bearprowler6
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Posts posted by bearprowler6
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Also - on Fauci's point about the primary way a mask helps is so he doesn't infect others.
I think he is totally wrong. Commonsense is that masks trap respiratory droplets coming in and out. The First Lady is right! Mask help reduce your chance of becoming infected.
Isn't that amazing - America's top doctor on that is probably completely wrong on what could be the most effective way to lower the R0.
Two points:
- Scientists and doctors rely on evidence. There is little evidence that masks protect the wearer in low-risk situations. There are two reasons why there is little evidence. One, they probably are less effective than you think (see below). But mostly, ethics boards tend not to approve research studies where you intentionally expose someone to an infectious disease.
- Common sense is that masks droplets coming in and out. So they should provide equal protection in either case. But if you think about it, you will see that Fauci is right.
Let's say a homemade mask reduces 50% of the droplets you inhale. But you can also get infected through the eyes, so let's say that reduces your protection by 1/3. You can also get infected by fiddling with an infected mask or improper washing. So maybe a mask is 25% effective. But respiratory droplets are probably not the primary transmission mechanism. Infection also occurs when you touch an infected person or item. Let's say that is 50% of transmissions. So a mask only reduces your odds of infection by 12.5%. (all numbers made up but roughly based on the limited research I have seen)
But what happens if you put that mask on the infected person? The mask basically eliminates the airborne virus. Any droplets are unlikely to be expelled with enough force to enter your eyes, mouth, or nose. It will also reduce the number of droplets on nearby items. So a mask on an infected person might be 75% effective.
Imagine you are in a crowded grocery store. There are 99 susceptible people and 1 infected person. If you put a mask only on the 99 susceptible people, the infected person will be walking around shedding virus on the shopping cart, breathing out droplets and aerosols, breathing on the veggies, touching the boxes, coughing on the checkout counter, touching the PIN pad.... So you can see why the Fauci and the CDC recommended masks for the infected people only! Now the problem was underestimating asymptomatic transmission and the lack of testing. The CDC advice is correct, but only if you can tell who is infected!
KCL using your numbers...
--masks worn by non-infected persons are 12.5% effective in preventing infection
--masks worn by infected persons are 75% effective in eliminating transmission
Have you not just made the case for everyone wearing a mask? And that is just to assist with lowering the spread of the corona virus let alone the impact on assisting with lowering the spread of other infections/ diseases.
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This is a Trump quote
"I don't think I'm going to be doing it," he said, going on to suggest it was hard to envision such a thing in the Oval Office: "Wearing a face mask as I greet presidents, prime ministers, dictators, kings, queens — I just don't see it."
Contrast this with the Chinese leader Xi - wearing a mask.
https://www.foreignaffairs.com/articles/united-states/2020-04-03/chinas-coming-upheaval
Trump doesn't get it. Memo to Trump: We are in a pandemic - wear a mask.
I fully support Trump's decision not to wear a mask and strongly suggest the other members of his administration to follow his example!
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Status of OMERS purchase of 40% of Riverstone UK?
When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval).
Well here we are...at the end of Q1 2020. Any news on this deal?
FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure).
Since the "deadline" (end of Q1 2020) outlined at the time the sale of 40% of RiverstoneUK has now been missed I think we can fairly assume the sale to OMERS is in trouble? Or at the very least being repriced?
Fairfax needs to communicate on this one......
Furthermore, their equity holdings are getting crushed including but not limited to:
-Blackberry
-Eurobank
-Resolute Forest Products
-Stelco
-Recipe
-Kennedy Wilson
In my view and I fully expect that others will disagree with this....a lifetime of work is being wiped out. Fairfax does not have adequate liquidity. The long term does not matter when you can't pay your current bills. Prem said he learned his lessons. Obviously not.
The tide is out and....well we know what that means.....ugly indeed....
I agree that a lot of value has been destroyed. But you're going to have to convince me they can't pay current bills.
Depends how you define it (not being able to pay their current bills) but consider the following:
-They are already drawing on the bank line and that's before the current corona situation arose
-Can't supply the capital needed to support the hard market in their insurance subs
-Private investments must be starved for cash and looking to Fairfax to stay alive?
-Selling off portions of long held assets (RiverstoneUK) to raise cash and now that's perhaps in jeopardy
-Unknown funding sources to complete the minority interests in various insurance subs including Eurolife and Allied World
-Capital markets don't offer a solution (but it would not surprise me if Prem dilutes his shareholders yet again even at these levels)
Prem and the team go to Omaha every year. Buffett laid out the case for growing over time yet Prem and the team did not listen or thought they were smarter.
