petec

The hedges were clearly a mistake (albeit I feel I understand why they put them on). They haven't clearly said as much but they have hinted at it several times and have corrected the error. On the long equity side they have done poorly at a time when most active and most value investors have also struggled. I can forgive them that in the light of their long term record. On the bond side they have continued to do outstandingly well. Bonds are and always will be the bulk of the portfolio. Given the float leverage 15% compounded long term is quite possible. I think the biggest threat to that will be the starting point (0% rates vs. much higher rates over most of FFH's history, and therefore elevated bond and equity valuations), not their investment prowess. In other words, they won't have the tailwind they have enjoyed for the last 30 years. But nor will anyone, and clever people can usually find things. I am encouraged by the pref/warrant deals. And, as Parsad says, the insurance side is better than it was by a country mile. Pete

Yes, I'd seen that. Westaim are clearly partnering with clever people (Way and Zwirn).

There is too much debt in the world for rates to go up much. Except...inflation might be self-reinforcing. If it accelerates, and people start to spend cash because cash is losing value, then the velocity of money rises and inflation accelerates more. If that gets bad, then Central Banks have to decide whether to stick to their inflation targets, raise rates, and trigger a recession; or to let inflation go for a while. Long bonds, though, are a speculative macro bet at this point. There is no value in them. Prefs are more interesting - good writeup of their valuation vs long term averages on Philosophical Economics recently - but you still get hammered if there is inflation. Unless, of course, you're in a Canadian rate reset preferred trading below par. The probable real returns on some of those look very decent. (I'm long Atlantic Power and Aimia.) Of course, we are ignoring the fact that huge inflation has already taken place, just not in CPI. Houses, bonds, stocks. In other words the cost to purchase your shelter and your retirement have spiralled massively, and yet Central Banks are still able to claim there's been no inflation. Crazy.

Thanks - as a shareholder, will red this.

GREK. 28% is in banks (which I can't own directly) trading at fractions of book and regaining profitability after 5 years of losses. More generally still a depressed market.

Yes - and outside FIH, Quess has gone mental since its July 2016 IPO and now accounts for 80% of Thomas Cook India if I've done the maths right. Which means a) TC stub is cheap; b) Fairfax is sitting on a nice gain; and c) maybe just maybe they really know what they are doing in India.

I notice IIFL has doubled ytd. Mind you, sounds like a phenomenal company and is still "only" on 18x 2018.

No, but then nor do you need to be. Part of this discussion is about moving to lower cost living areas, so it seems reasonable to make statements that don't apply solely to the US. That said, I part agree with your statement. I would *not* want to rely on the NHS for chronic care and don't plan to. I plan for elevated medical costs for a period of time (and I plan to eat into my principal to pay them).

+1

You don't need money when you're dead. With a 3% withdrawal rate you can earn nothing and still survive for 33 years. Retire at 65 and that would last till you're 98. Agreed, but for me the value of not worrying about money at the age of 97 is significant. I fully intend to die with a decently positive net worth.

Quite. $100k a year is $2k a week on average. Once the mortgage is paid off and the kids are edumacated, the wife's gonna have to buy a lot of shoes to get close to that.

The simplest and safest maths would be to divide your desired income by the dividend yield on (say) the SP500. Today that's 2%. So if you want $100k, you need $5m. Invest in an etf and you're insulated against inflation and market drops, and in fact you are likely to compound wealth in real terms by the rate of real earnings growth less any valuation reversion to mean. Really your only risk would be a margin reversion to mean, and that would wash out over the decades. Personally I think that's too conservative - I use 3% - but that's the only way to bullet-proof yourself. I also like Gregmal's variable method.

FFH will be much safer in a downturn. Largely developed-market related with plenty of cash. FIH is an (excellent) emerging-markets holding company. I think it will do well, but the potential for the share price to fall in a downturn is significant.

Thanks TBW. I need to go back and read Westaim historic annual reports. If you have any other sources of info that you can post or PM me I'd be grateful. Interesting that both Zwirn at Arena and Way at HIIG seem to be rebuilding careers tarnished by accounting scandals!

