bearprowler6

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.

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 The market communication they do is ineffective and outdated.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....

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.

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).

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"

Trump will blame the Boy Scouts of America.....

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?

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.

Here's another letter that everyone should read: http://www.npr.org/sections/thetwo-way/2017/02/08/514085145/read-coretta-scott-kings-letter-that-got-sen-elizabeth-warren-silenced

https://www.theatlantic.com/magazine/archive/2017/03/how-to-build-an-autocracy/513872/

We all need to calm down and take a deep breath. What we are experiencing is the decline of the American empire --- the decline of its importance on the world stage. This happens to all great empires eventually. Nonetheless it is painful to watch. In the early stages the decline proceeds somewhat slowly and therefore is largely ignored by most observers. The decline speeds up as time passes and when this happens denial is no longer an option. Many try to cling to the glory days of the past but the decline continues and cannot be stopped no matter who is in power or what policies are put into place. In order to make this as easy as possible on my American friends I say build the southern wall with Mexico. Let’s begin construction of a northern wall with Canada as well (of course the US will pay for this one). Close other borders points---airports and ports as well. Let the rot from within accelerate and let the implosion of a once great American society come to its final inevitable conclusion. Sad to watch for sure but there is no way to stop it.

First congratulations to a number of the Board members. Some absolutely stunning returns this year. For me---a disappointing year----4.7% overall return down from 9.3% in 2015 and compounded return for last five years (including 2016) of 10.3%. Took a large hit on cxr (the baby Valeant). Also, a basically flat FFH (which is a very large position) did not help. 35% cash heading into 2017.

Thank you BP6, If I have understood correctly, the main risks you see are: 1) Their stock picking performance will continue to generate very poor results, 2) They are financing the acquisition of Allied in a way that won't maximize shareholders' return. You said you have discussed a lot about FFH with people you trust and who know FFH very well. And you have come to the conclusion there is something wrong at FFH. Do you see other risks beside 1 and 2? I am really interested to understand if people who know FFH very well see risks that I might have overlooked. Cheers, Gio Gio, Your summary of my comments are not entirely accurate however I will try my best to respond to your questions. My conclusion to sell a portion of the shares in FFH that I have held for 16 years was made after consideration of a number of factors however bottom line my ability to simply ``trust in Prem`` is not what it once was. I did not say that FFH`s stock picking will continue to generate very poor results. I do not know what the future holds neither does the FFH team or any poster on this board. I did say that Prem owes his shareholders a detailed explanation of his exit strategy for 3 of his largest losing equity positions (Blackberry, Eurobank, Resolute Forest). Others may disagree with this—that`s okay. I will not reiterate the numerous concerns that have been written about by other posters however they all factored into my decision. In addition however I have become concerned with the following items: 1) FFH`s leverage was often discussed as the reason for the equity hedges. I accepted this explanation. What disturbs me is that FFH did not take advantage of a sell-off in the preferred share market to lower their leverage by buying back the preferred shares in the market at well below their issue price. The various FFH preferred share issues were done at $25 per share and yielded about 5% at issue. They all traded down substantially to levels as low as $11-12 per share earlier in the year due to the drop in bond yields. Despite having the authority to buyback these shares in the open market FFH chose not to do so. I don`t know about you but issuing shares at $25 and buying them back at $11-12 seems like a good trade to me. 2) Prem continually touts the longevity and experience of the management team as a key positive for FFH. This was great when the team was in their 40`s however they are now approaching their 70`s. It is time for Prem to also articulate the succession plan for all the key members of the management and investment team. As one individual I know says—``when Brian Bradstreet retires I will sell all of my FFH shares``. Prem has agreed to stay on until at least his 75th birthday. Great---what about the rest of them. I do not believe we can count on all of the key members to stay around as long as Buffett and Munger have done at Berkshire. 3) Board governance is also an area I have some concerns with. The lack of diversity and new blood (and in my view Ben Watsa does not count) on the board cannot be overlooked. 4) What is the Eurolife acquisition really about. As we all know—life insurance is a vastly different business than property and casualty insurance. It`s okay if FFH is now diversifying into life insurance but tell us that. I suspect that FFH`s Eurolife investment was simply another capital raising exercise for Eurobank disguised in another form. 5) The conference call to discuss the Q3 2016 results was held on November 4, 2016. At that time Prem was still extremely concerned about the US and global economies and as a resulted maintained the equity hedges and deflation protection. One week later---after the US election---FFH announces that everything is all right with the world and reduces the equity hedges by 50% because of Trump`s election win in the US. Simply put---I call bullshit on that explanation. I could go on however I will stop here. I trust you get a sense that my decision to sell is well thought out and based on a detailed analysis of the issues as I see them. Hopefully these comments assist you in deciding what to do with your FFH shares. As Uccmal said in an earlier post---what Prem has created at FFH is amazing. I could not have done it. He is to be applauded for what he has accomplished. Despite this I can no longer give him a pass when there are a series of issues at FFH that I have grave concern with which are not being addressed to my satisfaction. BP6

