oldye

Just doing it in my head...roughly 25%? You'd make 2.85x your money.

Any reason you are discounting their returns on equities and not the returns on bonds? I mean if you're going to be conservative why not assume something less than 9 on fixed income :). If you work with 10% on assets you'll have an idea of what the best likely scenario would look like, 6-7% far more conservative. I'd be quite satisfied if the stock portfolio doubled from current levels every 5 years, Without adding to it they'd have 16 billion dollars in stock 10 years from now Its scary to consider what it would look like if they maintain their historic rate of return. Cheers.

Here is a timely example: http://www.claimsjournal.com/news/international/2009/09/23/103997.htm "Standard & Poor's Ratings Services has assigned its preliminary 'BBB-' senior unsecured debt, 'BB+' subordinated unsecured debt, and 'BB' preferred shares ratings on Fairfax Financial Holdings Ltd.'s US$2 billion universal shelf, which was filed on Sept. 18, 2009. S&P said Fairfax exhausted its prior Aug. 31, 2009, US$1 billion shelf to fund the pending acquisition of the outstanding common shares of Odyssey Re that it currently does not own. S&P added that it is "unaware of any new strategic expansion initiatives that would require an immediate draw upon the new shelf. In addition it said the "ratings reflect Fairfax's strong business and financial profile. Fairfax, through its insurance operating subsidiaries, including Northbridge Financial, Crum & Forster, and Odyssey Reinsurance, maintains a competitive presence in the North American commercial insurance marketplace, as well as in the global reinsurance market. Fairfax reported consolidated pretax operating income of US$373 million in the first half of 2009, a satisfactory combined loss and expense ratio of 98.4 percent, and total shareholders' equity of $5.6 billion." These people are just stupid...They're rating a shelf filling now..and they're doing it wrong. In what world is it practical to ignore significant changes since quarter end...like an increase of equity of over 1.5 billion. If Fairfax lost 1.5 Billion+ they'd be going nuts but a gain in equity isn't substantial enough for the interns at a publishing company to raise the rating.

I'm going through some of it on google right now, looks like you guys have been holding back on us! There is even a interesting tidbit in the beginning about Davis's wife working for World Book

Another company has generated 16% compound annual growth in stock price over the past 25 years, but the CEO expects his company to "comfortably" exceed these returns going forward. Anyone know what company they're talking about here? Good Article!

There is a saying that generals are always "fighting the last war" http://www.youtube.com/watch?v=ckFfzoplC-I&feature=player_embedded#t=411 Robert Kiyosaki thinks gold is going to 15000 an ounce "the possible return of gold is infinity"

We're really far from demand outstripping supply...I don't really see how we get there.

What premium lol? Its not remotely close to fair value...don't use what other companies are trading at to tell you what your assets are worth. They gave up about as much as they're receiving in value. The fact that there is now an extra billion in equity...at least 200 million in additional earning power and still not seeing any upgrades. The people that work at rating agencies are incompetent...although they're bound to get it right sooner rather than later. I know because the stock is up and thats the only thing those morons seem to look at.

May I ask what source are you using for these figures? The Government has about 12 trillion in debt. At 5% that costs tax payers 600 billion a year...the government has a interest coverage ratio of like 500%...its overblown!

SD, I know the creditor agreement precludes them from paying dividends till next year, do you think there is a chance they'll can start buying back their debt for .50 on the dollar?

I always felt it was to their advantage to have a publicly traded sub where they could put excess capital to work but I think we just need to see where they go with all this. Buying it back gives them tremendous flexibility...all of their subs are over capitalized. At this point I'm speculating but maybe we'll see them go after a Esurance, 21st century type car insurer. They made a weird play on Progressive a few months back, put 50 million to work and then 3 months later sold out...maybe they saw some fundamental flaw that they could exploit? Allstate and Farmers are just begging to have their @ss handed to them. In Omaha Warren said that about 100 people signed up for Geico that weekend which paid for the entire event! With a 97% satisfaction rate...short term float really works like long term float!

anyone else keep clicking that "ORH deal unfair" adword? ;D

Harvest Natural Resources is not a Venezuelan oil company! Their biggest asset is in Venezuela and if it were nationalized they'd get money for that asset so his thesis really makes sense for this particular position. That said, the company grossly mismanaged capital over the past year and I no longer own it.

Thats funny because these contracts are no different than any long tail insurance contract which I"m sure no one really bothers to pull apart and just figures if Berkshire is doing it must be smart. These people have been doing smart things for a very long time.

They're still not even at 1.1 book ..imagine what kind of lunch you'll need to eat when they see 2 :)

Berkshire will be a trillion dollar company one day...for that to happen they'll need to generate about 50-100 billion dollars per year which is astronomical but thats what this machine is set up for. Thanks to last years investments they'll have no problem averaging greater than 10% growth for the foreseeable future so double earning power by 2016 or 27-37 billion per year. As long as capital keeps being put to work at 15+% they should have no issue getting 10% long term or better. I wouldn't be surprised if Berkshire is a trillion dollar company by 2026.

Back of the envelope math makes me think that there will be a drop in investments per share by about 20-25$ as a result of the transaction. We can be sure the benefit of the transaction adds more than offsets the slight decrease in eps.

I remember Charlie Munger calling Jeremy Siegel demented in front of thirty thousand people in Omaha ;)

Its been years since I've read Peter Lynch but I remember he wrote about how only a handful of good days in the market were responsible for most of the gains we've had over the past 100 years. He continues by saying that since the Expected risk adjusted return from his stock is higher than any other similar asset at any given time he should always be fully invested. All things considered, I think its Its penny rich pound foolish to be selling stocks at half of intrinsic value hoping to buy back at 40% of intrinsic value some day in the future. These guys are building a fortress at Fairfax. If you are worried about market risk, hedge...I just don't understand the rational behind capping future gains...implicitly you are saying that there is no way they float toward intrinsic value. Book value barely begins to tell the story of this company, why obsess about where the puck has been?

http://www.canada.com/business/fp/Prem+Watsa+business+style+display+financing+deal/1971735/story.html

Under the Obama white house, M3 money supply is currently growing at a nudge under 4% the lowest rate since 2004. For comparison sake m3 growth was about 17% in the beginning of 2008. Anyone else think Gold bugs sound exactly like real estate bugs did in 08? The asset class is up 300% since 2003 vs a U.S dollar that has relatively the same buying power relative to other assets. Far more buying power with respect to enterprises. We live in a post financial trauma world, lots of people experience just enough stress that their investment psyches were damaged beyond rational though so they rush into safe haven investments such as gold. Even if you don't know the intrinsic value, is it so hard to imagine that inflation is already baked into this cake...

Whats it worth and why? Why are you holding owning it when you don't know what someone will pay you for it in the future? Why is 1 ounce of gold almost as valuable as 3 shares of Fairfax? Its normal for people to rush to "safe harbors" after times of crisis because they anchor the experience, but there is a price point where gold won't protect your purchasing power. How sure are you that at 1000 an ounce you haven't passed that point?

They should be generating some descent cash at these levels, now lets cross our fingers and hope this persists for more than a few quarters. Cheers

Yes, with respects to ORH and FFH the market is plain stupid :)

But if they push the price up, there should be quite a bit of value being unlocked at the holdco as well which will help with the financing.