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Prem's CFA Conference Address
Packer16 12/6/2008

done by treating customers and employees well as well as giving to the communities where Fairfax is located. Currently, FFH donated 1% of pre-tax profit to charitable organizations where they ...

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Norm,

Thx for posting your notes. I was nice to meet some fellow boardsters face to face. Below is a copy of my notes:

The session started with Fred Speece interviewing Prem in a question and answer session. Fred did a good job in developing questions for Prem. I talked with Fred afterwords and he seemed to be impressed with Prem. Fred is a value investor who looks for firms with good cultures and does not have FFH in his portfolio, even though he does have other insurance firms. I would not be surprised to see FFH in his portfolio sometime soon.

Prem began by talking about his value philosophy (buying $1.00 worth of assets for $0.50) developed over his 35 years of investing. John Watson trained Prem in the Ben Graham school of investing. He was also influenced by Buffett and Templeton. He described the appeal of Ben Graham’s value investing as his Road to Damascus experience. As a matter of fact, he named his son after Ben. He explained value investing as having 3 components: looking at stocks as a part ownership in a business, having Mr. Market as you r partner (as described in Ch 8 of the Intelligent Investor) and the concept of margin of safety.

One aspect that Prem mentioned as becoming more important over time has been management. He has liked meeting management teams where he is looking for long-term, team oriented teams which do not include ego maniacs. He mentioned J&J as a company where management was not as important due to their market position. He believes in the Reagan quote “teams can do anything as long as no one gets the credit”. In addition, he likes firms who have decentralized operations. He mentioned that there will be unintended consequences from the government actions but did not elaborate on this point.

Prem next talked about FFH’s guiding principles, specifically the objectives, structure and values described in the annual report. First, focus on making money over the long-term (i.e. building shareholder value – earlier it was 20% ROR but now it is 15% BV per share growth). He felt this could be done by treating customers and employees well as well as giving to the communities where Fairfax is located. Currently, FFH donated 1% of pre-tax profit to charitable organizations where they are located. Prem gave Robert Gozetta (former CEO of Coke) as an example of a CEO who made money for shareholders (in the early 1990s his number one priority was to make money for shareholders) while treating other stakeholders well.

Second, be financially sound. He said they are now sound but they were not a few years ago. This is important so you can take advantage of opportunities. Third, disclose the negative decision making in the annual report.

As for structure, FFH’s insurance operations are run in a decentralized way but the investment/capital allocation is centralized. Management incentive’s include share ownership and are based upon bottom line (profit-based) metrics. The values include: honesty and integrity, team orientation (not confrontational), don’t succeed at expense of family, minimize downside, don’t bet company on one bet and having fun/using humor. As an example of downside protection, Prem gave an example of Roman roads, observing that they have lasted for centuries because they were built with a large margin of safety. The Roman’s enforced this margin of safety by making the road engineers stand under bridges they designed with full loads on them.

Prem next talked about. FFH’s purchase of CDSs. The purchase was based upon the thesis observation that the US economy had a long period of economic growth with relatively short periods of recession. With short recessions both stock prices and home prices continued to increase. FFH was able to purchase MBIA, Ambac and Mtg Insurance CDSs for 25 – 40 bps/yr in the 2003 to 2004 period. In addition, FFH did not buy corporate of asset-backed securities. He stated CDSs are 5-year securities whose value increases as credit spreads increase or firms experience financial distress. The CDS investments declined by 60 to 70% by 2006 and FFH bought more.

Next Prem discussed how and when to say no. First, when there is no margin of safety. Examples include stocks (when they are priced too high) and in insurance (when the premiums are too low – he expected in some lines premium written decline premium of up to 50%). He also said saying no requires courage of convictions because many times you are going against the crowd.

Next, he described the HW’s pension money management business. He told investors not to expect profits in the first few years of investment. However, when the market hit its first “air pocket” 25% of his assets walked out the door (I believe he said this was the 1987 air pocket). After clients left, he stopped offering outside money management.

With respect to dividends, FFH did not pay dividends for 16 – 17 years. He also thought buybacks were a fad with many firms buying back stock with no reference to price. With stocks now down 40 to 50%, now many firms have no money to buy back shares because they bought back without reference to price.

With respect to selling, Prem stated FFH has a 3 to 5 year time horizon and expects a typical stock to increase by 2x over that time resulting in 15 to 20% annual rate of return. He stated selling is the toughest discipline and he has never got out at the top. Prem does have price targets based upon P/E and P/BV and will sell if downside risk increase (as an example if firm overpays for an acquisition) or if the financial position has deteriorated.

With respect to avoiding value traps, FFH has taken its share of traps. Good management can mitigate firms turning into value traps while bad management can destroy value. Prem estimated top 20 positions represented 75% of portfolio and he stated that he likes to know management’s motivations and track record.

As to the situation today, he thinks this is a rare event (such as Katrina, California earthquake, Japan’s collapse). He sees a lot of opportunities. The main difference between the current crisis and 1929 is economic collapse of the 1930s. In that period, 99% of money management businesses that were in business in 1925 did not make it through the 1930s. One of his concerns is the economy is currently bad and could get worse. A portion of the uncertainty is due to potentially bad decisions in gov’t policy in the next 6 to 18 months. He thinks you should buy toady and has taken his equity hedges off the equity portfolio. However, he warned the first 50% decline is concerning but the second 50% can kill you. Two examples he gave of survivors of a 2nd 50% drop were John Deere (in farm equipment) and Schlumberger (in oil services). He stated FFH does/has short sold indexes and individual stocks. In buying stocks, Prem likes to see management have a large stake and have a good culture. In making acquisitions, he likes to make FAIR and Friendly Acquisitions(X) and doesn’t look at purchasing securities as being different than purchasing whole companies. The first question he asks is does the acquisition build shareholder value? He also thinks running businesses enhances investment selection and visa versa.

Prem next talked about a speech Ben Graham gave in 1974 called Renaissance of Value. In that speech, Ben stated information is a commodity but decision making is based upon human nature. Prem feels the ability to make good returns is still in demand and he does not worry about tracking error. He thinks sponsors should have a long-term performance measurement period of 4 to 5 years and meet with manages once per year. He views risk as permanent impairment of capital and thinks beta is not good measure of risk.

He was asked about the dual class structure of some Canadian firms and responded he did not mind if the CEO controlled the firm via the B shares as long as the management and the corporate culture was good. Next, he was asked about the role of ratings agencies. He felt many people delegated the credit decisions to the agencies – which was a mistake – and he encouraged doing the credit analysis yourself. He pointed out that there were 1000s of structured finance securities rated AAA while only 10 firms were rated AAA. In addition, Prem mentioned on one day many AAA securities were downgraded to CCC. Someone mentioned that many analysts at the agencies were there because they could not find jobs at money management firms.

He was asked about mark-to-market accounting and stated that the effects of cascading market value adjustments was causing people to make bad decisions. He also said he bought a brokerage firm 20-years ago that was value oriented but over time they wanted to provide technical analysis not because it was any good but because individual investors wanted it.

Finally, Prem spoke highly of John Templeton not only as a skilled value investor but also as providing a spiritual mindset and recommended his two books “The Templeton Plan” and “Riches for the Mind and Spirit”.

Packer

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Calculating bond gains
ericopoly 12/5/2008

manage holdco cash+investments at a large profit compared to their interest costs. Fairfax: 19,325 cash & investments 1,945 debt 4,620 ...

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Prem's CFA Conference Address
uccmal2 12/4/2008

that they control what is going on. I think that Prem and Fairfax have diversified successfully to mitigate the dumb management risk. Still, I think that they could ...

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I Wonder What FFH's CDS Portfolio Looks Like!
ericopoly 12/4/2008

if that were to be indicative of the move in the CDS portfolio held by Fairfax, then does this suggest that the portfolio increased by 15.5%, or roughly $92m gain? &...

