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Metlen announced a €600m buyback https://www.investegate.co.uk/announcement/rns/metlen-energy-metals-plc--mtln/commencement-of-share-buyback-programme/9630761

How do you size the options? How much is a big bet, or a regular one, and what size of the portfolio options occupy? Thanks

Well it's quite unlikely they'd be growing much next few years with the soft market. If they grew 3%PA I'd be happy. There's a good chance it stays flat. Hence that won't take up much capital. It boils down to additional acquisitions versus paying a dividend back up to the parent for the share buybacks. Another possibility is they are holding that cash there in the subs, to facilitate the minority buyouts when appropriate and available.

I bought at around $50 and sold at $65 because at the time I was like I don’t want commodities in the portfolio, sigh

Yeah, I've had the same experience. I think long puts are particularly difficult for a few reasons. First, volatility skew makes them "overpriced". Second, as they go in the money, the time value gets crushed faster than with calls. Third, when the security trades in "your direction", a 1% move becomes a larger absolute move with a call and a smaller absolute move with a put, which means every additional dollar gets easier with a call, and harder with a put. And finally, related to that last point, calls can rise to the moon, while puts have a maximum gain. So, if you get an extreme move in your favour, the impact with calls can be much higher. (e.g. back in the day, when Fairfax was fighting the shorts, while I sold early, I still made 30x on a small call position. If Fairfax had a roughly equivalent down move, I doubt it would've been even a 10x.) For me, the impact has been that I'll speculate with calls and short puts. But I'll almost never speculate with puts. (In this context for me, speculate means "make a directional bet hoping to get at least a 4x payoff if the stock moves in my direction.")

Yep, particularly Ukraine. During the early invasion, there was a lot of discussion about "Ukraine gave up nukes for a guarantee of security from Russia". I'm sure every other country on the map made note of the implications.

Yeah, I agree with this. I think the main impact these issues have on my investing process are to assume, if Fairfax owns a company that I also own, that Fairfax will be quite willing to make a deal beneficial to them that screws me. So, I'd be less inclined to own a business that Fairfax owns than an equivalent business that Fairfax doesn't own. I guess one could argue that Atlas kind of fits that profile--nudging out minority shareholders at a price below intrinsic value. But I have no problem with that, because there was no competing bid, and because the price offered was reasonable when pegged against the stock's trading range at the time. So to me, that was completely kosher. Also, I guess the other change is that I now recognize that the Fairfax name (fair and friendly acquisitions) is marketing--neither reality nor an aspiration. It's all just data points forming my mental model of what Fairfax is.

I trade options routinely and it's easy to make big money as long as you have the cajones. But, to your point I have failed on the latter (shorting the market). I stick with long calls and short puts on stocks that I like

Add to LEN.B

Glad to not be tracking this year. Ouch:)

Lots of countries will develop nuclear weapons - Saudi Arabia (through Pakistan), South Africa (they have nuclear power already), South Korea (counter North Korea), Iran, Ukraine (longer term) and likely Europe down the road. This a clear result of the wars on Ukraine and Iran, imo. This is a result of the Neo imperialism that is going to be the next chapter in a global politics.

How do you define cash flow? Last year they spent a bit less than the dividends from the insurance subsidiaries on buybacks. I think that’s a good estimate for FCF. The insurance companies still need capital to grow and their portfolio turnover shouldn’t have much to do with buybacks except to the extent it creates excess capital. This year they are allowed to dividend up $4b. So far this year they are on pace for over $2b of buybacks.

@73 Reds you are liberal idealist at heart!...me too!..this is indeed the way things should be if man wasnt so tribal, paranoid, prone to think of others as lesser than, if nationalism wasn't such a powerful tribal force etc etc........I was the same until I spent time studying IR and while no social theory is perfect (the world is far too complicated and so ANY theoretical frameworks are always gross gross over simplifications of the real world) the IR theory that stands above the rest and has the best (though imperfect predictive power) is realism. The great tragedy of realism applied to the world is the end game inherent in it....global and regional powers are prone to war not because they are crazy...but because in anarchic system a state acting rationally acts in ways that trigger paranoia in its foe which sets of inevitable escalatory paranoia sometimes ending in something of a balancing stalemate but many times tipping over into something much worse a hot war.......we all know the phrase - sometimes the best defense is a good offense...well States come to that conclusion all the time and we get hot wars. The thing I find with liberal idealists is they want to divide the world neatly into "good guys who want peace" and "bad guys who want war." The great tragedy of realism is proving that the bloodiest wars in human history are rarely started by cartoonish villains rubbing their hands together in pure evil. They are usually started by terrified, highly rational leaders staring at a map, looking at trend lines, and concluding: "If we don't attack them today, they will destroy us tomorrow.".......Israel is terrified of the trend line with Iran's nuclear capability, they should be....as I said above that Iran is highly highly unlikely to ever use a nuclear weapon on Israel they want it as a deterrent....."unlikely" is doing alot of work here of course.....I'm 99.9% sure of this prediction....but if I handed you a revolver with a THOUSAND chambers in it and a bullet in one of them how comfortable would be putting it to your head and pulling the trigger? This is Israel's dilemma....and I'm very sympathetic to it.

