gary17

fairfax book value is $573 cad after q3 and if account for First capital sale ... so would put today’s price of 674$ at about 1.17x book. seems cheap but the Underwriting Loss was very significant. Berkshire was 3b loss while fairfax is 900m. wow

I don't believe that's correct. There are definitely non-economic factors at play, just like with buying a car (what brand projects the type of image that I want to show? Will it attract a mate? etc), but money is still a big factor and not everyone is driving a Tesla or Maserati just because that's what they'd really want deep down. Right now what pushes people to overpay for real estate is the belief that prices can't go down for any period (so FOMO + fear of being priced out + we'll just take the equity out later to pay for consumption). If that psychology changes, or if lots of people start being unable to make ends meet as interest rates keep raising and RE rules are tightened, things will change... If you adjust for inflation, most generations in the past didn't buy the equivalent of million+ dollar houses (especially not ones that are just regular houses and not luxury mansions). car depreciates over time real estate may have correction but generally appreciates. most people know that

I think part of the expensive real estate is the cost of construction for new homes due to shortage of skilled labour — a new wood frame house will simply be $250/sf for entry level ... a new 2000 sf house means $500K is in the house. land is about 1M ? 1.5m for entry level this tends to put a floor on the price for existing homes too If we have a correction - hard to see cost of construction come down. Land may come down but i think a correction will have limited downside — not USA styled meltdown. I was just in NYC - Manhattan is just expensive but outside of that island lots of land. it’s just a real estate phenomenon. we got lots of land in canada. but people want to live in major centres ... it’s just part of life

Agreed by the way vancouver prices are still going up.

The private investor was not on the call when the operator turned it over to the guy so they moved on

why should AWH have any good will I guess if people want to value it that way OK... LOL it all comes down to how many times book

Since on July 5 FFH closing was $444 usd that's floating ratio of $ 12 / 444 = 0.027027 So 0.027027 + 0.030392 = .057419 AWH had about 86M shares out so * 0.057419 = 5M new shares of FFH after conversion 23M + 5M = 28M shares Gary, They provided the final ratio in the press release below. http://www.fairfax.ca/news/press-releases/press-release-details/2017/Fairfax-and-Allied-World-Announce-Final-Exchange-Ratio-for-Exchange-Offer/default.aspx ' LOL i didn't see. i'm not far off - if anything with their final ratio there's even lower bvps

they are issuing shares based on the formula according to the presentation updated in March http://s1.q4cdn.com/579586326/files/doc_downloads/2017/2017_03-Investor-Presentation.pdf Since on July 5 FFH closing was $444 usd that's floating ratio of $ 12 / 444 = 0.027027 So 0.027027 + 0.030392 = .057419 AWH had about 86M shares out so * 0.057419 = 5M new shares of FFH after conversion 23M + 5M = 28M shares

i get roughly $ 338 USD or $ 436 CAD per share. total equity from Q1 of the two companies = 12B less the special dividend and cash payout to existing AWH holders ... equity left is about $9.5B fairfax closing price is about $444 usd so the ratio is 0.027 + the fix ratio .030392 = about 5M new FFH shares being issued Q1 outstanding shares = 23M so now 28M share out $9.5B / 28M shares = $338 usd/share for book value. That's interesting earlier this year fairfax was trading about 1.25 xbook & the $52 buyout is also about 1.25book right now it's trading around 1.3 book 30% premium just as a perspective, I looked at AWH a few years ago when it was trading at a discount to book. It wanted to buy Transatlantic and BRK came in with a similar offer too - interesting back then these were 0.7 ~ 0.8 to book. It's been great for AWH shareholders to see growth in book value and an increase on valuation http://www.reuters.com/article/us-alliedworld-idUSTRE78F1V120110916

As a father of a student who will be entering the work force in a couple of years, I am disgusted by what is going on. Good jobs are hard to come by, and housing is out of reach. What a way to run a country. yah and 100 years ago many europeans were in china buying stuff left and right. remember hong kong and opium war? it's just a turn of fortune. remember we took over stuff from the natives in America?

50, you need to provide some context otherwise your statement makes no sense. how much is the house worth ? if it's worth $2M. a 700k loan is no big deal at all. even if they default or if market corrects 30%, the bank is still ahead by repossessing.

i have a "high" income myself but believe me it wasn't easy to get a mortgage. even though i got the asset too , they won't let me bridge a loan for 1 month while i complete a new purchase and waiting to get money for the older place we sold - i know many high net worth people - some immigrants, some small business owners that made it here in BC - can't get mortgage. all they could get is a line of credit that is roughly 25% of their real estate asset. i think unless you've personally applied for a mortgage and know of the real story behind things, it's just anecdotal evidence from stuff you read online or in the news. Anyway, we don't need to waste our times here debating this; it just basically comes down to a life style choice. If you rent, nothing wrong with that - my brother does not - I just told him then be prepared to buy if the market does really correct one day; don't try to time the market, just pay fair price when you can afford it. but be prepared to sell your other investments, raise fund, and hopefully at a time when interest rates are reasonable & the stock market or whateverelse you are invested in can be sold at reasonable price... i think in the end it's a wash... good luck to you all. real estate is a very local thing; you can't be deciding about what the asset is worth by just thinking about it while reading stuff online... u gotta be here and live here to know it. my 2 cents.

