Parsad

Parsad That's unfortunate that you would sell Fairfax at 2x book considering you have such a low cost basis. I presume that after selling you would look to buy back at a lower multiple of book, but what multiple? 1.5x? 1x? And if it's 1x what if it never gets back there, or what if it gets back to 1x but book value has grown so that it is at a value greater than when you sold at 2x? I've probably done that at least ten times in the last seven years...both in my own portfolio, CMC's corporate portfolio and in MPIC's portfolios. Not necessarily selling the whole investment, but certainly portions at higher prices only to buy it back cheaper. And not even at 2 times book. The last time we did that was just in November when we sold all of our Fairfax only to buy other investments at dirt cheap prices. We purchased in the money call options on the shares we sold for a 3% premium, which was paid back by the dividend in January when we exercised them and got our shares back. Our partners may have paid LT capital gains on that investment, but we made considerably more on that capital when we invested it and it allowed us to keep our lead on the markets. If we had stayed pat, we would have lost ground as Fairfax shares finally fell this year after the 1st Q report. We ended up buying back more of our shares at cheaper prices. We've done that with Overstock on several occasions. With Wells Fargo three times over the last year and a half. As well as Berkshire Hathaway. Each time, we've made anywhere from 20-30% to 300-400%. As much as we love Prem, Warren, etc., we don't fall in love with the stock. I'm assuming an excellent business so I don't want to give people the impression that I'm suggesting these notions be applied to any and all stocks. I firmly believe it's an outright fools folly to sell an excellent business just because you are offered a rich price, and I think Buffett and Munger would agree with me. I think selling an excellent business at a rich price with the belief that you can pick up another excellent business at a cheap price is a very slippery slope fraught with problems. Actually it does apply to all stocks. The stock market gives you this opportunity. For many investors, it is pure folly because they treat it with a casino mentality. We don't do that, but we operate within a fairly strict mandate of buying below our estimate of intrinsic value and then averaging out as we approach it or go over. Sometimes we even take into consideration the economic environment and make a calculated decision to sell...as we did with Wells Fargo. Generally though, the investments we do make, we are content to hold the stock for the long-run. It's just that we don't necessarily have to. The point is that something cheaper always comes along with investing...always! Cheers!

With less than three weeks to go, we have 40 guests coming to the dinner this year. To date, the list of attendees includes: - Sanjeev P. - Alnesh M. - Andrew C. - Paul R. - Eric A. - Jim B. - Brian B. - Stephen C. - Stephen C. (Crip) - Jordan C. - Marc C. - James E. - Gregory F. - Stuart F. - Stephane G. - Leon G. - David H. - Simon H. - Gary H. - Tom J. - Charles K. - Stephen K. - William M. (possibly a guest) - Stefaan M. (possibly a guest) - Mark M. - Eng-Chuan O. - John P. - Norm R. - Al R. - Keith S. - Brian S. (possibly a guest) - Jeff S. - Nicholas S. - Martin Van B. - Jack W. - Ilya Z. If you haven't already given me your RSVP for the shareholder's dinner, then please do so. Details about the dinner are below. Cheers! For the fourth year in a row, we will be holding a Fairfax Financial Shareholder's Dinner in Toronto. About nine people showed up the first year, and last year we had about 30 shareholders attend. For the last three years, Sam Mitchell and Francis Chou have graciously attended, where they have entertained questions from shareholders for over an hour. Many attendees left with sage advice that served them well through the volatility of 2008! Fairfax Financial Shareholder's Dinner Tuesday April 14, 2009 Joe Badali's 156 Front Street West Toronto, Ontario (416)977-3064 Drinks: 6:30pm-7:00pm Dinner: 7:00pm-9:00pm RSVP: sanjeevparsad@shaw.ca

Old School Graham taught to think like an intelligent private business person in buying and selling publicly traded equities. The only downfall to the theory was that private business people put their businesses up for sale much less seldom than does a common stock operator. Buffett obviously converted himself to the business ownership aspect -- but with a major cavaet: that he would only buy outstanding franchises. Don't get me wrong, I have the utmost respect for Graham -- however, if people are buying sub-par businesses do so with eyes open (and perhaps 'trade often' would be good advice). Time is not necessarily a friend of the sub-par business as it is with the outstanding one -- tremendous margins of safety are of the essense. I don't disagree with you at all Uncommon. Though the operative word is "private" business when it comes to Berkshire. Public equities have a bid/ask on them every second, of every hour, on every day. Public businesses don't go on sale that often. Cheers!

Hi Jack, No there is nothing wrong with what you are proposing. What it does leave you open to though is market volatility such as what we are currently experiencing. Look at Wesco for example...COST, KO, AXP & WFC. That's pretty much it for the last ten years, and Wesco has done perfectly fine. But the portfolio naturally experiences tremendous volatility during that ten years. Buying well below intrinsic value and then selling when the investment is at or above mitigates that market risk. Yes, you may pay slightly more in taxes, but generally returns will be slightly better while volatility will be less. Even Buffett suggested that he should have sold Coca-cola when it was over $80/share back in 1998. If someone offered me two times book or better for Fairfax, I would be a seller, not a buyer. This is not present day Buffett, but old school Ben Graham. Cheers!