Yeah the higher yields go, the equity book has to do less and less for Fairfax to be a great investment from an already comfortable starting point. Additionally two of the biggest equity investments, Eurobank and TRS are positively geared to higher rates.

As usual, for the most part I agree and do tend to look at look at things from a Western-centric POV. But this is because I believe our POV is largely correct and the best model for a free, prosperous, peaceful World. There is no reason to eliminate, cultures, customs, histories, alliances, religious practices, and fundamental beliefs as long as they don't threaten and infringe on the rights of others. History teaches us that this can largely be accomplished through deterrence but the exceptions like Iran have to be dealt with more directly unless we want another 47 years of fundamental fanaticism. For me its about time. Because of its success, the US has a unique role in the World. Nothing says the role can't be shared and in time it will.

The odds are not great but payoff is asymmetrical . The Soxx looks very overextended with many crapola stocks mooning.

I like this idea. Never thought about doing that.

The 2-year note at 4.23% and rising seems awfully bullish for Fairfax. Especially with inflation break-evens, swaps and *yikes!* "truflation" all diving back to the harmless zone.. Seems kinda like a gift. I wonder if even Berkshire will give their government bill auction guy a bit of a break and let him buy some 1 and 2 year notes https://fred.stlouisfed.org/series/T5YIE https://fred.stlouisfed.org/series/T10YIE

This appears to be Fairfax / Odyssey buying some additional AGTF in the open market last week

It's why for me personally while the stock stays at these levels. If they used every dollar of cash flows to keep buying back shares I would be a happy camper. I clearly don't know or can't see the upside in what they are doing with these equity acquisitions and although it wouldn't be a mortal blow to the company if they didn't work out, just like Equity hedges and shorts did not, it sure would be at a tremendous opportunity cost. Let's say $3B was allocated here, unless it's worth well over $6B in 5yrs or so time. Buying back almost 10% of the company would have proven to be the best alternative.

@RichardGibbons, you make a great point - it is complicated. Not just for Prem/Fairfax but for any company. It gets to the heart of what makes assessing management so difficult - it qualitative and comes down to judgement. As a result, two investors looking at the same information could come to very different conclusions. In my framework (right or wrong), much of my analysis is weighted to the past 5 years. Years 6 to 10 matter, but much less. More than 10 years is interesting but much less relevant (for me). It is important people understand that when they read my stuff. If I had completed the management chapter in late 2020 it would have had a very different tone. Fairfax is very active - buying and selling. They are involved in a number of transactions every year. Volume alone is going to put them in a tough spot every once in a while. Not that I am trying to make excuses for past behaviour. My view that Fairfax has moved up the quality ladder when making new purchases should help (if true). Taking companies private also helps. Buffett is an interesting comparison. He also had a few big stumbles over the years. Those are largely forgotten. Understanding Fairfax's long history pretty well, I am just so happy with where the company is at today.

Good OP. I've tracked my performance vs the S & P for 25 years. Then it dawned upon me it doesn't matter. If you need 8% returns to make your goals, go for it, and make it as safely as you can. Who cares what every one else is doing?

Messi - 5 ARG goals in two games - all from Messi. At 38! I have fallen in love with soccer in the last few years.

The integrity dimension is an interesting one, because the Fibrek transaction was a bit sketchy--deliberately supporting a low bid when there was a much higher bid on the table. That was ruled by the courts to be legal. However, for me, it doesn't pass the "high integrity" test. There was also an insider trading investigation, but that was eventually dropped. It's unclear to me if the insider trading allegations were a case of "it happened, but couldn't be proven enough for charges" or "people were annoyed at completely innocent Watsa and Rivett, so decided to pursue regulatory revenge against them", or anywhere in between. As far as I know, Watsa's never done anything unethical that hurts shareholders of the various Fairfaxes. In sum, to me, that means on the spectrum of integrity, he's certainly well within the "integrity" half, but I wouldn't put him as far on that side as Buffett. (e.g. Buffett doesn't just avoid being unethical, but also tries really hard to avoid looking unethical.)

I wonder what the statistics are on having to hit on BOTH (1) making money buying an option, and (2) betting against a bull market. Any oddsmakers here?