Interesting Ben. I came to this conclusion a while ago as you know. I dont understand why more insurance? To get more float? Why not just invest the float in really good companies, and increase it through cash flow? Prems economic comments scare me. Is he just trying to justify selling off the hedges? I dont believe it, for one second. US markets, and the world at large have gone this long without a bear market, precisely once, before. When Trump takes over and the markets realize he cant deliver on his promises, and that his economic advisors are incapable of operating in government this is going to get really bad. It scares me when everyone thinks sunny days are here again. And Prems economic comments just scare me more. Sorry Al, I thought I responded here but I didn't. Several things kind of led me to sell, and it's similar to your line of thinking. I may rejoin the fray again, as I do like the management team. 1) The poor logic (my opinion) by those claiming a new era has arrived. I find the logic humous because ideologically, I'm very closely aligned with the free market folks... just don't think that helps the stock market (I think it does help the economy and many issues we see... but those issues weren't holding back markets, so it's strange to think even a partial fixing would make the market even better!) 2) The complexity of Fairfax as an investment. Perhaps for some, a reasonable multiple to book and Prem's stamp is enough, but for me when they are multiplying their asset base by buying huge companies, it makes the work needed to understand the business much harder. 3) The financing of their deals doesn't make sense to me. They use *way* too much equity / JV funding (as well as debt!), and it either means something nefarious or that Prem and team are so conservative that I need to assume $2-4B in assets will just always be making $0 which changes my math on the name. Also, I would extend this to them continuing to carry large debt while simultaneously carrying multi-year huge cash balances.... 4) Fairfax's explanation of many of their actions have been lacking for a long time and I lost patience. 5) At this stage, Fairfax's equity investments have been utter dogs, and if you think they haven't lost it, then it's a way better deal to buy some their holdings as if you believe they are still good, then FFH has more $$$ to chase those stocks with. You can also buy these holdings at 1x "book" Don't mean to malign anyone who owns, just stating my logic. When the S&P trades for 25x+ TTM GAAP EPS though, and I see some of the logic recently displayed on this and other boards, I know which way to take my chips.... +1 I just sold 15% of my position in FFH. I am now below my core position in the company for the first time since I initiated the position in November 1999. I did this after much thought, reflection and discussions/debate with individuals I trust. I echo the comments made by both Uccmal and Benhacker---something is not right at FFH and hasn’t been for a VERY long time. Seriously---would anyone actually hold Blackberry, Resolute Forest and Eurobank as their 3 largest equity positions? Prem owes us (the shareholders of the company) a detailed explanation for what the exit strategy is for these and other underwater equity holdings. Simply saying that over the long term everything will work out is inadequate at best. The statement is meaningless without defining what “long term” means. As outlined by Benhacker---the deal financing strategy being deployed recently by FFH (buy first / finance second) also concerns me greatly. Bringing in outside investors to finance these deals greatly changes the metrics and not favourably from a FFH shareholder perspective. I remain a large shareholder of FFH however it was appropriate for me to reduce my equity exposure to the company because of the real concerns I have. Prem is now on a very short leash---it will be much easier for me to sell my remaining shares should he not deliver in short order. As for capturing the animal spirits that have supposedly been unleashed by the Trump victory (I remain a huge skeptic) ----- I would suggest that holding shares of Goldman Sachs, AIG and Cheniere Energy would give you a much better opportunity to do this than by holding shares in FFH. BP6

