Parsad

For Prem, any judgment in his favor...monetary or not...is vindication. They tarnished his reputation. That's far more important to Prem than money. Alot of these guys will also be out of business. Cheers!

Yes often, but not always. For example, Fairfax just issued $1B in equity and another $400M in preferreds, but there was no negative credit watch for the Odyssey Re acquisition. I think Berkshire's had a bit tougher time through the last year, and they do have alot of underwriting risk and derivatives risk that the credit rating agencies may be concerned about. If Berkshire had enough cash where they didn't have to issue any debt and retained at least $25B in cash, I don't think S&P would have been concerned...or if they had issued stock, then there probably would not have been any implications as well. After Berkshire pays off the debt in three years, they'll get their AAA-rating back, if not sooner. Cheers!

FFH has long been criticized for having too small a float; and now that both ORH and NB are gone, the issue has grown worse. A modest share split at some point, has to be almost a given. Not necessarily. Berkshire has done perfectly fine and their share price went well over $100K each. There is absolutely no need to split Fairfax shares. To the extent that it encourages a dramatically higher P/B valuation, and they use the shares as a currency for acquisitions, then it does. If the acquisition were to happen anyhow, but the split allowed it to happen at a more favorable share price, then it increases IV per share. This could easily happen without a split. Remember that Fairfax once traded at four times book...$600/share...and no one was complaining that the stock needed more liquidity to enhance shareholder value in any way. Berkshire traded at two times around the same time, and the stock was almost $90K per share then. As recently as a year and a half ago, Markel was trading at over two times book. Again, liquidity is not an issue. Fairfax has not split their shares, yet they managed to increase shareholder value by nearly 180% over the last five years. Do they really need overvalued stock to make a bigger dent? Cheers!

Well Al, I think you're approaching this with a completely selfish point of view...which isn't wrong considering how much you own now! ;D You can view share splits several ways: - First and foremost in our minds is that it encourages an inferior, more speculative shareholder group - Second, it generally increases liquidity, as the share volumes will increase with more speculative trading and smaller shareholders - Third, it could possibly encourage Fairfax to be added to various market indices, which enhances price and reputation - Fourth, custodial and administrative costs go up, since the more shares issued, the higher the listing costs and custodial costs - Fifth, it promotes the idea that market price is more important than growth in intrinsic value I'm sure there are a number of other pros and cons that can be mentioned. I'm of the opinion you don't do things purely to increase marketability. Would a share split increase Fairfax's intrinsic value? Nope. It would only increase volatility and allow some shareholders to prosper at the expense of other more ignorant shareholders...which in Berkshire's case, and ultimately other companies like Fairfax or Markel, completely obliterates the premise that all shareholders are equal partners. It's like Dave Letterman and the interns. Sure there are a whole lot of other people who have done what he has done (Bob Barker comes to mind), and geez I wouldn't fault him for it entirely, but you just didn't want to hear that he had done it...not Dave! Now I can't even watch the guy. Sheesh! Cheers!

I don't think Prem would, and I truly hope he never does, split Fairfax shares. I'm actually VERY disappointed that Berkshire is doing that. You are going to attract an inferior group of shareholders, whose time horizon will now be at the same level as shareholders in any other company. It's the same reason we don't take fund of fund money in MPIC...we want individual partners who understand the culture and philosophy. And remember, for Fairfax loyalty is paramount. This company was on the precipice at one point, but their shareholders held true. You want to propagate that type of mindset, not diminish it. Cheers!

While I'm sure it really doesn't matter as long as claims get paid and Berkshire keeps printing money, the two pillars of Warren's foundation for Berkshire have been dislodged: 1) Maintain our AAA-rating 2) Never split our shares Cheers! http://www.cnbc.com/id/33621425

I believe it was the '04 meeting, as I was there. I met Ajit and started to ask him about Fairfax. We talked for a few minutes about Fairfax and then I brought up the subject of both Prem and Ajit attending IIT. He told me that Prem went to one IIT campus and he had gone to another one, but they got to know each other through the insurance industry over the years. Then some Wall Street suit type interrupted and said "Isn't Fairfax in trouble?" Ajit snapped at him "Is he IN TROUBLE, or GETTING OUT of trouble?" The guy shut up. I met Ajit again in 2005 and we spoke for about ten minutes outside of the Omaha Marriott near Borsheim's. At the end of it he was kind enough to ask for my card which I appreciated. I met him briefly again after the 2006 Press Conference with Buffett & Munger as well. Each time he was very nice to me. Cheers!

I can tell you for a fact that Prem and Ajit Jain know each other very well. I would assume with all the daily conversations Ajit and Buffett have had over the last 15 years (Ajit is the last person Buffett speaks to every night), Prem and Fairfax probably came up at least a handful of times...I would bet significantly greater than a handful of times! Buffett is not only aware of Fairfax, but he most certainly knows who one of his greatest disciples is. Cheers!