At best Fairfa's share price flatlines for the next long while at its new share price level. Just like it fluctuated between $600 and $700 CAD for the last 10 years. Folks the market got this one right. One for the efficient market believers!
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Status of OMERS purchase of 40% of Riverstone UK?
When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval).
Well here we are...at the end of Q1 2020. Any news on this deal?
FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure).
Since the "deadline" (end of Q1 2020) outlined at the time the sale of 40% of RiverstoneUK has now been missed I think we can fairly assume the sale to OMERS is in trouble? Or at the very least being repriced?
Fairfax needs to communicate on this one......
Furthermore, their equity holdings are getting crushed including but not limited to:
-Blackberry
-Eurobank
-Resolute Forest Products
-Stelco
-Recipe
-Kennedy Wilson
In my view and I fully expect that others will disagree with this....a lifetime of work is being wiped out. Fairfax does not have adequate liquidity. The long term does not matter when you can't pay your current bills. Prem said he learned his lessons. Obviously not.
The tide is out and....well we know what that means.....ugly indeed....
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Status of OMERS purchase of 40% of Riverstone UK?
When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval).
Well here we are...at the end of Q1 2020. Any news on this deal?
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This stock is very thinly traded. At the first annual meeting, 2 years ago now, management indicated they would be taking steps to address this issue. Nothing has been done. Depending on the size of your investment this may become a problem down the road should you wish to or need to liquidate. I believe this to be a major knock against the stock and one of the major reasons it has drifted towards zero since the IPO. You will never get major buying or institutional support for this stock until this issue is addressed.
Maybe not, but equally it will go up a lot if performance improves because *any* buying will move the stock.
Petec.....respectively, the issue is not whether the stock price goes up or not on good performance. The lack of liquidity of the stock makes it impossible for all but he smallest investor to take a position in the stock and have any hope at all of exiting when they need or want to. The traded volume yesterday was 3509 shares (closing share price is $3.01). So sure a very small retail investor can accumulate a couple of thousand shares at the current price and then trade out when/if the price recovers to...lets say even the IPO price of $10. But honestly, is this really what we are trying to do here?
Fairfax Africa shares cannot be accumulated in any meaningful amount without dramatically moving up the share price. Also, once accumulated, a significant number of shares cannot be disposed of without greatly influencing the share price downward.
In my view, why bother. There are simply too many other opportunities out there where similar profit opportunities exist without the constraint of trading liquidity to worry about.
Furthermore, management did say they would address this issue (lack of liquidity for the shares) and have not done so. Perhaps this alone is reason enough to avoid these shares.
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This stock is very thinly traded. At the first annual meeting, 2 years ago now, management indicated they would be taking steps to address this issue. Nothing has been done. Depending on the size of your investment this may become a problem down the road should you wish to or need to liquidate. I believe this to be a major knock against the stock and one of the major reasons it has drifted towards zero since the IPO. You will never get major buying or institutional support for this stock until this issue is addressed.
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An update on the Horizon North and Dexterra transaction:
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Dropped 25% in 3 hours.....
Yep. Did anyone ever expect to see FFH with a 4% dividend yield?
SJ
FFH's dividend will be no more.....the company (at the holdco) is severely cash restrained....and that was before this drop.
Anyone else suspect that Omers will look to find a way out of its plan (act of God/force de majeure) to buy into Riverstone UK for $600 million?
Forget about funding the growth of the insurance subs in the so-called hard market. Highly likely that insurance premiums will not be paid.
And lets not forget about the devastation across its equity book (both public and private equities):
-Atlas Corp (formerly Seaspan)
-Blackberry
-Recipe
-Eurobank
-Resolute Forest
-etc
Let's hope that Brian Bradstreet, the real brains behind the investment team at FFH, worked his magic yet again and sold out of all fixed income positions at the optimum time although this will only help so much.
Comments/thoughts?
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Points I took away from FFH 2019 Annual Letter:
1. The letter lacks integrity. Starts with 2019 was a great year for FFH and continues mostly with unbridled optimism throughout. Reality is shareholder return for 5 & 10 years have been terrible - he doesn't openly admit it and doesn't admit frustration with it and lay out a plan to change it. If one cares for their shareholders, he would be more contrite about the returns he has delivered.
2. Ends letter with : "Over our 34-year history, we have always operated at Fairfax with a small team which, with great integrity, team spirit and no egos, protects our company from unexpected downside risks and which takes advantage of opportunities when they arise". Well, after reading a decade plus of his annual letters, I've changed my mind - he's not showing integrity/honesty and his writing has consistently exhibited egotistical behaviour and FFH has not been able to take advantage of opportunities like others have.