it's not that much better here's home index for Vancouver https://shawglobalnews.files.wordpress.com/2016/02/capture10.png?w=720&h=480&crop=1 the diff is it's a leveraged purchase and the low interest rate and no capital gain tax really helped creating wealth the last few years the only other true tax free investments are 1 Tax free saving account which is roughly $ 70K now for ppl (sotpped keeping track) , and about $850K lifetime cap gain exemption for small business owners so tax free is important because if you make say $ 800K tax free that's the equivalent of $ 1.6M of earned income for ppl making the highest tax bracket and say that's $ 200K salary - roughly 8 years worth of 'work' saved up.

Ahhh... the great theory of value investing: go out and buy assets that have had very large run up in prices. Maybe you should compare your dad's situation to a guy who rented and put his down payment, and savings from repairs, forced principal payments, prop tax etc into BRK and see how that latter guy did vs ur dad. You don't need to be a math wizard for that either. you assume we didn't own BRK and you assume that everyone knew about BRK 30 / 40 years ago - i think many BRK owners then also did buy a house the diff is likely immaterial if BRK is the main driver of wealth. anyway, wish you guys luck and happiness :) it's just a number game... i can careless lol

Because rent for a 2 bedroom in Vancouver is less than $2,500, and because the cost of that condo isn't just the interest on the mortgage, but rather includes things like depreciation, insurance, and taxes. What's more, that $2,500 mortgage cost isn't fixed, but rather can increase dramatically with interest rates at the same time as the value of the assets decline. Plus, big, costly things can go wrong. The risk of owning is far higher than renting, and ignoring those costs is a mistake. So, if you actually care about the math, the math on renting in Vancouver is far superior to buying right now--I'm grateful that my landlord subsidizes my living expenses by hundreds of dollars a month (my two bedroom is $1,600). OK - i don't need to be a math wizard to know those who rented when my dad started out vs those who bought - the latter are doing better now - OK just keep renting. we'll know who is right in 30 years.... Gary

The other aspect is paying rent that is just gone and not into the equities is just a crazy idea for me if i rent in Vancouver the rent is $ 2500 for two bedroom i can pay $700K mortgage with that, an amount of that goes into principal repayment and then i get to participate in future up side - i'm not flipping it tomorrow, but if i want to retire 15 years from now and move to the suburbs, it'll be good , and all that capital gain is tax-free. why leave money on the table by renting ? if you look at the history, major cities in Canada, US and many developed countries just tend to worth more over time than the less-developed Gary

Liberty IMO, it's not about if substantial amount of RE is driven by foreign money, but if whatever amount that is - even if small - is having an impact on how other market participants will value the asset. it's just like we have an efficient market where for example Popeyes was valued at X , and then 3G came along and said we are willing to pay Y , and now the market agrees and the price jumped, as well as other similar assets in the industry. Also, RE is very illiquid , not like stocks, and it also happens to be people's principal residence a lot of times, so a lot of effort is put in by the seller to not easily let the asset go cheaply unless it's a very unique circumstance (divorce, estate sale, etc). We are seeing a correction now in Vancouver, but i just don't expect to see the correction we saw south the boarder a few years ago. And even if we did, we know over the long time the asset will be worth more. It's in WEB's letter - don't time the market. if it's something you want to use for a long time - 10 , 20 or 30 years, you might as well be in now. The relatively low rate also makes RE not expensive - while prices may have gone up significantly in Canadian dollar terms, it hasn't really gone up that much in US$ terms which is what international buyers are basing the valuation on. Gary

Mr. Buffett doesn't often discuss Berkshire's investment portfolio in detail, but he goes out of his way to say that Bank of America has been undervalued. And he applauds the bank--and other companies in the Berkshire equity portfolio--for buying back its shares. "Many of our investees, including Bank of America, have been repurchasing shares, some quite aggressively," he writes. "We very much like this behavior because we believe the repurchased shares have in most cases been underpriced." This comment comes after he adds an interesting nugget to his paragraphs on holdings of Bank of America warrants and preferred shares starting on page 19. We reviewed that investment on Friday, in a story entitled "Warren Buffett’s $5 Billion Bank of America Bonanza: Thank You, President Trump." In short, Berkshire has warrants to buy 700 million shares of Bank of America at $7.14 apiece. The stock closed Friday at $24.23, so Mr. Buffett is looking at a paper gain of about $12 billion. In the past, Berkshire has said it would probably only exercise the warrants just before they expired, in September 2021. But now, Mr. Buffett says he would consider doing it if Bank of America raises its dividend, and would exchange its Bank of America preferred shares to fund the transaction. Right now, the bank pays a 30 cent-per-share dividend annually, but it it hits 44 cents, it would make the swap, he writes. Why 44 cents? He doesn't spell it out here, but that works out to just over $300 million in annual dividend proceeds. The preferred stock Berkshire now owns pays a chunky 6% annual dividend that also works out to $300 million a year. The preferreds have little downside, so long as Bank of America stays solvent, but they have no upside either. Mr. Buffett is saying he'd rather enjoy the upside on the common stock, about as clear a buy signal as you'll get from the famed stockpicker. A Bank of America spokesperson declined to comment. The bank raised its dividend to 30 cents annually from 20 cents last year.

