Danny DeVito Explaining Value Investing Benjamin Graham Style Other People's Money)

[@jasonrfoss248]

Danny DeVito is a master at pacing and rhythm of speech in his monologues

[@Chiefjoseph82]

Other People's Money one of the most underrated movies out there.

[@PhilBachmann]

The play by Jerry Sterner even more so.

[@FirstLast-cg2nk]

What I always found interesting about this character is how blatantly honest he is. He doesn't lie, cheat, or steal, everything is clear and all cards are on the table. No underhanded tactics or anything. He's a legitimately greedy person, but he's also completely honest about both his intentions and his reasons for why he's doing it.

[@miamitten1123]

.....and they STILL didn’t want to listen to him.

[@morgangalegarcia6946]

He is basically the oposite of Gordon Geeko

[@marks47]

@@EagleFang86 I agreed (and still think) with Kate when she said he deserved to lose his company. He kept obstinately refusing relatively harmless courses of action (state of incorporation, borrowing money, etc) that would have slowed down a takeover. Imagine the business he probably turned away because he didn't like someone, or refused to modernize the plant even before Carmen/Garfield noticed them. The newspaper shown in one scene had a quote from a financial analyst saying he was surprised somebody hadn't noticed them earlier.

[@notavailable4596]

​@@EagleFang86That's why localized companies shouldn't go public.

[@notavailable4596]

​@@marks47Maybe so but those people didn't deserve to lose their jobs or the town to have its heart ripped out.

[@ricardocantoral7672]

Danny killed this role. I couldn't get enough of him.

[@hippiehillape]

The fire growing in the warehouse behind them is hilarious

[@Stever99999]

Any mgmt team that hadn't already figured this out deserved to be liquidated.

[@kevinhixson1586]

If I'm remembering correctly, the entire team either worked their way up to the role or inherited it.

[@SidewaysSurfDrinksHQ]

He was born for that role, utterly brilliant clever movie, criminally under appreciated 👏👏

[@mr.mxyzptlk3994]

Gregory Peck's speech at the board meeting was also wonderful. This movie is so underrated on so many levels. Just a masterwork of writing.

[@ricardocantoral7672]

That's what Roger Ebert called a Frank Capra moment. That was going to be the moment when Garfield would be moved to tears and then the company would be saved.

[@Angyali]

One of the 100 best movies of all time! One of the 3 best movies of Danny DeVito! In Hungary, it is known under the title: The Great Liquidator.

[@bewealthyguys815]

He truly sent us the great Margin of Safety. Great explanation.

[@jamesrashbrook9485]

Nobody does sleazy better than devito,an absolute master at what he does

[@tomb7942]

Hope you saw him in "Ruthless People". A real scumbag.

[@rievans57]

Why Danny Devito did not receive and Oscar nod for this performance is beyond me. The Academy of Motion Picture Arts and Sciences was wrong again.

[@Bobaklives]

Because Michael Douglas played a similar role better a few years earlier, and the 5 nominees were had to argue: Anthony Hopkins - The Silence of the Lambs Warren Beatty - Bugsy Robert De Niro - Cape Fear Nick Nolte - The Prince of Tides Robin Williams - The Fisher King

[@rievans57]

Best supporting actor....

[@JonMartinYXD]

@@rievans57 Couldn't be, he was playing the lead role.

[@davidweihe6052]

Best Original Script DeVito was good, but the year had a bunch of great performances.

[@rievans57]

@@Bobaklives I disagree. This list is filled with star power. These performances were nowhere near the best these great actors have given. DeVito did not have the "juice" to be nominated.

[@elichilton7031]

One of Danny Devito's best performances. Probably his masterpiece in the movies. His final monologue in OTM is fantastic.

[@wgemini4422]

It only works if you are rich enough to buy the company, break it apart and sell them. For ordinary shareholders it will just continue to bleed money.

[@brianl.wenninghoff7696]

How did CARMEN work? How was it connected to Wall Steet? On a daily basis somehow it's being fed data. There was really no commercial use of the internet in 1991.

[@alexmckee4683]

Reuters, telex.