3. Insurance business is doing very well, has improved significantly and is successfully generating no cost float and is the jewel of FFH
4. I’m glad that he has openly admitted that BB, Exco, and Resolute were mistakes – he is more open about this today than in the past
5. Believes, “India is the best country to invest in long term”. OK, but no explanation as to why. Not genuine.
6. Believes Modi re-election will turn around Indian economy. Again, no explanation as to why especially given that was the thought at time of Modi’s first election and it didn’t come to fruition. Again not genuine in his writing.
7. Over 5 years intrinsic value has compounded by <5%/yr & share price <1%/yr. Over 10 yrs: IV - 3.2%/yr & share price at 5.2%/yr. Prem’s only comment on stock price is : “In last 4 years stock price has not gone up with intrinsic value, but it will happen again” - with no explanation. What about the fact that IV is only up 3.2%/year over 10 years?
8. On investments: “shows that Fairfax’s investment results have been consistently very good since inception, with the exception of the 2011 – 2016 time period, when we treaded water” - how can he say “consistently very good” as investment returns over 33 years have been 8%/yr and over past 10 years have been <5%/yr ? Isn’t the point of his investing prowess to do better than the index? How can he say “very good”?
9. “So when the correction happens (and it may be happening as we speak), we expect value stocks to provide better protection on the downside”. A week after the report comes out, we are in a correction. From what I see, when there is a correction, everything goes down – BRK & FFH are down just as much as tech stocks.
10. Committed to buying back shares over next 10 years
Being optimistic is one thing. Not being in touch with reality and getting people to invest in you/your business by shrilling dishonest optimism is getting to be on the Ponzi scheme side of things. As a long term shareholder, I am so disappointed in this man.
@Sanjeev: You have been a big supporter and believer in Prem Watsa’s honesty and integrity. This website's name is in homage to FFH. Watsa has shown his belief in you and invested in you. I’d appreciate your thoughts to above comments. Would also love it if there was a way to get FFH to reply.
Investmd....I understand your frustrations totally. I have studied Fairfax in-depth for well over 20 years and invested in the shares almost as long. I concluded a few years ago that something was very very wrong. Despite all of my considerable efforts I could not get to the bottom of the problem. in the end I concluded it was not one or two problems but a myriad of problems that could not be corrected/overcome. As a result I started to sell off a portion of the shares I owned until I reduced the overall share position to a much smaller portion of my overall portfolio. I can assure you that I never looked back. My only regret....not selling all of the shares that I owned. I enjoyed going to the annual meeting and related activities which included meeting up with old friends that I had met along the way but let's get serious these reasons are not enough to keep me invested in the stock.
So for what its worth....start selling off your Fairfax holdings. It will hurt to do so but in the end you will not regret it.
Others will disagree with this recommendation but a growing number will agree. Good luck!
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http://www.horizonnorth.ca/news-and-knowledge-centre/news/horizon-north-and-dexterra/
Another attempt at surfacing value?
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Does anyone have an opinion of what positions Fairfax is looking to monetize next (stock holdings, affiliates etc)? This has the potential to be a nice short term catalyst for the shares. Here is what the company had to say on the Q3 conference call.
Paul Holden (CIBC): "...you referred to monetizations and process. I was wondering if we can kind of get a status update on that monetization and process and just a characterization of how far you think you're along in that process. Is there still a lot to potentially do there?"
Paul Rivett (Fairfax): "...So we're quite far along in the process. There -- we've got the whole Hamblin Watsa team from Prem right through working with us. A number of these things are close to fruition. A few that are more at the earlier stages. But as you can imagine, we can't give you specifics on it, but we're very happy that we're close to being able to get a few things across the line in the fourth quarter. ICICI Lombard was part of that. So you saw that we can act fairly quickly. But also, it's a -- we want to get best price and best execution, right? So we're working to -- we're getting -- we're working to do that for our shareholders."
What I thought was even more interesting was the commentary later on about wanting a more diverse, more liquid portfolio, albeit still with a value/opportunistic bent. They were also quite explicit about not wanting positions over $1bn (although that would mean reducing Eurobank which I think is unlikely and a mistake at this point).
Short answer to your question is I have no idea what they will sell but the changes might go some way towards addressing a lot of the concerns raised here over the years.
Given the comments made on the call related to a more liquid portfolio it would seem a number of existing private investments would be the initial candidates for monitization. The would also be consistent with the comment mae by Prem in his march/2019 letter to shareholders:
"We expect to monetize some of our remaining investments in private companies with similar results!"