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I Wonder What FFH's CDS Portfolio Looks Like!
glider3834 12/4/2008
my bet is that Fairfax will sell most of their CDS positions held for investment by the end ...
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my bet is that Fairfax will sell most of their CDS positions held for investment by the end of Dec -I would not be surprised to see their CDS position down to 4-5 bil notional - essentially covering their reinsurance receoverable counter-parties .

This would be consistent also with the removal of their equity hedges.

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Should we berkshire board members plan a trip to meet Buffet like the schools?
SanjeevParsad 12/3/2008

Well, I wasn't planning to meet with fairfax, but even if I do it now, the letter you wrote makes it difficult to ...
get a natural response from Prem should I contact fairfax now. What natural response do you want? He said he hopes that you ...
so". I did...twice. I made it plainly clear how I felt: Fairfax holds an AGM to inform, reward and thank their loyal shareholders every year. Asking ...
...

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Well, I wasn't planning to meet with fairfax, but even if I do it now, the letter you wrote makes it difficult to get a natural response from Prem should I contact fairfax now.

What natural response do you want? He said he hopes that you understand why he prefers meeting with students and not private investors outside of the AGM. There was nothing unnatural about his response...it came from the man himself!

You chose to bring up the question about meeting with Buffett on this board. Others decided to include Prem. My primary goal is to worry about the entire board, not the interests of just part of this board.

Perhaps his answer would have been yes, or no, but I rather would have heard from him directly if I were to have chosen to contact him. It would have been better if you mentioned "you guys can go contact him directly, but don't use this board's name in doing so".

I did...twice. I made it plainly clear how I felt:

Fairfax holds an AGM to inform, reward and thank their loyal shareholders every year. Asking for a seperate meeting, outside of what is already offered (both through the AGM and the Fairfax Shareholders dinner) seems quite gratuitous as private investors. You can count me out, as well as any sort of representation using this board's name.

My point from my post was that I don't want boardmembers representing me or the name of the board if they decide to request a meeting with Fairfax.

Each time I said that, someone else wanted to continue to pursue the idea on here. There was nothing stopping you from providing your email ,so that individuals could contact you privately to pursue this, or anyone else for that matter that was interested in the idea.

I think this is really the main point of the contention in this thread.

Actually, the main point of contention was made by the moderator. That this idea was best acted on privately by those that wanted to participate and not on the board or on behalf of the board in any manner.

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Should we berkshire board members plan a trip to meet Buffet like the schools?
dengyu_the_nugget 12/3/2008
Well, I wasn't planning to meet with fairfax, but even if I do it now, the letter you wrote makes it difficult to ...
get a natural response from Prem should I contact fairfax now. Perhaps his answer would have been yes, or no, but I rather would ...
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Well, I wasn't planning to meet with fairfax, but even if I do it now, the letter you wrote makes it difficult to get a natural response from Prem should I contact fairfax now.

Perhaps his answer would have been yes, or no, but I rather would have heard from him directly if I were to have chosen to contact him. It would have been better if you mentioned "you guys can go contact him directly, but don't use this board's name in doing so".

I think this is really the main point of the contention in this thread. But that being said, everyone is entitled to their opinions, but what is not OK is for people to put words in others' mouth, and not to be assumptious.

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Should we berkshire board members plan a trip to meet Buffet like the schools?
SanjeevParsad 12/3/2008
meeting Buffett. There were subsequent posts from others that suggested and included Prem and Fairfax. As well, Smazz's last post said: Put your self in the position ...
t stopping you from making any sort of private arrangement if you chose to contact Fairfax. Just that no one should use the board's name in doing so. ...
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Yu,

I apologize, your original post was directed at meeting Buffett. There were subsequent posts from others that suggested and included Prem and Fairfax. As well, Smazz's last post said:

Put your self in the position of say denngyu. and then re read ytour letter. There were members here who seemed fine with the fact of doing it privately - as FFH investors.

I was just trying to say that I wasn't stopping you from making any sort of private arrangement if you chose to contact Fairfax. Just that no one should use the board's name in doing so. As I said, people are more than welcome to arrange something privately. Cheers!

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Should we berkshire board members plan a trip to meet Buffet like the schools?
dengyu_the_nugget 12/3/2008
As I mentioned above, there is no reason Yu Deng cannot contact Fairfax on his own. His original post was to contact Fairfax through the board and ...
that was not acceptable to me. Where did I mention I wanted to contact Fairfax? My original post was: "I was thinking, the MBA schools plan these trips ...
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As I mentioned above, there is no reason Yu Deng cannot contact Fairfax on his own. His original post was to contact Fairfax through the board and that was not acceptable to me.

Where did I mention I wanted to contact Fairfax? My original post was:

"I was thinking, the MBA schools plan these trips to omaha to meet Buffet.

Could we, berkshire board members, try to schedule something to meet him? There are so many of us with such intense interest in investing that I believe the meeting would be MUCH more interesting than the normal MBA teams.

How do we even approach something like this?"

My post was in light of having an intellectual discussion with Mr. Buffet, about ANYTHING in life, just as the MBA meetings, with WHOEVER might be interested. As opposed to requesting USING THE BOARDS'S NAME TO MEET WITH PREM as you suggested.

Who said I wanted to use the BOARD'S NAME for anything? I wanted to use the board as a way to communicate ideas, and possibly meet people. Where did I mention that I will write a letter in some manner that says "On behalf of the berkshire message board....I would like to....etc etc", I am not in charge of this board, so I would never organize anything "on behalf of the board".

I refused to make any accusations throughout this entire thread, I merely stated an idea and to use the board as a way to reach out to people with similar interests. Yet at the end, words are being put into my mouth, and my intentions are spinned with certain assumptions.

Perhaps this is the result of us having different ways to approach things in life, or different about what is considered "previlage" vs. what is considered "enthusiasm".

Nonetheless, I want to follow through on the buffet meeting. Anyone interested, we can have a private conversation going, yudeng2004@hotmail.com

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Should we berkshire board members plan a trip to meet Buffet like the schools?
SanjeevParsad 12/3/2008
nbsp; As I mentioned above, there is no reason Yu Deng cannot contact Fairfax on his own. His original post was to contact Fairfax through the board and ...
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your letter, to me, looked like sabotage.

Sabotage? Sabotage would be a small group of private investors who want to risk the rest of the board's access and benefits, simply because they want to be able to meet Prem outside of the AGM. The motive was selfish.

Put your self in the position of say denngyu. and then re read ytour letter. There were members here who seemed fine with the fact of doing it privately - as FFH investors.

As I mentioned above, there is no reason Yu Deng cannot contact Fairfax on his own. His original post was to contact Fairfax through the board and that was not acceptable to me.

I often think that some members here take these privileges very gratuitously. I think it is a God-awful shame and one that I'm immensely disappointed with! Cheers!

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Should we berkshire board members plan a trip to meet Buffet like the schools?
SanjeevParsad 12/3/2008
was not specifically talking about you, but that I didn't want anyone to contact Fairfax using the board as access, as I have been put in that awkward position before ...
on a couple of occasions, including once recently when Fairfax had to contact me. If investors want to contact Fairfax on their own, I'...
It was to make sure that no one here jeopardized my relationship with Fairfax, as well as everything they do for all other boardmembers at the Fairfax Shareholder'...
...
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Smazz,

This started out harmlessly enough, and I tried to quell the idea by my first post. Immediately after that post, a couple of posters including you, decided to try and continue the idea.

Once, again I commented that we are a group of private investors, and that I would not support this idea using the board's name in any way. You became defensive with that post, and I responded that I was not specifically talking about you, but that I didn't want anyone to contact Fairfax using the board as access, as I have been put in that awkward position before on a couple of occasions, including once recently when Fairfax had to contact me.

