Luckyone77

Well, boys, after 10 years of owning this stock I decided to sell my remaining shares today. I'm out. Greatly disappointed in their ability to judge stocks and, in particular, their ability to judge the management of these companies. I simply can't justify their continued underachievement. A dart board would have had greater success of stock picking. I hope my exit proves to be the turning point for the stock, as it so often seems to be (lol), and that you all are greatly rewarded for having hung in there. Hopefully, India will be the salvation. Nevertheless, I do appreciate the keen insight of many of the posts on this site. Its been informative.

Great job, Parsad! I feel like I just went to India.

I find this whole Global Warming/Climate Change belief to be a fraud and a scam of epic proportions. Groupthink at it's absolute worst. Science gone bad and few adults around to call BS on the herd. Education today is politically correct garbage. Universities today are more concerned about gender identification than good science. So disheartening. Glad I was raised when I was because this lunacy is getting out of hand.

How much did they pay for it?

It wasn't just the bet on deflation that soured my opinion of Fairfax. I agreed with that play and, IMO, your take on it is exactly correct. Who knows, it still may play out. It was the poor quality of equity purchases that was the nail in the coffin for me and, frankly, inexplicable at this level. Too many Hail Mary's for my taste.

The assumption here is that "they find good opportunities to reinvest the cash". Their terrible recent track record on that is why the stock price is so low and why it's hard to believe they will. It's one thing to just miss. It's another thing to be 180 degrees wrong. If they do regain their sanity, it's a steal at this price. If they maintain the same philosophy and gamble their money on a bad thesis and declining company then watch out below. It's tempting at this price.

Sanjeev: I've never attended though it has crossed my mind in the past. However, I've basically liquidated my position and no longer hold them in the same high regard. As I've stated before, it wasn't the hedges, shorting etc. but just the horrendous stock picking. I could no longer justify or trust having them manage my money. They lost their way. Though I feel terrible for you as you clearly put so much effort into this website and event, I'm afraid the lack of interest lies squarely on Fairfax. Hopefully, they'll rebound and right the ship again soon.

Agreed 100%! Last year again they lost money with their equity investments. It’s hard to believe… I still like the business model of course, and I still like management (they have done a great job on the operating side of the business in recent years). But insurance without good investment capabilities is clearly unsatisfactory: they should prove they can be good stock pickers again. Cheers, Gio So, they've become an excellent insurance company but a horrible capital allocator. And I mean REALLY horrible. I've dumped the bulk of my Fairfax stock at this point. Hard to justify the results but, nevertheless, I don't blame them for the hedges. I shared their beliefs and it was a safe bet that simply didn't pan out. It happens. But no way you can justify some of these horrendous stock purchases. A 10 year old should have known several of them were losers with little potential and bad fundamentals. Of course, now that I've sold my shares it's probably a good time for the rest of you to buy. The stock will probably take off!

"Fairfax is one of the best capital allocators in North America and we look forward to working with them." On what basis? Sandridge, Blackberry, Dell?

He sounds like a cartain manic depressive fellow I want to sell some shares to... really strange. Yea - This is getting bizarre. I don't have any issues with the acquisition in and of itself, but the 180 degree turn on the U.S. markets as the result of the election with no commentary on rising rates, falling liquidity, strengthening dollar, declining corproate profits, levered corporations, and valuations that appear excessive certainly seems strange. If you read what he's said carefully, he hasn't done a 180 on the US markets but on the US economy. The hedges were not mainly explained in valuation (e.g. CAPE, Tobin's Q) terms. They were explained in terms of protecting the company from another 1929-33 type selloff, which would have destroyed the company in the absence of the hedges. They now feel that that kind of catastrophe has reduced in probability, because we have a quantum shift from a world in which politicians over-regulate and rely on central bankers to promote growth via leverage, to one in which (maybe) government gets out of the way and productivity drives gdp. So the hedges have gone. Doesn't mean they think the market goes up. All they've said on that front is that it will become a stockpicker's market again. Value starts to win again. I have a problem with this idea that productivity is suddenly going to go up and all ills are cured because of the election. This implies something along the following lines: As a business owner I have a project that I can execute that would that would improve productivity of my labor force and I can make me more money. Interest rates are low so I have cheap capital available. But I don't execute the project because I don't like the guy in the White House? In addition economies are large and complex mechanisms. They don't turn on a dime. You don't go from deflation risk and possibility of a great depression just because you had an election. The risk of a stock market crash definitely doesn't go down after you've had a 100% or so rally in stock prices. Others here have said things along the lines of just go with it and don't ask any questions or Prem has a master plan that shouldn't be disclosed, trade secrets etc. Please! Managements are accountable to shareholders. Strategies reflect management thinking and should be disclosed. More disclosure is required when those strategies go bad and when they are dramatically changed. Take Berkshire for example. Their strategy is well defined and well communicated. They say what they will do and do what they said and it works. The fact that the strategy is public doesn't prevent them from implementing it. If Berkshire did something radically different like go and drop 50 billion on airlines or buy Twitter you can bet we'd get a way more detailed and reasoned explanation then "Trump won the election - problem solved". So in 2010/2011 the strategy was buy quality companies at attractive prices (remember the big 3?), hedge the long portfolio and hedge against deflation (a macro call since the hedges were outsized relative to FFH risk). This was based on a view the the economy will stagnate and would be at risk of recession. Ok this is quite reasonable for an insurance company in the 2010 environment. Then they go ahead and ditch the quality companies and buy duds. Ok maybe they've made investment mistakes we're all allowed one or two of those. But one should acknowledge the mistakes, learn and correct. Then we get back to the hedges. The economy in 2014/2015 was different that the one in 2010. They look at the facts and decide that the hedges are still appropriate. They don't take even a reduction. Now you get the election and it's 180 change? I'm sorry but "Trump won the election - problem solved" is just not good enough. Actually, an economy can turn around very quickly when the animal spirits are unleashed and the correct policies are enacted. Thomas Sowell describes that in an older interview with Peter Robinson in Uncommon Knowledge that you can download or watch on Youtube. I believe it was Harding, though my memory fails, that basically did it and the economy turned on a dime with a year. And he states it's been done before. And to your point about a business owner not doing something because you don't like the guy in the White House, that's a bit simplistic. It's not the person but the policies and philosophy and it's ramifications that would gives them reason to pucker up and freeze. It happened to millions of us who were extremely wary of risking capital with such an anti-capitalist/socialist in charge.