[ Okay, I'll play along (because I too am unwisely concentrated). If a systemic event adversely affected WFC, BAC and AXP to the point that there were a meaningful permanent loss of capital, what else would likely be occurring in the broader economy and society? I fully concur that there are a number of systemic events that could take out all three companies, but I would assert that it would likely be accompanied by a debauching of the currency and general collapse of the economy, for which gold bullion, canned food and adequate ammunition supplies are the only realistic hedge. Food for thought. SJ I believe the circumstances that one finds oneself in play a large role in what level of concentration is "appropriate". This is something I do not believe this board spends enough time on. For example---someone who is in the early stages of a solid career that provides surplus cash flow (above living expenses) is likely more able to work through even an extended significant decline in their portfolio. Whereas someone that is living off what their portfolio provides perhaps cannot. Also---the whole discussion of the risk of a permanent loss being the only potential risk of a concentrated portfolio (SJ---not implying you said this) is also overly simplistic. There are many real life examples where a large albeit temporary decline in the value of investments would cause great pain (e.g., in a divorce settlement where the higher value at separation day is used to determine payout at the divorce). Basically the point I am trying to make is that the level of portfolio concentration that one should consider is very much dependant on their own circumstances. No one size fits all and I would caution all those who blindly believe that a concentration portfolio is the only way to go should re-examine this issue in light of their own circumstances. I suspect that in most cases a more diversified portfolio would be the result.

Buffett strongly endorses Hillary Clinton and rips into Trump at a rally in Omaha today ..... http://www.bloomberg.com/politics/articles/2016-08-01/clinton-looks-for-buffett-s-help-to-burnish-economic-credentials Generally when a second level thinker such as Buffett has a strong view on a matter it is worth listening too.

+1 This morning---11 Gold Star family members penned an open letter to Trump demanding he apologize to the Khans for his "repugnant" remarks made in response to the Khan's appearance at the DNC. Mr. and Mrs. Khan both spoke on CNN this morning about their love of the U.S. and the character of son who made the ultimate sacrifice in service of his country. I invite all of you to watch the interview and attempt to connect with their grief as well as with their love of the U.S. How can any active military person or veteran not be disgusted by Trump's comments. Why would anyone enter any branch of military service in the U.S. if Trump became President knowing that if you die in service that Trump would respond by ridiculing your parents in the time of their ultimate grief. Trump is not fit to be President---I am not sure how any sane person can think or believe otherwise.

I don't know if this helps your thinking at all but i think it's related. Basically I have mostly given up trying to reason with people that support Trump. If they still support him after all he's done and said and promised I don't think there's anything that he can do or anything I or anyone can say that'll change their minds. Let alone facts and figures. Sadly, Trump is right. He really can go and shoot people on 5th avenue. +1 Like Trump himself---Trump supporters are so easy to bate into showing themselves for who they really are and what they truly stand for. But they do serve a purpose---once they explain why they are supporting Trump it becomes so very clear to the rest of us why we cannot.

Sadly many Americans believe that Trump is the answer to their societal problems. The rest of the world does not agree---Trump's "walk softly but carry a big stick" policy will fail because the rest of the world will be too busy laughing at the US to engage in discussions of any kind never mind those related to the renegotiation of the trade deals should he get elected as the President. So sure go ahead and vote for Trump---we need a good laugh.

In my view --- each investor needs to select a base currency and report their performance results in that base currency. This is what companies/pension plans/funds do when reporting their results and also in assessing whether to hedge or not their foreign currency exposures. In my case -- I live in Canada and therefore use the Canadian dollar as my base currency. It would not make sense for me to report my performance in USD. Having said that---I fully expected the USD to strengthen against the CAD during 2015 and increased my exposure to US equities in early Q1 2015 accordingly. Historically the CAD correlates to the price of oil almost 1:1. The relationship between the price of oil and CAD continued in 2015. Although I do not believe the run up in the USD versus CAD is fully over--I am looking to slightly lighten up my USD equity exposure in Q1 of 2016. The result---in Canadian dollar terms I achieved a rate of return on my overall portfolio of 9.24% during 2015.