If investors want to contact Fairfax on their own, I'm perfectly fine with that. The reason I contacted Prem, was to make sure he understood that I was not condoning members from this board to contact him. It was to make sure that no one here jeopardized my relationship with Fairfax, as well as everything they do for all other boardmembers at the Fairfax Shareholder's dinner, AGM and through the year.

This board probably has more indirect influence on Fairfax operations and policy than any other group of shareholders. They really respect the loyalty, support and care that shareholders here show for them. It has helped them better understand how to inform their shareholders, and exactly what thoughts may be going through our heads. That is a relationship that really needs alot of respect, and one that I would think most shareholders here want to maintain for the next decade or two. That was my reason for contacting Prem. Cheers!

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FFH investment portfolio
SParsad 12/3/2008

Hi Arbitragr, Yes, Fairfax files a 13-F every quarter, as well as any changes in 5% ownership holdings: &...

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Should we berkshire board members plan a trip to meet Buffet like the schools?
SanjeevParsad 12/2/2008

you directly. My comments were for those requesting a meeting, not specifically you. Fairfax reads this board. Not just a couple of people, but most of the top ...
year, they sent hats for everyone without any request. Someone from this board contacted Fairfax a couple of months ago, using this board as a reference to try ...
and tour the office. Fairfax contacted me and I said I didn't know this person. I don'...
...

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YES! we are getting NB back!
mills-man 12/2/2008

same move on ORH, they were certainly reluctant to sell ORH share too. Prem restoring Fairfax. ...

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YES! we are getting NB back!
ericopoly 12/2/2008
Except that "buying your own shares" entails a purchase of NB, ORH, C&F, Fairfax Asia. Not quality businesses? ...
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In most any case, buying a quality business will be better than buying your own shares

Except that "buying your own shares" entails a purchase of NB, ORH, C&F, Fairfax Asia. Not quality businesses?

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Should we berkshire board members plan a trip to meet Buffet like the schools?
SanjeevParsad 12/2/2008

the right thing means that eventually there should be some payback for doing so. Fairfax holds an AGM to inform, reward and thank their loyal shareholders every year. Asking ...
a seperate meeting, outside of what is already offered (both through the AGM and the Fairfax Shareholders dinner) seems quite gratuitous as private investors. You can count me out, as ...

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10-yr and 30-yr Treasury Bonds
glider3834 12/2/2008

also Fairfax has been buying municipal bonds that are 100% Berkshire insured ...

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Should we berkshire board members plan a trip to meet Buffet like the schools?
SanjeevParsad 12/1/2008

often struggling students just beginning their life or career. We hold our annual Fairfax Shareholder's dinner the night before the AGM. Prem is kind enough to ask, ...

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Should we berkshire board members plan a trip to meet Buffet like the schools?
Myth4654 12/1/2008
Thats a great idea. As a fairfax shareholder I would be interested in one with Prem and that may be easier to ...
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Thats a great idea.

As a fairfax shareholder I would be interested in one with Prem and that may be easier to setup.

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YES! we are getting NB back!
glider3834 12/1/2008

nbsp;insurance capacity has been decimated in the last 6 months for many insurers except Fairfax& this bodes well for insurance pricing - Fairfax is possibly making a bet on a ...
rebound in insurance pricing in Northbridge's business Fairfax probably sees Northbridge's equity portfolio as undervalued so book understated I suspect Fairfax ...

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10-yr and 30-yr Treasury Bonds
653211 12/1/2008

does anyone know how Fairfax might try & take advantage of the big decline in Treasury yields? Yeah, they ...

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Fairfax to privatize Northbridge
georgethurst 12/1/2008

I was just checking on yahoo and they announced a buy back a...

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YES! we are getting NB back!
dr. malone 12/1/2008

much prem! next target: ORH! thank you. the doctor. Northbridge and Fairfax Announce Privatization Offer Fairfax Financial Holdings Limited (Toronto: FFH.TO - News )(NYSE: FFH - News ) and ...
Northbridge Financial Corporation (Toronto: NB.TO - News ) today announced that Fairfax intends to make a formal offer to acquire all of the outstanding common shares of ...
Northbridge, other than those shares already held by Fairfax, for $39.00 in cash per common share, representing total cash consideration of approximately $686 ...

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10-yr and 30-yr Treasury Bonds
glider3834 11/30/2008

does anyone know how Fairfax might try & take advantage of the big decline in Treasury yields, they must have ...
the other hand treasury yields are hitting a 50 year low - is there some way Fairfax can mayb use derivatives to lock in some of the gains on their treasuries , where ...

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Bill Miller's Record is a Mess
mungerville 11/30/2008

not even keep up with inflation. Reminds a bit of AIC. They dump Fairfax in the lean years. But if you went back to their glory years ...
only reason they outperformed in that fund all those years was due mainly to their Fairfax holding! Then in 2000 they hire a bunch of idiots with Ivy League degrees ...
turn the place into a complete mess while, a few year later, selling off their Fairfax during the lean years. ...

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Watsa Teams Up With His Investing Hero!
ericopoly 11/29/2008

somehow Prem got the proverbial call I think we'll find out that Fairfax is a significant shareholder in USG, and that they got the call because they will ...

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Watsa Teams Up With His Investing Hero!
SParsad 11/29/2008
Fairfax has been getting lots of calls for investments in these markets. The investment banks ...
quickly figure out who has cash and who doesn't. Fairfax has also been in the game a long time, so they are well known. &...
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Fairfax has been getting lots of calls for investments in these markets. The investment banks quickly figure out who has cash and who doesn't. Fairfax has also been in the game a long time, so they are well known.

I doubt if Berkshire got in touch with Prem directly, but Prem and Ajit are good friends. And whether anyone does pass the torch or not won't matter, it will happen anyway as the rest of the competition is just falling apart. Cheers!

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Watsa - CEO of the Year
smazz104 11/29/2008

this time, a high-profile manager at one of Canada's largest fund companies examined Fairfax's financial statements and concluded that it was "a house of cards." ...

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Watsa - CEO of the Year
SanjeevParsad 11/28/2008
investment manager, and owning my own company was completely a result of Berkshire Hathaway and Fairfax Financial. I think virtually everyone here has also been influenced by both companies. ...
and hang out, it would be somewhere around the intersection of Berkshire Street and Fairfax Avenue. So the new board will be called "Corner of Berkshire & Fairfax". ...
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We'll have a new board in a couple of weeks. My whole existence as an investment manager, and owning my own company was completely a result of Berkshire Hathaway and Fairfax Financial. I think virtually everyone here has also been influenced by both companies.

If there existed a cafe for all of us on this board to meet at and hang out, it would be somewhere around the intersection of Berkshire Street and Fairfax Avenue. So the new board will be called "Corner of Berkshire & Fairfax". The web address will be www.cornerofberkshireandfairfax.com . It will be a free board like this one, but we may have a few select ads in the future to pay for itself.

We'll be transitioning people over slowly until I get the hang of things. But I'll have it up and running in a couple of weeks, with users slowly transferring over. The other thing I'll have to figure out before this board shuts down, is for me to figure out how to archive the posts here and then make them available somehow. Anyway, as things progress I'll provide more information. Cheers!

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Watsa - CEO of the Year
SanjeevParsad 11/28/2008
s decision to make Prem CEO of the Year: During the worst times at Fairfax (and things got very ugly), not a single executive left the company. Not one ...
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There is one very important piece of information missing from that article that definitely corroborates the Globe's decision to make Prem CEO of the Year:

During the worst times at Fairfax (and things got very ugly), not a single executive left the company. Not one single person jumped ship. Extraordinary!

Cheers!

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Watsa - CEO of the Year
Sleepless_Twindaddy 11/28/2008
of who was behind him and who wasn't. His primary concern is Fairfax and its shareholders, and everything else is just that...everything else. He'll also ...
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Prem's actually a very forgiving individual. But he's very much cognizant of who was behind him and who wasn't. His primary concern is Fairfax and its shareholders, and everything else is just that...everything else. He'll also be the first to say that it wasn't just him, but his entire team of managers and his terrific staff. Let's just say Derek saw the light like alot of other people! Cheers!

