YouSaid · the spoken record

Bob Robotti

lines on the record: 112
first: 2024-06-23
most recent: 2024-06-23
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“The opportunity, I think, is huge. What do you think happens to a stock? How did you say that who would have thought that that would happen? If you had thought about it, of course you would think that. And you should have thought about it because that's the margin to safety. There was no margin to safety. That pricing, that assumption set the pricing for both of those markets. And then if you change that basic premise, obviously they won't. So 22 happened and bonds and stocks had terrible performance. Somehow people have forgotten that. They relegated that to like that was a mistake. And of course, the critical element that happened, there was inflation happened. And therefore, where did that come from and what caused it? And where of the camp again? So there's one of my colleagues working with many years has this concept of grassroots macroeconomics. And so that's why I said we're a macroeconomic investor. We're not a bottom-up stockpicker who think we're agnostic on the macros because when you understand a business and you understand the industry.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“The risk is not necessarily in the public market so much, even with the higher valuation stocks. There are these other markets that mark to a model. And therefore, are less volatile. Of course, we all know the answer to that is, no, no, no. I invest in a business, right? In the public markets. And the stock price may be volatile, but the risk and the volatility in that business is no different than the one that's owned in the private market. So our risk largely are not that dissimilar. And yet one goes like this in price and the other one like this in price. And in a period of time when interest rates have changed radically and therefore discount rates should be changing radically and one's not changing.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Are things that I recently saw a study Cambridge gave to us, us being one of the things I do is I chair the Pace University endowment. And they said, yeah, the multiples have come down. So they went from 10 to 11 to 12, 12, and now they're down to 11. And I'm like, wait a second. They went from 12 to 11 and interest rates went from one and a half to four and a half. Somehow that doesn't seem like the right adjustment. That number is like raw. And so I think private markets, which are levered and real estate, which is levered. The nature of those assets are you always leverage those assets because they're very leverageable. And if you start to change multiples because inflation is higher and the interest rate is different, your risk-free rate of return is different. And that just takes time because those markets don't reprice quickly. So I think.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Return is going to be determined by the dog and not the tail the tail is the fed and the dog is inflation. The dog determines interest rates. The tail, the Fed does not determine interest rates. And people think that that's the case. I hear one more time on the radio, four times on TV, you know, like, what's the Fed going to do next? And they're going to raise rates. I'm like, oh, would you get a life and figure something that is relevant? Because the Fed is going to be forced to respond to what inflation is. And the Fed can't control inflation. And so that's the critical element. And valuations, all real estate, in my mind, has risks of coming down in valuation because cap rates are going to change because where does inflation moderate out at? We'll determine what the right interest rate is and then we'll fix where capitalization rates are. And the private market.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“The foundation was in the wrong place. Because if nothing else, there was no margin of safety in assuming that that was your risk-free rate of return. And yet, in real estate, capitalization rates were all predicated on those low returns. And so therefore, so the real risks in my mind, because I do think, I think capital today is substantially misallocated, right? It's been allocated based on an environment of free money and the presumption that that's the norm. And the fact, and of course, we talk about public markets, but the other market we haven't specifically referenced is the private market. So private markets, I think there's a huge amount of risk and more capital goes there. And it's allocated to private markets. And private markets, valuations move slowly. And what's the right rate of return? And the right rate of return is the right...”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“I think a critical thing is valuation. So I regularly quote in the 2011 letter, Buffett made a point of talking about fixed income. And he referred to Shelby Cole and Davis' famous line that bonds were a return-free risk. That was in 2011. That was a long time ago. And for that entire time, that didn't come home to roost. But of course, What's my risk-free rate return? And so therefore, I saw a risk-free rate of return. I actually think for, you know, go back two, three years ago, saying, how do you figure a risk-free rate of return? Because if he's figured a 10-year treasury, but the 10-year treasury was like lower than what the inflation rate was. So the real return on 10-year treasury was negative. So if you're a risk-free rate of return, it's negative. And then I got to put the premium on top of that. What's the premium on top of that? And where do I start? So it's...”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“But some of them won't do well. And I don't know which ones those are. And if you pick the right ones, you'll do okay. And if you pick the wrong ones, you have clearly valuation risk in those securities.