[@carrickrichards2457]

In that era, computers were people who did sums long hand, all day long. Electronic spreadsheets came out in the late 1980s' and revolutionised trading floors... early adopters made billions (back when billions were alot of money). This film was made in 1991 just as PCs with that software were becoming easily available to the general public.

[@11sfr]

There were private, subscription-based commercial computer networks, Bloomberg Terminal (real time live market data, analytics, and electronic trading) had been around since 1982, Telekurs had been offering the same type of service in Switzerland since 1975 and expanded to the US in 1990, FactSet switched from couriers delivering paper reports and analysis to downloading data directly to users' computers in 1981, Intercom Data Systems launched in 1981, CARMEN is presumably some sort of proprietary software Garfield's company has had developed to analyze and aggregate data from those financial information networks.

[@marccolten9801]

Watch his speech at the end to get a true picture of how this works.

[@tdreamgmail]

@Cat Egorical @Cat Egorical well at the very end, the lady suggested selling back to original owner, equipping the plant with new technology to sell an in demand product. So, yes repurposing the capital, everyone did end up better off. But usually this is not the case for workers.

[@kyereCat]

@Cat Egorical These stock holders are out of a job. Their profit will be used up by the time of their retirement according to the increased cost of living. If the company had continued and replaced old technology with a new one, the company could flourish for the next 100 years by simply adapting to new technology.

[@kyereCat]

@Cat Egorical You are unable to understand the meaning of my comment.

[@kyereCat]

@Cat Egorical Wire and Cable companies are in great demand. These items can attract companies like Telecommunication, Electrical etc. companies all over the world, especially in the Asian markets. All they would need are great marketing strategies to attract offers from other companies, especially start- up companies, who would love to merge this company with theirs bringing them into the new technology era. BMW American company has many subsidiaries on their compound. There's even an ostrich farm for the cultivating of feathers used for the buffering of the cars' beautiful car sheen.

[@jakobstenfalk7001]

@Cat Egorical, in the film, the conglomerate as a whole was running at a healthy operating profit. That is a major part of the intrigue, and why the old Rockefeller Republican patriarch is unwilling to liquidate. The reason for this contradiction - where fundamentally healthy companies could be liquidated profitably - was that the going-concern valuation was deflated by unreasonable expectations of the time-value of money. The film does not explain this very well, but in the early 1980s, Fed chair Paul Volker did some incredibly irresponsible things with the risk-free interest rates (raising them to 20-30 %, which of course no non-Ponzi company can ever hope to match). This caused knock-on effects that took most of the decade to iron out. One of the fallouts was that for a while the going-concern valuation of companies dropped below the liquidation value of their assets (the prices of physical assets adapted less rapidly than the discount rate of cash flows). The Savings and Loan collapse and junk bond scams were other, better known, consequences of Volker's willful or grossly negligent mismanagement. (Also, there was some looting of pension funds involved, which is not shown in the movie. That "fully funded pension fund" Garfield talks about would typically get plundered in this kind of operation, and the company's original creditors - the pensioners - would be left holding the bag.)

[@abcdwxyz3819]

Which movie/series is it?

[@sambyrne9753]

I wish net-nets were still as widespread as they were prior to 1980.

[@unclececil]

For the stock to be selling at less than half the actual book value of the company, would indicate either some really dumb investors that sold cheap, or management doing a really bad job of keeping investors apprised of the company's value, or some combination of both Of course, it was necessary to carry the plot of the film to the general public, hence the over simplification

[@redram5150]

unclececil well, the movie is about inept management

[@jakobstenfalk7001]

Not really, no. It indicates that the pre-raid stockholders believed that the management had controlling lock on sufficient proxy votes to refuse to liquidate. If that is correct, then the correct valuation is the going-concern valuation, not the liquidation valuation. And the going-concern valuation was artificially depressed by competition with the Federal Reserve paying 20, 25, or 30 % p.a. on simply doing nothing with your money. That's hard to beat for a company that has to actually create value in order to get paid.

[@samuel.andermatt]

I mean credit suisse is right now lss than half its book value and there are other companies like that. This definitely exists I think Naspers would be another one). There is just typically a reason why tthese companies trade at so little compared to their book value.