Couldn't agree more Sanj. While my first reaction was the desire to fax Derek a copy of the old article I think it's best to take the high ground and let it go. Prem has always said that results will speak for themselves. Many are seeing the light!

That being said we can still have some fun amongst us girls!

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Some new/old ideas
viking 11/27/2008

recession. You get paid to wait and then capital appreciation (18 months or so out). Fairfax was a recent buyer (adding to their initial position) and likely holds close to 20%. ...

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Here is what I am currently doing:

1.) Canfor Pulp (CFX.UN): $2.90/unit; dist = $0.12/mo = $1.44/year = current yield = 50%. Yes, it likely will be cut... RBC estimates to $0.08/unit = 32% yield. Remember this company was trading at $16 last year and as high as $12 in the past month (I know all this says is how stupid someone is... hope its not me!) Over the medium term they will earn $1.00 to $1.50/unit (or more). They have low debt, strong owners (Canfor owns 51%), efficient operations, low cost beetle kill chips, and now lower energy and freight and an $0.80 Can $. They will not only survive, they will do well. And you get paid lots of cash to wait!!! And 9 different insiders have purchased units in the past few weeks lead by P. Bentley who has puchased 75,000 units alone. For what its worth Mercer International insiders (another very large NBSK producer with plants in BC and Germany) have also been loading up on their shares.

2.) Liquor Stores Income Fund - Liquor Depot & Liquor Barn (LIQ.UN): $9.60 unit price. dist = $0.135/month = $1.62/year = 17% yeild. Own liquor stores in Alberta (private market) and BC (quasi-private market). Was trading at $25. Appears Q3 results fell short. Low debt. Communicated that October same store sales were positive. Nov 5 purchased the top liquor retailer in Alaska (Brown Jug) and communicated it will be immediately accretive to dist income. Bottom line is base business will chug along and some nice upside potential... and you get paid 17% to wait for management to do their thing. Insiders purchased large amount in Sept when the units fell to $15. The CEO just bought another 100,000 units (for just under a cool $1 million!) the past few days. Other insiders recently only bought close to 20,000 units!

3.) The Brick Income fund (BRK.UN). $2.15 unit price. Dist = $0.05/mo = $0.60/year = 28% yield (this is after 50% cut this month, meaning lower distribution amount should be somewhat secure iduring the downturn!). Low debt. Company is hunkering down for the big nasty recession. You get paid to wait and then capital appreciation (18 months or so out). Fairfax was a recent buyer (adding to their initial position) and likely holds close to 20%. I believe Bill Comrie holds 40%. Decent insider buying the past few weeks.

4.) Just this week I have also contructed the beginning of a portfolio I call one hit wonders where I am looking to piggyback on FFH. I have initiated 1% stakes in the following companies and would like to get my total to about 10 holdings (i.e 10% of my investable assets). These are 2, 3 or in some cases 10 bagger opportunities for the next 3 to 5 years. Either they go out of business or I win big.

- Canwest Global (CGS): Bought at $0.68. FFH bought a second time at under $1.00 and is involved in a big way. Loads of debt. L Asper just bought in last few days a couple million shares.

- Torstar (TS.B): Bought under $7.00. FFH has not bought since $12 level. Reasonable amount of debt, ad market shrinking dramatically and wacky family ownership structure. No insider buying recently. Sports 10% dividend yield.

- Jazz Income Fund (JAZ.UN): Bought under $3.50. FFH added at $3.65 and owns a bunch. No insider buying. Yield is just under 30%.

- International forest Products (IFP.A): Bought under $1.50. Small but very efficient producer (been modernizing their mills) and producing higher value products. Low debt. Some insider buying recently.

- International Coal Group (ICG): is on the list but moved higher before I decided what I wanted to do.

- Abitibi/Bowater (ABH): not sure if I want to add yet.

- SFK Pulp (SFK.UN): prefer Canfor (pure CAN$ play). The Quebec facility should be doing well. Not sure how US operations will fare with Hardwood pulp falling so fast. The good news for US Operations is SOP/recycled fibre pricing has fallen dramatically in the Eastern US... I'm just not sure what it all does to the bottom line. If I did not hold CFX.UN I would buy at $0.50/unit as their is tons of upside to this one. Some small amounts of insider buying.

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Watsa Teams Up With His Investing Hero!
ericopoly 11/26/2008

HWIC could manage his portfolio if they had some skin in the game (like if Fairfax were to own a stake in Berkshire). I don't think it would happen, ...

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SNS Debt Covenants!
SanjeevParsad 11/25/2008

the average person. Geico, Washington Post and Gen Re were all Buffett turnarounds. Fairfax was Prem's turnaround, and they've been involved with LVLT and OSTK for a ...

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Sanjeev - this is the key because what the lenders are seeing right now in SNS is not improvement but deterioration in its core operating business.

That's not deterioration that occurred under present management. That is the legacy of the previous management's decision to expand the business regardless of return on capital. I think the lenders see that new management is more concerned about improving the performance of each store, rather than growth at any cost. Two and a half quarters is not a turnaround.

Lenders don't care about the upside, they only care about getting their loan paid back. I'm sure Biglari is a nice guy, but FITB and PRU care not one whit that he writes nice letters and quotes Buffett a lot. They want to see operational improvement or they will accelerate their loans.

I don't think Biglari cares about quoting Buffett either, if SNS goes down the hole. He has a greater vested interest in SNS than any other shareholder or lender.

I think SNS is in a tighter fix than most folks here want to admit. Its not just the FITB and PRU debt, they also have over $275 million in capital and operating lease long-term obligations. This is a form of debt too. Both lending agreements make sure to include it in their fixed charge ratio calculations.

Yes and they brought down the lease obligations by $5M in the last year, and that was under a regime that was resistant to the idea. As Biglari opportunistically refranchises the business, those obligations will come down. It is a very tough environment where there is just not as much investment occurring. This is not going to turnaround in a few months. It will take lots of work and a great deal of commitment. Frankly, I don't think this company could be in better hands at the moment, since Biglari is willing to do both.

This is now a turnaround and turnarounds seldom turn.

This quote is thrown around all the time, but the one thing I've noticed is that rational allocators of capital who are willing to commit to this are usually more successful than the average person. Geico, Washington Post and Gen Re were all Buffett turnarounds. Fairfax was Prem's turnaround, and they've been involved with LVLT and OSTK for a hell of a lot longer than a few months. Tim McElvaine was involved with Sun-Rype and Humpty Dumpty Snacks, and Rainmaker Entertainment right now. Eddie Lampert with Kmart and Sears. The list goes on and on.

Steak'n Shake will be Biglari's first legacy...make or break! Alot of people thought he couldn't improve Western Sizzlin, that there would little interest in opening new restaurants. They were wrong. That turnaround under Jim Verney and Robyn Mabe's help took about three-four years in total. It's now in great shape and continues to improve. The same rationale and behavior will work here as well. Steak'n Shake has a lot going for it, but at the same time it can improve in so many ways. Biglari setting the standard so high, along with the lenders expectations, can only bode well for an individual not accustomed to failure. Cheers!

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Fairfax and their Eurodollar futures contracts
watsa_is_a_randian_hero 11/23/2008

Betting the TED spread contracts. It was reaching highs in s...

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Fairfax and their Eurodollar futures contracts
ericopoly 11/23/2008
Okay, never mind. They go on to explain it later on pa...
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Okay, never mind. They go on to explain it later on page 15:

During the third quarter of 2008, the Company entered into 90-day Eurodollar futures contracts (“futures contracts”) as protection against a decline in value of certain fixed income securities in the event of a fall in interest rates. These futures contracts will appreciate if interest rates decline. The futures contracts are settled on a daily basis with changes in fair value recognized as realized investment gains or losses in the period in which they occur. At September 30, 2008, the Company posted $693 of cash as collateral for the futures contracts. The cash collateral is included in assets pledged for derivatives and short-sale obligations at September 30, 2008.

