Spekulatius

This begs the question - if you like Bridgewaters unique management style so much, why did you leave after just 3.5 years? In my book that is not a long time to spent with an employer your really like working for.

Call me skeptical that the radically transparancy really applies to everyone equally and that leads to people giving rational and unemotional ratings to everyone.I think they system is just meant to be gamed with kickbacks or revenge ratings. I am not debating that it works for Bridgewater, but I think it would not work in most places in the wild. Bridgewaters employes are handselected and highly paid and the environment is fairly academic. I am fairly sure that the average company cannot operate in the same way.

This model works only in certain industries like investment banking or hedge funds, where the pay scale is very high. Think about it - why would a software engineer deal with that level of stress and crappy work environment while getting paid maybe 150k/ year? You probably have to double and triple the pay to get people to work there. For 10-20% more, not many would do it and turnover would be sky high. Is it worth to pay eomployees double the salary so you can put them under that level of stress and portably still have huge turnover? I don’t think so for most tech companies.

I think Gregmal hit the nail on the head. The market is not an excuse. Mr Market is here to serve you not to guide you. I do think that it is Ok to underperform a bull market that run basically on multiple expansion, but it is not excusable to lose money in such a market, by going short etc. I would also think that if you are underperforming, that you need to be able to make the case, that you are taking on less risk than investing in a market index.

Not that I believe it will happen, but if there is an ounce of justice in the business, this stock should be a zero. Companies have been bankrupted for far less negligence.

I bought AXS, RE and a bit of AHL. Those stocks have been battered enough discounting a 100 year event. I think the well managed insurers keep exposure to a 100 year event to <20 % of their book value.

I love the "If it works out- you get your money back, if it doesn't' it's gone" type of partnerships. Heads, he wins, tails, we all lose. A great deal, if you can get it.

Can you please elaborate on how you get GE at 15.6 P/E. Roughly $1.6 (and a few cents) earnings on $25.5 stock price.

Bought a starter position in GE. It's an example of an above average quality business with above average balance sheet trading for much less than the market multiple (~15.6x earnings).

As far as stability and reliability is concerned, I rate IB , using either the TWS application or the mobile app (I use the iPad and the Android App) as best in class. I have been able to execute trades in the wildest days of the financial crisis and during the mini crash a couple of years ago, when no other brokerage was able to get anything done (I have fidelity, E*TRADE and Wells Fargo investments). The Turbotax issues is a big nuisance, since the CSV export is lacking. This is not an issues , if you have and IRA account with IB. While the TWS app has become too complex over the year imo; I do most of my trades using the IPad or Android mobile app nowadays and both are fairly straightforward to use.

Interesting story and good lessons here. Not that it matters, since I am a layman, but I followed the financial crisis closely and also could not fathom the extend of it in the beginning. I was not surprised about a few hedge funds blowing up or Countrywide blowing up etc. Living in CA at that time, it was quite clear that there was a lot of froth and fraudulence in subprime. What I did not get is that so much of the same stuff was going on in our core financial institutions and how interrrlated the credit markets are, as well as the issue of reflexivity. It appears to be a result of how the people operate and how in incentives are structured and all the former attractivjng a certain crowd of people that is willing to do almost anything to earn money fast. As long as that is in place, it is all but assured, that those thing will recoccur, but of course I do not know when and the extend of it. We did see quite a bit of panic in the credit markets for energy in late 2015/ early 2016 for example. I think OP's opinion about the EM credit markets is a good one, since we know that these markets can become illiquid really fast, which means that everyone is going to run to the exit, if they see fire or smell smoke, I would love to read theLads book too, should he ever publish one.

If the mortgage is non-recourse, would always take a mortgage. Owning a property with a mortgage is safer than buying for cash in a sense, because you have the put option to give the property back to the bank, if prices fall a lot. If you take out a fixed rate mortgage, you are also protected against higher interest rates, If interest rates were to go much higher, your property would be worth less, but so would be the fixed rate mortgage that you took out. Most likely, your cash flow would increase, because rents would rise due to higher inflation and owning being too expensive for prospective buyers because of increasing interest cost.

On the topic of great investments they may have done in the past, what are some names they've held for their entire existence? Or even >10/15 years. Akin to Berkshire holding KO or AMEX. Prem talked about that sort of holding was what they wanted to get into with their 2009 windfall. Mentioned JNJ and such. I know, they're not Berkshire and all that but their investment approach has been head scratching. Nothing to show for. Bonds, absolutely done great. Trying to get my head wrapped around the stated 15% rate goal. Edit: I've been on the sidelines for about 5 years now and price down to where it was then. At this valuation, great investments are not necessary any more for FFH stock to do well, just not screwing up will suffice.