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“To the point where we've done really well the last number of years. And I think we're extremely well positioned today. So those are the two pieces of value investors and how they've kind of changed over time. And the ones that have adapted have money. But I think also how valuation issues that they have in their portfolios and businesses that have done well and could do well. And again, that's why I say it's a stock picker's decade because even Magnus 7, I heard the Bloomberg the other day say the Magnificent Six. So they've already kind of like they identified one. And that's what will happen. It's the same thing that happened with the Nifty 50. Some of these businesses are, they are phenomenal businesses. And the reasons the stocks have gone up is because the economics have been strong. And so it's not like just not what it was in the dot-com era where the valuations and things made no sense in the businesses that weren't worth anything. These are real businesses that have had significant economic returns and I'm still.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“The value guys who performed well are the guys who held on to those stocks and probably have bought in a little bit more to the idea like, gee, there is maybe better businesses are worthwhile to pay a higher price for it. And again, you hear Warren Buffett say that and therefore you apply that to every situation. Oh, it's a better business to pay a higher price. When do you start to confuse yourself as to what's a better business? And when do businesses change over time? And it was a better business. But does it change? I mean, let's continue to have that. So value investors have gone two different ways. They've either imploded because they bought hard assets and therefore those things have been out of favor. And we're fortunate because we didn't manage a lot of money. And the money that we have is from people who are really long term and have been witness for a long time that we've made returns for. And so therefore, I've had, because that's a critical piece. If my capital wasn't aligned with me, then I couldn't do what I have done because they wouldn't have stayed with me through the lean years. And there were definitely a bunch of lean years.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“So there are two types of value investors in my mind, right? There's the value investor like me who owns hard asset kind of businesses. And, you know, so maybe that's also Curtis Jensen who joined this a number of years ago, third avenue, Marty Whitman's firm, right? Or, you know, there's a lot of examples of firms that were that. And of course, they had the misfortune of being very successful in raising a lot of money. And so therefore, back in 06, 07, 08, 09, they had billions and billions of dollars. And so therefore, those businesses then have imploded substantially. The other value investor who did, who was smart enough, who did buy Apple, Microsoft, you name the company when it was a cheap stock. And it was a value stock. And therefore, they had the good fortune not to sell that thing over time, too, right? Because they would have truncated their opportunity for profits. And so those who've grown to be very successful investments, that they're kind of stuck in today.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“That's right. That's what I always do joke because 1975 I got out of college. That's what I say when I got out of college, there was a great business called the Wall Street Journal because there was no across the street from the Wall Street Journal. And I interviewed with a railroad company and said, this is a horrible business, capital intensive. Costs are too high. The thing just loses money like crazy. Why would you want to be in it? The fact of the matter is railroads are inherently a monopoly business to the extent that you have a rail line that goes from this place to that place. You are the low cost transporter of anything and everything and no one's going to build a new one of them. So therefore there's a barrier to entry and therefore you have that advantage. So structurally it was a business that has those positive attributes. And of course today the Wall Street Journal is a vanity thing for people who can afford to lose a lot of money and can't make any money anymore. So things change, you know, and people don't have the perspective of, oh, there are cycles. There are things that happen. And what is true today is not necessarily true tomorrow.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“In North America, because you're in the end market that demands it, you've got the iron ore, the domestic, you got the coal that's domestic, you got low cost energy, and you have an industry that produces steel for substantially less CO2 per ton than the rest of the world does. So environmentally, we're competitively advantaged also. So these things are very different. That's why I say the metamorphosis of the old economy, because these are fundamentally structurally different businesses than they've ever been. And in a period of time where activity in North America given things like the Inflation Reduction Act and all of those other advantages as we build out renewables mean the demand is growing exponentially and therefore you're extremely well positioned for high growth and yet valuations are extremely modest because oh I know that business is cyclical crappy business it changed it isn't what it used to be it's a butterfly today it's not a catalog”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Large portion of the world's economy. And so therefore, it's European businesses more than Asian businesses, but also Asian businesses that are coming to North America to take advantage of that long-dated opportunity for excess profits in returns because of the low cost environment for energy, which will be persistent. So that's, again, a critical thing that I think. And therefore, if you are an industrial business in North America, frequently there's three of them left. And that's an oligopoly. that has the lowest cost and therefore is competitively advantaged against the rest of the world because labor is not a big component. It's the inputs and the inputs in any cases to the extent that you make a chemical and use the raw materials natural gas and your energy is supplied by either natural gas or a lower cost electricity, you're competitively advantaged. So you've got to make ammonia fertilizers chemicals in North America. You're going to make steel.