet the criteria of "screwing up" for a few years, but, even he had a heck of a track record when on message boards; plus, he was one of the most "right" people on the housing bubble, so even he is probably a bad example for what I am getting at.

Comparing morals to legality is crazy. Is it okay to jam someone into a high fee variable annuity within an IRA because it's legal? ??? OMG, how do I get into these discussions. Your really serious about judging people's morals? By the time you get to my age, you have seen nearly everything, I should hope. People, simply put are not perfect, and never will be. I don't claim to be perfect and I know that people are not perfect. However, there are things that are more important than money. To me, integrity, honesty and loyalty to one's family are all above money. If business success is the most important factor...well, that's a shame. This may not sound great, but integrity, honesty, and loyalty to family don't contribute to society's advancement of knowledge. If we want to learn from the greats, we need to be agnostic to their personal lives. I think that if you look at the greats of human history, many had odd personal lives. But it's ultimitely irrelevant to their wisdom in their field of study. Few remember Darwin's rascism, Einstein's adultery, or Jefferson's slave orgies. And few will remember Buffett's odd personal life or likely affair with Kay Graham. Their impact on society is no less great. As long as they don't rail against something and do the opposite in their personal lives. For example, oppose gay marriage because of the "sanctity of marriage" and family values, whilst cheating on your cancer striken wife. You know, while I disagree with a lot of the situations that have been thrown out in this forum, I think that it is a mistake to judge people without knowing the situation they were in... I have not walked a mile in any of the examples' shoes. As a result, I think that what they did was wrong, but, that doesn't mean that any of us, put in the same situation may not have acted in a similar manner. We are all humans, and will all screw up in ways that would appall other people, but, may have been something that we didn't/couldn't avoid. Everyone will do horrendous things when put in the right situation, especially when they think the rewards outweigh the consequences. Just because people screw up, doesn't mean that their other accomplishments should be discredited or that their philosophy (such as value investing) is good or bad. As a correlation, I have noticed that a lot of people seem to not want to be religious, because they dislike the actions of people, who are "religious". That seems to me to be a big mistake, as it is obvious that humans screw up... there is nothing else to draw from that, other than people are fallible.

Additionally, here is a great op-ed that just came out: http://seattletimes.nwsource.com/html/opinion/2016950119_guest07kealy.html

Unemployment goes down, but then we get to deal with a population that will likely be declining... That doesn't seem like a good swap to me. It really makes me worry about the Social Security Administration and Medicare/Medicade.

Lots of good input here. I will add that a lot of what I have learned is from where I screwed up. It seems that most people don't want to ever think about missing something in their investment thesis, but, I try to relish it; hard as it may be to put into practice. One of the best things I ever did was have a big loss on a small bank that I didn't understand as well as I should have. It taught me a lot of good things. Another screw up was investing in a regional airline before oil went to $150/barrel. I don't want to suggest that people should lose money to learn, but, the lessons I learned in the process, when I was (and, still am) pretty young, will hopefully keep me from making it an even bigger mistake on down the road. Plus, being young gave me more time to recover from the losses. In the event that you lose money, you might as well try to get some good out of it and learn something!

The politics of Washington State confuse me. I am somewhat surprised (on a moral level) that a Democratic governor seems to favor increasing the state sales tax (which, is arguably the most regressive tax I can think of) and cut things like Health and Human Services funding, rather than allow what are essentially slot machines that are already legal in parts of the state, be put into card rooms where people already go to gamble so that the state can plug a huge part of their budget shortfall. Then, I look to who the native american tribes (who don't want these things outside if their reservation casinos for revenue reasons) make their campaign contributions and it makes a bit more sense... the tribes contribute almost exclusively to democrats. By the way, the above is not meant to come off as an attack on democrats in the state of Washington or elsewhere, it's just as an observation in regard to the political climate where I (and, I am under the impression, a few other board members) are invested. This will be an interesting thing to watch unfold.

I like to think of sanjeev as the "philosopher king" of the board. :)

Yeah, that type of plan makes sense, but, with there being wide swings in stock price, they may try to shy away from that? It seems like insiders buying shares in smaller companies has a greater impact on the price of the shares than of bigger firms; almost irrespective of the types/sizes of purchases. That said, that is one thing about the company that I am at a loss over.