Yep, Another Buffett myth blown completely apart. He has always used economic analysis particularly at times of great flux in the economy. No, not really a myth. What Buffett does with Berkshire is very different than what he may have done in his partnership days, early stages of Berkshire, or currently in his own personal account. Berkshire for some time now, has to operate under the assumption that Buffett won't be here in a decade. Thus "buy & hold" is what has to be reinforced in shareholder's minds, because that is what the vehicle is now. It has to run autonomously because that is pretty much what will be happening when he's gone. It also happens to be a public trust in many ways, since virtually all of his stake will go to charity. It can't operate based on exploiting macroeconomic factors because that means someone has to actually make active decisions. Finally, the "buy & hold" philsophy is espoused for very obvious reasons in economic terms, because Berkshire is trying to acquire private businesses where the owners probably don't want to depart with their stake. The fact that Berkshire promises to never sell those businesses, is what gives these owners the comfort of selling to Buffett. Otherwise they would probably tell him to take a hike! So "buy & hold" has a very specific mandate, that probably doesn't apply to the investor with some ability. It really became the twisted mantra with which mutual fund and investment companies sold their wares. Buffett tried to turn that around by encouraging those without much aptitude for investing to buy and hold index funds instead. Cheers!

Yup, that's an important distinction Eric. I would propose that half that drop is also primarily related to financial stocks. There are alot of non-financial companies that were dragged down with the market, even though their earnings are down less than 10-15%. Investors should remember that they aren't buying the market, except those that jumped in with both feet and bought index funds or ETF's in the last few years! >:( Cheers!

Really? FFH's stock price is flat today. Maybe you should add a salad or fries to your sandwich...... Hey I think Prem should just buy shares back, rather than me carrying the load...literally carrying the load if I eat those fries! Cheers!

What are you guys holding right now? A sandwich in one hand, and a cup of coffee in the other. I'm typing with my toes! ;D Cheers!

Those that can...they do! Those that can't...they write! Let guys like Olive write what they want. I remember Fabrice Taylor writing often about how Prem couldn't run an insurance company, yet Taylor ran his magazine "Frank" into the ground in less than a year. Buffett is being treated about the same as when Jordan decided to take some time off and try his hand at baseball. To the press, you're only as good as your last game, and it was an off year for just about every investor out there. What did Jordan do when he came back after his stint in baseball? He went out and won three more championships! Cheers!

I have no problem with Congress trying to do anything to get the bonuses back. The U.S. government owns it, and they should treat it like they are the owner. I have a problem with the moral outrage that they show, in particular the shellacking Liddy took, when he's working for peanuts to turn this thing around after being brought in specifically to do so. How about each Congressman take a pay cut for missing the boat too, as well as Chris Cox, Alan Greenspan, Hank Paulson, Ben Bernanke, Sheila Bair, etc. I believe the taxpayers pay their salaries as well. What about Bush & Cheney? Cheers!

Yup, that's a pretty good analogy. What I hate about Congress is how after every debacle, they get on this friggin' high horse and hang a few people. Yet, they never explain how all of them or the regulators missed all of this as well. - Didn't Congress approve the increased leverage that Fannie Mae and Freddie Mac started using a few years ago? - Didn't they also approve the merger of banks and investment companies? - They also created the precedent a decade ago by approving the merger of banks and insurance companies...remember Citibank and Travellers merging? - Why didn't Congress enact any legislation preventing 100% or 110% mortgage financing back when Angelo Mozillo was sitting on CNBC talking about it? This era's Milken or LTCM will be AIG & Madoff! Cheers!

I'm not sure which is the bigger joke...the whole financial industry debacle or how the political parties operate after such a crisis! Cheers! http://www.globeinvestor.com/servlet/story/RTGAM.20090319.wAIGtax0319/GIStory/

Yeah, that's pretty much what they did! Bloomberg ran a story today on the report, Lehman Bros and naked short selling. Cheers! http://www.bloomberg.com/apps/news?pid=20601109&sid=aB1jlqmFOTCA&refer=home

Interesting report issued by the Inspector General of the SEC, on how the Enforcement Divison is hampered in investigating naked short selling, due to some deficiencies in how complaints are referred. Doesn't quite bluntly state that they are not doing their job, but does infer that enforcement of naked short selling is not being handled in an appropriate fashion. Cheers! http://www.sec-oig.gov/reports/AuditsInspections/2009/450.pdf

If the market now returns 2x the average, say 10% per year, it will take 10 years to get back to 1500 - 2020 is almost exactly 20 years. Dude, without a calculator...the rule of 72. 72 divided by 10% equals 7.2 years. Thus 2016 is when you should get back to 1500. But you are pretty close. The S&P500 hit a 12-year low last month, so add 7.2 years and you get pretty close to 20 years. Remember though that the market does not move in a linear fashion. Cheers!

It's not so different than Walmart or McDonalds closing a store that tries to unionize. I have no problem if they want to do that, or if Chrysler is playing hardball. They just have to deal with any fallout that comes from playing such a hand. If they leave because the Canadian Government or CAW don't want to bend, then Chrysler has to live with that decision, just like the government or the union has to as well. This is a capitalist society and businesses, government and individuals all have choices...be it savory or unsavory. Cheers!