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Factor. The other part of globalization about evolution is people say reshoring, which again is a misnomer, not reshoring. It is North America's competitively advantaged in energy intensive business. So energy fossil fuels is something I've invested in 50 years. I think I have a really good understanding as to how those businesses work. Not that I know where the commodity price is going to be in six months. I have no idea where the commodity price will be in six months, but how those businesses work. But North America, because it has an abundance of north of natural gas that you can't export has an energy cost that's disconnected from the rest of the world. And that is a persistent long-term advantage. And if you're doing something energy intensive, doing it in North America is a competitively advantaged place. So when I got out of college 50 years ago, we were competitively disadvantaged. Today, we're competitively advantaged in a large”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“And they weren't making things in China anymore. They had already gone to Bangladesh and Vietnam. So businesses have been gravitating out of China at some point for a long time. That process, I think, is going to accelerate. So therefore, I think it's the evolution of globalization and the evolution of globalization is, well, it moves south and it moves west. And so the next place is it going to is Southeast Asia with 650 million people and India, 1.4 billion people. So there's 2 billion people that are in the process of replicating some of what China did 40 years ago. And so that globalization process and the evolution means huge amount of infrastructure build out, huge amount of changes, huge amount of energy consumption. As you start that economic ladder, Japan, Korea, China, per capita consumption of energy significantly increases. So you're going to see 2 billion people in the world start to raise their income level. So I think that that's a critical.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Graduated Morton back in 2005 took a trip to Asians and thought we need to invest in Asia. I said, Isaac, I'm a kid from acquaintance. I don't speak English. I'm not going to learn a foreign language. How do I invest overseas? But he took me to Thailand in January of 2007, which is almost 10 years after the Asian financial crisis, which was the Thai bot devaluation was a critical element to that. And these stocks were extremely cheap, strong balance sheets, generating free cash flow, paying dividends, 7% dividends. And so therefore, you know, I didn't have to speak Thai to understand that these businesses are substantially discounted in an opportunity. So he got me to invest and think about the world as it is. And so with”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“One of them is anybody who uses the phrase deglobalization really just doesn't understand what's happening. And what's happening is, of course, it's the evolution of globalization. And therefore, things change. Different countries, companies, industries become advantaged. And that moves over time. And so therefore, and of course, we kind of know that if you think back long enough in history, post-World War II, there was a period of time where Japan had its recovery and therefore had a significant positive period of time. And then what happened was it got to a cost level where the opportunity migrated to South Korea. And South Korea then had a significant period of time where it grew and had all these advantages. And then over time, that moved to China because China had all the advantages, including the scale of the population of the country. And so therefore that did really well. And what's happening, been happening in China for, so Isaac Schwartz is a young colleague of mine who, when he”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“So again, here we are at bottom up stock pickers, and we'll value investors that we've always been. And the fact of the matter is the last two to three, four years, I realized that actually I'm not that. So in many cases, a macro top-down investor. And I'm not a value investor. I'm really looking for businesses because of cyclical changes and structural changes have a significant amount of growth in front of them. So I'm really looking for businesses that have significant growth opportunities and yet valuations that are depressed. And why did that happen and how did that happen? Economics 101 really does work. Capital does get pulled out of things. And therefore, things are different. So the two major themes that we think are structural changes that we think are decade, two decade long kind of opportunities that will dictate who the winners are. I don't care who the losers are, so that I'm not going to short anything. So I'm not going to go through that. But who the winners are. And so those two things are.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Businesses are cyclical, crappy business. Businesses change. That's what I talk about too. I talk about not the revenge of the old economy. I talk about the metamorphosis of the old economy for industries that have done poorly for a long time are capital deprived, have consolidated, have restructured, and maybe the underlying economic environment is different where they've gone from being disadvantaged to potentially very advantage today. And I think that that There are many examples of that pattern of both the poor performance consolidation, restructuring, and yet underlying economic environment totally changing now and therefore being extremely well positioned.