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The "history" or story we most often tell is one 55 years ago when General Robert F Sink (Bob, to the family) was at Easter Sunday lunch with all the brothers, their wives, and of course Granny Sink his mother...and majority owner of the newspaper - which in those days made her pretty much his and everybody else in town's commander in chief. Bob, as was the norm, injected "GD" into almost every sentence while not with his mom and he slipped up and used his adjective of choice at the table that day. I was ten years old but clearly remember Granny Sink calmly looking at him - amongst the deadly silence resulting from his inappropriate GD use - and saying, "Bob, you can leave the table now, I'll send for you when I'm ready for you to return." With a sheepish look on his face, while in full general uniform, Bob got up without saying a word and tiptoed away from the table. What Granny Sink as a teetotaler wasn't aware - but all the rest of us at the table were aware - is that Bob and all the boys (his brothers) kept bottles of liquor in the water tanks of the backs of the commodes at her house. I'm quite sure he just visited the bathroom and got a sip or two - smirking with silly enjoyment while waiting for his boss to pardon his punishment. By the way, I was only allowed at the table because Granny Sink's sister Mattie, a former mayor and city council woman of our town, had Alzheimer's. She's often drop her false teeth while eating they'd fall under the table and/or her chair. My job sitting next to her was to fetch those teeth!

More free speech. I guess you can insult people in the US but you can’t report on Trump’s government any more: https://www.wsj.com/politics/policy/trump-administration-subpoenas-new-york-times-reporters-after-air-force-one-reporting-b7f1b368?mod=hp_lista_pos3

The WSJ never predicted negative GDP growth for the US economy to my knowledge. We had a brief contraction of GDP in one quarter when Trump announced his disastrous tariffs. Trump mostly reversed the tariffs so the economy bounced back the subsequent 2 quarters . The current growth rate isn’t too different from what we had during 2023-2024 under Biden. Inflation also picked up a bit. The fiscal deficit remained high too. I think the biggest growth drivers are the AI investment and the big beautiful bill which are actually synergistic (BBB provides tax incentives for Capex ). The AI investment provides about 2/3 of the economic growth if you add it all up. If you are not the AI business, you probably feel closer to being in a recession than an economic boom. Same if you are in the lower K part of the demographic. Stocks went up under a Biden as well, so that’s not a differentiator. .

It’s more about understanding how a bank makes money. They have a capital base and then lend multiples of the capital base. That’s the leverage I’m referring to. It has nothing to do with TRS per se which are fully hedged. They only make money on the difference between the rate they lend at and the rate they borrow at.

This would not surprise me, as I was a straight C student in my econ program. The business world was much more educational I was a very slow learner. I should have been a history major, as your stories about your family and Uncle Sink are far more interesting. Real American success stories.

Cubs, if nothing else you are a fantastic read! Like most "economists" I'm not so sure you've got the benefaction/cause and effect in any form of reality... ...but at least you are consistent. That use of the word consistent is your praise of all things Trump. When do we put Trump in a straight Jacket and sit him restrained in a public place babbling his endless scrambled "plans" that will still sell ads for both wings of media enabling both to keep being profitable? If we could do so so I'll assure you Cubs that the "economy" and whatnot is going to be the same upcycle success---- at least for now.

Could you explain how the counterparty uses leverage in a TRS for us "slow leaners"? I'm still not getting it, Do they have more exposure than the shares they own?

John - you are sadly mistaken about POTUS and his economic plan. Please see my post back to Spek regarding the President's and Scott Bessent's plan for the American economic revival. It's working - and it was obvious to me, from the beginning - with a very tough economic backdrop of deficits, high inflation and economic malaise - this would be the right approach - although difficult politically to execute - ESPECIALLY cutting wasteful government spending and massive fraud - and directing US growth to the private sector - while attempting to reduce government role. I too, am an economics major from a decent school, but don't think that means too much. However my background in working for fast growth high tech companies has taught me a lot about productive economic GROWTH. For the last 18 months - many on this board have predicted economic collapse for the world and especially the US economy due to the economic plan of POTUS. How misguided they have been, especially those that feed themselves with the Economist, WSJ, NYT and Washington Post - those publications and "economists" that look like bozos currently - precisely because they HATE Trump. They have been proven seriously wrong - and I do think the future outlook looks even more promising.

Mike [ @cubsfan ], I haven't ever predicted negative US growth, and I have continued almost constantly, for at least now a decade, to allocate more and more capital to North America. I consider POTUS a pro-business person, with some exceptions. The same way I consider myself to be pro-business. I'm also an uncurable optimist about the long term future. POTUS' ideas for establishing economical exceptionalism and world domination are to me flawed idiocy. I'm educated in Keynesian macroeconomics. [Please also see Sanjeevs [ @Parsads ] comments about tariffs etc. above.]

