gary17

Thanks SD. I have been learning a great deal from thoughts shared by you and many others (Packer, Eric, cardboard, sanjeev, etc) I've just started and have a lot of interest in this. Now I have also just been offered to be a partner in the engineering firm I work for which would mean I need to sell some stocks for this and borrow money. Interesting you mentioned using the investing experience and $ to fund business. The partnership will sell for 3x book and earn about 12% a after tax (profits paid out as wage bonus not dividend) which seems attractive , but definitely not as attractive as some of the returns I have seen here ... But it offers great cash flow security I suppose. Any thought / advice would be greatly appreciated.

If it's a fundamentally good business, and the initial cost was very low, why sell, even if slightly over valued? I really think it needs to be evaluated on a case by case basis - if it's in a regular account it might incur significant capital gain... I would say Bank of Ireland right now is over valued relative to its European peers, but probably fairly or slightly under valued relative to its future earnings potential. Same goes for many wonderful US businesses -

SD Don't take this the wrong way, but I'm wondering if you mind sharing how well has this concentration approach worked for your portfolio in the past? I believe in concentration, but have a difficult time seeing just picking one bank.... although anyone who concentrated in the Canadian banks the last decade probably did well

I don't see a lot of discussions on life insurance on this board - trust a lot of people here are good at investing money what are people's view about life insurance? do you own life insurance? is it just a term life insurance (i.e., pay a lump sum at death) or life insurance plus investment - almost using it like a registered tax free account - which at some point can be used as a collateral for loans from the bank (for retirement) -- ??? any thoughts greatly appreciated thanks

SD thanks for sharing this - I have a similar 'system' in my head but yours is clearly very organized, well thought through and probably based on years of experience... I don't have JKL or MNO - just stocks - I'm not sure how relevant this is, but I have a list of criteria that I came up with myself and assigned some weight to each factor. I then give a score of 0 to 10 for each company I hold. The final score will have an influence on my allocation , I guess in terms of 'confidence' in the pick, and so far I have tend to not include the upside in the calculation as I'm more concerned about downside. Untitled.tiff

Interesting... So what variables do you use to come up with the probability figure in Kelly's formula. And what if your portfolio consists of different securities... Do you look at each security independently Or relatively.... For me I weight them based on what I think I understand the most... I think I can see the story behind why banks are cheap and the steps needed to realize the value so I have a much greater concentration than telcos Thanks

my 2 cents: - Prem & WEB are from different backgrounds , born in different eras and have exposure to different environments... can't judge how one will act in another person's situation - just too tough to call. - Deflation was a real risk and still is in my opinion - so I think it's a good call - but I probably wouldn't have hedged like he had. - Since WEB had cash flowing businesses, i'm guessing he is less concerned about deflation / recession as the cash flow will allow him to buy cheap stocks. - am i correct that Prem has less cash flowing business so he kinda had no choice but to hedge to protect the equity portfolio? - one thing i kept finding out about investing , and yes, i'm only 4 years into this game, is to be flexible - being too 'theoretical' doesn't help sometimes... the market is irrational and at times it is not the wrong thing to be a bit irrational or flexible rather than holding firm on some notion, even if supported by sound theory / data. we are dealing with not just money here, but mostly emotions. - Prem never said he is buffett , but he certainly does say that is the model he is going after very early on his annual letters though -so it's not unreasonable for people to compare him to Buffett - i think while long term investment makes sense, i constantly think about the value of time and if the time & capital could be better off in some other asset classes... the day we are born we all have unlimited potential wealth, which declines over time and almost zero the day we die - the idea is to convert potential wealth into real wealth over time through decisions made throughout the lifetime - so while time is the best thing for a good investment, it could be very bad for a poor one.... as that time lost is never coming back. - in conclusion i think Prem is a great investor, as great as WEB remains to be seen since he is younger. i'm not fond of all the decisions that's made, but he probably did a better job than i could have so at the right price i'd buy. one man's trash is another man's gold bar =)

The base rate is unusual. Once it goes back to the usual level, the banks make more money on the non-interest-bearing deposits. So higher interest -> more people want to save -> banks make more money on deposits (the spread on the saving side) so banks need to pay 3% interest to saver and it needs to somehow make money somewhere in a higher interest rate environment.... could they make 5% almost risk free? so make 2%? Higher interest also leads to less loans - so that side of the business goes down. It's interesting to see which of the two forces will make banks more or less profitable than in the current low interest enviroment

