oldye

I don't think there is a relationship between the solvency of the United States and the amount of commerce that takes place here. GDP = money supply x velocity of money or C + I + G + (Ex - Im)...at the current pace money supply will double over the next 8-9 years. Companies with sustainable growing economic moats by definition will earn a greater % of the money supply in the future. As long as the Chinese want the U.S consuming its products they have no choice but to accept dollars, what scares the crap out of me is that for now they've chosen to put that money to work at 3-4% when they could have been buying up our best assets.

GDP is a straightforward function of total economic spending, its kind of like comparing debt to revenue, not profit. The numbers are scary but irrelevant. I think debt vs the value of all U.S assets both foreign and domestic is a more useful ratio. Considering the fact that U.S debt is in U.S dollars, its impossible for the US to be insolvent!

Sounds like that debt is being put to work at a very high rate of return is a big net positive for society. If the U.S borrows at 4% and invests at 6% you have a huge net positive. Problem is people were borrowing at 7% and investing at 1% w/ 6% transaction costs.

"But of course, all this assumes the market prices remain where they are. So when some of us board members argue that the market increase since March 9 is not the real thing, that prices will come down... we also need to be consistent and accept that FFH's book "value" may come down again." How is this any different from looking at the scoreboard above a roulette table seeing 4 reds in a row and absolutely knowing that it just can't be red the next time? I'm not surprised to see that even some of the smarter players at the table don't realize that future events are dependent on actions and outcomes that haven't occurred and that the stock market is no better at predicting the future today than 2 years ago. "I find it very ironic that the market can be up over 2% (as I write this post), yet the stock price of FFH is down close to 2%" Whats ironic is that atheists imbue the "market" with omnipotence. Which truthfully reflects of their own egos, any religious person should have no problem explaining why no earthly system can be!

"What I am learning is how, during one-in-50-year storm, things can go south fast on well run companies. Amazing!" Sfk was supposed to be my hedge on the price of oil. Oil goes down, CAD goes down, costs drop and sales in cad shoot up..definitely has the potential of paying 60 cents a year in dividends. Then came shock in demand... Bam...my 20 cent dollar is now selling for 10 cents.

I stand corrected...but wth? so you take on a million dollar subordinated note in exchange for a million dollars, you get 1 million in cash which counts as tier 1, and the money you owe on it is tier 2 capital? So you end up with, 2 million in capital? This is rather confusing because they're using the same terminology as FASB 157...nm thats level 1,2,3.

debt is a liability...its what you owe, it can never be an asset...its not tier 2 capital.

I assume everyone will be at the cocktail reception Friday night- I'll be wearing my Fairfax cap, could kill 2 birds with one stone and meet up somewhere inside the mall?

stole the link from reflections on value investing blog 8) http://money.cnn.com/2009/04/13/technology/gunther_electric.fortune/index.htm

http://www.newswire.ca/en/releases/archive/April2009/27/c5216.html Looks like you guys were right, the contract was canceled.

My point is that last years Combined Ratios won't tell you whether the underwriting was any good. If an insurer took risks where they were being compensated properly and turned down business where it wasn't than they have good underwriting. An insurers Combined ratio could be 70 on any given year, but if they took bad risks than their underwriting was poor! Look for little behaviors like reducing premiums during soft markets. You really can't have a bunch of idiots running an insurer and expect good results. You really need to trust management in this business.

Good underwriting is all about pricing risk properly, what does last years Combined Ratio tell you about their underwriting potential? Does it help you figure out their cost of float over the next 10 years?

If my math is correct (which it probably isn't) but Fairfax's stock portfolio is down a mere 10% YTD!...17$ pretax. Thats not taking into account any changes in 09, but still quite good all things considered! Now the numbers reported next week will show the MTM values as of 3/31/09, which were weak but those MTM values were as useless as the ones I used so who cares. Eagerly looking forward to the next 13f.

I think you give this guy a little too much credit, all of those questions are bad because I'm pretty sure I've heard them all answered before. I'll give it a shot. #1 Ajit Jain can't be replaced, oh be the world that gives me 50 years with Warren Buffett and then makes me settle for someone worse...type of answer. A great Ceo has the ability to make his managers feel important, I just don't see him saying "oh yea that guy can be replaced, no problem." Berkshire will be doing reinsurance after everyone we recognize at the company is gone. #6 You can make money doing both, railroad business has changed (double staking, toll road etc), regulated utilities ensure that we earn a fixed return on our investment. #9 They don't tell management what to do, management didn't pass newspaper test etc. My #1 question would be, can we print our way out of a negative feedback cycle?