Wow, he was down almost 90% over one year! Holy cow! Cheers!

Usually when these articles start coming out of the woodwork, you know that Berkshire has hit bottom for now and things should get better. The one from Diane Francis last week, which followed a number of articles by Doug Kass, and recently Peter Eavis and James Cramer, should mean good news for Berkshire owners going forward. http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090315/REG/303159971/1030/MUTUALFUNDS What's quite amusing is the quote below regarding Fairholme's decision to sell Berkshire: His dumping of Berkshire Hathaway, however, is a particularly troubling signal since his investing acumen is so well-respected that he is mentioned by some industry experts as a possible successor to Mr. Buffett. So they suggest in the article that investors shouldn't put too much weight into the opinions of the "gurus", yet they use Berkowitz as a guru and his opinion should matter. Oh the hypocrisy!

I just finished watching Jon and Cramer go face to face... I am not sure what Cramer was trying to accomplish by going on the show. Jon provided many examples of how CNBC is blowing it and Cramer just kept agreeing and was unable to say anything that made any sense the whole time. Cramer should have simply said that very few people knew how bad things were. Cramer also should have fessed up that his show has a lot in common with the World Wrestling Federation (is it really real???)!!! I was also surprised at how angry Jon was during the interview (there wasn't a lot of comedy)! Serious stuff I guess. Let's see where it goes from here... The funny thing is that John Stewart is a financial layman. How can guys like Cramer, or for that matter Mr. Joe Kiernan who likes to jump into the Becky Quick interviews with Buffett, respond if someone knowledgeable actually questions them? Did anyone else here think that Kiernan jumping into Quick's interview with comments about the Schering merger sound ridiculously moronic? Another perfect example of how CNBC caters to Wall Street idiots and the short-term trader. Nothing will come of these confrontations. It never has and never will. Hopefully a few minds get changed, but nothing significant will ever happen because it is a highly collegial atmosphere. One that regulators are reluctant to change, and one that the media whores benefit from. Cheers!

What does this mean. Does Berkshire has to post collateral/deposit money for any of the derivatives or puts it has written ? Probably not. Financing costs for businesses like Clayton Homes and Mid-American may be higher. Although AM Best, Standard & Poors, DBRS will probably not do such a stupid thing and downgrade Berkshire, so I'm not sure exactly how much more in interest they would have to pay for any debt they issue. Going from AAA to AA+ isn't going to be detrimental, but it does take away Buffett & Munger's ability to say they are AAA-rated by every rating agency. I bet Munger has some choice words for Fitch...like Fitch-off! Cheers!

One of the dumbest things I've seen in the last year (and that says alot), including their reasoning for doing so! Cheers! http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b8684919A-8A3A-406D-A69E-0EF5A50A4170%7d&siteid=yhoof2

With a month to go, if you haven't already given me your RSVP for the shareholder's dinner, then please do so: For the fourth year in a row, we will be holding a Fairfax Financial Shareholder's Dinner in Toronto. About nine people showed up the first year, and last year we had about 30 shareholders attend. For the last three years, Sam Mitchell and Francis Chou have graciously attended, where they have entertained questions from shareholders for over an hour. Many attendees left with sage advice that served them well through the volatility of 2008! Fairfax Financial Shareholder's Dinner Tuesday April 14, 2009 Joe Badali's 156 Front Street West Toronto, Ontario (416)977-3064 Drinks: 6:30pm-7:00pm Dinner: 7:00pm-9:00pm RSVP: sanjeevparsad@shaw.ca To date, the list of attendees includes: - Sanjeev P. - Alnesh M. - Andrew C. - Paul R. - Eric A. - Jim B. - Brian B. - Stephen C. - Jordan C. - Marc C. - James E. - Stuart F. - Simon H. - Gary H. - Tom J. - Charles K. - Stephen K. - Peter L. - William M. (possibly a guest) - Stefaan M. (possibly a guest) - Eng-Chuan O. - John P. - Norm R. - Al R. - Keith S. - Brian S. (possibly a guest) - Jeff S. - Martin B. Cheers!

Talk about closing the barn door AFTER the horse has left the barn. Isn't that how the government normally works? :D Mary Schapiro has also confirmed that they will be proposing the reinstatement of the uptick rule in April. Cheers! http://www.cnbc.com/id/29634974

Article on Grantham's comments suggesting to slowly move into equities as it is impossible to time bottoms. Cheers! http://www.bloomberg.com/apps/news?pid=20601213&sid=aqR2H8gIZ0.M&refer=home

I'm sure she is, but just like we responded when people were treating Prem like crap back in 2003 & 2004, we aren't going to let anyone treat him like a God now. He's Prem Watsa, CEO of Fairfax Financial, who has done some amazing things since starting his company. If anyone is the ideal student for Buffett and Graham, it's probably him, but at the end of the day he's still just Prem. I'm pretty sure his wife and kids don't tell him he's "one up on Buffett" at home! ;D Cheers!