[@jaystrickland4151]

That was not so uncommon in the 1980s before every investor could go to the Edgar website and pull the P&Ls and Balance sheets with about 30 seconds of effort. Is this exaggerated ? Yes, but a large number of corporate raids were caused by a clever analyst realizing the reported book value was well under reality. Go look how a few attorneys and accountants held up the MTA when they bought a bankrupt company that had the right to build upwards at Penn station. The company had depreciated the rights to 0 on their balance sheets but it was worth an easy billion.

[@112steinway]

"The only bad news is that this wire and cable division isn't making a profit, and all the other divisions have to support you. Now as a stock holder that doesn't make me very happy." Well, someone doesn't like Amazon at all.

[@warrenadams4486]

Not comparable. Amazon shows a bottom line loss because they are constantly reinvesting and growing, and as a result their stock is way above their liquidation value.

[@minnchilla]

@@warrenadams4486Last I checked Amazon’s delivery service does and always has operated at a net loss, cushioned by the other industries they’ve integrated like AWS. Based on Larry’s logic their whole delivery service should be scrapped since it’s draining their other more profitable ventures.

[@agustinpena2752]

Can someone please explain what was wrong with NE Wire & Cable? If it had no law suits, no debts, why did Larry want to get rid of it?

[@alexmckee4683]

It's what corporate raiders did. They bought shares in firms that had more assets than stock value. In the early 80s there were a lot of companies around that had assets that, if liquidated, would create more cash flow than the actual business activities of the company. This was partly because US and UK firms were struggling to compete with Japanese and other Asian companies. Labour laws, environmental laws, working time laws and unions were all affecting the profitability of companies that had a lot of assets (plant, machinery, land, cash reserves). NE Wire & Cable is fictional example of this. They have a division that is not profitable. The cost of labour, pensions are eating into the profitability of the company. The wire and cable business is competing with Japan, Taiwan, Mexico etc. But the prior good management has left the company strong in other areas, it has massive cash reserve sitting in the bank. It has smaller companies it owns that are making a profit but the profit is being reinvested into the unproductive wire division. So to a corporate raider it's a dream come true. The stock price is low because the company isn't paying a good dividend, but the book assets mean that if you acquire enough shares you can take control and liquidate the company to get the cash value of the assets, i.e. the cash in the bank, the value of the land for other purposes, the cash price for the plant, machinery and goods on hand. Since the 90s most companies have measures in place to deter such corporate raiders. Plus business practices have changed. Companies no longer tend to have much cash in reserve, and the need to keep up with modern equipment means that plant and machinery is no longer as valuable as it used to be. Companies also tend to lease offices instead of buying. So many firms today are literally only worth the going concern and as soon as the business has trouble it's finished. Lean capitalism. I can see both sides of the argument. Jorgy is concerned about the town, the staff, the legacy, believes that times will change and the plant will become profitable again. Larry believes that the wire and cable division is just a dead concern, and that the company should be broken up for parts and to recover value from the underutilized assets. The shareholders would benefit in the short term from Larry's play, but in the longer term Jorgy may be right but equally he might not. So it comes down to whether the shareholders have confidence in his vision for the future.

[@AshishShrivastava-q6i]

@@alexmckee4683 Very, very well summarized and explained. The only point you missed was obsolescence. Devito makes it in the movie in another scene and the plot turns on the company winning a big contract to make airbags but in today's era miracles don't happen and the obsolescence cycle is much,, much shorter. Particularly in Tech.

[@alexmckee4683]

@@AshishShrivastava-q6i I understand that the original play it is based on has a less upbeat ending. Obsolescence is indeed a huge factor, good point well made. Thanks for the compliment on the summary :-)

[@jaystrickland4151]

It was worth more dead than alive. The company was losing money but had a large number of valuable assets. The company was limited to a certain field that was going away. Fiber and wireless were replacing cable in the communications. The movie says they make cables for air bags but air bags use fiber optics for the same reasons telecommunications does its faster and cheaper so it was just a stapled on good ending by a writer who wanted to have a good ending.

[@jameshaynes7062]

Love the way Piper Laurie folds her arms when DeVito mentions pms...