Therefore the likely candidates would inlcude the following:
- APR Energy
-Davos
-Peak Performance (formerly Performance Sports)
-Farmers Edge
-Toys R US (land value which they continually say is the value of the investment made)
-Boat Rocker
-Sporting Life/Golf Town
Monitization could take several forms including IPOs and/or sale of a part or whole of these investments to a private equity buyer.
The following from their public holdings are also possibilities:
-CIB (Egypt)
-Sterling Resorts (held through Thomas Cook)
-Thomas Cook itself
-Resolute Forest (take the hit and move on)
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Sold the last remaining 4.91% stake of ICICI Lombard for a slightly better price than the previous block.
JEast---any chance the team at Fairfax uses this to buy back their stock at its current levels? It would seem that a lasting benefit to all long suffering shareholders could be attained if the funds from the sale are used in this way?
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If I could just get the timing right for when the algos cover and go long on the space...Lol!
What a world...where are the value buyers, where are the business buyers, the LBO guys?Buy it and take it a part...for 150%....who is going to be the new Icahn? I think someone should get ahold of Fairfax and see if they are there?lights still on?
Maybe there should be an Algo message board?
Shhhh.....you will wake Prem and Paul up. Its already past their bedtime.
The complete silence from the Fairfax team regarding Blackberry and several of its other losers equity investments is nothing less than shameful! Awhile back one of the regular posters on this Board (who it was escapes me) suggested that one of the major problems with Fairfax was its non-existent investor relations communication strategy. Of course this person was shot down immediately by all the hard core net book value -- value investors. Well....that was about 40% ago on Blackberry and a good 20%+ ago on Fairfax itself. The standard response of "we focus on the long term" falls way short. I suspect they are embarrassed and simply don't know what to do and are hiding away under their desks just waiting for the January dividend payment and juicy year-end cash/stock bonuses.
Is it possible to start a revolution at Fairfax?
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What is mindboggling is the decision to continue to hold Resolute Forest Products at all. And may I add...Blackberry, Eurobank, Stelco Torstar etc etc. As far as the "long term" defence for hollding these positions....with the exception of Stelco all of these positions have been held for numerous years without any positive results.
Funnily enough several of these look really interesting to me at the moment. I have developed a new rule for following Fairfax: buy what they buy, just do it several years later.
Fair enough Petec....but one needs to ask why they are always so early?
In fact...they need to spend considerable time addressing this major flaw in their investment process. For example, as soon as they bought into Stelco it was pointed out by many on this board that the timing was very poor given where we were in the economic cycle and given the tariffs being levied by the Trump administration. And what happens...50% of their investment literally disappears over night.
And they were way early on Blackberry and truth be told this is not a sure thing even from this level. Full disclosure....I bought into Blackberry late last week.
Furthermore...although I might be wrong....Resolute Forest is simply a bad investment. They have had hundreds of million tied up in this loser for years. Time to admit the mistake, sell and redeploy the capital.
I could go on but I think my point has been made. I have followed Fairfax for literally decades and am a very patient investor but something is not right when you assemble a group of equity investments like the ones they hold at the prices they bought in at.
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That is a stunning decision by the Judge and damning commentary on Prem.
At one point The Judge called Prem's testimony "mindboggling"....on this I have to respectively disagree with the Judge. What is mindboggling is the decision to continue to hold Resolute Forest Products at all. And may I add...Blackberry, Eurobank, Stelco Torstar etc etc.
As far as the "long term" defence for hollding these positions....with the exception of Stelco all of these positions have been held for numerous years without any positive results. Blackberry for instance has been held 6 years since John Chen took over as CEO and years before that. Argue all you want but something is broken at the Hamblyn Watsa equity team and that is what is truly Mindboggling.
Thanks UK for posting the article.
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I initiated my original position in FFH in Nov 1999...and trading around that core position for years. I sold off a portion of my core position a few years ago and continue to hold a smallish position in the company. I have watched this company very closely since taking my initial position. With that as the background ... I will now comment on the this company...