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Fairfax and their Eurodollar futures contracts
ericopoly 11/23/2008
I am finally getting around to reading the recent 10-Q for C...
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I am finally getting around to reading the recent 10-Q for Crum & Forster. There is always something new there that I didn't find elsewhere:

http://www.cfins.com/assets/downloads/financial/CFHC-10Q-10312008.pdf

Page 13 indicates that they have $488m notional exposure to Eurodollar futures contracts.

Please, if you know what they are up to, explain what they are doing. I'm on Wikipedia reading about Eurodollar futures contracts... I'm a slow learner though.

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Fairfax and Ridley
ericopoly 11/22/2008

Are we entering a wholly owned operating company ph...

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WEB and FFH back USG Again
Sfvalue1 11/22/2008

This is big news! Not only is it another 100 mil put to work by Fairfax but I believe this is the first time we've invested alongside Berkshire. This ...

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Fairfax and Ridley
ericopoly 11/22/2008

It just occurred to me, "we" own a higher percentage of...

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Fairfax Removes Hedges on Equity Portfolio
mungerville 11/22/2008

I followed the Master and unwound the 2nd third of my hedge ...

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WEB and FFH back USG Again
oldye 11/21/2008

This is big news! Not only is it another 100 mil put to work by Fairfax but I believe this is the first time we've invested alongside Berkshire. I hope ...

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Prem and Warren
BigBear 11/21/2008

sell $400 Million in convertible debt. $300 Million to Berkshire and $100 Million to Fairfax! passing of the torch? ...

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Berkshire - Anyone buying here?
ericopoly 11/21/2008

lot quickly in a plummetting market like this. An investment in anything but Fairfax is costing a lot of money! The naked puts are expensive to close out, ...

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Writing naked puts, which I only started to do a month or so ago is a major part of my problem right now. These suckers start to cost an awful lot quickly in a plummetting market like this.

An investment in anything but Fairfax is costing a lot of money! The naked puts are expensive to close out, but my philosophy is that if you hold them to expiration and then hang with them to expiration you'll get your dough. The key thing is that I am adding leverage on the long side, but it's safer than just buying shares because there are no interest costs and a wider margin of safety if you write them way out of the money.

I took tax losses on my KMX and wrote some RWT puts -- the return on the RWT is 100% if shares finish above $10 in 2010. So I am back to a break even position given where prices are currently at for KMX shares. This is easier than wishing for KMX to go back to $14.50, because I'm alreaady "in the black" given my method of accounting where I consider only if I am losing what the options market refers to as "intrinsic value" vs was they consider "volatility". I care only about losses as if they were expiring right now -- could give a rats tail if it's simply a matter of the volatility.

Some people might say that I tied up my capital for what will amount to be piddling gains vs what I could be doing if I had patiently waited... and they are right! I didn't think it would come to this. However, the volatility is so darned high that for the positions where I has deep in the red, I can close them out without a volatility hit and write at-the-money or slightly out of the money where volatility is vastly higher, so I'm back in the black by my own method of accounting.

At least somebody must be laughing at my method of accounting... but you know, the head coach of the USC basketball program doesn't count road losses as losses. He has a scorecard of the locker room where his team can hold their head up as winners by ignoring the road losses and looking at only how they perform at home. Man that guy is a loser! I hope I'm not as bad as that. The man needs to be fired, what a disgrace.

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Fairfax Removes Hedges on Equity Portfolio
Shah_Khezri 11/21/2008

I think I'm going to get a Manchester United jersey with "Wat...

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Fairfax Removes Hedges on Equity Portfolio
ericopoly 11/21/2008
I wonder. If the market got cut in half yet again, it ...
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I wonder. If the market got cut in half yet again, it would be perhaps FFH's turn to help MKL raise capital at 20% below book? I'm alluding to the $120 per share in 2004 that FFH was forced to issue shares at.

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Fairfax Removes Hedges on Equity Portfolio
ericopoly 11/21/2008
Another day like this and FFH will be worth more (market cap...
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Another day like this and FFH will be worth more (market cap) than LUK and MKL put together!

$2.41b MKL
$3.15b LUK

$5.56b MKL & LUK put together
$4.86b FFH

87.4% of the way there.

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Fairfax Removes Hedges on Equity Portfolio
ericopoly 11/21/2008
The long treasury bonds and CDS would be enough to hedg...
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The long treasury bonds and CDS would be enough to hedge the equities if we went into Great Depression 2.0. Then there is the greater underwriting profits from the hard market that would create. CR of < 95% -- I would imagine regulators would prevent the gouging from getting too bad -- especially with Democrats in control.

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Fairfax Removes Hedges on Equity Portfolio
uccmal2 11/21/2008
Very busy FFHwatcher. Me thinks the bond traders may b...
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Very busy FFHwatcher. Me thinks the bond traders may be selling and buying, the stock traders buying, and the CD guy selling.

All three companies ORH, NB and parent produced the same news release today.

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Fairfax Removes Hedges on Equity Portfolio
FFHwatcher 11/20/2008
How busy do you think their traders are right now?
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How busy do you think their traders are right now?

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Fairfax Removes Hedges on Equity Portfolio
smazz104 11/20/2008
any idea how they ended up on closing out their hedge? &nb...
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any idea how they ended up on closing out their hedge?

i.e. were the remainder of the hedges in the black?

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Fairfax Removes Hedges on Equity Portfolio
tooskinneejs 11/20/2008
Is Paulson now following the writings of Prem Watsa? S...
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Is Paulson now following the writings of Prem Watsa? Sure sounds like it...

http://finance.yahoo.com/news/Paulson-crisis-happens-once-apf-13635212.

"Treasury Secretary Henry Paulson called the financial crisis now plaguing the world economy a "once or twice" in a 100 years event"

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Fairfax Removes Hedges on Equity Portfolio
valuecfa1 11/20/2008
I've been wondering at what point they would reevaluate their...
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I've been wondering at what point they would reevaluate their hedge, given the collapse in equity prices. I think this is fantastic timing. But you know what they say about timing.

Cheers, all.

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Fairfax Removes Hedges on Equity Portfolio
Partner24 11/20/2008
nbsp; We'll probably talk about this 2007-08 period in the Fairfax history for decades to come and we'll see today's announcement as ...
a significant day in Fairfax history. Cheers! ...
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This is amazing. That's the first time that I hear them being bullish like that since I'm a shareholder of the company. It's a textbook "sell high, buy low" value investing example.

We'll probably talk about this 2007-08 period in the Fairfax history for decades to come and we'll see today's announcement as a significant day in Fairfax history.

Cheers!

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Fairfax Removes Hedges on Equity Portfolio
zarley03 11/20/2008
What Prem and the team at Fairfax have done over the last few years is really impressive and has been fun to ...
to Sanjeev and the other posters here who introduced me to and helped me understand Fairfax....
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What Prem and the team at Fairfax have done over the last few years is really impressive and has been fun to watch. Seeing a great investor knocking the ball out of the park (on your behalf) is fantastic.

Thanks to Prem and thanks to Sanjeev and the other posters here who introduced me to and helped me understand Fairfax.

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Fairfax Removes Hedges on Equity Portfolio
Partner24 11/20/2008
selling prices. I mean, the decisions they are taking now (I guess) will shape Fairfax destiny for years to come! I really wonder what kind of overall things they are ...
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As value investors, we are finding an incredible number of investment opportunities across the world.

Terrific. We're now in phase 2. Redeploy that cash at desesperate selling prices.

I mean, the decisions they are taking now (I guess) will shape Fairfax destiny for years to come! I really wonder what kind of overall things they are buying.

