Parsad

My point wasn't simply averaging in, but that the best managers can and will have periods (sometimes long periods) of underperformance. From 1971 to 1975, over a 5-year period, the brilliant Charlie Munger underperformed the market: http://awealthofcommonsense.com/2014/09/charlies-munger-becoming-better-investor/ If Charlie Munger can underperform for 5 years, would it not make sense that merely very good investors might underperform for periods longer than 5 years? If you had stayed with Munger from beginning to end, you would have done extremely well, even with that poor 5-year period. For most investors, it's difficult to stay with a manager during challenging periods. Indirect has been a Pabrai Funds client from shortly after the 1st year. He has stuck with Mohnish through good and bad times, and thus has finished ahead of the index. He was also smart enough to buy when Mohnish was down and add to his account...thus he is miles ahead of the index, even though Mohnish is modestly ahead of the index over the life of PIF2. Cheers!

Fairfax is nearly at the same price today, as it was 18 years ago when I first bought a share in Berkshire. It was at 5 times book then and it is at 1.25 times book today. I would say that investing in Fairfax only once in 1998/1999 was probably a bad idea at that valuation. But imagine what your portfolio looks like if you bought a little Fairfax every year over those 18 years. What type of investment results do you get then, when compared to simply buying a stock and holding it? I'm not trying to defend Francis or any other manager that has struggled over the last decade. What I'm trying to point out is that even very good, intelligent investors can underperform for long-periods of time. It could be due to mistakes, concentration in specific mistakes, distortions in valuations, influence of monetary or fiscal policies, black swan events or changes in circumstances that affect the original thesis. What I will defend is that there are a handful of managers I know that are ethically beyond reproach...I consider them friends and mentors...Prem Watsa, Francis Chou, Tim McElvaine, Mohnish Pabrai, Jeff Stacey, Allan Mecham, etc...I would be comfortable with my family investing with any of them. And yes, many of them have struggled on and off over the last decade versus one of the largest corrections and then one of the hottest bull markets, including underperforming their respective indices. But I suspect that if investors averaged their investments into their funds over the same period, the results look markedly different...just like I hope more of our partners average into our fund over time, or into PDH shares...just like I do! Cheers!

CoBF is the reason we have no market crash in last 7 years! 8) Sanjeev did it. You're welcome! Actually if Mobius is saying that, then do the frickin' opposite! One of the highest profile and worst investment managers of all time! Cheers!

Ah, I never took down any posts in the last 48 hours, only closed three boards because I was getting complaints of too much politics on the board again. If anything was deleted, it was deleted by the writer. Cheers!

Well, I could just delete them altogether, but then how would anyone know you existed? I'm still allowing you to exercise your 1st Amendment rights, but simply telling you that there have been a number of complaints from other boardmembers on how you may be infringing on their rights. Cheers!

It's really become ugly. In all my 50+ years I've never aligned myself to a party as I am now. Maybe that's because I've voted Dem more than twice. But all this disrespect and fake grandstanding generated from your side has really got me infuriated, to the point where I swear I'll never vote democrat again. Pelosi, Waters, and their miserable flock of sheep are doing great disservice to this country (see your comment: 'Russian connections') and I'll never forget it. Oh, they've got their faults...no doubt. But both sides have their flocks of sheep. No one in their right mind would back this orange, glowing monkey of a man. But people aren't in their right state of mind...they were so disillusioned and put off by many of the Democrats, that they simply voted for whatever was available and would take a bat to the other party or even his own party. Now we have something no one really wanted, but his supporters stubbornly stick by him. Clinton & Obama pissed off alot of people, but you've got the saddest state of affairs that could have existed now in place. Fortunately the country is greater and stronger than him! Cheers!

Fake news! Cheers!