The stock performance of this company continues to disappoint. Many of the reasons for the under performance have previously been discussed on this board however I believe the time is right to revisit them:
i) The equity portfolio is made up of a bunch of out right losers. Sure Blackberry has some promise and Eurobank is the cheapest bank on the planet but seriously....who in their right mind would put together a portfolio of equity positions that look anything like the ones held by FFH. Resolute Forest ...surely they can find something better. They need to cut their losers and free up and reallocate the capital.
ii) The company is seriously over leveraged. Continuing to borrow at 4%+ in today`s interest rate environment is foolish. And don`t get me started on the outstanding classes of preferred shares.
ii) Their major non-insurance subsidiaries largely consist of various retail and restaurant companies. They have not performed (and that`s with the tail wind of a strong economy behind them) and need to be addressed.
iv) Communication to the market. I know all you hard core value guys will think this is unnecessary however the reality is in today`s market this may be the most important aspect behind operating a successful public company. The market communication they do is ineffective and outdated. Wake up...its 2019 and todays investing community expect and deserve more than ...we manage for the long term.
v) Building on the point made in (iv) earlier this year management floated out the idea that they were looking at monetizing several of their private market holdings. Since then...total silence. Bueller...Bueller....Prem ...Paul.... please provide an update.
vi) The Board....please dont get me started....do your job....do something....
vii) Share buybacks....perhaps management is waiting for the stock to go lower. Not a bad bet if you ask me. What a farce. Singleton if he were alive should sue this company for misrepresenting what he had done.
vii) Buyout of minority positions in Brit, Eurolife, Allied World....provide the details....amount, timelines, etc. Why the secrecy...
viii) Fairfax India and Fairfax Africa...okay...now what....yes...yes ...I know....long term....frankly that explanation or what they are trying to pass off as an explanation is old and tired and of no real value.
I could go on and on and on...but whats the point. The next move is on me...most likely I will follow TwoCitiesCapital lead and exit this position entirely once and for all and not look back. I will however to continue to show up at the AGM to collect my $25 Keg gift card.
I await the attack from the FFH hard core fans...all 5 of you....
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It would also be very helpful if those individuals on the trip in India could report back on the current political atmosphere in the country. Especially, as it relates to the likelihood of Modi`s re-election later this year. As we all know---a big reason for Prem`s decision to invest so much capital into India was due to the benefits that he believed a Modi led government would bring to the country. From what I have been reading---Modi`s re-election is less than a certainty. Any insight into this area would be greatly appreciated.
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Torstar (TS.B on the TSX)....
Started the year at $1.91 per share. Closed yesterday at $1.64.
Fairfax announced on November 10th that they had made a significant additional share purchase at $1.25 to increase their ownership in the non-voting shares to more than 40%.
Main business (newspapers) remains under significant pressure however the company is debt-free has a significant cash balance and interest in a number of interesting media properties (Vertical Scope and Blue Ant to name a couple).
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This discussion reminds me of a conversation I overheard recently on a trip to NYC between a prominent Wall Street Trader and and early investor in Bitcoin:
Bitcoin Investor speaking:
"you a wall street trader who spent years in school earning multiple degrees and learning the minutia of finance and investments, worked 100 hour weeks for the last 10 years, never seeing your family and risking your health seem super excited about your 10% returns this year. Me a Bitcoiner, read a few books, posted a few ideas on Twitter, ate some steaks and drank a few beers and can sit back and enjoy my 900% return this year"
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;D
I voted China, but it could just as easily be Mexico, immigrants, or Democrats. Who voted "The Fed", does trump even know what that is?
Trump will blame the Boy Scouts of America.....
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Oakville has also slowed down. Townhouses are not moving at all. There is one down the street from me that has been for sale for 2 months and has had 4 open houses during that time and still hasn't sold. Detached are still selling but its taking a lot longer to sell. I have seen some detached houses that were for sale and have been taken off the market.
I am also in Oakville---south east of Trafalgar and QEW---market still very hot here---very few active listings and those that are listed still sell very quickly. I have heard (from several prominent agents and a few real estate lawyers) that things have slowed down north of QEW but the slow down has brought the market activity back a more "normal" level from the torrid pace it was on earlier in the spring. Where are you in Oakville?
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I suspect the share price drop has to do with the Allied World purchase. Current holders of AW know they will be getting shares of FFH at the time the deal is closed. If they have decided (for any number of reasons) they will not continue to hold the FFH shares they are selling now (effectively shorting) FFH and will close out the sale when the FFH shares are awarded when the acquisition closes. They profit at the expense of current shareholders. Just one of the negative consequences of the FFH team entering into the AW transaction before they had the deal financing lined up.
Furthermore not all of the FFH equity holdings have been doing well this quarter e.g., IBM is down substantially.
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Here's another letter that everyone should read:
FFH AGM 2020
in Fairfax Financial
Posted
https://www.fairfax.ca/news/press-releases/press-release-details/2020/FAIRFAX-ANNOUNCES-ANNUAL-MEETING-WEBCAST-DETAILS/default.aspx