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“And given extended cyclical periods, the idea that people think, you know, they forget. Past performance is not a predictor of future results. And so therefore what has worked isn't necessarily what's going to work. And there's all the more reason why there are rotations. There are cycles. And that's the phrase I have now. It's, you know, I'm stealing the phrase from Clinton when he beat Bush for president. It's the economy stupid. What's the economic environment? Which companies are going to benefit from the economic environment and therefore do extremely well economically, those are the stocks that are going to perform well. And so to think about what companies, what industries are well positioned today and for a combination of well positioned, excellent growth and evaluations that also are heavily discounted because they haven't performed and the conviction is they won't perform. Or I know that business.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Of course, it is recent Z bias, but it's easy to believe it's not recent Z bias. When it's been 10 years, you think, oh no, no, no, no. If it was one year, that would be recency bias. But I have conviction, it's not recency bias, because it's happened for 10 years. So I think I'll attribute it to Jim Grant is a line that says that in science and in engineering knowledge is cumulative. And in finance, it's cyclical.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“The economic beneficiaries in the next decade, and they're going to be very different than who would the beneficiaries of a non-ballistic economic environment.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Very low inflation for an extended amount of time, depressed interest rates, low, no negative interest rates, people got to believe that that was the norm. And people, and anybody who graduated and lived in that decade-long period, and that's what it is, a decade-long is not like two or three years, then you would say, oh, no, no, you haven't lived long enough, you don't know, you've lived a long time. That's the way the world works. And then even people in business, I do think there's been a gravitation that, well, maybe I am wrong and the world has evolved. So I really think that it's not only people with 10, 15 years experiences that have only lived through one world think that that's the norm. Everybody else is going to believe that. And that's what everybody believes is we're going to go back to that environment again. And therefore, that capital stays where it is because we're going to get back to that. And then I'm saying, no, no, no. That was an anomalistic period of time. It's not going to return. And therefore, you have to be prepared and invested on who are.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“is making the opportunities. And that's what people, you know, today they say, well, Gene, these opportunities, and they'll say, well, they perform poorly. Yes, the performance is what sets the stage for the opportunity. The valuation and the pricing is giving you these opportunities because nobody believes.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“So two years ago in my letter, I talked about financial brigadoon and said that's, I think, the world in which we live today. And so Brigadoon, as I'm sure you know, it's the learner in low play from the 40s, and it's about two gentlemen on a trip to Scotland wandering across the Moors and coming across a little town Brigado, and it's an idyllic little town, everything about it is just lovely. And so they leave and they come back the next day only to find the town's not there anymore. And they ask someone, what happened? Whisadoom? And the guy says, Brigadoon only shows up one day a year every hundred years. It's gone. And that's what we have today. We have post-financial crisis, an extremely anomalous period of time, an extended, extremely anomalous period of time. And the fact that it exists for as long as it did convinces people it was the new norm. And so therefore, the distortions of people's thought process and capital”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Managers in the next decade, I think, have a bright future and I think would be, I'd be shocked if they don't outperform it.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Using the line from Horace that Graham has at the beginning of security analysis. And that's what I think. I think the next decade is going to belong to stock pickers. And I don't care if that's technology companies, growth companies, industrials, financials, all of those have reasons to pick stocks and not the index. And the indexes will not outperform selecting stocks and the ability to identify, do research, select companies that are well positioned and have valuations that are attractive that is something that can be done today. And there are many fewer people doing that. That is not a productive effort out there today. And therefore, that means the competitive landscape is extremely limited. And that's where the differentiation is going to be. It's not going to be an Onian index. It's going to be owning stocks. And so that's what I'm saying. It's the restoration of the fallen stock pickers, active.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“So, you know, that's a phrase that comes up a lot. Of course, when you do value investing and you do asset based companies, you talk about value traps. And so I think that value traps are kind of like, in what time frame are you talking about? Because recently I hosted a dinner about a month ago. So I had about 10 of us there and I invited a bunch of people who are still in value investing active management, managing much less money than they used to, including people who don't do it anymore because they converted to a family office because they've given up and given back the money. No one do that anymore. And the nature of my dinner was I called it the restoration of the fallen.