bearprowler6

http://www.fairfaxindia.ca/news/press-releases/press-release-details/2015/Offer-to-Acquire-26-of-IIFL-Holdings-Limited/default.aspx

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.

In addition to the tax implications of going from invested back to 80% cash, is that for the first 8 years they invested mostly in T-bills so most of their returns in those years would be ordinary income (based on US tax rules). It is hard for me to understand why someone who is primarily focused on preservation of capital would choose Patient Capital over BRK. While BRK has had greater volatility, it has meaningfully outperformed PC, and after taxes would have materially outperformed. Obviously it must be the unwillingness to stomach volatility. Some very good points---tax efficiency of any fund certainly needs to be considered however perhaps this is less of an issue if the fund is held within a tax deferred account of some sort. As for simply going with BRK over the PC fund--- this is a possibilty however being a Canadian resident the added issue of the FX exposure (which I briefly touched upon earlier in this thread) adds a level of complexity that needs to be taken into consideration when considering BRK. Perhaps for a US based resident the "go with BRK" decision is much clearer. As for the ability to stomach volatilty---a very valid concern---I currently self manage my family's portfolio (my wife and me) and I can safely say it is VERY concentrated in a few select names. Volatility is truly something I do not concern myself with. Nonetheless---I raised the possibilty of potentially having my wife use Patient Capital as her investment manager should something unexpected happen to me because of that firm's focus on capital preservation and the low volatlity of its results.

What I am not sure I understand well about these funds which hold lots of cash and justify their decision by saying their main objective is “to protect capital” is the following: With the exception of a new Great Depression, I am quite positive all investments of mine would grow much faster in a volatile environment than in a muddle through scenario… I actually think a 30%-40% market crash would make the companies I own stronger… not weaker! Of course, in a market crash, as the fundamentals of those business improve, their stock prices might probably go down with the overall market… and would probably go down a lot! But, if the fundamentals of those businesses improve, how can my capital not be sufficiently protected? Even if stock prices go down? Therefore, imo it could be either a) They truly fear a new Great Depression or b) Their true aim is not “to protect capital”, but “to buy assets very cheaply, when they become available”. Cheers, Gio In mid 2008 I went to 80%+ cash (selling 20yr positions in Canadian banks, etc but keeping BRK) and moved some money into some cash rich companies (Appl) and companies that had a history of being opportunistic in bad markets (eg Loews). Everything dropped in the market downturn and most companies did little to be opportunistic. APPl did nothing. Loews funded CNA. I ended up having to double up on APPL at 90 to gain from it. Added to BRK a couple days before it bottomed. (My biggest single purchase ever.) So even though BRK was clearly being opportunistic, its shares still crashed as existing shareholders panicked and dumped BRK. So the lessons are, one, you are on your own, doesn't expect your holdings to grow stronger in a recession, their mgmt may freeze due to their temperament. Two, even the best companies will drop in a recession and you'll see it in your own portfolios plummeting value, and you'll consider selling and not buying. Well said KinAlberta! In addition, despite what an individual investor may state now about themselves and their risk tolerance---there is no way of knowing how that individual with react during a protracted bear market. Will they be able to hold onto their existing positions that have dropped 30, 40 or even 50% or more? Will they be able to deploy additional capital at or near a market bottom? Perhaps more importantly --- will their circumstances allow them to hold on? Deploy additional capital? By circumstances I mean their employment/personal situation may change drastically from what they expected or they may need to use their liquid funds for some unforeseen expenditures rather than investing in value bargains. There is a segment of the population that simply cannot tolerate even temporary declines in the value of their portfolios. For them---avoiding any "loss" of capital (even one temporary in nature) is a much bigger motivator than achieving outsized returns. I suspect that a manager such as Patient Capital would very much appeal to this type of investor. One of the fears I have about the market correction in 2008-09 is that once it reached bottom it basically went straight up from that point due to central bank intervention. So even the most nervous investors made out okay provided they were able to hold on through the bottom. I am not at all certain that those same investors would be able to hold through several years of a flat lined market after a severe downturn.

A good response Packer! The question then becomes which index? I am based in Canada so using the same index selection as Buffett likely does not make sense for me without also considering the currency hedged vs non-hedged issue which greatly complicates things. I also believe we should not take Buffett at his word---his "capital" far exceeds most humans (certainly exceeds mine) so really does it matter what he chooses to do with his money when he passes? For example-- Buffett likely has $1-2 billion in cash set aside for his wife with the rest being allocated to the index. In any case---Buffett's wife will be well cared for regardless of how his money is invested. I think it is critical that when selecting a third party manager that one also looks at how they did in 2008/09. Many managers especially index managers or index-huggers took severe performance hits in that period. Then they hid behind---"I beat the index "when questionned on why they did so poorly. Again---perserving capital is my #1 critertia---growth of that capital at a very modest rate is a distant second. Personally my overall "balanced" portfolio lost 4.39% in 2008 and gained 10.55% in 2009. Taking a look at Patient Capital's annual returns: http://www.patientcapital.com/calendar-year-returns LOL---perhaps I should be moving my money to PC now?