Not trying to talk you out of it at all. It looks very interesting. But, the growth skew is nowhere near as extreme today as it was in 2000. In fact, if anything is exceptional today it is that valuations are high across the entire market, which is consistent with the fact that the discount rate is at an all time low.

Yep, sorry, I was looking at the index not the etf. Since the inception of the index in 1995 the TR has been 8.7% vs. the S&P at 9%. I've no idea if the index methodology has been tweaked.

It has, although (like so many value oriented things) it has underperformed since 2007. Edit: what I mean is, 2000 stands out in stock market history and therefore might not be a good starting date for comparing a value strategy vs. the overall market.

Fairfax recently invested $100m of prefs and warrants in Westaim. More importantly, they committed to invest $500m in Arena, Westaim's asset management arm. As far as I can tell Arena is one of many nonbank organisations stepping in to fill the void created by banks withdrawing from small business lending. They seem to be building a diversified portfolio of secured loans with reasonable risk metrics yielding ~12%. I've read the Westaim/Arena annual and investor presentation. Interested to know if anyone on here knows them well or has any thoughts. Thanks P

IUKD looks at the 350 largest UK stocks and takes the highest-yielding 50, and then weights them by yield.

True, but the same argument could be made for planes. Ultimately all forms of transport have material weaknesses that make them vulnerable to accident or attack (planes = altitude and pressure, cars = bridges and tunnels, trains = any removal of track, boats = mild issue of sinking when holed). Yet, all work extremely well. I have no idea whether the hyperloop will join them, but I won't be surprised if it does.

Its a 600 km long near vacuum. There is absolutely no cheap way to make that work and the issues are obvious. Destruction of the vacuum at any point makes the whole thing fail and when vacuums fail you get explosions and/or implosions. If I were a terrorist...bash an SUV into the tunnel a little before a train is passing through at 700km/hr, the vacuum tube implodes or explodes. The pod in the tube comes out at 700km/hr and hits a building. Just too easy. The power needed to maintain the vacuum would be tremendous. The explosive energy of the vacuum itself would be incredible. And then of course there are the ridiculous cost estimates which are 1/10th what you would expect. The utterly ridiculous design which is completely insufficient to deal with the forces produced by vacuums. Its a 2 inch thick steel tube. Any real world situation which produces vacuums of the kind you will get would typically have all sorts of structural reinforcements and redundancies like multiple layers of containment which would hugely increase costs. This becomes an even bigger issue when you consider safety and terrorism which almost no typical large vacuum application has to deal with because they aren't using the vacuums to do mass transport. This of course mean you are dealing with costs that aren't 1/10 of normal public transportation costs but more like 100 times traditional transport costs. The operational problems which all center around the huge vacuum and the incredibly high speed of the pods are tremendous. Probably every single day you would have catastrophic failures. I would say the operational problems are essentially equivalent to space shuttle launch every single time a pod runs through. This article lays out the problems: http://dailycaller.com/2016/07/26/scientist-lays-out-5-huge-problems-with-elon-musks-hyperloop-video/ There is no way Musk is stupid enough not to understand this. All the problems of space and electric cars involve the type of physics and mechanics that would easily enable him to grasp this. Logically Musk must already know this isn't going to work. So then the question is what is his real agenda. Railways must have seemed just as absurd when they first came out. Strips of steel track, any one of which could have snapped or come loose at any time? Big fire-breathing tanks of boiling water that would drag you across country at unimaginable speeds? No thanks, I'll stick to my horse. And yet...

Time to put the hedges back on? ;)

Entirely fair - it is very difficult to calculate an IV and I don't try. But, nor do I think the current p/bv (I include goodwill at 1x for this calculation) is unfair. There is clearly franchise value here, and I can see how the company can compound healthily with reasonable investing. Cheers Pete

Would you mind sharing your thoughts on this?

I wonder what survivorship bias there is, especially regarding concentration. To put it another way, I wonder how many people there are out there who invested everything in 4 stocks and got it wrong!