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Well, personality is very different because he is task baster. He's hard to work for. He's demanding person has high expectations and doesn't let you know sometimes if you don't meet those expectations. So he's a different person than I am. I think in terms of interesting curiosity, I hate to say it on air, but I don't read books either. I hate that at the end of interviews, people always say to you, what's your favorite book? What have you read? And I'm like, you're like I'm an idiot now because you don't read any books. And that's what it is. Annual reports. I read through letters. I read journals. I read all these other things. So I have an interest in stuff, but I don't read books. And so there's a similarity, of course, we really do have between us in that way. So interest in businesses and how they work and how they operate. And I think that's been a critical thing is understanding the latent earnings of businesses that are not earning something today.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“A little bit, the Hunt family, the silver implosion. And Baish is going to go out of business. And we're a broken dealer. So therefore, our money is not protected. So Kabeli is about in the process of potentially losing all its capital. And so therefore, we had to scurry around and go over and move the business and get that out of the way. So therefore, so things happen that were really interesting. And I worked with Mario intensively on a one-on-one basis that entire time. So, you know, he's a great businessman in addition to being a great investor. So therefore, that experience was, again, couldn't invest for a better opportunity.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Very quotable, very has a persona that Alan Abelson then loved and therefore broadcast that. So those things all kind of help Mario leapfrog. And so when I left, that's what it was. He only managed in 83, 77 million dollars. So it was still a very modest amount of money. But that's what so every day he had his morning meeting because it was this brokerage business that talked to the four salespeople to go out to sell the idea he had. And he'd go through his investment thesis. That's what I say. I had an executive MBA program taught to me almost one-on-one by Mario and Gabelli for three years where he went through his favorite investment thesis and what it was and what the company was and he paid me to attend the class. I didn't pay him to attend. So it was a phenomenal opportunity and it was a 12 person firm. And so I was the chief financial officer, chief operating officer, and that was when I first started to work from 1980, we used to clear through Bayesian company. And that's 1980s, the silver.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Main part of the business was he was originally an institutional analyst on the south side before May Day rates happened and therefore that was a lucrative business and that business from 72 to 77 disappeared and then it ended up that's what happened William Water where he was at got bought by Drexel Burnham he spent three weeks at Drexel Burnham and decided this is not what he wanted to do so he went out and started his own firm so his main business at the time that I was there was doing institutional brokerage business And so that was the economic driver of the business and only, so it wasn't $7 million is what he managed when I first started to work for him. And so that was only beginning. Now, of course, the amount of capital he had, intelligence he had, the fact that one of the industries that he was very active in was the cable industry and entertainment, and then business was in the process of exploding. So, you know, it was a combination of factors. And he is.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Well, of course, we knew who he was. And actually, Alan Abelton had already discovered Mario. And so, therefore, his business didn't in any way match what his persona personality and reputation were. And of course, when I started working for him in 1980, he started the firm in 77. And so when I started, there were 12 people who worked there.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Opportunity. And therefore, if I don't get full value, do I still make a good annualized rate of return in that investment?”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“We're in 87, 88 against Leukadia. So there is risk in it. And even actually today, I was having a chat with Alan Khan and we were talking about CM Industries and Christian Siem and his concern about what's going to happen with CM Industries. And I said, I don't know what's going to happen there. And you're at risk that the asset value is different than clearly the trading price in stock. And there may be a movement of value that doesn't get equally dispersed. As I say, in these situations, when there's a guy who controls the company, you deal the deck, one for you, one for me, one for you, two for me, one for you, three for me, one for you, four for me. So that's a risk. But if you buy a big enough discount, you know, if you end up getting half of what it's worth, then that's probably a really good rate of return. And so, you know, that's part of the equation that you have to do that calculation. And what is this thing worth and what is the option?”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Record before I came across them to say these are money makers who think about capital allocation because they own a lot of stock themselves and understand the businesses and not only control it, but understand how do you allocate capital, therefore maximize the opportunity for investing. So it's kind of different in those situations because in 1987, 1988 with Lukadia, I didn't sue them three times. So initially when I started in business and you're buying small companies that potentially have a huge disparity between price and value controlled by a really shrewd guy. Well, one of the things that really shrewd people do in situations like that is take advantage of that market disparity. And therefore, they start to do things that they can. And so therefore, part of that outcome is, gee, you know, as the little minority shareholder, I used to be like, gee, that's not fair, equitable. And so therefore, I would do, you know, I was the nameplaintiff in 25 class action loss and three of them.