Hi Folks, Diane Francis' article "Smartest Guy In The Room On Markets" has been updated, as there were a few typos in the original. Cheers! http://network.nationalpost.com/np/blogs/francis/archive/2009/10/31/345839.aspx

Out of the multitude of businessmen out there, I hold Wilbur Ross quite high, and he had some very interesting comments about the U.S. commercial real estate market today. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aoRYl03Rw1_g&pos=5

You got it square on Oec! Not only that, virtually everyone on here would have gotten their asses kicked if we weren't paying attention to what Prem and his team were talking about for the last four years in their presentations. I think we can give them some slack. Cheers!

Underwriting was 99% overall. Still very good. I'm pretty sure Fairfax pads the reserves when things are good unlike many other insurers. Thus the annual surpluses that usually appear over time as reserves are drawn down. I bet they pull a wad out of Odyssey once it is completely under their control. Cheers!

Book is now $371/share. Cheers!

Looks like the merger is going quickly, as ORH has now been delisted. Cheers!

Fantastic little interview. What an exceptional speaker as well! Every time I hear him, I become more ecstatic to have him as Chief Operating Officer of Berkshire in the future. Cheers!

Hi Sharper, Thanks very much! We'll only be matching the $5/head attendance, so if 50 people show up, we'll donate another $250. We'll also have some other stuff that will be drawn for in a raffle, and the proceeds will also be donated. What I'll do is contact the "Crohn's & Colitis Foundation" over the next month or so, and inform them of what we are doing. I'll get a direct contact and mailing number for those that knew Joann and want to make additional donations. That way they can issue a tax receipt to you guys directly who decide to make a larger contribution. Cheers!

Hi Oec, Thanks for the suggestions. Regarding the ideas: - We originally started the dinners at Joe Badali's, so there is a sense of nostalgia there for those that attended the first one with only 9 people and Francis as our guest. They can handle up to several hundred people, so we can continue to hold it there for years to come. They've always been very accomodating, and the place is disarming and easy going. - Joe Badali's can provide the mic and speaker, but for $175. I'm looking at cheaper places in the area where I could rent them. Tentatively we have the attendance price at $5/head with all proceeds going to the "Crohn's & Colitis Foundation" in Joann's name. I may increase it to $10, with $5-6 going to charity and $4-5 to cover the cost of the mic and speaker. Corner Market Capital will also match the donations from the attendance. - Regarding holding it the next evening, unfortunately alot of shareholders come in the night before and then fly out after the AGM. We would probably have less attendance holding it the next day. - In regards to the managers, I believe Sam and Francis usually get together the night before to chat about investing and life, so they started coming to our dinners together. For the most part, the dinner now fits into Fairfax's agenda for those days. If we move it, there's a chance we may be making it more difficult for Fairfax, since they have their manager meetings ongoing for the next day or two. Cheers!

Bank charge-offs of uncollectible loans are at 2.9%, which is higher than in 1932. Annualized rates are at 3.4%, which is on par with 1934. Cheers! http://www.cnbc.com/id/33481862

It's hard to tell, but I would say don't be so quick to discount the value of the $2100 tuition. There is a world of difference between great value investors and bad value investors because there is a huge divergence between practice and theory. Maybe there will be people there who are successful and you can get one good idea worth the entrance fee alone. I think that is the general idea people have when they attend. I equate it to the same perspective people use when buying a higher probability lottery ticket. You would have more luck on this board, or attending the Berkshire or Fairfax AGM's. Why? Because you are asking questions and having them answered, rather than simply listening to prepared speeches. Cheers!

I would spend $100 of the $2100 on the "Intelligent Investor" and "Securities Analysis" if you don't have them already, and then put the other $2000 away for investing. Cheers!

