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First Interview For The New Board!


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After Berkshire Hathaway and Fairfax Financial, our board seems to have a growing following of combined shareholders in Western Sizzlin' and Steak'n Shake, both run by Sardar Biglari.  That being so, our first interview for the new board is John Linnartz, managing partner of Mustang Capital Management LLC. 


Mustang was acquired by Western Sizzlin last year as many of you know.  I had a conversation with John this morning that lasted about two hours, but would have easily gone on for several hours if we didn't have to work.  After talking to him, I knew that John would make a terrific candidate for our first interview and he gladly obliged.  In the 2007 Western Sizzlin' Chairman's Letter, Sardar described John and Mustang as such:


I met John a few years ago at a Christmas party held by an accounting firm servicing our respective investment companies. As two value investors, John and I naturally gravitated to a corner to discuss pink sheet stocks. His knowledge is impressive; as a sample, I gave him a few facts about a certain stock, and he identified the company simply through my sketchy data.


The next time I saw John was last year in New York at Western’s annual meeting, as he then was one of our largest shareholders. Several months later he asked for a meeting and broached the idea of Western’s purchasing his business, a proposition I immediately embraced. To John, price was not the primary factor; rather, he wanted a good home for his business and also wished to continue running it. His investment record, founded on a very stable client base, is phenomenal. He will continue to operate his business as before.


Mustang's investor base is only ten families deep, and they've known him for a very long time.  Many of them got to know John when he was a stock broker, and have been with him since.  He really grew his book of business in the early days by studying and investing in local community bank stocks, and where he also got to know Wells Fargo CEO John Stumpf.  He bought his first share in Berkshire back in 1987.  John is not interested in raising any more funds for Mustang, and is more interested in taking a more activist approach. 


This being a period of distress for the financial industry, I thought John's expertise in banks, in particular those in the State of Texas, is probably unparalleled.  He has no MBA, CFA or business degree.  He has a hard-nosed approach to business using common sense as his guide.  He gives very frank assessments of things, so I thought it would be particularly useful to those exploring the financial industry these days, as well as giving you all more color on Sardar, Western Sizzlin and Steak'n Shake.


Please submit your questions on this thread, and I will compile them and submit them to John.  Naturally, there will be some questions he will not be able to answer due to confidentiality regarding Western Sizzlin, Steak'n Shake, Sardar or Mustang Capital, but feel free to submit what you want, and he will answer the ones he is comfortable with.  Cheers!

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I have a couple quick questions:


When reviewing a banks liabilities are banks with higher levels of non-interest bearings deposits worth more that CD funded banks in your eyes?


How do find your ideas? i.e. screens, other investors, etc...


Thanks and great idea.  I look forward to reading his/your comments.



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Guest misterstockwell

Speaking of Texas banks, what do you think of Hilltop Holdings(HTH) and their plan(with Gerald Ford) to use their cash hoard to buy a bank "carcass" from the FDIC and start anew? The preliminary acceptance of this plan/charter by the comptroller of currency can be found here:  http://www.occ.treas.gov/ftp/release/2008-137a.pdf  It appears that the players involed have a great record of owning/growing/selling banks, so it may present a low risk entry into that market. What do you think?

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Thanks Sanj for all you efforts.


My questions:


With bank consolidation,  will fee and transaction income account for a significantly larger part of bank revenues/margin especially at the retail level where the consumer may be limited to little choice in some areas?

Or do you see govt. intervention to protect the customer on gouging?




With the banking system weakened, do you think the FED/Treas. will manipulate rates so banks earn fat margins over an extended period, and can earn their way out of their troubled assets.  If so, is this an extended golden era for the few healthy banks around?




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As a banker (and active bank investor) i am curious how he got started in the business and what he looks for in a community bank stock he invests in?


It is tough to offer up specific questions with minimal background but I do look forward to hearing his perspective on the market and what he is planning on become more of an active investor in (industry, sector, and why).

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1. What good books have you read lately.

2. How decentral are your obligations to Western'. Are you sending monthly reports, updating on major investments, sending money back to the main hold co weekly?

3. What did you see in Biglari that made you feel comfortable trading your Mustang shares for Western shares.

4. What lead you to your investment in O.I. Corporation (thought process)



Thanks for working the interview Sanjeev.

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This interview idea is great.  I missed it somehow on the last board.  My question is "Was pumping $$ into banks/counter parties assumed too large to fail a necessary evil or would have letting them fail and investing in banks with good models have been better? Or was there a completely different way to avert what we were told was going to be financial armeggedon this past fall?

thank you

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Great job and thanks Sanjeev!



1) There is not a trivial risk that Bank of America and Citi will be nationalized and their shareholder wiped out.  What range of probabilities does he assign to this.  Would invest in either anywhere in the capital structure?


2) Second order effect of the such a nationalization, how does he think that will affect strong banks?  Wells Fargo seems to be a strong bank.  What does he think of it?  The preferreds versus the common.


3) Other than the usual suspects, American Banker, WSJ, Barrons, Fortune, Forbes, Newsweek, and the 10K's etc. what does he read currently. 


4) What is his circle of competence and how did he establish and grow it. (I don't think he was ever a banker.)


5) What are the key ratios he uses to evaluate and compare banks?


6) Why does he want the additional conflict involved of active investing?


7) Could he illustrate his thought processes concerning specific investments? (previous positions are fine)


8) As an investor what was (were) his worst mistake(s)?

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Thanks for setting this up. I have a few questions:


1. How does he rate Jim Verney? Follow-up: What are his thoughts on Verney's departure from Western?

2. If he had to pick out one quality of Sardar's that gives him an edge in investing, what would it be?

3. I'll understand if he can't answer this but I'll give it a shot nonetheless: Did the idea for the "put" provision related to the purchase of the remainder of the minority interest in Mustang originate from Sardar or John?




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