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“No, I don't stay away from 1987, 1988 with leukeredia being opportunistic, right? We were shareholders in Filcorps. I remember Alan Khan connecting me with Chuck Royce and going to visit him and Whitney Tilson and saying you should buy Phil Core. And a year later, Whitney Tilson calling me up and said, why don't you tell me to buy Phil Core? Why don't you tell me to buy Leukadia? That's where the value is being transferred to. This stock's cheap. And in Leukadia, well, I just saw what they were doing and I saw the opportune situations and the discounts and what they were. So I lived through Lucadia. I didn't know Leukadia and have kind of the history of it as opposed to Christian scene when I came across him. He had already had a record of being successful and acquiring assets in a depressed business at an opportune time, capitalizing that, converting the company, merging it into someone. So he had already other people as life has gone on, the gut walls of people who clearly have a long-term decade more.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“The people, and it's not just aligning, it is a business that is substantially discounted and opportune. And so one or two of the building related companies were not based on, it was a better management. It was a better business that was in a consolidating industry that was extremely well positioned. So there's a combination of factors. I do say investing is a mosaic. There's a lot of things you look for and you don't necessarily”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“So that's what it is. So we bought cheap stocks originally, and cheap stocks frequently sometimes deserve to be cheap because they're really not good businesses. But certain times they are controlled by someone who is a great capital allocator, who also sees the same opportunity and is buying in and it's using it as a vehicle. And so therefore how they think about that and what they do and how that really changes the opportunity set. And then, of course, that's frequently in businesses that are cyclically depressed, that are going through difficult times. So therefore, someone who has a longer term vision. So that's what it is over time. That's what we've done is we've identified these opportunities that are from aligning with the right people who can be opportunistic, who have the capability and have the ability to do that from an intellectual point of view to capture those opportunities, to go along with that. So that has been critical that what worked? Who to align with? Who to invest with? And what situations? Because sometimes it's not just”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Value was so clear and compelling at the time that it was like, this is a great opportunity. And confirmation that Lukadia knew that because they proposed all these transactions where they would try to buy the whole company, buy the whole thing and took advantage of the fact that the market wasn't efficient and they understood what the values were here and they were far away from what the intrinsic values were and were opportunistic. And so it's easy to be opportunistic and invest when somebody that's really smart that really knows the situation much better than you do is investing their own capital. And if I can go alongside that, that's a great opportunity. So that was a opportunity based on a fact pattern and a situation that was critical and informative for us.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Terrible. In the meantime, they said if it was a gain, well, we had intended to sell it. And under quasi-reorganization accounting, we're going to book that directly into Stockholm's equity. So we're not going to take that through the income statement. So they're putting all these losses through the income statement. They're not reporting the gains, accumulating cash, and this insurance company is going to pop out of nowhere. So I'm like, I'm excited. This $5 stock's worth two, three, four times that. And it has a huge NOL and use it as a mechanism. Then the crash comes. Well, of course, everything goes down when the stock market crash comes. So it goes from five to three. And so then what happened was leukeredia in 1987, 1988 created a huge amount of value. Bill Corp, Break Corp, the demutualization of vampire insurance, they eventually then took it private at a fractional with that business was worth. So those things gravitated my interest.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“For empire. And so I had met the CEO of the company at a broker's dinner one night. And so therefore called him up and met with the CFO to say, gee, you're in the process of demutualizing. And that's what it was. The demutualization process was a year and a half in the way. And what was going to happen was the equity was going to be distributed in return for the surplus note. So they were going to own 75% of the company. The company the year before had earned $18 million. So they're going to earn $13 million. This $13 million shares outstanding. So there's a dollar of earnings that will pop up out of nowhere. It's a $5 stock. What Lukadia Steinberg and company had done through the year that he controlled it where they were selling off assets. And raising cash, eliminating all the debt, accumulating cash. In the meantime, they said, oh, issue was we sold at a loss. They took it through the income statement. So the earnings look.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Well, so 1987 was particularly interesting time, right? So, you know, it wasn't long after I had started the business. I didn't really have much of a business yet. Market corrects as much as it did. I thought about my grandmother's farm upstate in New York still in the family. I said, well, maybe I'll go farm my grandparents farm. But what happened was one of the big investments we had was in a company called Phil Corp. And Phil Corp was the recapitalization of the old Baldwin United and had been in bankruptcy and come out of bankruptcy. And Lucadia National Joe Stein Burgundy and Cumming had identified it, got acquired control of the company. And so therefore, it was a focal point of what we were doing in 1987. So stock traded at $5 a share. And one of the things they had was they had a surplus noted in an insurance company in New York called Empire Insurance. Now, my dad wrote insurance bill.