Cheers!

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Fairfax Removes Hedges on Equity Portfolio
smazz104 11/20/2008
"2. Make lots of money by closing out your equity he...
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"2. Make lots of money by closing out your equity hedges when the market is down 50%."

It always blows me away when companies/people dont utilize the low hanging fruit of addition by subtraction.

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Fairfax Removes Hedges on Equity Portfolio
tooskinneejs 11/20/2008
It's the perfect situation for Fairfax: 1. Hedge your portfolio against price declines. 2. Make lots of ...
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It's the perfect situation for Fairfax:

1. Hedge your portfolio against price declines.

2. Make lots of money by closing out your equity hedges when the market is down 50%.

3. Use that money (plus other spare cash and treasuries) to buy stocks when the market is at record lows.

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Fairfax Removes Hedges on Equity Portfolio
woodstov 11/20/2008
"As value investors, we are finding an incredible number of i...
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"As value investors, we are finding an incredible number of investment opportunities across the world."

That's the best part of the announcement!

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Fairfax Removes Hedges on Equity Portfolio
Sfvalue1 11/20/2008
jaja...Thank you.. However, you are right in the ...
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jaja...Thank you..

However, you are right in the sense that the CDS will go out the other bringing profits with them in that case...

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Fairfax Removes Hedges on Equity Portfolio
(deleted) 11/20/2008
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Fairfax Removes Hedges on Equity Portfolio
smazz104 11/20/2008
my apologies Sfvalue, not enough coffee this morning. &n...
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my apologies Sfvalue,

not enough coffee this morning.

I actually meant to write the CDS value will go up.

I will delete my original post - come back when I get more jave!

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Fairfax Removes Hedges on Equity Portfolio
Sfvalue1 11/20/2008
its also fair to say that as the market goes do...
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its also fair to say that as the market goes down (probably at the discretion of the credit markets) so will the CDS.

The have so much cash/marketable securities they prob dont need the hedge

as the market goes down the CDS will go down too?...ytou mean the amount they hold, right ? (as opposed ot the pirce of them)

thanks in advance,

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Fairfax Removes Hedges on Equity Portfolio
ericopoly 11/20/2008
Prem is finally in agreement with me. Let's hope this ...
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Prem is finally in agreement with me. Let's hope this is the first time I'm right.

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Fairfax Removes Hedges on Equity Portfolio
linkmont1 11/20/2008
thnx for the heads up, toosk! its doubly notable ...
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thnx for the heads up, toosk!

its doubly notable when a value investor who had been so bearish for the past few yrs & then ACTED on that bearishness & played it like a fiddle announces he has taken off his hedges & sees values that discount even his gloomy outlook.

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Fairfax Removes Hedges on Equity Portfolio
smazz104 11/20/2008
Hi Bigbear, did we not come to the same conclusion? &nbs...
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Hi Bigbear,

did we not come to the same conclusion?

Regards

Smazz

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Fairfax Removes Hedges on Equity Portfolio
BigBear 11/20/2008
I made a much more bullish interpretation Smazz. ...
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I made a much more bullish interpretation Smazz.

Prem is risk averse before all else . . . I think he is essentially calling the market bottom. He said in the release that the worst case scenerio is already priced in.

I might have to change my name.

-Big Bear

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Fairfax Removes Hedges on Equity Portfolio
(deleted) 11/20/2008
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Fairfax Removes Hedges on Equity Portfolio
tooskinneejs 11/20/2008
Fairfax Financial Holdings Limited announces that it has removed the hedge on its equity portfolio investments ...
October 31, 2008, <st1:City w:st="on"><st1:place w:st="on">Fairfax</st1:place></st1:City> continued to hold approximately 73% of its investment portfolio ...
their ultimate value will therefore only be known upon their disposition. Similarly, the values of Fairfax's other portfolio investments, including treasury bills, government bonds, other fixed income securities and equities ...
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Fairfax Financial Holdings Limited announces that it has removed the hedge on its equity portfolio investments by covering its S&P and S&P/TSX60 equity index total return swaps.<o:p></o:p>

<o:p> </o:p>

"During our third quarter conference call on October 31, 2008, I disclosed that we had reduced our equity portfolio hedging from 100% to 65% of our equity investment portfolio and of course that at some point we may remove the hedge on our equity portfolio. That day has come," said Prem Watsa, Chairman and Chief Executive Officer. "Given the unprecedented decline of the equity markets during the past several months, we felt it was prudent to promptly inform our shareholders that we closed out our equity index total return swaps this week and effectively eliminated our equity portfolio hedge. While we believe the recession may be long and deep, we also believe that stock prices may have already discounted the worst of the economic decline. As value investors, we are finding an incredible number of investment opportunities across the world. That said, in the short term we recognize that stock markets can continue to fall significantly."<o:p></o:p>

<o:p> </o:p>

As of October 31, 2008, <st1:City w:st="on"><st1:place w:st="on">Fairfax</st1:place></st1:City> continued to hold approximately 73% of its investment portfolio in treasury bills and government bonds as well as approximately $9.7 billion notional amount of credit default swaps. The credit default swaps are extremely volatile, with the result that their market value and their liquidity may vary dramatically either up or down in short periods, and their ultimate value will therefore only be known upon their disposition. Similarly, the values of Fairfax's other portfolio investments, including treasury bills, government bonds, other fixed income securities and equities are also volatile, and particularly so given the increased volatility of current financial markets, and their ultimate value will only be known upon their disposition.

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thoughts on fairfax's ugly side
ericopoly 11/20/2008

I think growth rates of the 1990s are going to be back. ...

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thoughts on fairfax's ugly side
uccmal2 11/20/2008
Never mind FFHs ugly side. They must be making a killi...
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Never mind FFHs ugly side. They must be making a killing off bonds again. Will we see a press release before Christmas. I am ready to retire anytime.

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thoughts on fairfax's ugly side
uccmal2 11/20/2008
Well Mills, The buy and hold mutual fund proposition is star...
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Well Mills, The buy and hold mutual fund proposition is starting to look a little dumb right now. Last spring I tried to get my parents (retired) out of their mutual funds but they wouldn't budge (I am not their advisor). Now they have eaten at least a 30% loss, if I work in the fixed income side. The worst part is the mutual funds will keep right on charging 2%/year. So, in order to break even they will need the TSX or S&P to reach about 15% above its previous high. And that will take - what 10 years with another bear market in the middle.

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thoughts on fairfax's ugly side
mills-man 11/20/2008
I think we can be confident on Fairfax team, they saw and understand this crisis better than a lot of economist and ...me! ...
to be an oil believer in front of a recession. I tried to share the Fairfax bearish view to my friends, but they placed their confidence in their broker. Congratulations to ...
Fairfax team for their good work. A+ ...
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I think we can be confident on Fairfax team, they saw and understand this crisis better than a lot of economist and ...me! They often take surprising position but i'm always impress by the results. I'm building a new house for my familly (5) and unlike my friends, i sleep well at night with my portfolio. When others are suddenly looking on their funds , we can take a little time to follow our company. I have some friends loosing all their REER on oil and others. They follow bad advice from their broker like NT.to, OPC.to . I just remember in 2002-2003 when we saw the first short attack and apologize. They are loosing all their money and quickly, very quickly. It's so hard. But why to be an oil believer in front of a recession. I tried to share the Fairfax bearish view to my friends, but they placed their confidence in their broker. Congratulations to Fairfax team for their good work. A+

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Berkshire - Anyone buying here?
mungerville 11/20/2008

future point (could be as soon as 6 months - look for clues from Hoisington and Fairfax re inflation/deflation and trade it in), you trade your credit in for stocks. ...

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OK. I have been buying some BRK in this range and some today. I now have KO, JNJ, BRK and a tad of SU. This comprises about 30% of my portfolio. The other 70% has been all ORH. The whole damn thing is then hedged about 50% with Russel 2000 puts at this point as I took some of the hedge off earlier in and around these levels (the Russel should be and has been more sensitive than the S&P so the hedge might really be 2/3 rds in practice).