[@nathanmiller8213]

Terrific movie, though the stock differential would be almost impossible today, and even in the time the movie was made was likely exaggerated to allow for the audience to get the point

[@johnaugsburger6192]

The company is trading below equity, stockholders are bag holders.

[@pjabrony8280]

The working capital that isn't in cash...what is it in?

[@HockeyGoon939]

Working capital is current assets - current liability. Cash, Accounts Rec, Prepaids, investments, life ins cash value subtract accounts payable, accrued liabilities like PR, PTO, and other liabilities. Back in the crash of 2008 John Deere's stock valuation didn't even total their cash on hand. There were lots of bargains out there.

[@stocknews393]

This only applies if you assume the company in question will be liquidated. But NOT all companies will be liquidated so you have to value them differently such as DCF.

[@billbrandt5735]

I really like the scene. Only thing that pulled me out of the mood was the land. 110 acres of grazing land for $10 million? $91k/acre? It’s still not worth 1/10th of that 30 years later. Back then it was a silly number. It’s exaggerated at 1,000 acres or $1million. I think the writers used downtown NYC land prices for grazing prices?

[@varianschirmer9375]

It's about supply and demand. How much undeveloped grazing land in an area vs the number of farms needing grazing land to grow their herd. Watching land rent pass the $600 a acre on farmable crop acres for unirregated, un-draintiled land... land that asking $300 to buy it in the 1980s seemed absurd.

[@dariusthurman8835]

Equity (Assets - Liabilities) / # of Shares Outstanding = Intrinsic Stock Price Intrinsic Value: Current Share Price - Intrinsic Value; if negative undervalued, if positive overvalued.

[@stacking4life86]

to determine overall equity for a company would you use enterprise value or something else?

[@nikolassykora6602]

I think this is just book value per share. We need to use Discounted cashflows model to find out intrinsic value of stock, because not past but future is determining true value of company.

[@stocknews393]

This is the Liquidation Value and not necessarily the intrinsic value of a company.

[@leverage2279]

How about the earning power of a company? Shouldn't that add to the worth of a company?

[@terrysteven3528]

WRONG! Assets-Liabilities = Equity or Book Value or Net Worth. This is not the Intrinsic value, It's not that simple, intrinsic value can be many multiples of book and is usually determined by a company's future potential earnings.

[@cameronwhyte7223]

One thing I've never got was, did Garfield invest in all the companies or just the wire and cable company? It sounds as though all of them, but what was the name of the parent company?

[@11sfr]

New England Wire & Cable was the parent company, it owned the electrical company, the adhesives company, the plumbing company, and the original "core" wire & cable division - presumably, the three other businesses were acquired many years earlier when the wire & cable operation was healthier and could support acquisitions, but now the cable business is dragging down the value of the other three

[@carrickrichards2457]

Classic film. Shame this is so hard to find, it has lessons that will be valueable in a thousand years

[@antoniobotello1903]

One if the best and funniest parts 🤣

[@evanflowforever6615]

It's like going shopping. You see eggs at 2 dollars when they are normally 3. VALUE...Yet you must ask yourself: is this an anomaly? What goes down...just might go back up. Play the game...

[@joelhenderson4450]

What a cast!

[@sunghwanhwang8817]

2:04 no offense LOL

[@GordiansKnotHere]

Danny DeVito is a beast.

[@jimcollins8097]

I love that movie.....

[@johnonoh59]

The stock was 10 when I woke up 3 weeks ago. That's a 10 for a 25 dollar item what a sale!

[@johnbrooke4420]

I havent seen this movie. I can only assume where Danny was going with this is he was about to suggest the company do a share buy back!

[@linda6896]

whats the name of this movie?

[@emilianomurillo2882]

Other people's money

[@ericwsmith7722]

And it was just that simple.

[@jdb77745]

Yeah, but what about union problems?

[@jimbarino2]

If you are going to liquidate, who cares about the union?

[@forever_golfer1981]

How do you get started in this business?

[@lamontconyers2728]

Michael, the Graham formula of investing which devito was explaining is the essence of how to value a company as a potential investment. trusting in the approach will produce great results.

[@sixers333333]

you cant find companies like this anymore. everyone knows about it and buy them up.