Just want to say Merry Christmas to all - your discussions this past few years have been tremendous in helping me achieve my financial goals. Market is truly inefficient else we wouldn't have seen -900 the night Trump got elected and then the rally over the last few months. Glad to be one of the value investors and hopefully 2017 will bring many more interesting opportunities for all. Cheers Gary

i tend to agree with Frank also people forget that when the rates are low, even people who don't need a mortgage would borrow because they'd rather use the cheap money from the bank and keep the cash at hand for other uses... take my inlaw's family for example - they have the ability to own the house they live in now without a mortgage, yet they still decide to take a line of credit out - i know for a fact they have other sources of funds that can easily paid off the loan should the rates go up. no problem with real estate in Canada - only up from here

Gary, downside risk is important imo, because in this market I don’t see many good bargains as FFH is right now. If downside risk is somewhat mitigated from the current share price level, I can keep my shares until some good bargain comes along. Then I might decide to sell some FFH shares and invest the proceeds elsewhere. Not so if there are good reasons why FFH’s multiple should compress further, or FFH should start posting unexpected losses. Therefore I would like to know if someone sees threats that might have escaped me. Cheers, Gio i tend to not think i'm buying a stock but rather buying a business. the best defence is offence. so a business that can grow for a sustained period of time should prove to be a better investment over the long term. just my view

Gio i think a company that has not much down side risk but at the same time not shown significant ability to grow is in itself at risk of under performing the market-- i think some call this a value trap amazon is expensive but look at how much it has grown. same with facebook.

I wonder how is 'foreign' defined - I would say if the money wasn't made in Canada; it's foreign... even if the homeowners are residents or citizens of Canada. Gary

Liberty, I don't think there's much point arguing about thins, not that I don't enjoy the discussion. I think that this is a world view that if you don't get it in 5 minutes you'll just never get it. People are just wired differently. You brought in Buffett. For comparison purposes I'll take a polar opposite: Trump. Both are very rich and can afford to get anything that they want. One lives in Omaha in a larger but otherwise quite average house, works 9-5 and then goes home and watches Breaking Bad or whatever, and gets a good night sleep. The other lives in a gold plated penthouse in NYC, works insane hours, barely sleeps, and engages in twitter wars in the middle of the night. Both seem really happy with their lives. If you forced them to trade places that will probably both be so unhappy that suicide would not be out of the question. It's really as simple as that. Different strokes for different folks. I see people everyday, working ever longer hours. But they want bigger and bigger houses that they don't need. They can't afford them, so they decide to work even longer hours and buy then further away (where they're cheaper) and then they spend extra hours in traffic jams to commute back and forth every day. Then they have to spend more money to get extra crap to fill the bigger house, and more money on repairs and more time on cleaning. To me and maybe you just seems totally idiotic. But to them it makes perfect sense and I'm the idiot. Who knows? maybe I'm lazier than them. I just know that i really like my time :). Of course. The whole point is know thyself and do what truly makes you happy and fulfilled. If you thrive in a high-pressure environment and truly love luxury, that's fine. Nobody's pressuring anyone to go a certain route. The main problem is that most people just go with the flow and aren't even exposed to the alternatives that might actually work better for them. There's a huge machine that studies human psychology and has been iterating for decades on the best way to sell people stuff, and most of that comes from associating happiness and the good life with certain products and lifestyles that they want us to buy. They're very good at it, but it doesn't mean it's the way to go for everyone. People also don't understand the tradeoffs. Unless you are born wealthy, you usually have to make pretty big sacrifices to acquire all the stuff you think you need. You might sacrifice your time, your health, you might sacrifice your peace of mind or your family relations. The cliché can be true and the things you own can end up owning you because you can't get off the treadmill of bills coming in, so you become a slave to some job that you might not like all that much. And so you exchange quality time with your spouse and kids, or with a good book or friends, with time dealing with commuting and office politics and that power-hungry middle manager, etc. Trump might project that he's "tremendously" happy, but I'm not sure. He's a salesman first, pretty much playing a character every time he's in public. Trump seems both insecure and never satisfied (always needs more power, more money, more glory and fame). OK - I am going to scale back my kitchen reno now !!

are you referring to property taxes or something besides cap gains? Because the U.S. does exempt up to $500K of capital gains ($250K per individual) for a primary residence https://www.irs.gov/taxtopics/tc701.html capital gain if u buy something and sold when you retirement - basically a very nice gain with no tax. no limit.