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“So we continue to do that, or when tide water went bankrupt, I bought tide water out of the bankruptcy again and loaded up funded. So I continued to, the opportunity continues to persist even if the company doesn't and the opportunity has become substantially greater when that stress is happening and the economic response to stressful situations in poor economics in industries.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Well, today is world valuation is particularly important, and it's something that people have kind of forgotten. And I think it is a critical element. Of course, Disappointed and traded down. So the idea that somebody has rule of thumb that down 20%, I'm out of the stock, I move on to the non-existent in our conversations. And now, of course, the corollary to that is, you know, Buffett's, of course, famous for saying the first rule of investing is don't lose money, the second rule of investing is don't forget the first rule. Well, we forget that rule all the time. So we will buy things that are troubled and financially stressed and have risks to them, including the solvency of the business. And we've done that. And we've been too soon and they have gone bankrupt. But the opportunity in that business and that industry persists in a different form. And therefore, we make sure we follow the next the buyer. So in manufactured housing, when that happened in the early 2000s, when Wheatwood went bankrupt in Palm Harbor and Palm Harbor went bankrupt, in both of those successively were bought by Kafka, well, we bought CAFCO.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“And I collected significant interest in the short term. So the very first security I happened to buy was a troubled, financially distressed situation. And the other thing is I have the rule I don't know. I don't know sell stocks. I tend to own things forever. And so therefore, and eventually things to fork out and potentially huge opportunities come from things that have been abandoned, exhausted, and depressed because the valuation only goes down when you disappoint. And so therefore, the spread fatigue, what the value might be and what the prices in the marketplace gets wider and wider and the opportunity for it gets greater and greater.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“I guess the most important things are the foundational emotional things. Markets are inefficient. And there is opportunity. And that inefficiency provides huge opportunities. And so I've never thought the market's sufficient. And of course, today, I think the market is less efficient, especially in a timeline. If you look at a three to five-year basis, there's a whole bunch of mistakes that investors and markets are making today and providing great opportunity. The other experience that I had was the very first thing I ever first security I ever bought was in 1975, I did buy New York City housing authority bonds. So the city was going to go bankrupt. And so the housing bonds traded at 33 cents in a dollar. And so I thought maybe it doesn't go back. I buy a dollar for 33 cents. Again, that's a value easy to do the calculation to see I could see how there's value in that. And as it turned out, of course, the city didn't go bankrupt in my housing authority von paid off.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“So there were obscure companies that were neglected and therefore had valuations that were extremely discounted. So I'm a CPA, right? So therefore, I can calculate net networking capital. This was not a sophisticated business and it wasn't technology that I had to understand. This was looking at a balance sheet and doing an analysis and finding companies that were trading for far less. They want the liquidation value the business was. And Tweety had grown successful. And therefore, you know, eventually when I started my own firm, we did a lot of pink sheet stocks also because Tweety couldn't put capital to work into it efficiently. They were doing a lot less in it. And so therefore it opened up the opportunity. And that was easy work to do was to be able to buy cheap stocks. And that's what we initially did.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Well, in the first John Train book, the chapter on Tweety is called The Pawn Brokers, because Tweety's specialty was making markets in all of these pink sheet stocks. And pink sheet stocks at the time, there were a lot of them, because what those were securities that were companies that were created before 33 and 34. So before you had 33 and 34, the registration that came from that, you had companies that had gone public in a way, but therefore weren't subject to the SEC reporting requirements. And so there was a significant number of these companies, and that was originally tweez differentiator, and they bought networking capital in a time when you could do that because these companies were also a little bit definitely more obscure and then out of favor. And then even the bakeries of the market probably, somewhat similar today, is not a universe that people were looking to invest in. They were looking at the nifty 50. That's where capital flows in. That would make sense. That's when we made money.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT
“Joe worked with me, went through the investment process. So, you know, it was a great introduction to investing. And as a result, I never was a finance major. I didn't know the market was efficient. So I didn't understand that nuance. Instead, I thought it was pretty inefficient because you could pick stocks that were substantially undervalued.”
2024-06-23 · We Study Billionaires · RWH046: A New Golden Age w/ Bob Robotti · IDENTIFIED FROM THE TRANSCRIPT