[@shyamt2559]

@@sixers333333 there are always opportunities and you will be surprised. Like it's always, it's like gold - precious things takes time to find

[@indicatorlist373]

Go back to the 1980's and work with Mitt Romney.

[@reeve1able]

Stock selling for half of tangible book value might be a few in today’s coronavirus market 👍👍 just gotta have balls of steel

[@harleyd9180]

Great delivery, but the devil is in the detail. Fire sale value of this company would be more like $50mil. Land, salvage and cash. Everything else depends on unknowns like the present value of other businesses and access to borrowings. The $10 share price is still a little low, but not by all that much.

[@marks47]

They weren't hurting *yet* though. A fire sale would probably have been necessary a few years down the line.

[@jaystrickland4151]

They weren't going to sell the company in a fire sale. They were going to sell the company's assets over time think chapter 11 bankruptcy where the company continues to run but assets are sold and layoffs occur but at points in time where it benefits the shareholders and creditors ( in a bankruptcy).

[@forever_golfer1981]

What does Garfield Investments do?

[@TheAlanWilcox]

it must be a private equity firm therefore Larry the Liquidator is a corporate scavenger aka a Vulture capitalist

[@driveshaftracing3614]

Net-nets were friggin sweet. Question is would I give up being born in this era to be born back with Schloss & Graham and hunt for net-nets? Too many smart people in this game unfortunately for them to ever come back... Also this is actually incredibly accurate, like even to figuring out pension liabilities, etc. For a movie that's kind of a rarity. Schloss moved to trading under adjusted book value after these dried up, worth looking into that if you are interested in this stuff. Even that game is hard with few opportunties -- until now with covid or course. Also don't try to look for these, majority are scams. The time has just simply passed for these until some sort of major great depression occurs again and 80% of investors call it quits... Like Graham's era. He had a lot less smart people to compete with.

[@aaryanmehta4609]

I mean it works in my country, well

[@aaryanmehta4609]

You have to be patient

[@Value_Pilgrim]

The problem Schloss faced was size. As position size increases and given that most net-nets are illiquid, its difficult to deploy AUM into net-nets. These net-nets are still available and still valuable. But only for very small investors. And the best part is they still give outsized returns provided you can be patient and also provided you can sniff out the ones with Shenanigans. A bit of Accounting knowledge is needed.

[@Value_Pilgrim]

@@aaryanmehta4609 which country is that? India? How long have you been doing Net-Net Investing? And did it work during the current bull market run?

[@peteplayz-norskgaming5723]

The time will come, we are in a house of cards rn don’t worry

[@blankityblank6029]

Yeah Danny Devito is great. If he wasn't an actor he could have been a great marketeer.

[@chuckhall5347]

This is an awesome movie. It might have gotten better with time.

[@christopherlopez7907]

Crash course on company valuation.

[@RobWinchesterBoston]

They should have made the company be at least $1 Billion - but otherwise I have loved this movie since it came out!

[@abstract2029]

Warren "deVito" Buffet

[@warrenadams4486]

Other Peoples Money and Cash McCall are about the only movies ever made that understand Econ 101.

[@daytona453201]

So you want to start a wire and cable company. Equipment cost 120 million but to sell it all, it's only worth 30 million and lose 90 million. Why even go into business at all?

[@gcjbhar]

$91,000 per acre as "GRAZING" land!?!?! I don't think so!!!

[@SuperChuckRaney]

that's high for grazing land..... they are just making a plot company. But it's only 2 $ a square foot. Apartments are built on $8-10 sq ft property. Malls and retail are much more. The land that fast food is on in front of Walmart can be 1-2 million.

[@thepedalsadvocate7389]

Uncy Herb.

[@notavailable4596]

Vulture capitalism and corporate raiding in a nutshell.

[@tylermcfadden2000]

Is this before Frank went off the rails ?

[@icingbunstomatocardtom]

Elon musk was in the background playong with a fire extinguisher

[@NiiCudjoe]

Fr?

[@littlestockguys7290]

amen to this!

[@INNO222]

Larry and Carmen just gave those three a stroke.

[@SevenDeMagnus]

Hehe, cool.

[@cliftt]

Pardon me...No, Bill...No offense....