A smug looking Ted Cruz gets his teeth knocked in by Yates. He thought he was going to take her to task! And why the hell did the Dems pick Hillary, when you have such intelligent, strong, ethical leaders like Yates? Cheers! https://finance.yahoo.com/news/sally-yates-ted-cruz-heated-214622346.html

Oh, I agree it's not a fad. It makes long-term sense. But you have a congregation of capital of enormous size going into them. When a correction happens it will be bigger and faster. The recovery will also be quicker. Cheers! Bogle talks about what happens if everyone starts indexing: https://finance.yahoo.com/news/jack-bogle-envisions-chaos-catastrophe-markets-everyone-indexed-194610197.html As he states, the likelihood of 75% of investors indexing is almost impossible. But I would imagine that at even 25-50% of investors indexing, you are going to get compressions in cycles and greater volatility as investors exploit inefficiencies and opportunities. That doesn't even include what the psychological effect of a large correction would do as lemmings flee markets! Great for the value investor when corrections happen, but difficult for them to keep up when markets are bullish. Cheers!

When your mechanic and plumber start investing and touting the wonders of cryptocurrency, you should start to get concerned! Both have tried to arrange meetings with me recently on how amazing and hot Bitcoin is, as well as they want to introduce me to their Bitcoin guys. Also, the fact that Patrick Byrne is now spending Overstock.com money on this, should also concern people! Cryptocurrency is the future, but the winners will be few and far between, like how Amazon presently leads the internet wars with the dead carcasses of its competitors littering the street or barely surviving. Cheers!

I think most people are watching, so that's probably why it's a bit quiet. They will all chime in later after the meeting. Also, alot of people are actually in Omaha, so that might also be it. Cheers!

Works on IE11. Was not working for me on Opera. Ha, that's interesting! I just also found that out. Works on IE 11, but not Chrome. GAAATTTTEESS! Thanks!

Anyone having problems accessing the Livestream?

I am not arguing that the traditional hedge fund structure isn't a disaster. It's definitely very, very bad for investors. What I am saying, is that the bet wasn't even remotely fair. Buffett is an absolute genius who picked the right index to put a 100% weighting into at the right time. This was not luck, he did it because he is smarter than nearly everyone else out there and knew it'd be impossible to beat. Looking at the performance of the opposition, their returns weren't even mediocre, they were diabolical before the ridiculously high fee structure was considered. I take umbrage with his comment the fact that indexing is always great and that active is always bad (except presumably for himself and the 10 other people he talked about as being able to outperform). I'll tell you what's not fair. That no hedge fund manager wanted to stand behind the fees they charge. We know why too? They have no intention ever to beat anything. Seides obviously didn't know wth he was getting into. The 10 guys who Buffett was speaking about have returned something in excess of the index over the long term. Why? Because that's what they intended to do so. Using Buffett 's threshold for earning his keep as the proxy, the fee was after performing. That's fair. This was not about picking this versus that. Go to longbets.org and listen to Buffett's sermon last year or in the annual letter.It was about the ripoff called fees for nothing. Long haul's used car analogy captures the issue perfectly. At least you get a car. The hedge fund managers did quite ok over the period of the bet. We stand behind our fees...we don't have any, so there isn't much to stand behind! ;D I think if all managers used the model we use (Buffett's original partnership model), long-term you would only be left with those managers that can actually beat the S&P500. Not many...only handfuls! And those that just like reaping large fees would be actually working used car lots where they belong. Cheers!

Is this another way of saying Fairfax suffers from a conglomerate discount or was this in a different context? They are just saying that intrinsic value is significantly higher than book value. Some of their acquisitions under IFRS are being carried at cost, while the value is far higher...be it the intrinsic value or market value. Cheers!