This deflation bout was predictable. Watsa nearly spelled it out for us for anyone paying attention. Hoisington Asset Management laid it out. Those guys at PIMCO are good at telling us what just happened whereas Hamblin-Watsa and Hoisington have been good at telling us what will happen in credit. Again, in stocks, Watsa laid it out there more than once in the Globe and Mail: the S&P could go lower, remain cautious.

The problem is deflation is negative for stocks. So if the market perceives that the deflation may last, then stocks could go lower from here. If the S&P goes down further, I will remove more of the hedges - at 700 another chunk will come off, most will probably come off. I agree with a lot of what SWUSC said - this is why I have remained hedged throughout and often since 2000.

Some Strategies:

1. I want to go long only credit (remaining hedged with my non-ORH equities) - we need to talk about opportunities in credit on this board not just equities because credit is where some of the juicy stuff is. Fat juicy safe yields - that's what I want. Then at some future point (could be as soon as 6 months - look for clues from Hoisington and Fairfax re inflation/deflation and trade it in), you trade your credit in for stocks.

2. Another thing I have been bating around - but just in the last day or two - is a BRK/ORH combo portfolio. Both are selling not too far from book. The first has an inflation bias and the latter has a deflation bias. And both will make a killing in insurance market share going forward if markets stay depressed. P&C has this built in counter-cyclicality whereas other financial businesses do not. This is a very important basic advantage to remember in my opinion in this slow growth environment: it means growth when other companies are having trouble growing. Sometimes I think to myself, why the hell should I bother trying to invest when both of these are selling near book now with that advantage and when the markets - both credit and now equities are getting there - are in such disarray that they can both navigate freely. Buffet will put the final stamp on his long legacy here in this market and Watsa's legacy will be brought to a whole new level operating in his prime right here in this market for which he was totally unequivocally prepared.

3. Never bet against Buffet and never bet against Watsa. They are saying slightly different things - so I am splitting the difference.

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thoughts on fairfax's ugly side
Partner24 11/19/2008

I don't know any company that was better positioned to not o...

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thoughts on fairfax's ugly side
(deleted) 11/19/2008
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thoughts on fairfax's ugly side
goldfinger 11/19/2008
I sure hope so! But I believe WEB or Cummings/Steinberg can a...
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I sure hope so! But I believe WEB or Cummings/Steinberg can add tremendous value at this moment too...

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thoughts on fairfax's ugly side
Zorrofan 11/19/2008
Just as the 73-74 bear market was WEBs moment this bear coul...
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Just as the 73-74 bear market was WEBs moment this bear could be Prems!

cheers

Zorro

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thoughts on fairfax's ugly side
ericopoly 11/19/2008
I think this is finally the environment where that debt at...
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I think this is finally the environment where that debt at holdco will add enormous value (all the offsetting cash to deploy in equities) and runoff will add value as well (getting out of treasuries and into higher bond yields).

Their first debt isn't due until 2015, and some of it isn't due for another decade after that. For a long time it has been discussed that the holdco structure has been a drag -- well, it won't be anymore. They should be able to manage the holdco cash for returns far in excess of what that structure costs them.

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Berkshire - Anyone buying here?
Partner24 11/19/2008

I have cash to invest. That's exactly the question that I'm asking myself. Fairfax or Berkshire? Berkshire would add a fifth business in my portfolio. But I check Berkshire ...

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Berkshire - Anyone buying here?
uccmal2 11/19/2008
What would you prefer to buy actually? Berkshire or Fairfax? Nasty question. Since I already hold as much FFH as I care then ...
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What would you prefer to buy actually? Berkshire or Fairfax?

Nasty question. Since I already hold as much FFH as I care then the answer becomes BRK. And since I have now reached my comfort limit with BRK I am looking elsewhere for something with more upside which of course sacrifices the safety of owning BRK.

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Berkshire - Anyone buying here?
Partner24 11/19/2008
problem is the other options left! What would you prefer to buy actually? Berkshire or Fairfax? ...
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Pretty tempting indeed. Cheap and safe.

That being said, I like the idea of holding stocks for at least a decade. More is better.

Let's say that Berkshire:

- will be able to double it's intrinsic value per share over the next 10 years

- is actually trading at 50% of it's full intrinsic value

- will trade at par with it's intrinsic value in 10 years

That would give you a 15% CAGR after tax and expenses (no need to trade for 10 years).

I like the idea, but the problem is the other options left! What would you prefer to buy actually? Berkshire or Fairfax?

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The Man Who Beat The Shorts: Prem Watsa and his Fairfax Financial are among the
Buffet_Groupie 11/17/2008

http://www.forbes.com/global/2008/1124/042.html?partner=yah...

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SNS
SanjeevParsad 11/12/2008

the comments I'm hearing, I doubt if many of you would have actually bought Fairfax at $57 back in 2003, unless you had many other rational boardmembers on ...
said previously that I can't comment much on our holdings other than Berkshire and Fairfax, as it is well known about my history with those two investments. But&...

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The wife and I were out few weeks ago and stopped at a SNS for a burger meal and shake. Normaly the bill would have been $17.99, but with the discount, it was around $12.30. That sure has to hurt. Even at $12.30, I can still go to MCD or WEN for a burger, frys, and shake for under $7. Granted that the quality is not the same, but that is some huge headwind to face and, in part, why we saw such big numbers from MCD as people start to watch the pocket.

According to some notes on the Yahoo SNS board, SNS will be moving away from discounts and coupons. It was also noted at the meeting that Sardar mentioned that their banks very much are interested in continuing their relationship. Don't know if anyone from here attended, but some notes or comments on the meeting would probably be appreciated by boardmembers.

On another note, God I don't know how often I see boardmembers get so negative on an investment without any real opportunity for the CEO or whoever to even get a chance to turn things around. It's been less than 3 full quarters at the helm of SNS for Biglari. Take a look around. There are extraordinary companies selling at 7-8 times earnings. Why wouldn't a troubled turnaround restaurant chain that just went through a proxy fight hit the floor in such a distressed market? Sometimes I can't believe that some of you guys are actually "deep discount, margin of safety" investors.

From the comments I'm hearing, I doubt if many of you would have actually bought Fairfax at $57 back in 2003, unless you had many other rational boardmembers on here tearing apart many of the arguments that were being thrown around back then. I said previously that I can't comment much on our holdings other than Berkshire and Fairfax, as it is well known about my history with those two investments. But members should not be so hasty in trouncing Biglari as he has had limited time working on SNS. Didn't you guys learn your lesson from the guys pounding on Prem? And that was for years! Cheers!

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Fairfax Keeps Increasing Their Stake in LVLT!
SanjeevParsad 11/12/2008

Fairfax has increased their investment in LVLT to over 10% of the company. Cheers! ...

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Mackenzie Financial Sold Part of Fairfax Stake!
SanjeevParsad 11/12/2008

Mackenzie Financial dropped their ownership of Fairfax from 14%+ to about 8%+. Cheers! http://www.sec.gov/Archives/edgar/data/...

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Lemmings on this Board
SanjeevParsad 11/12/2008

to turn around the Washington Post, Geico, Gen Re and Solomon Bros. Prem turned Fairfax around. It's funny how the minute an investor or manager starts writing like Buffett, ...

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Traps
uccmal2 11/11/2008

mythology trap (otherwise known as the buy and hold trap): Agrium, Viceroy Homes, Sherritt Int, Fairfax (1997-2004),... - The low liquidity trap - well now that explains why I had so much ...

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Fairfax 13-F is out
FFHwatcher 11/11/2008

FYI Citizen Communications changed their name to Frontier Com...