Tokenization, at present, is little more than Tech Bro's trying to find a market for the tech, and doing it badly. We built it, now use it ... no idea for what though The best application is around property; secure blockchain record, tokenize to separate the land from the dwelling(s) on it. Already done manually in legal offices throughout the world, it is just not the common practice in the US; an application that is all about reducing cost, not creating something new. Strong agency disincentive. The whole idea of affordability by splitting the price of an expensive asset over many units ... is really about stranding the asset. Sell it at a high price to the token holders, make a spread .... market making the illiquid tokens, consolidate the tokens back later at illiquid (low) prices, take back the asset. A scam. Different PoV. SD

What are you trying to hedge against? For most passive portfolios, if it's a 30% drop in the market; either be a little more active, sell covered calls, roll puts on the relevant index, or sell down and put the funds into a money market fund. Tell yourself it's your next 2 years of living costs money, change your mind later. If it's an active and concentrated portfolio; just sell up to 50% of the vulnerable positions .... and buy back later. These portfolios make their money from change in share price (volatility), so use the opportunity ... don't destroy it. Of course, if you're happy with earning less from your side hustle .... SD

Yes, banks use leverage to earn an acceptable ROE on their own capital. The banks are also hedged so you are correct they likely own the equivalent number of shares or have other counterparties that want short exposure.

Are you referring to leverage by the counterparty? I thought the counterparty owned an equivalent number of shares as its exposure(?) Sorry for the confusion but I never did understand the precise mechanics.

They would owe the dividends to FFH on the TRS as well. It’s a lending business with almost no risk that probably gets the best capital treatment. It’s still good business once the leverage is factored in.

Higher is my guess. I think it’s hard to go below 1.2x BV given how active FFH is buying back stock so we’re at the lower end. It might take a hard market to go beyond 1.5x unless some quant funds jump back on board over time as BVPS starts growing again. What’s interesting is the optionality on how high it can go. The theory is higher lows and higher highs on the multiple over time.

Got it. Doesn't seem like a very high rate of return considering the counterparty has to own the stock to generate 3% interest plus whatever dividends it may receive.

Gemini: fairfax trs arrangement If you are referring to the corporate financial structure, Fairfax Financial Holdings Limited (TSX: FFH) has historically utilized Total Return Swap (TRS) arrangements to manage its stock portfolio, hedge risk, and execute share buybacks. [1, 2, 3] Fairfax's corporate TRS arrangements operate through the following mechanisms: How Fairfax’s Stock TRS Arrangements Work The Structure: Fairfax enters into derivative contracts with institutional counterparties who purchase Fairfax subordinate voting shares on the open market. [1, 2, 3] The Economics: Instead of physically purchasing all the shares itself (which requires massive upfront cash), Fairfax agrees to pay the counterparty a floating interest rate (e.g., SOFR plus a spread). In return, the counterparty passes all total returns (dividend payments and capital appreciation) back to Fairfax. [1, 2] Cash Preservation: Prem Watsa (Fairfax's CEO) uses these arrangements to gain the economic exposure of owning its own shares without heavily depleting the company's cash reserves at the holding level. If the share price drops, Fairfax must pay the counterparty for the loss; if the share price rises, the counterparty credits the gains to Fairfax. [1, 2]

They charge interest on the outstanding amount. My guess is FFH did the TRS in CAD given it’s with Canadian banks so are probably paying under 3% for the exposure. It’s just a form of leverage.

Please excuse the dumb question but if the counterparty owns an equivalent number of shares as its TRS exposure, how does it make money? Does it collect a "vig" either way?

Maybe he can now afford his child support payments.

I think there will always be a counterparty happy to do this trade with Fairfax. They buy the equivalent number of shares, and bill Fairfax every quarter based on how the shares have done. There’s no risk involved, since if the shares go up, they pay Fairfax the amount of the gain but they will have made the exact same amount on the shares they hold (presumably with no taxes, since they have offsetting losses on the TRS.) And inversely if the shares are down, they’ll have lost on the shares but they’ll have won an equal amount on the TRS. Then whenever Fairfax wants to end the arrangement, they sell the shares (probably but not necessarily to Fairfax) and pay out or take in whatever amount makes them break even, while keeping the small fees they’ll have earned every quarter. What’s not to like? I would think other banks would be jealous of whomever gets to do this deal. [I should have read to the end of the thread, this is all well explained by RichardGibbons and Djokovic.]

Just did it, no problem.

Yes. On the other and, the red card for the Swiss player doing a dive against Argentina without contact was justified. In this case the availability of VAR really helped. I wish they would book more players for simulating.

Like Trump when Robert Mueller passed away...I'm surprisingly the opposite of sad on this one! Cheers! https://www.cnn.com/2026/07/12/politics/sen-lindsey-graham-dies-at-71-hnk

Sanjeev [ @Parsad ], After this post, I delete the first one.