Parsad

Thanks for sharing that nwoodman! Cheers!

Say there was a large catastrophe year and now premiums for ORH's business skyrocket. ORH can write business at 1.5 x statutory surplus, but that may lead to a review or downgrade by credit rating agencies. So while you can write at 1.5 x statutory surplus, you don't want to unless premiums are extremely favorable. Instead, if you increase the amount of statutory surplus within the insurance business, you can still write at below 1.5 x statutory surplus while taking advantage of better premium pricing. The higher ratio you are writing at, worries credit rating agencies that you have less capacity to underwrite new business...in other words, they may assume that you are underpricing business, or have less capacity to write at a higher price, and may incur more future losses. Does that make sense? When Prem says the subs have excess capital, he means that they will generally be profitable and over reserved on the business they are underwriting in future development years as the claim is paid out. 2002-2005, the last time they wrote at 1.5 x statutory surplus was after 9/11, Hurricanes Katrina, Andrew, Ivan, Charley & Rita, so you had like four or five outlier events in a row, with over the equivalent of $150-$200B in insurance losses in today's dollars. It's unlikely they will risk writing at 1.5 x statutory surplus unless we see more catastrophe losses and continued upward pressure on premium pricing. Cheers!

Looks like Munger talked to Xi! Cheers! https://www.bloomberg.com/news/articles/2022-03-15/asia-to-get-boost-from-easing-china-rout-oil-drop-markets-wrap?srnd=markets-vp Cheers!

Correct. The math was off on the hybrid mileage numbers. A plug-in hybrid might get you down to 30% of fuel use, but most other hybrids are only about 20-30% more efficient than the non-hybrid. For example, regular 2022 Hyundai Tucson is like 28 mpg combined, while the 2022 Hybrid Tucson is: https://www.fueleconomy.gov/feg/Find.do?action=sbs&id=43753&id=43799 You save around $3-4K over 5 years, while the cost is about $7-10K higher. I don't know about the U.S., but they don't provide any sort of tax credits for hybrids anymore in Canada. Plug-in hybrid and electric cars still get tax credits, but they are generally $12-20K more than equivalent gas version vehicle. In this type of market, buying slightly older gas vehicles from private sellers is probably the way to go. As most dealers aren't giving significant discounts on financing or lease rates, and are marking up the vehicles above MSRP. With inventory levels low, your selection is limited as well. Cheers!

Western media is not downplaying this. You can find plenty of articles written by both left and right wing media talking about Ukraine's history and current problems with neo-Nazis. They exist in North America too, but the problem isn't as prevalent. Zalensky himself is Jewish, so he's certainly no proponent of Nazis. But just like left wing and right wing groups all supported U.S. aggression after 9/11, the Ukraine's are happily taking support from less desirable groups to fight a larger foe. Cheers!

Saying Cardboard was wondering inflames the situation. You could have asked the same question yourself, but saying Cardboard was asking...you know that's a trigger comment...almost like a "Your Momma". I don't need to deal with Cardboard shit. Tell him to pay his friggin' $49.99 if he wants me to deal with it! Really, his fee should be like $4,999.99, because he stirred the pot like no one else. Cheers!

No one complained. I hate it! And if I hate it, I know someone else is going to complain too. Consider this preventive posting! Thanks!

Ok, let's not kid ourselves! Every politician looks out for themselves and their constituents. The big picture is never taken into account, so let's not pretend Manchin or anyone else on either side is looking out for the country! Frankly, I'm not sure how either side can argue against fossil fuel security on a national/regional level. I'm all for alternative energy, but it is clear that we need to use all sources of energy available in Canada and the U.S. to stop dependency on the likes of Russia, Saudi Arabia, Iran, Venezuela, etc. Yes, everyone should move towards 100% green energy like Germany, but we all know there has to be a balance in how and when we get there. Wars for fuel and sucking up to less than amiable nations is not the solution. With oil and natural gas prices where they are, I'm 100% for pushing through with pipelines between U.S. and Canada, and also to Europe. I'm also 100% for adding surtaxes on the eventual profits to be made to offset pollution and spend on green energy...that would not only create energy security but funds to speed the process to 100% green. You have massive pools of available energy in NATO partners like U.S. and Canada...friggin' use it. But you better bloody expect a ton of taxes on there as well! Cheers!

Greg and everyone else...just friggin' use Biden and Warren...or the names of the politician you are targetting. This shit gets tiresome and just provokes others. If you can't avoid politics, then at least use the god-damn names so that I don't have to keep dealing with flame posts! Cheers!

Greg, this is out of line...consider this a warning! Cardboard is not a member here because of his behavior. Throwing around something you discussed with him privately at another member isn't appropriate. And what does it have to do with the discussion you were having with the party involved? Let's leave that stuff out. Cheers!

I'm sure the analysts and managers are working overtime right now looking at corporate bonds and deals in Europe with the panic and drop. Their commodity side is probably killing it. And they will probably get some opportunities here in North America as well over the next 2-3 months. Short-term pain for long-term gain folks! Cheers!