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Fairfax 13-F is out
uccmal2 11/11/2008
The rebuying of ZNT is interesting. They sold it in th...
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The rebuying of ZNT is interesting. They sold it in the 40s and are rebuying in the 30s and probably lower. They certainly know the company.

The position in ORI is interesting too - best in breed? I hold some common in this one.

Ryanair is interesting as well - another best in breed?

Less on the cigar butts and more on quality.

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Fairfax 13-F is out
masterP3250 11/11/2008
Major % changes in positions: Level 3 +31% Dell +31% Frontie...
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Major % changes in positions:
Level 3 +31%
Dell +31%
Frontier Communication NEW
Citizen Communication eliminated
Zenith Natl NEW
Cresud +70%
Sandridge Energy NEW
Ryanair +53.5%
USG Corp +13.7%
US Bancorp NEW
Bristol Myers Squibb NEW
Mohawk Inds NEW
OLD REP Intl +25%

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Fairfax 13-F is out
Partner24 11/10/2008
Nothing very significant indeed. That being said, I've notic...
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Nothing very significant indeed. That being said, I've noticed that we are back with Zenith National Insurance (but a fairly small new investment on 9/30/2008).

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Fairfax 13-F is out
NumquamPerdo1 11/10/2008
No major buying as of the end of Sept. Only includes U...
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No major buying as of the end of Sept. Only includes US listed companies.

http://www.sec.gov/Archives/edgar/data/915191/000090956708001153/o42396

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Brick Group cuts distribution
NumquamPerdo1 11/7/2008

available to make it worthwhile. The Brick is a clever outfit. Like Fairfax, they are strongly positioned for this kind of economy and will opportunistically increase their market ...

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Question about currencies and ADRs
dmangan 11/6/2008

FFH, say, in the U.S or Canada? FFH trades in the U.S. as Fairfax (USA), how is that different, if at all, from Fairfax Canada? With the strengthening of ...

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Markel Q3 vs FFH Q3
Crip_1111 11/6/2008

I believe that P24 is spot on with his comments. I do not know whether Fairfax or Markel will outperform over the next 5-10 years, but the returns of each ...

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Here is a link to the Q3 MKL Conf Call Transcript:

http://www.bloomberg.com/apps/news?pid=20601085&sid=aSy4riO87iCg&am

There are some great quotes imbedded therein...among them:

Steven Markel - But let me be very clear about what is happening at Markel. Our prices has been on downward trend for several years and while they have certainly not at a dangerously low level. We have no longer any room to reduce them further. We are increasing our prices.

Tom Gayner - The last time Markel our calendar year, when investment returns were negative in both our fixed income and equity portfolio was 1994. In that year, book value per share declined from $27.83 to $25.71, a decline of 7.6%. As a 97% combined ratio and underwriting profitability weren't enough to offset the difficult investment environment, partially rising interest rates from that year.

I think it is worth pointing out though that in 1994 the book value declined 7.6% from $27.83 to $25.71. Our news today is that so far in 2008, book value is down 11.1% from $255.42 year-end to $235.72 at the end of the third quarter.

The book value per share is up nearly tenfold over that timeframe. If I could sign up right now for another tenfold increase in the book value per share of Markel over the next 14 years, I would happily do so immediately.

By the way, as we are all certainly aware of the credit crisis environment we face today, and the challenges of secure energy slide, the last 14 years were not exactly trouble free. Among the issues that came to my mind quickly as I considered the past 14 years, were items like the Asian currency crisis of 1997, the Russian currency crisis of '98, the collapse of the long-term capital management, when we should have all learned the lesson that Warren Buffet spoke recently about, I beware of key securing models.

The building bust of the dotcoms, Y2K issues or concerns ranging from getting stuck on the elevator all way have having planes fall out of the sky, and major human catastrophes such as the 9/11 terrorist attack, the wars in Afghanistan and Iraq, terrible tsunami in Malaysia, ongoing and continually attractable troubles in Africa and elsewhere, and Hurricane Katrina are among others.

While some may look at that list, could be afraid to get out of bed in the morning. I think one can also look that list and think about the amazing resilience of the human spirit. And our ability to overcome with themes like interminable problems.

Tom Gayner - While we're naturally disciplined with any negative results we've protected the balance sheet of Markel to what I believe is the once in generation storm of physical and financial catastrophe our company have greater liquidity than in anytime in its history with cash and short-term investments available $900 million at September 30, our debt stands at a low of roughly 20% of total capital, and we have the financial strength and flexibility, to respond to better insurance markets and a disciplined and way.

I believe that P24 is spot on with his comments. I do not know whether Fairfax or Markel will outperform over the next 5-10 years, but the returns of each firm should be, at minimum, satisfactory.

-Crip

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Markel Q3 vs FFH Q3
Partner24 11/5/2008
the best by a given quarter performance. I could have done the same with Fairfax some years ago and it would have been a mistake. Yes, one will outperform ...
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Long term fundamental investing and a business are marathons, not 250 meters races. Nearly every business will have some disapointing 250 meters in their long road to prosperity. That's ok, that's life and I'm not going to determine wich one is the best by a given quarter performance.

I could have done the same with Fairfax some years ago and it would have been a mistake.

Yes, one will outperform the other over the long run (too soon to say wich one), but I'm confident that both will provide pretty decent returns for their shareholders.

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Markel Q3 vs FFH Q3
oldye 11/5/2008
returns and less favorable underwriting results compared to the same periods of 2007. Compare with: Fairfax Financial Holdings Limited (TSX: FFH) reported a 2008 Q3 net profit of US$467.6 ...
of US$856.8 million and US$274.6 million of net catastrophe losses, a Fairfax release says. Investment gains, the company reported, were based on a net gain of US$...
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http://sev.prnewswire.com/banking-financial-services/20081104/NETU06604112008-1.html

Markel Corporation (NYSE: MKL) reported diluted net loss per share of $14.46 for the quarter ended September 30, 2008 compared to diluted net income per share of $9.26 for the third quarter of 2007. Diluted net loss per share was $2.63 for the nine months ended September 30, 2008 compared to diluted net income per share of $31.28 for the same period of 2007. The results for both periods of 2008 reflect lower investment returns and less favorable underwriting results compared to the same periods of 2007.

Compare with:

Fairfax Financial Holdings Limited (TSX: FFH) reported a 2008 Q3 net profit of US$467.6 million, an increase from 2007 Q3's profit of US$253.2 million.
These Q3 results include net gains on investments of US$856.8 million and US$274.6 million of net catastrophe losses, a Fairfax release says.
Investment gains, the company reported, were based on a net gain of US$651.8 million related to short equity and equity index positions and US$531.6 million related to credit default swaps. These were partially offset by US$176.7 million in other than temporary impairments on common stock and bond investments.
The combined ratio of the company's insurance and reinsurance operations in 2008 Q3 was 115.5%. Its subsidiaries Northbridge Financial Corporation (TSX: NB) and Odyssey Re posted quarterly combined ratios of 113% (up from 2007 Q3's 88.4%) and 113% (up from 97.8% over last year) respectively.
Northbridge reported net earnings of Cdn$74.6 million for 2008 Q3, an increase over the Cdn$53.9 million reported in the same period of last year. The commercial insurer also posted an underwriting loss of Cdn$37.8 million over 2007 Q3's underwriting gain of Cdn$32.7 million.
Odyssey Re's net income for the quarter was US$121.5 million, compared to US$112.1 million in the same period of last year.

Never thought I'd be happy about combined ratio of 115 but in this case its fantastic, good job guys!

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Swiss Re Reports First Loss in Six Years!
SanjeevParsad 11/4/2008

way, and Swiss Re and Munich Re suffering losses, it seems as though Berkshire and Fairfax should gain market share. Cheers! http://www.bloomberg.com/apps/news?pid=20601085&...

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Fairfax Conference Call!
mills-man 11/3/2008

Yes uccmal2, it's an interesting point. They are now able to...

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