I'm absolutely a believer that with the leverage they have, the insurance businesses they now have, and the investment team they have, they will get 15% annualized returns over the LONG-term. Remember, with that leverage and insurance operations that now consistently write at below a 100% combined ratio, they don't need stellar investment results like the past...they just need good returns. Many people, on here and elsewhere, always assumed that Fairfax's insurance businesses would never operate at below 100% CR long-term...well guess what! They have consistently added new managers, and some of the older ones are still young enough and very healthy enough to last another 20 years. They also know that they can outsource some of the investment work load now, instead of having to manage it all in-house as the core team ages. They have a deep team, and it will only get deeper as they get bigger and their reputation even more alluring to smart young managers and executives. I would recommend that they start to outsource to other good managers as the cash flows get bigger and bigger...give Francis more money...give Vito Maida money...I'm happy to manage more over time! ;D Cheers!

That's about right. Eric hasn't gone anywhere. He's enjoying retirement over the last few years...including learning to surf! He still reads the board and posts from time to time. Cheers!

Hi Everyone, The Fairfax AGM this year was fantastic as usual! I know many have been critical of the company over the last couple of years, but I think they are making a huge mistake in underestimating what is going on. The easiest way to see that there is a basic miscalculation of Fairfax is simply by taking a look at this year's lanyards and shareholder badge. If you opened up the badge, you could see the logos of many of the companies Fairfax owns, and this didn't include most of the insurance businesses. Literally, the badge looked like Berkshire nearly 20 years ago when I first began to look at the company. And the insurance businesses are getting better and better as a whole at Fairfax! Roy Thomson Hall is also getting too small for the AGM. I suspect we may have to move it to the Metro Trade and Convention Centre soon, as the number of booths and venues literally engulfed all of Roy Thomson Hall, including the outside courtyard area. Amazing to see all of the different businesses, organizations and people involved at Fairfax. Unfortunately, I was manning the Templeton Foundation book table for most of the morning, so I did not get to see the Fairfax presentation. I'm sure others can share comments on here. The presentation slides are available here: http://www.fairfax.ca/news/events-and-webcasts/default.aspx Once again, amazing what is happening at Fairfax...we are watching the wheel being replicated again...the brushstrokes and final painting will look different than Berkshire, but the similarities are definitively there! Cheers!

Hi Everyone, This year's dinner raised $30,798 for Crohn's & Colitis Canada. Thanks to all that supported and attended the dinner, as well as those that could not make it but contributed nonetheless! Big thanks to Fairfax Financial, in particular Vinodh Loganadhan, Pat Hios, Paul Rivett and Prem Watsa! Also thanks to Jeff Stacey for moderating the Fairfax panel. Thanks to: - Definitive Sound - Manulife Office - Ruby Yawney-Lougheed - AB Value Management - The Keg Restaurants - Cara Food Group - McEwen Group - Wayne Gretzky & his foundation - Milos Raonic - Dustin Johnson - Lauren Templeton & The Templeton Foundation - Dr. Ryan D'Arcy - Robin Speziale Finally, thanks to all of the volunteers, including those who helped organize the various events, pre-dinner meeting and our dinner! We had about 135 people attend. Fairfax brought their usual of 10-15 executives, managers and guests. Gary Shilling was there, and surprise guest Mason Hawkins. That panel was moderated by Jeff Stacey. Francis rekindled some excitement for all of the long-time attendees who remember the days at Joe Badali's, by bringing together a panel after the Fairfax panel of Brian Bradstreet, Sam Mitchell and Peter Furlan. All in all, it was another terrific year! Sanjeev

Oh, I agree it's not a fad. It makes long-term sense. But you have a congregation of capital of enormous size going into them. When a correction happens it will be bigger and faster. The recovery will also be quicker. Cheers!

Could be Klarman remains incorrect. I just think there are certain systemic events that take much longer than expected to reach a tipping point. People could be making money hand over fist during the cycle, but that doesn't mean that the risk doesn't exist. If you have massive coordinated global quantitative easing combined with a broad concentration forming in index funds, I would imagine that could create such a circumstance where any change in policy or some sort of crisis, could result in a rapid correction as algorithmic trading systems kick in. Klarman may get the end result correct, while looking foolish for a very long time. Cheers!