The Wesco meeting is a great way to bring in the end of the Value Season. This year I'm looking forward to listening to him talk about ways we can get out of a negative feedback cycle! Aside from Whitney, the questions are usually much better and Charlie's wit and wisdom is really showcased unlike the Berkshire meeting. You normally don't need to own shares to get in, and Charlie takes the time to sign books and take pictures with his acolytes so come early!

My thesis is based on the simple fact that Baby Boomers need to retire. With most of their assets in stocks and housing, I think we can expect the government to do everything in its power to inflate those asset classes. V is in part a function of perceived wealth, create another bubble in either stocks or housing and you will see increased velocity. Its not the healthy solution but its politically convenient. I can't speak for all stocks, but if you pay book and book is compounded at 14% there is no way a 3.5% treasury will perform better over time (Maybe if Brian Bradstreet is doing his thing).

Yea thats what I meant, sorry for not being clear.

Fairfax underwriting is just fine for a soft insurance market. They're demonstrating discipline by turning away business that doesn't adequately compensate them for the risk that they're taking. That means fixed costs as a % of Cr are much higher today. Don't hate the game.

"Coal fired power plants have to conform to newer and more stringent emissions standards, which erodes the economics. The real energy generating market is for "clean coal", and that is not necessarily cheap." Thats not where Sam said they'll be making their money...none the less I doubt China and India and the rest of the developing world will be under the same kind of environmental pressure.

I wouldn't mind Fairfax selling annuities, but why take the risk that life insurance prices adequately price in the risk of a 1/100 flu pandemic or other catastrophic event? Berkshire Hathaway has set up a direct life insurance company that you can read more about in the link below. http://www.brkdirect.com/message.htm

Sam called coal the 800lb gorrila in the room, my interpretation is that coal represents too much cheap energy not to be developed over time. He also said ICO has little downside from current prices and that each share of Ico was backed by several tons of coal reserves. Ico profits will come with a rebound in demand for metal making coal and that their legacy problems were over.

The old Wells was certainly capable of growing equity at 12% after dividends, I haven't the faintest clue what this new hybrid Wells can achieve, probably shouldn't expect more than 8% annual growth in BV for at least 2-3 years plus remember that you are taking on some serious earthquake risk. California is a powder keg right now, a few little tremors can be enough to normalize real estate prices with the rest of the nation. They hold just a smidge under 10% of the nations deposits, what happens if margins aren't so frothy in 2-3 years and there is no room to expand the depositors base?

If you can do it with an insurance company you can do it with a bank...you need to be comfortable enough with a particular issue to normalize return on equity for say 10 years then bring it back to today by discounting at your cost of capital. Put another way, because you are forecasting far into the future you need to be comfortable with estimating the rate of return management can achieve on future earnings. Lets use Wells as an example. If you assume 12% growth for wells, shareholder equity will be at 400 billion in 10 years. You can guess at where the stock will trade in 10 years, assuming moat continues to grow you'll have probably 2-2.5x equity so assume a market cap of 800-1000 billion. Of course thats if they manage to grow equity at 12% a year. Easy enough to do the math in your head! Even if they have to dilute shareholders by 50% over the next 10 years, you'll still have a 5-6 bagger in 10 years from todays price. Hope Fairfax's 13F for Q1 comes out before the meeting because I can't wait to see what they did last quarter.

I'll be there, even though I'm not on the list :(

"We appreciate Steelhead's and Fairfax's confidence and willingness to support our restructuring initiatives. AbitibiBowater's efforts will now be directed at obtaining support from our banks to bring Steelhead and Fairfax into our lending syndicate," stated William G. Harvey, Senior Vice President and Chief Financial Officer. "We believe the additional funds proposed to be made available by Steelhead and Fairfax would provide us with sufficient short-term liquidity while we continue to address our restructuring of Bowater's debt. The approval from and support of our banks in this process is a crucial step to a successful outcome." http://finance.yahoo.com/news/AbitibiBowater-responds-to-prnews-14837042.html