gary17

I think Mr Market now sees lower deflation risk in light of good economic data & ECB's less than expected stimulus , which signals the officials see a good chance of normalized inflation... my 2 c! http://www.cnbc.com/2015/12/04/ecb-pres-draghi-risk-of-deflation-firmly-off-the-table-thanks-to-policies.html

i am not sure if the hard - soft market cycle is simple as "risk on or off" - i thought it has more to do with the overall underwriting environment, which is affected by how many disasters , etc. as the interest rate moves up - do bonds not fall ? and will that cause a soft or hard market?

well, if the jobs report is half decent, according to Yellen there's a good chance of a higher interest rates to come... fwiw

I don't have any MKL. I went with FFH because it looked to be down near the low end of where it usually trades, and I sold it because it was up by the high end. Rapid revaluation -- it happened very fast and i didn't think something like that would happen... when it did I was just shaken up by it. I didn't feel like book value was going to compound at a high rate anytime soon because of the hedges, and if the hedges were going to be sold and working in our favor, it would come at a time of a big market dislocation. As I keep pointing out a thousand times, FFH's valuation (price to book) got compressed the last time the hedges worked out in a major way (2008/2009). So I thought there was no reason to hang around with a lofty valuation for a market crash which would make them drop the hedges, which I feared would lead to price compression anyhow (suppressing a good deal of net book value growth gains from the hedges). But I didn't really fear the market crash -- it was just as much the case that if a market crash never happened, then book value growth would still suck anyhow because of the hedges. And I have no idea if I was right, or lucky, or neither. Plus I felt nervous after making "hot money" so quickly that I reacted with the above logic, whether right or wrong. Thanks. Well, if I recall correctly ... last year they had about 21M shares trading at $500 CAD... and the reported book value was 9B USD= 10.6B based on the 85c exchange rate then... So they just reported 12B in book value.. at today's exchange rate that's about $15B CAD .... they now have about 22M shares trading at 650CAD = 14.3B... Feels like similar valuation as last year !

Thanks ! So when you were looking a year ago... did you also look at MKL ? If so, I'm still curious as to why you went with FFH over MKL. was it purely valuation and since you think it might be a short-term hold, FFH was more undervalued than MKL? Or did the quality of the business come into consideration as well?

Eric I seem to recall you bought FFH... Did you buy MKL? I'd be curious as to know why you chose one over the other! Thanks Gary

It's so interesting for me to look at these high quality mega cap names and think all day to which one do I want to be a partner with... Fairfax.... Constellation.... Knight Therapeutics.... Berkshire... Markel..... the name goes on. If I had a crystal ball I'd be rich LOL

hi Wisdom this is consistent with what i have been learning in the last few months - my wife's family recently sold their house and used a Chinese agent for her connection with the Chinese buyers - the deal was good , but I did learn from her that most of her clients are buying with Canadian mortgages. I also spoke to people I know at TD and RBC and were told that the banks will give them loans provided they can show their incomes in China. Aside from the Chinese buyers; there are also real estate agents and developers in this game - who are bidding up the lot prices. Take for example a North Van lot recently sold for $1.8M... and you could get a brand new 5000 sf house in the same neighbourhood for $2.3M - okay, both are overpriced; but the point is the lot price is way out of proportion than a newly completed house where we know the cost is likely about $150 ~ $200/sf. We will then have suckers like myself, who have a relatively 'good' income in Canada and can likely mortgage our way to buy a $1.5M house in Vancouver , with a bit of parent's help and a basement suite as income helper. I also learn the bank will give you mortgage based on the basement suite rental income - something I was told not possible a few years ago. I am wondering how this game will end - and what it'll do to Canada's economy. ADD: My thought process is that if a few years ago we decided not to trust the accounting of most Chinese RTOs .... why do our banks trust the immigrant's income in China ?

Thanks :D

Dazel with all this , do you still feel like owning FFH? what's the margin of safety in this investment ? would BAC not be better ?

so instead of printing money they should consider printing pseudo monies with an expiration date - let's give everybody $500 for the year 2016 and 2017 each to spend , but you must spend it within the calendar year... :)

just to give everyone a sense of how crazy real estate is ... I made an offer on a small house a month ago. didn't get it. a month later a similar property came on the market on the same street. but house was in worse condition and needed to spend more money to have an income suite. so I passed. well, it just got sold for 400k more than the much nicer house I didn't get a month ago...

seems like we will get a liberal government.