+1

For those wanting to do a deeper dive---here is a link to the NCMSL's website: http://www.ncmsl.com/index.asp

Another deal by the Fairfax India team: http://www.stockhouse.com/news/press-releases/2015/07/20/fairfax-india-to-acquire-national-collateral-management-services-india-s

Sanjeev---with the utmost respect---I cannot agree with your statement. I too am a very long time shareholder of Fairfax (initial shares bought in the mid 1990's). I stayed with the company through its darkest days and added to my aggregate shareholding throughout. Yes---my patience has been greatly rewarded. All the more reason why it pains me greatly to have to vote "No" against the Proposal at hand. My concerns with the Proposal are best described on page 20 of the Management Proxy Circular that was sent to shareholders. The two issues outlined on that page are as follows: 1) The Amendment may prolong the period of time during which Sixty Two can exercise a controlling influence on most corporate matters; and 2) The Amendment may have an anti-takeover effect. Detailed comments are provided for each of these items in the Circular. These items are significant enough (to me) that I believe as a shareholder of subordinated voting shares that I should be compensated for these two items which are arising only as a result of the Proposal at hand. I do not believe that Prem's commitment to remain as CEO for at least another 10 years and to fix his compensation at its current level are adequate compensation. I respect that others may disagree with my view and vote for the Proposal however I could not. Everyone should vote as their conscience dictates, but I think you guys have missed a couple of points: 1) The Amendment may prolong the period of time during which Sixty Two can exercise a controlling influence on most corporate matters; and Sixty-Two already controls Fairfax, and will never relinquish control of Fairfax. They'll stop acquisitions through share issuances before they ever give up control. The reason being, Fairfax like Berkshire, has done particularly well over the years under this structure and this corporate culture. This type of control could be tyrannical as we've seen with Biglari, or it could be successful and fair to shareholders as we've seen under Prem. 2) The Amendment may have an anti-takeover effect. Neither Prem, nor Sixty-Two which already has control, will ever sell Fairfax...so there is no anti-takeover premium or effect. Even back in the 1986 shareholder's letter, when it was still Markel, Prem stated that he would never sell: "Why did we sell subordinate voting shares which have only one vote and retain multiple voting shares (10 votes) for ourselves? Mainly because we wanted to control Markel Financial and manage the company to provide an above average long term return to shareholders. Our multiple voting shares are not traded and can be sold in the public markets only as subordinate voting shares. Also, a takeover offer for our shares, if accepted, immediately triggers a similar offer for all the common shares outstanding. A Canadian Tire type of situation, which we find very distasteful, cannot and will not happen with Markel Financial. However, we must add that it is extremely unlikely that we would sell our multiple voting shares even if an offer came in at 100% above the current market price. Thus, our multiple voting shares prevent an investor from getting an attractive one time bonanza. Our feeling though, is that for this short term pain, there could be some excellent long term gains. Berkshire Hathaway, for example, has experienced an unbelievable increase in its share price from $20 in 1965 to $3500 currently. Any takeover offer for Berkshire Hathaway, though attractive in the short run, would be hard pressed to match the long term returns that have been achieved. For Berkshire Hathaway, this is a fact. For us, it is only a goal!" Boy did Prem deliver! Cheers! A few points of clarification: Sixty Two does NOT currently control Fairfax. In Prem`s own words (please refer to his letter to the shareholders dated June 12, 2015 included in the Management Proxy Circular) he has EFFECTIVE control of Fairfax which is not control. The excerpt from Prem`s 1986 letter---again in Prem`s own words: ``...it is extremely unlikely that we would sell our multiple voting shares...``. Extremely unlikely but not impossible. My point---and I suspect the point of others who have voted against the Proposal (or are seriously considering voting against it) is quite simple. The shareholders of the multiple voting shares are gaining at the expense of the subordinated voting shareholders if the Proposal being considered passes and the subordinated voting shareholders are not being adequately compensated for what they are losing. The Proposal being voted on is not a vote for or against Prem`s past performance (which has been superb) nor is it a vote for or against what we can expect from Prem in the future (which I suspect is also likely going to be stellar). The Proposal at hand is one of valuation and compensation for lost shareholder rights or value---lost value of the existing subordinated voting shareholders. For that reason I voted NO after very careful consideration of all the information available to me.