Isn't that first sip awesome! I don't actually really drink lattes much...the occasional mocha or cappuccino. I do blends of my favorite coffee grinds and then I do a pour over. Not those fancy cone pour over things all the millennials use, but the same little strainer I've used for 20 years well before the millennial baristas started doing pour overs. I use an unbleached filter, three pours with the first to bloom the grinds, and then suck that bad boy up! Damn that's good coffee! I saw a young orphaned Ukrainian boy, maybe 9-10 years old, carrying his little backpack and just crying painfully as he walked alone. Gut punch as I thought about my own niece and nephew and what if they had to go through such agony. I just don't understand how someone could do this without provocation...ridiculous!

Xerxes, don't lie! We all know you sip lattes like the rest of us! Cheers!

https://ca.finance.yahoo.com/news/billionaire-investor-bill-ackman-warns-181807581.html Ackman comments on the war. I agree with him that China is the one who can end this thing right away. Question is, will they? The war is to the benefit of their future interests in Taiwan, but at the same time, the sanctions and economic issues could destabilize China itself. Cheers!

So the liberal media was responsible for Putin attacking Ukraine? Because as we know, "Putin is a great guy!" Cheers!

You're actually going after the media when a dictator starts an unprovoked war against a country 1/10th its size militarily and 1/3rd its size in population? I too said that Putin will win out of this through concessions, since the West can't get fully involved and Putin will need to save face. But to go after the media and their "irrationality" is sorely misplaced! Cheers!

The fact is that is that if you did that...buy well below book and sell above book...it has worked out every time for 35 years...roughly 8-9 times! It also doesn't mean the "fan boys" don't concern themselves with details. There might be 3-4 people on this board who scrutinized Fairfax the way I did from 2001 to 2010 after the financial crisis. Same with Berkshire, but that was between 1999 and 2005. At some point in time, you become comfortable with management, their behavior (including risk assessment) and their ability to recover from adversity. It's not that we're ignorant, but we know the gameplan. How much do I have to analyze Coca-cola or Disney management or their gameplan to know when it is cheap or not. You cannot value management, only the business and its competitive advantages. The difference is that Buffett, Watsa, Gaynor, etc add to the competitive advantages of their underlying business...not subtract. When both the business and that management is available at a favourable price, a significant margin of safety, you are buying at a price that offsets the stuff you may not be able to assess adequately. How does Munger offset political risk...he buys Alibaba at a deeper discount. It may not work out all of the time, but it tends to work out most of the time. No doubt other shareholders share your concern. But it's probably more of a comfort issue, than a material issue. Cheers!

You're correct. Lehman was done for because it's funding was already cut by the Treasury and they couldn't find buyers for their CDS...extremely overleveraged. The naked short selling sped up the process. Again, these are companies that are vulnerable. When you push their price down fast enough, and naked shorting does exactly that, their ability to raise capital dries up. If their stock price drops from $50 to $10, how likely are they to raise equity without massive dilution? Or what is the likelihood financial institutions will let them borrow? In most cases, financial institutions usually cut the lines of credit for such companies. Fairfax is the perfect example. Because of FTD's on the NYSE, and planted articles in the media, we know the stock price collapsed from the mid-$200's USD to $58 USD in a very short period of time...less than 3 months after listing on the NYSE. I doubt Fairfax could get loans at that point, and any equity issuances would have been massive dilution. How do you sell insurance businesses that are now under media and analyst scrutiny as "finite insurance?" They had to turn to three long-time colleagues that knew the company and knew they needed short-term capital. Once they had that capital, and insurance results started coming out, the stock turned up. It was a period of roughly 6 months in 2003 that all this happened. As soon as they delisted from the NYSE and raised that money, the FTD's stopped, the stock recovered and the rest is history. But naked shorting sped the process up so that the hedgies could make a killing and possibly kill the company. Why didn't the same thing happen to Fairfax on the TSX at the same time? Because the TSX did not allow naked shorting, and fined market makers for not processing transactions within T+3. There were many companies, Overstock.com being one, where I saw FTD's that were 6 months to 9 months old! Meaning the share certificates had still not been delivered for 6-9 months to the proper owner, and the market maker was not being fined. Just nuts! As soon as the SEC closed these loopholes and started fining, the FTD's dropped like a rock, and short sellers were scrambling for shares to cover their shorts and paying up to 25% interest to borrow. This is similar to what happened with the Meme stocks, but this time shareholders screwed the short sellers because brokerages started closing trading or loopholes in those Meme stocks, and asking for higher collateral against the hedgies naked put options. Until they get rid of the timing issues between paper and electronic trading, they will not be able to fix this entirely. So naked shorting unfortunately is probably here to stay for a while, unless the SEC gets really tough with market makers or we see blockchain work its way into day to day trading. Blockchain would effectively kill naked shorting, since the certificates would transfer immediately from buyer to seller. But we are probably at least a decade away from seeing this happen! Cheers!