Just to be clear I don't think they r taking money from the rich Just taxing the high incomers at a higher rate. If you are already rich , you are not getting taxed on what you already have. Just what u bring in in the future. and since u r rich u likely have ways to better plan for this. This is the cost of capitalism , looking after those who didn't win at this game or didn't even want to participate.

STOP HARPER ! LOL I like the Justin policy of running a deficit - compare to many places in Europe / Asia, we have very bad infrastructure here... we need better roads, bridges, highways, and transit system / and high speed rails.... Let's spend the money and get people to work. I think if Justin & Elizabeth team up they could do some good for a few years. I like their visions; not sure about their experience.

I would love it if we have a huge deflation in Vancouver real estate.

RB Do you have the link to your analysis handy? Also, if interest rates are low, is that a good reason for using a low discount rate? Thanks

Dazel respectfully , I am wondering have you thought about what if FFH is wrong about deflation and we see Businesees continue to grow. ... In that scenario, is it still worth owning FFH and if so , what do you think the intrinsic value of the business is ? I read somewhere before FFH could earn 6% on the investments if they are wrong plus the insurance underwriting income. So maybe 10%. I wonder what P/E is fair

So Fed, ECB and BOE all seems to think they are seeing inflation... who is right ! LOL http://www.bloomberg.com/news/articles/2015-08-29/fed-ecb-and-boe-policy-makers-all-say-they-see-inflation-rising

Some spend no money at home on the COBF board LOL

The U.S. Has an economy that's very domestically driven I believe. But in the case of Canada. We would be hurt because we are an exporter. How much of US gdp is export ? Okay, so... the Chinese goods on US store shelves will be cheaper now. Therefore people who buy those goods have more remaining money in their pockets to spend at Chipotle, or Starbucks, or pretty much anywhere. So shouldn't a whole raft of companies benefit from this, other than Fairfax? A US company who manufactures in China will spend less to get his product onto US shelves and it will also sell for that much less -- same profit though right? So where do US workers have their incomes hurt because of this, and if their incomes are the same and by habit they spend it all, well then many companies will benefit since the cost of their Chinese purchases will take less out of their wallets.

You would be amazed how many things in Star Trek are coming true LOL. We will need to provide means of living for 80%+ non working population. I don't think we are prepared for that at all (intelectually, spiritually, morally, economically, politically). I acree with the intellectually/sprititually.. but not economically. I mean if we are in a position where there are no jobs due to technical obsolescense it is because we don't need people to work. If we don't need people to work then what is the economic issue? However, politically it could be a bit turbulent as you will need to move towards a more socialist model.

LOL, thanks ! i have no finance or economic background; just an observation as an engineer. US treasury and muni bond holders at the long end US dollar So if I am a Canadian holding a major US Bank should I do well ????? fingers crossed....

No, but we might be seeing the start of that with big corporations lifting bottom-end wages and minimum wages rising. If this feeds into other wage levels then we will see how QE+policy=reinflation. Other than that, +1! I'll believe it when the numbers show it. Real median wages haven't sustained upward momentum over the last 15 years despite periods of economic growth and minimum wage hikes. Obviously, nominal wages are the only thing that matters for CPI, but inflation has been tremendously hard to find even before the strong dollar so where is it going to come from after the strong dollar? I think real wages will be a relatively good proxy for nominal wages going in the near-mid term. I don't expect wages to be stagnant forever. I just don't expect the problem to magically fix itself anytime soon due to minimum wage hikes... I have my own theory.. and no real data to back it up , that we need to account for the fact that technology is replacing human labour... and this could affect wages, employment, etc. movement of stuff to the Cloud probably meant less manufacturing of paper- and general office stationary music / movies are now cloud based... we have self-checkout counters.... even for fighting a war we now send drones... Self-driving vehicles probably next - could have a very huge impact ! i know mining companies will be the first to do this in their own operation where insurance is not an issue. Interesting world to see

Tom did you look at RX (Biosyent) , DAP-U (XPEL) - great micro-caps trading at reasonable valuation in my opinion. decent CEO... I believe RX still expects 35% growth and 50% for XPEL they have been growing without debt or equity financing - a ver attractive figure for me (also why I like BRK and CSU... great companies don't need to issue shares or take on significant debt). Gary After selling NTLS I'm "stuck" with 33% cash. Don't feel like buying large caps with maybe 50% upside or compounders that are decently priced either. This too requires patience I guess. Am I alone in having this problem? Many seem to be buying hand over fist. I just don't see many obvious buys. Only briefly but it didn't seem as attractive at first sight. In hindsight of course neither was Eurobank! Definitely was lucky there.