Attracting talent ain't cheap. Insiders have a good bit in options; all said and told, they have almost 15% of the company as a result. From what I gather, the legislation seems like a coin flip at worst; but, a Washington resident would likely have a better feeling for it. That said, I have been surprised that they have not been buyings shares. I would imagine that it might have something to do with the fact that they are constantly working on deals, most of which seem to have a material impact on results. For example, their last acquisition will increase revenue by more than 30%. If they bought shares anytime around this (which, really, could happen at any time- they are in talks over various management contracts as well), I would imagine that it would look really bad on them, and open them up to a whole lot of scrutiny that wouldn't be worth it.

Hey, I was curious if there were any residents of Washington State on this board. I am pretty long a card room operator in the state (Nevada Gold). Presently, there is some legislation that would be huge for the company (their EBITDA would probably go up by 500%, maybe more), I was hoping that there might be someone on here that would be willing to email with me about the legislation and overall mood of the legislature. I am located a few thousand miles away, and figured that this might be a good way to get some "on the ground" intel. :) ragnarisapirate(at)gmail.com Really, even if you are not a Washington State resident, but have some insights that would be useful, I would love to throw ideas back and forth with you. -Jeff

Thanks man. That's a great idea; I always forget about libraries... Look forward to hearing what you think.

All, I was curious if anybody had a subscription to the wall street transcript, and if so, if you would be willing to do a guy a favor, and maybe email me the newest one for Nevada Gold and Casinos. Here is the link to it. http://www.twst.com/notes/articles/avo608.html ragnarisapirate(at)gmail.com Any help would be appreciated!

There are a lot of charts in there that make me think that things are not so bad... Thanks for posting.

The shear idiocy of him not being able to back up what he is claiming though... Seriously? It seems like he would know better than to screw around with something like this. I am not saying that the offer is legit, but, surely nobody is dumb enough to fake an offer like this; it isn't like this won't generate a ton of press either. No?

The longer that this goes on, the more clear it is to me: BAC is either going to be the sharpest guillotine of a falling knife in the history of value investing, or, it is going to be what proves the brilliance of many in our school of investment. I see little room for anything in between. That said, I was one of the people that voted "BAC is probably cheap, but, I am invested in other things" in the poll that moorecapital put up the other day...

Personally, I think that the way that this baffles most people goes to show how nimble Warren Buffett is. Plus, if any of us were managing as much as Buffett, I would hope that we would be able to occasionally shock the people that look to us for investment advice.... After all, that is what gives him an edge. People have always been shocked by things that he has done. It's just that in the rear view mirror, we thought that we understood it. The Buffett of today very different from the Buffett of 1960, 1980, or even 2000.

Smallest is presently under $850K... The biggest is about $1.5 billion. Generally, I tend to stay with really small companies, but, that doesn't mean that if I saw a better value in the $100+ billion market, that I wouldn't go there. It's just that they never tend to sell at such a discount to their liquidation value, or, even at a super low multiple of earnings to come.

Is anybody here bothered that ~85% of respondents on here think that BAC is cheap? I have long been worried about a group becoming a crowd. especially if that group generally thinks like I do...

I too noticed that he left that performance out. That said, there is a difference in pointing out the stock price of the company that you operate (which, we generally would criticize managing a company for share price) as opposed to the share price of activist targets. Furthermore, with ITEX, he kind of hit a wall, much like newer activist attempts have. Which really sucks; I can't imagine an executive being more un-friendly to shareholders than Steve White. Managements tend to not put the company's that give them a pay check up for sale without some prodding. But, going on the letter, it doesn't seem he is looking to sell off the company... well, at least until operations and such improve. There are a lot of things that could be done to improve things there.

True, but, there would have likely been closures in the mean time... Jobs were saved, and, now, are being created every time that a new one opens up. This is especially true if he can hit the 2000 unit mark that he has states as a goal. There is almost no chance that any of that would of happened had Biglari not come in.