I suggest that the focus on a comparison to a particular benchmark may be misplaced. In the case of Patient Capital the performance comparison to the S&P 500 is for illustrative purposes only. Is it the "right" benchmark---perhaps yes perhaps no---but in reality who really cares. Let me explain. Although I do not currently invest with Patient Capital---they are on a very short list of managers for my wife to contact should something happen to me. Why is this---because Mr Maida is fanatical about protecting the capital already in place. For me personally---this is the key criteria. Having achieved a level of capital that is sufficient for us to achieve our goals and satisfy our obligations --- protecting that capital is what it is all about. The very satisfactory return that Mr Maida produces is for me only an added bonus. In other words--I believe it is critical that each of us sets a personal return benchmark --- if that personal benchmark is achieved it really matters not how our individual performance compares to the returns on the S&P 500 or any other arbitrary index. BTW---Mr Maida's performance well exceeds my personal benchmark and has for sometime.

Fairfax Financial chief Prem Watsa tells his 'Horatio Alger' story: http://business.financialpost.com/news/mining/ceo-interviews/fairfax-financial-holdings-ltd-chief-executive-prem-watsa-tells-his-horatio-alger-story

I suspect the HWIC Asia fund performance numbers were meant to be indicative rather than an absolute reflection of Fairfax India's future performance. Accordingly, I am not sure that one needs to make the direct comparison being suggested. Furthermore, the investment mandate within Fairfax India is far broader than in the HWIC Asia fund as the latter must adhere to investment insurance regulations of the various investee companies in that fund.

From the National Post: http://business.financialpost.com/news/fp-street/its-fairfax-financial-holdings-time-to-shine-as-companys-strategy-gathers-supporters

I attended the 2014 (May 2014) annual meeting. Bruce Flatt and other senior executives provided an overview of each business line as well as a summary of the significant events that occurred across the business in the prior 12 months. The meeting was then opened up to questions---only one question was asked (very disappointing) so they concluded the meeting. Light refreshments and snacks were offered following the meeting during which time the executives including Bruce made themselves available to the shareholders/other meeting attendees to answer any questions one on one. I spoke with Bruce at length during this time and was able to ask him his views on deflation and its possible impact on BAM's various business (a concern of mine given the levels of debt the company and its subsidiaries have against income producing assets) as well as about the decision to invest a small amount along side Fairfax in the Eurobank capitalization. I found Bruce to be very approachable, extremely knowledgeable and he took as much time as I needed to respond to my questions. I plan on attending this years meeting which is schedule for Wednesday May 6th starting at 11:30 am at the Design Exchange on Bay Street in Toronto.

We do not know whether $10 USD (less underwriter's fees) is still reflective of the current NAV since we do not know for sure whether any investments have been made since the IPO on January 30th. Also---the investment mandate is very wide---not limited to just public or private equities. Public and private debt as well as infrastructure investments are possible investment choices. They can also utilize leverage. They raised USD during the IPO which means that one also needs to be mindful of the USD/India Rupee exchange rate fluctuations. As for the management fees --- these were negotiated on behalf of all investors by Fidelity (one of the cornerstone investors) so they reflect hard bargained market rates for these services. Full disclosure --- I acquired my shares in Fairfax India during the IPO and for my wife a few days after the IPO. I strongly believe buying at even the current market price offers an investor a rare opportunity for significant long-term growth however time will tell on this point.

In addition to the very strong return on their overall investment (Prime/Cara) to date---I believe it is perhaps more important to note that while Fairfax's interest in the overall equity of Cara will drop to 40-41% after the IPO they will remain in control of Cara with 53% of the votes.

Hi Gio, Yes---the NAV at the time the company went public was $10 USD---in late January. The US dollar has strengthened somewhat against the Indian Rupee since the issue date so the "purchasing power" of the funds raised has increased. The investment mandate is quite broad -- giving the Hamblin Watsa team a lot of latitude. Although no acquisitions have been announced publically it is impossible to know at this point whether any of the funds raised have been deployed or fully remain in USD. I would highly recommend a read through the prospectus if you haven't had a chance to do so already. It can be found by searching the company's documents on Sedar. Take care, BP6

Fairfax has also announced a $200 million preferred share deal (with a $50 million overallotment privledge) as well as a $300 million senior note issue! The investment bankers (BMO, RBC and Scotia) are having a nice week! Maybe its time to buy some Canadian bank stocks?

http://www.istockanalyst.com/business/news/7191789/fairfax-announces-c-650mm-bought-deal-financing