Partner24, Since 2011 these are the results: EQUITY (cumulative): $628 million HEDGES (cumulative): -$3112 million BONDS (cumulative): $2950 million CPI (cumulative): -$570 million UNDERWRITING (cumulative): $1333 million It seems to me that, if we are to blame Watsa for something, it is because FFH has been a very poor stock picker in the last 6 years: the idea of a 100% hedged stock portfolio should be that your stocks go 1%-2% higher than the stocks you have shorted. Of course you would expect to make a very meager profit overall, but still a profit... not a loss of -3112 + 628 = -$2484 million. In other words, if FFH had been a good investor in stocks, and equity gains equaled losses from hedges, in the 6 years from 2011 to today FFH would have earned 2950 + 1333 - 570 = $3713 million. Starting in 2011 with an equity of $7.4 billion. Not bad! Watsa has always said he was worried about a 1 in 70-80 years event that could shock the markets... Sincerely, were you sure that event was never to come? I know I was not, and I don't blame him for protecting FFH. Instead, what I would surely like to know are the reasons why they have chosen equities that performed so poorly... Furthermore, those $3 billion of earnings in bonds imo were very much related to their macro views: FFH held onto long term US bonds for at least three years after Buffett started calling them the worst investment. And the reason was they thought yields could continue decreasing because of disinflation in the US and deflation in Europe. Finally, they have picked almost the best time possible to sell those bonds, just before Trump got elected. Another macro call that turned out to be right. This is how I view the recent past. But, as I have said, I would prefer to talk about what lies ahead. Cheers, Gio "what I would surely like to know are the reasons why they have chosen equities that performed so poorly.." That's the billion dollar question that is highly concerning and indefensible to me, Gio. The macro bets, I get. The bonds, I get. The stock picking, "Huh? You bought what? And then you doubled down and bought more of that turd when the original thesis for purchasing was no longer there". It's just the incongruence that keeps giving me pause.

1) It depends. If the combined ratio is kept below 100%, everything works fine. In a rising interest rate environment they can invest in bonds that pay more, but we have to consider after tax returns on these bonds and inflation. We have not had a significant rising interest rate environment since the 1970s, early 80s. If policy payouts rise more rapidly than interest rates then the combined ratio will turn negative. There is also the effect of rising interest rates on competition. Prem himself had a chart where he showed that combined ratios in the industry improved when interest rates where low. Now, your guess is as good as mine as to what the actual level of rates needs to be at which competition heats up, and combined ratios drop. And then there is the aspect of a major claims event, which seem to come in waves, and are generally unpredictable. Granted FFH has worldwide diversity which they didn't have when Katrina and the Twin towers hit. Buffett has had periods with his insurers when he would rather have not heard the numbers, for years at a stretch. 2) Prem has never admitted his mistakes. He is an incredibly good salesman. Had I invested according to FFHs doctrine of the last 6 years I would have had an investment return of zero, or less. I simply dont believe that we are going to get all the tail winds everyone expects, without a major hitch along the way. We dont know what the achilles heel is yet but its somewhere. Markets, and popular sentiment indicate that everyone is 'happy' right now. The wall of worry is suddenly gone. There is a con man who will be running the US shortly. We dont really know how this is going to play out. I dont get why everyone is suddenly so optimistic right now. And I have never been a perma bear, in fact, more the other way around. Oh, please. A con man will be running the US? He's infinitely better than the talented phony that's been running us into the ground for the last 8 years and he enters the Presidency certainly more qualified than Obama was, and is, even to this day. Thank God amateur hour is over and the adults can assume control. There's so much low hanging fruit out there that stoking this economy won't be that hard now that Capitalist are running the show.

It appears that Ray Dalio has the same opinion as PW about future US economic prospects. I share their sentiment that things have changed 180 degrees. Doesn't mean there won't be bumps on the road but, FWIW, I haven't seen this many people this hopeful and optimistic in a very long time. https://finance.yahoo.com/news/dalio-trump-could-ignite-animal-spirits-and-it-could-be-huge-for-markets-104253070.html More detailed comments: https://www.linkedin.com/pulse/reflections-trump-presidency-one-month-after-election-ray-dalio?trk=prof-post

I didn't look it up but I don't recall seeing this many Fairfax US shares trade hands before. Volume was 47,000 shares today when 2500 or so has been the norm. Off the charts compared to what's been normal. Makes me wonder if someone is still unloading a ton of shares but maybe Fairfax decided to step up and start buying them. Very interesting.

http://finance.yahoo.com/m/671a4c37-1317-3108-83b5-c04556dc8cca/ss_canadian-billionaire-prem.html