Bought FRFHF today (add) and dipped my toe a bit into AZO as well (starter position in one account).

Same here. If they just invest like any other insurers (mostly bonds ), then the stock should do OK. If they do some smart investments that pay off like they have done in the past and continue to shoe good underwriting, the stock should do very well. F they blow their surplus cash flow and subpar investment, then we probably will look at a stagnating stock going forward. In other words, it's getting closer to a "heads I win, tails I don't lose much" type of investment. I am in and buying more as the stock goes down.

@ thelads - thank you for sharing your experience and taking time for detailed answers. I very much appreciate the "insiders" look into workings of the machinery. It does appear that the book - " The big Short" captured many essentials of what was happening in these markets at that time correctly. Fascinating!

Interesting story. My general question arelsted to above is how well do the decision or even the creators of these products understand them? Do they actually do diligence and reading/studying the prospectus or run their own models, or do they tend to rely on the reputation or relationships to make a decision. I mean, who can read a 500 page plus prospectus, especially for something that is new/complex and you don't even know what to look for?

The problem with above example of a 100% ROE is that the company usually cannot reinvest the profits with the same ROE in the business again. It is quite obvious with the car dealership example - if a car dealer really has 100% ROE and they could reinvest with the profitability in the business, it means that they could double the business every 12 month. Realisiticaly, a car dealership is not a business that can double in 12 month - where should all the growth come from? There are some business that can theoretically double without much capital spent (internet business like FB), but there are of course other limitations for their growth (law of large numbers, addressable market, ability to grow organization)

Agreed, I missed the comment in the annual report on the bottom of page 4: (1) Amounts in this letter are in U.S. dollars unless specified otherwise. Numbers in the tables in this letter are in U.S. dollars and $ millions except as otherwise indicated. So, now, I can reconcile this. Pretty stupid of me, I always assumed that a Canadian company has their balance sheet in Can $, but that is clearly not the case. I do agree that this makes FFH at least reasonably priced, if not cheap.

Not sure that FFH trading cheaply at this point. From looking at the Y2016 annual report, Shareholders equity is 8,484 Canadian $, which at 23M shares leads to roughly $370 Can book value. now, I understand we have to adjust for fair value ofaffiliates - those were (3,267-2,633 or another 634 Can $($28/share). Even if this increased to $57 CAN/share, the book value is now $427 Can $ and at $570 Can $ (where it is trading now) we look at 1.33 book value. I don't understand how OP can look at the consolidated balance sheet and get to US$7.048 in book value for the insurance component. There are minority interests here that need to be deducted, so starting from the common stockholders equity as stated in their filing seems more appropriate. I have to say, for a value investment and compounder, I find FFH's annual report very hard to read and it is quite difficult to understand the financial results as they relate to prior years. The disclosure seems to be all there, but it is much harder than for most other companies to put them together and get and deal how the company is doing.

There is no reason to go to Detroit. Sure, real estate is cheap there, but that is true in a lot of other places as well, that aren't as dumpy. Michigan is no tax haven either. I work in the NYC area in engineering and the company Of work for inshore to upstate NY. we can hop in a car and be there in 3 hours. The wasteland begins ~ 1.5 hours north of the city already. Same applies to Nevada if you are in CA. The problem is that human capital does not want to move. If you try to do so, many will just take the packet and find a job elsewhere. So you will lose the employees with the best skills or those that are the most underpaid. Aalso, from my somewhat limited experience, these jobs at the new o shored locations are not very safe either, as companies shut down these new locations rather quickly, if they don't work out, or the business goes bad, despite being in a low cost regain. Then you can be stranded in a location with not that many other jobs, and need to move again. So for employees, the prospect of moving is not too enticing. I think the sunbelt state are more likely benefit from onshoring than Michigan. The states are more business friendly and probably better run, demographics are better and there not really much difference between cheap and dirt cheap.

Fixating on metrics is at least an investment thesis. The worst is fixating on your purchase price, which is irrelevant for anybody but yourself.

I'd like the military to be robotized. Dangerous job, expensive healthcare, PSTD. Money shouldn't be much of an issue and it is clearly something where robots do the job safer. 8)

The answer is 42:http://hitchhikers.wikia.com/wiki/42

I think most will agree on one thing - the future will look different than anyone envisions it.