Financial Time Out – For Poetry

Mono PrintIn honor of the 4.5 years since Warren Buffett showed us all how its done, in the midst of the near-implosion of the financial universe, and in light of the announcement today about how he continues to reap the benefits of his investments, an oldy but goody, “If.”

If you can keep your head when all about you
    Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
    But make allowance for their doubting too;
If you can wait and not be tired by waiting,
    Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
    And yet don’t look too good, nor talk too wise:
If you can dream—and not make dreams your master;
    If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
    And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
    Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
    And stoop and build ’em up with worn-out tools:
If you can make one heap of all your winnings
    And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
    And never breathe a word about your loss;
If you can force your heart and nerve and sinew
    To serve your turn long after they are gone,
And so hold on when there is nothing in you
    Except the Will which says to them: ‘Hold on!’
If you can talk with crowds and keep your virtue,
    Or walk with Kings—nor lose the common touch,
If neither foes nor loving friends can hurt you,
    If all men count with you, but none too much;
If you can fill the unforgiving minute
    With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
    And—which is more—you’ll be a Man, my son!
By  Rudyard Kipling, 1865–1936

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Cracker Barrel Amateur Hour

The San Antonio Express-News reported that San Antonio-based Biglari Holdings failed last summer to notify the Justice Department of its intent to initiate an activist approach to investing in Cracker Barrel Old Country Store Inc, as required by law.

Sardar Biglari operates in the exceedingly small financial sandbox of San Antonio, where his firm’s $850,000 Justice Department fine makes news, or for that matter where $10 million in city initiatives constitute a significant portion of local venture capital investments over a three year period.

Does the Biglari fine matter?

It matters mostly to Biglari’s image, something he cares quite a bit about.  This is a businessman who has managed to get every single press mention of himself in recent years to compare him to value investor Warren Buffett.

Nevermind the fact that Warren Buffett has never engaged in hostile, aka activist takeovers, or management shake-ups – Biglari’s preferred investment style.

Biglari, and activist investors like him, seek to acquire enough shares in a target company to demand a board seat, and from that vantage point of power demand changes in management or company direction.  This is the kind of thing explained and exemplified in the popular culture by Michael Douglas’ Gordon Gekko.  Biglari’s fine from the Feds is precisely for not declaring his intent as an activist investor in Cracker Barrel.  Buffett, by contrast, famously only purchases companies in which he already admires and supports management.  Buffett is the opposite of an activist investor.

Also, nevermind the more important point, that a Buffett comparison is best bestowed by the investment world, not claimed by the investor himself.

Biglari’s is the kind of hubris and obfuscation you only can get away with locally in San Antonio, where comparing oneself to Warren Buffett isn’t immediately met with a snort of derision and a rolled eye.  For one thing, people are too polite for that around here.  For another, the wide gap between Biglari’s style and Buffett’s style would be too obvious to anyone from the larger sandboxes of the financial industry to take his self-proclaimed similarities seriously.

Besides just Biglari’s image, does the fine matter to Biglari’s actual business?

It should.  To the extent that a hostile takeover practitioner like Biglari depends on outside capital – as it no doubt does – he needs to credibly present himself as an expert in the field of activist investing, to attract sophisticated capital.  When you miss something as obvious as a regulatory filing – to declare your intent at activist investing – you really are declaring to anyone paying attention that you are not exactly covering all your bases.

This is not necessarily a problem the first time around.  But if I had money with Biglari – I don’t and I don’t plan to – I’d be a lot more skeptical about his claims of expertise as an activist investor as a result of this news.

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