If any of us were smart, we would have written the show "Billions" based on what happened, instead of Andrew Ross Sorkin beating us all to the punch. As good as that show is, I don't think they've still touched on many things we've seen that would easily fit into a season's worth of episodes. Cheers!

The funny thing is how Chanos and Loeb responded to the decision...that they were gratified by the court's well-reasoned decision. That decision only occurred because the New Jersey court had no jurisdiction over them...not that they were innocent of such claims. Cheers!

Hi John, In so far as I am biased and prepared for a downturn, I suppose. I was prepared by the summer of 2007 the last time. I got caught off guard over a year later when I thought the worst had past and did some stupid investments on the way down. Washington Mutual comes to mind as one. With inflows like what we are seeing into an overvalued stock market, things IMO are getting dangerous. Part of the problem is outside of oil cos. I am not seeing any value. And I am tentative with oil because it will get pulled down in a market crash, recession scenario. People have forgotten, as usual, how fast and how badly things can turn. As usual I am probably early but in this case it doesn't really matter. I am not losing any opportunity cost. Snapping up a bunch of blue chips in a downturn when their yields go above five or six percent is worth the wait. I'm firmly in the camp that any sort of congregation of investors in any one strategy will result in some sort of large correction. That correction in ETF's will simply take a much longer time to come to fruition, because you are talking about such a large overvaluation in the broad market...not simply in one sector. Seth Klarman talked about this two years ago in his annual letter. Can anyone tell me that the economic cycles for the stock market have not compressed with algorithmic trading, ETF computer trading and huge interventions in monetary policy? We've seen this accelerate in the last 15-20 years. As someone else said on here, Buffett and Bogle are correct long-term about index investing...but that is completely based on investors ignoring all emotion and simply holding or averaging into an index fund over the long-term. But that is not how portfolio managers or the average investor behaves, and certainly not how computers will behave, if their programming directs them to push a sell order with no triggers to stop a cascading market. I remember an encounter with a certain investment manager and his professor in Omaha, and we had a discussion on the markets. I said at that time I was concerned about systemic risk and agreed with an article that Larry Sarbit wrote about how even money markets would break the dollar level in such an event. It was why Sarbit was getting out of many financial investments, including Fannie Mae and Freddie Mac. The professor turned to his protege and asked him the question I posed. The protege thought about it for a moment and said that the likelihood of such an event occurring would be small because the treasury market was so large that a liquidity event was unlikely to occur to the money market industry on any given day. The professor agreed and there you have it! Two great intellects that clearly indicated how such an event could not occur. Well a few years later in 2008, money market funds for the first time in their entire history of some 70 years, finally fell through the one dollar mark. There is a reason why this Buffett quote is always on the inside cover of our annual report: “…Over time, markets will do extraordinary, even bizarre, things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risks, including those never before encountered. Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed today by financial institutions. Temperament is also important. Independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital to long-term investment success. I’ve seen a lot of very smart people who have lacked these virtues…” Cheers!

lol! Thanks for the advice about how to handle and approach this brick, longinvestor! The Lady of the House will most likely shake her head again - Last time was when I bought both the English and Swedish version of the Investor AB 100 years Anniversary book. She did not understand why I really needed both versions. When I'm reading the financials of Svenska Handelsbanken AB - on/off - [244 pages], she asks me : "What's so interesting about that light blue old fashion community telephone book? - is it the Swedish verson this time, or the English?" ... John, it's a pretty fascinating read. My first copy, I read the entire thing that week! I just couldn't put it down because of all of the history, details, personal stories about Buffett, Berkshire, Omaha, investing, etc. Then you buy another copy say 4-5 years down the road, and read all of the new stories. Then buy another one 4-5 years down the road again, and read all the new stuff again. Plus, you'll go back and read some of the other stories over and over as well. As Longinvestor said, it's a great reference guide as the index in the back is very comprehensive if you are looking for a specific subject. Cheers!