Trading in Fairfax India to commence today on the TSX: http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-India-Completes-US1-Billion-Offering-Comprised-of-US500-Million-Initial-Public-Offering-and-US500-Million-Private-Placements-and-Will-Commence-Trading-Today-on-the-TSX/default.aspx

Fairfax purchases all of Praktiker Hellas to add to its Greek portfolio that already includes exposure to banking, real estate and industrial production: http://www.theglobeandmail.com/report-on-business/international-business/european-business/fairfax-intends-on-being-a-long-term-investor-in-praktiker/article19174631/

For those interested---an interesting and reasonably cost effective way of gaining direct access to the "recovery" taking place in Greece is available via "The Global X Greece ETF "that trades under on the NYSE under the symbol "GREK" offers . A link to the ETF website is provided below: http://www.globalxfunds.com/GREK The ETF holds 22 positions including Piraeous Bank, Alpha Credit Bank, Mytilineous Holdings and Eurobank Properties REIT -- all of which were mentioned in the Stansberry Report.

Invest along side Fairfax in the new Fairfax India Fund: http://www.theglobeandmail.com/report-on-business/streetwise/fairfax-india-to-expand-after-bjp-election-victory/article18735019/#dashboard/follows/

BV has increased substantially since the end of the Q1 given the movement in the bond market combined with the sell off in the Russell 2000! Market is likely reacting to both of these along with the increasing threat of deflation in the Eurozone!

Al, of course he has his inconsistencies! Yet, he is the one who created an $8 billion company from scratch. Not me, neither you, nor anyone on the board (at least that I know of!). Therefore, the real question is: has he lost his mind? From a first class entrepreneur, has he suddenly become third tier? Gio He has not adapted to having large amounts of cash available. It is all back to the argument you had on the other thread. If they are gojng to be in the insurance business they need to invest for cash flow, not lumpiness. If they are going to be a PE shop then this is fine. The high debt, and poor cash flow of this style is damaging the insurance operation. Again, I repeat: 1.4 billion could have generated a lot of cash flow directly to Fairfax. 150 to 250 million per year. instead it was thrown away on a speculation. Think about that while you defend them Gio. Where are you finding these businesses with sustainable cash flow yields of 11-18% in this environment? I want in on that action. In defence of Prem (and of Gio)---I believe it is unfair to dismiss BB as a "speculation". FFH was not the only investor in the recent convertible offering. Have Markel; Mackenzie, Brookfield and Canso all lost their minds? I sincerely doubt it! BB is restructuring! Restructurings are complicated, stressful, difficult and not for the faint of heart. They do not occur at a measured pace. Ideally the restructuring should occur out of the glare of the public markets however for a number of reasons that could not happen in this case. Having "effective" control of a restructuring is the best way to protect your position. Prem has done that. John Chen appears to be the "real deal" and is comfortable in these type of situations. Time will tell---patience is required on this one!

I have read this discussion with much interest...it reminds me of a true story from several years ago when I was very early on in my career.... A successful small business owner was being encouraged by his advisors to make "better use" of the cash he had accumulated---$2 million (a lot of money at the time). They could not understand or accept why he would only invest his $2 million in 30 day t-bills earning about 4% at the time (yes it was a long while ago---mid '80's). They were frustrated by his unwillingness to invest his cash more tax-efficently or into vehicles that would allow him to achieve a higher rate of return which would of course allow him to grow his money at a faster rate. At the end of one meeting during which time the advisors had offered up several suggestions for the money---the business owner reminded them of something very important ---something that put all of their advice in context---he reminded them that he was the one with the $2 million! From that point forward the matter was never discussed again.

Mr Market may be starting to consider a deflationary scenario and therefore is placing value on FFH's deflationary bet -- we don't need deflation to set in --- all we need is the expectation that it might. Also--the US 10 year hit 3%+ a few weeks ago -- now trading at 2.50% -- given their deflationary view--- is it possible that Brian B loaded up on US government bonds at the 3% level?

Back to BBRY for a moment---I would suggest that yesterday’s move on BBRY was more defensive than offensive---done to protect/salvage FFH’s existing investment in the company. Only time will allow us to know whether the move is ultimately successful or not. While the list of recent equity investment “failures” (Torstar, Abitibi, Canwest) is long so is the list of recent mega hits -- Bank of Ireland, Mega Brands, the Brick and J&J to name just a few. It is also worth mentioning the almost flawless execution around the management of FFH’s fixed income portfolio. The frustration surrounding FFH and Prem seems to be at an all-time high---however those who are patient and focus on the long term will stand to benefit the most. For the record---I still believe that FFH will realize significant gains from both its deflation bet and equity hedges however I understand why not everyone holds this view. For these individuals; investments other than FFH may hold more appeal.

A simple case of selling out at the top (Canada) and buying in at the bottom (UK).