Sanjeev, I realize that other stocks are cheaper now than they were two years ago, but I am surprised by your comment. It looks to me that FFH is trading under book value. Is likely overreserved and still has a lot of cash to deploy. If the market tanks from here FFH should be able to profitably grow its insurance book (as other insurance companies will not have the capital) . .. if the market keeps rising this company has a big equity portfolio. I realize that you probably want to err on the side of caution and certainly feel some sense of responsibility as you did create this board, but I for one would sleep like a baby if I went to the moon for ten years and had my entire net worth in FFH shares (in a safe deposit box in Switzerland). Hi T-bone, again it all depends on your tolerance for volatility. We own both Fairfax and Berkshire in our corporate accounts, but that is mainly out of loyalty, for the annual reports, and because we can handle the ups and downs. In our funds, we have no Berkshire and have reduced our Fairfax holdings considerably. If you feel comfortable answering, I am curious if you think either that FFH is not trading at or below book value or that you don't think this is a great price to pay for a company like this. I have always been firmly in the camp that a well run insurer is worth a lot more than tangible book (and I agree with the earlier comment that ICICI now negates goodwill from ORH and NB, so GAAP is roughly tangible in my mind). I think 15-20% returns on book value PLUS an eventual revaluation to above book value is something to be very excited about. No, I certainly agree that Fairfax is trading below current book value. Unfortunately, Fairfax is now also a little more exposed to the whims of the stock market...thus book will move up and down...possibly dramatically depending on what scenario you see unfolding. I'm sure Fairfax will hedge based on their views, so that volatility will be tempered, but shareholder equity will fluctuate unlike the last couple of years where they held enormous amounts of cash. To look at it another way, I think this is a great time to be a bank . . . but their aren't any big flexible banks I trust. I applaude those on the board who had the conviction to invest in WFC and others in the single digits. . . I didn't. For all I know they are still insolvent (not that it matters with government support I guess). FFH is definately solvent and able to play the same (temporarily rigged in their favor) game the banks are. Instead of cheap deposits FFH takes in low cost float, but they don't have to worry about embarassment and can buy cheap CDOs (as evidenced by the ORH NAIC filing) or anything else that the "real banks" cough up. This is a great time to be a conservative leveraged investor (safely leveraged through deposits or well-written insurance float). Other than the recent opportunity to buy $100 cheaper (which is a large psychological barrier to buying more here) . . I don't think FFH has ever been cheaper. Oh, it's been cheaper. Significantly so! At the low point, it traded at about a quarter of shareholder equity. But that's my point. It's a very different company today than even a couple of years ago. This company is now a very solid, well-run ship. We don't invest in solid ships...we invest in broken-down ships. Why? Because they protect on the downside and carry far more upside. And the solid ships we do invest in are far smaller and less well-known, so they generally have an advantage as far as future growth is concerned. Does that mean we wouldn't own Fairfax or Berkshire in the future? Of course not! If the market does something stupid, we would be the first ones on board. We don't like rosy, optimistic scenarios. We prefer fear and desperation. Cheers!

Hi Valuebuff, No worries. While we don't take any responsibility for investor's own actions, if I see something that sounds a bit worrisome, then I'll respond. 40% of your actual position allocation is fine. Cheers!

Fairfax is not a good bargain at $360 per share. It's a decent price and you'll get a 12-15% annualized return going forward with a 2% dividend kicker, but it's not a deep-discounted bargain. If you were an investor who was agnostic on the market last year, you got killed. People should invest when things are cheap, regardless of the market, but there are varying degrees of cheapness. My original comment was based on the premise that a board member had put 40% of their portfolio into Fairfax at current prices. My response was just be cautious. Cheers!

One of the great strength of Warren Buffett is not to be impressed by the recent past. For instance the fact a stock was at 4$ a couple of months ago does'nt mean necessarely that it is not a bargain at 10$ or 15$ (See Singleton too). In 1950, Even his mentor was pessimist but Buffett bought because he looked forward and not in the rearview mirror I think the greater tragedy is when investors become transfixed on a company. I'm more attached to Fairfax than anyone on this board, other than those that may work at HW or are directly related to employees there, but regardless of who is running a firm, investors always have to weigh return in value relative to market risk. In 1950, circumstances had changed significantly compared to a decade earlier. What exactly has transpired in the past 12 months that makes people think that we are past tough times and a renewed optimistic view is warranted of market prices? I just read the quarterly letter from the Baobab Fund, whose manager happens to be an analyst at Hamblin-Watsa. He certainly doesn't believe a rosy scenario is in the works. I don't know if those sentiments are shared by the rest of the team at Hamblin-Watsa, but it might be interesting to see exactly how much of their equity position Fairfax has taken gains from when the report comes out next week. I'm not quite as bearish as Martin, but I think things will get tougher for a lot longer before they get better. We may not see the lows of the recent past, but we will most certainly tread deep waters over the next couple of years. Cheers!

QUE? I guess it depends on whether your implicit goal is wealth creation or maintaining wealth...long term wealth creation usually comes from concentration of assets. And if the goal is wealth preservation, you'd be perfectly fine putting 40% or more in Berkshire at these prices... It's all dependent on the individual's tolerance. As I mentioned, if he's comfortable holding long-term and can handle the volatility then that is fine. I'd beg to differ on the definition of wealth creation and wealth preservation...they are intertwined...you cannot have long-term wealth creation without wealth preservation in mind. Concentration is only useful if the assets are undervalued. Unfortunately, we have 680+ members, and I would say that their psychological make-up, regardless of how much Ben Graham they've ingested, isn't probably that far off the psychological representation of the general public. There were alot of people on this board who weren't interested in WFC at $9 or GE at $7. Even after everything Buffett said, they still weren't interested. How many here wanted to buy Steak'n Shake under $5? You can probably count them on one hand. I remember alot of people who did not want to touch Fairfax at $60 a share in 2003. At $360 a share, Fairfax is no longer the deep-discounted value stock most of us have owned in the past...neither is Berkshire at $100K compared to what else is available. They are businesses that are in great shape, and their market value is representative as such. As Francis said last year, never underestimate how cheap things can get. Cheers!