Back in BOFI: what's changed?

Hello Saul,

Out of respect for your experience and in deference to your ability to change your mind however golly-gee-well you deem fit, I’d nonetheless ask for clarification regarding a former post in which you wrote the following:

I’m hearing (especially on the BOFI board):

Okay, so they are giving insiders huge loans at preferential rates… But other companies give insiders lots of stock options.

Okay, so one of their senior vice presidents is a convicted felon… But his felony doesn’t have anything to do with his Bofi duties.

Okay, so BOFI insiders were connected to two banks involved in the biggest scandals and bankruptcies in California… But that could just be coincidence. It doesn’t prove anything.

Okay, so they are helping this shady company evade banking laws by opening loans for them and selling them the loan after 24 hours… But that’s probably not strictly illegal, and it makes good money for the Bofi.

Okay, so one of their ex-internal auditors is suing the company with a huge list of irregularities… But he’s probably just a disgruntled employee, and someone has already dismissed his complaints.

Okay, so they are hiding risky loans in mortgage warehouse loans, a usually safe category of loans (this came out today)… But it’s not proved that Bofi is doing anything strictly illegal.

Okay, so they are involved with this unlicensed Center Street company that specializes in fix and flip homes… But it’s not proved that Bofi is doing anything strictly illegal.

Okay, so…and on, and on, and on…

Just a word of warning: However this turns out, this is no longer the bank we bought into and respected and were proud of. They may skate along on the rim of illegality without ever falling in, but that’s not where I, at least, want to be risking my money.

I’m wondering what your present self has to say to the past self who wrote the above, especially the paragraph in bold. What’s changed?

Humbly Yours,



Did monkey perhaps not see post 17987?
Seemed self explanatory to me…

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“I’m wondering what your present self has to say to the past self who wrote the above, especially the paragraph in bold. What’s changed?”

I am not Saul but I just wanted to give my view for whatever it is worth: everything changed and nothing did.

I guess there is always the risk especially in the financial sector of ponzi schemes, creative accounting, cooking the books, lying to auditors etc…you can only judge what you can see and the numbers did (and still) look great.

It is just that some accept the risk and focus on the longer term thesis playing out while some others cannot bear the risk and would flee at almost any bad news. The bad news may often turn out to be noise and be irrelevant. But it could also have turned out otherwise.

nobody can really know. No one.

Saul said: “I decided that the prudent course of action was to reduce my position, not because I was sure there was anything wrong, but because I wasn’t sure that everything was okay.”

well I can never say that ‘everything is okay’ in any of my investment because I know there will be things that I will not know about that business. That is the risk.
Maybe the best thing to do would have been to tune out for the past 6 months and not listen to all this drama.

Even when you hear about this or that news, you can never be sure how it will affect the stock, or often times if it is even relevant to the future of that business. Certainly it was hard ‘not to do anything’ in the face of these allegations. But I think if you take a long term view and focus on the long term thesis of why you put money in in the first place then you would be less inclined to move money in out with the news of the day.

Note again that those allegations could have been true but that is not the point. The point is to focus on the thesis playing out over a much longer term for each business we decide to invest in. We could be right. We could be wrong. But reacting with the news of the day is not the way I roll.



Hi Monkey, By a curious coincidence, the post you reference is the very one I linked to in my post 17987, which began this discussion, to describe my worries at the time.

Golly-gee, perhaps you didn’t bother to read my original post to see what this discussion was about before you decided to comment. I describe my thinking clearly.



I had been thinking for the last month of buying back in after having sold out in Jan.
Your post on Bofi was a catalyst for me so I bought back in yesterday.
Thanks Saul,

It can be tempting to buy back into BOFI, especially considering the valuation and the growth potential. So we ask what has really changed in the past few months. The stock price has changed quite a lot. And, as some have pointed out, time has passed with little additional incriminating evidence. Now, I think about my reason for selling. Simply, I did not trust management. Companies have enough challenges without needing to worry if management is honest, honorable, and shareholder friendly. In my opinion, BOFI management could not be trusted. Has the passing of time changed that for me? Clearly no. Again, there is enough that can go wrong with a company and management’s execution plans without any possible shenanigans. To me it seems foolish to place my capital in the trust of managers who I don’t trust based on their past actions and past behavior. I can instead invest in companies run by people who are exceptional and have good character. Some examples of such people, in my opinion, are Tom Fallon of INFN, Dave Aldrich of SWKS, Mark Zuckerberg of FB, Warren Buffett of BRK-B, and Tobias Lutke of SHOP. Now I don’t own shares in all of these companies, but I certainly avoid owning shares in companies where I question the integrity of management. So how do you know if the managers have integrity? You need to watch them for what they saw, what they do, and how they behave. So when there is a tempting situation like BOFI, think hard about whether you want to entrust the people in control with your hard-earned dollars.



Hello Saul and Friends,

I think Chris gets at what I was fishing for: risk management makes sense, of course. But when the reason for risk management is the repeatedly questionable character of the management team, the issue remains one of trust and whether shady characters can become wholesome with the mere passage of a few months’ time?

If the reason for selling was character––or lack thereof–– would buying back in violate the original reason for selling?

That’s not to saying buying back in is the wrong decision, but perhaps we need to acknowledge that we’re doing so in spite of the danger of the character of the management team continuing to persist. That risk has not gone away, has it?

So monkey is just trying to learn and follow basic logic is all. Though of course in the investing world logic isn’t everything either, but it’s not the worst thing to keep track of.




Does there need to be more to it than different folks have different levels of risk they are willing to take with their investment dollars? Risk for someone already retired living off their investments is a world different than someone with an income, still working for a decade or more. Saul’s appetite for risk has been shown again and again, not only with his caution w/ BOFI but with other positions he sold in the last year, some tiny and some not. Some I sold too, and some I kept.

I don’t see it as more than this.


“…he repeatedly questionable character of the management team”

sometimes one false statement repeated over and over again may begin to sound true and feel like a repeat offense. The question is is the initial statement true?

can you know?

ok today a class action suit has come out and BOFI is down 20%. Are you going to sell?