I cannot answer to your question… I am sorry! As I have said many times, investments must make strategic sense… And what makes strategic sense for my firm has already changed 2 or 3 times since inception in 2004… I guess it will change so many more times in the future, that I really cannot name an investment I think I will be satisfied to own forever… Also price is very important to me: at the right price, I will sell everything. I can tell you which are my 3 largest positions right now, because I think they will continue to be very large for some time: 1) FFH, 28,3% of portfolio 2) LRE, 20,7% of portfolio 3) BH, 10,9% of portfolio giofranchi Thanks - I have a lot of respect for Prem I mean I followed him on IRE and it's now almost 30% of my portfolio (was 40%) - I'm quite surprised that I see almost no discussion on IRE or see any board members that have invested in IRE.

Gio, are you an investment firm or engineering firm? i had thought I read engineering at some point.

Gio i'm curious , of your 'compounders' - IF you can only choose one to keep for the rest of your life - which one would you... thx

That's an interesting perspective thx. I just wonder if interest rate has been this low ever in history. Low interest means low interest rate for home mortgage,and credit cards, etc, My concern is are we creating a generation of people in the west that will not be able to cope with higher interest later ...

just thought i post this publication from Lauren Templeton - interestingly she also talked about long term performance of FairFax and used Apple as a comparison http://www.laurentempletoninvestments.com/documents/sma-1383076603.pdf

Nice article. I'm reading George Soros' book on reflexivity and now I'm seeing his theories in action everywhere :D can you please share may be one or two things that you are seeing the theory in action... just like to get a sense of if it's something I'd want to pick up a copy too thx!! ;D

good call on this one SD. Unfortunately I figure to get into another bank for me would mean selling IRE shares and pay tax so I wasn't able to catch this 25% congrats!!

SD Do you by chance have data on ROA % for NBG prior to 2008 - my RBC DI only shows up to 2008, which is around 0.8%. Just trying to get an estimate of how much they could earn when everything goes back to 'normal' Can you please also she'd some light on the domestic mortgage moratorium. thanks

My point is that companies like FFH and LRE seem to depend heavily on one person. Who is the second in command?

I'm wondering who is the Charles Munger of Fairfax. Great businesses should depend on the business model and the brand the firm provides and less so on the men or women running them

Has anyone looked at railways in Europe lately? Any names to suggest. Thanks.

May I ask what people on this thread think the IV range for FFH is approximately. Thanks

So what criteria do you normally use to evaluate if it makes more sense to invest in the shares or the bonds? thanks

Does one generally hold equity stubs for the one gain from 50c back to a dollar, then sell; or long term hold - that the company going forward can be profitable? Thanks!

I was wondering if someone could explain to me what a equity stub is. Sounds to me like it's investing in companies with a lot of debt and the share is a 50c dollar - therefore it's calculating the risk of whether it goes to zero or not. ???? thanks Gary

hi, SD: I just check back and noticed you responded to my earlier post about risk. I'm from Canada as well and my background is in chemical , although I do mostly fire stuff now. I just noticed there's a 'notify' button, so hopefully it works when you reply next time. I find your response insightful so I went back to see some of your earlier comments about concentration. I was wondering if you could elaborate on the last sentence "the downside ....... stub positions is very difficult to manage" - I didn't fully comprehend what you mean.... if you don't mind elaborate a bit more On my BBRY position I have been unloading - even the last two weeks when the BO rumour started to get hot again, so I've managed to limit the risk on BBRY, and can appreciate what you mean by taking money off the table. Also curious as to what you think now are some of the industries you think are out of favour and worth looking at. My brother is a mining engineer, although I know nothing about mining =P

I think if there is a correction unlikely to be the kind we saw in 08/09. I think a lot of people are fearful of that , I am too, but logic tells me a correction is not likely going to take 40 or 50 percent off . So while being invested I think just prep for a way to find cash when we have a 20 percent correction or just ride it out... We went through 09 ok I think we can ride out future waves. This is like this whole fear of Syria because of recent memory of Iraq