Bear Stearns...Lehman Bros...there were a ton of FTD's during the financial crisis. Overstock.com was not driven out of business because they had no debt. If you drive the stock price low enough, and equity issuances would result in massive dilution, and you call the debt...you drive the company out of business unless they can get cash like Fairfax did from Cundill, Markel and Southeastern Asset Mangement. Yes, virtually every business that got hurt from naked short selling was already in a vulnerable position. But that's why the hedgies target these businesses. The goal is to drive the price down as far as you can with artificial shares, so that they have no choice to capitulate to the debt holders, find a white knight or go under. In the meantime, the hedgies and their cronies sell their shorts and walk away. Wash, rinse, repeat! Cheers! https://www.federalreserve.gov/econres/notes/feds-notes/the-systemic-nature-of-settlement-fails-20170703.htm

Let's look at the ORH transaction. They sold 9.9% for $900M, giving it a valuation of essentially $9B. But ORH book value at year-end is $5.4B. Correct me if I'm wrong, but that means they sold 10% of ORH at nearly 1.67 times book! And then they went and bought back their stock, including the remaining 90% of ORH at 0.65-0.8 times year-end book value depending on which share buyback and the TRS. I'm surprised they didn't sell 20% of ORH to buy back even more stock! They will not pay 1.67 times book to buy back that 10% of ORH when they do...they are going to pay somewhere around 1.2-1.3 times book...watch! So I'm not too concerned about that 10% of ORH growing at 12-15% over the next 2-5 years before they buy it back, because Fairfax is far ahead of the game by doing what they did, and then buying back ORH at a lower valuation than when they sold. Cheers!

I agree with what you are trying to state Stubble, but I'm not sure that is fair. You can't say they had a shitty year during a bad year and then say they had an ok year during a great year. At some point, you just have to give them some credit for their work. Anyway you cut it, the things they did this year were fully accretive...whether it was by selling ORH, buying back cheap shares, TRS, growth in premium volume, paying down debt, stabilizing the hold co's cash levels, extending the global reach of the insurers, value recognition of many of their holdings...it was pretty much all good. A great year in Fairfax's history, especially after what shareholders have been through on the portfolio management side in the last 2-3 years. We know from Fairfax's history, they will issue equity and buy back their stakes in their insurance businesses when Fairfax's book is at 1.1-1.2 times or better and at $1,000-$1,100 per share. Which I imagine will happen within the next 24-36 months...probably in line with when they sell out of the TRS, you will see an announcement to buy back ORH. They are opportunistic with every asset other than perhaps Blackberry's meme debacle. Which I agree, they should have taken advantage of in some way. Can you imagine if they had? There probably would have been no need for an ORH sale. But Prem doesn't do that...he's not going to sell a position he's fixing and leave them hanging. There are certainly years where we should be calling out issues, but overall, this one ranks very well in their history! Cheers!

Congratulations on the Kia! They make great cars. I've held off replacing my car. Prices at dealers are crazy right now, and I always loved the 0%, no down financings. I don't want to pay a penny if I'm borrowing the money. You can't find those right now. So, I'll keep driving my BMW 3-series until I find the deal I want after things calm down...maybe later in the year, maybe next year now. Still looks like new and drives great! Cheers!

This documentary that just came out about the whole Robinhood/Gamestop/Citadel saga discusses naked short selling. A subject many Fairfax and Overstock.com shareholders are familiar with. It's taken nearly 20 years for this subject matter to be taken seriously...stated in the documentary as arguably the greatest fraud in Wall Street history. Fairfax's and Overstock's lawsuits from back in the day, laid the foundation for the investigations and prosecutions into many hedge funds by the Justice Department, but ended unsuccessfully for Fairfax and Overstock overall. Now, roughly 12 years later from the end of that saga, naked shorting is at the forefront of the Robinhood/Citadel saga. I remember when some of the main culprits on Wall Street, along with their crony analysts and journalists saying how ridiculous the idea of naked shorting was, and how crazy Prem and Patrick were. Even when there were fail to delivers going on nearly a year in some cases! Artificial shares used to drive down prices and drive companies into oblivion. I was warned by someone that the guys even I was writing about could put me in danger...that these were bad guys! Patrick was going after them with alarming gusto through his blog DeepCapture...he was getting threats. Some of the people in those lawsuits were charged, fined, prosecuted or shut down. Most got away scot-free! Some started their own blogs or media businesses, distancing themselves from their pasts, and even becoming "respected" writers. A couple even disappeared or died mysterious deaths! And some are reappearing in this whole Robinhood/Citadel debacle as proteges of the Sith Lord. Many on CNBC and elsewhere laughed at Byrne when he came up with that moniker for a well-known hedge fund manager, who owns a baseball team and was sanctioned by the Justice Department. These guys just keep funding proteges who end up doing the same thing over and over again like their predecessor...rinse, wash, repeat! Well worth watching! Cheers! https://www.cheatsheet.com/entertainment/gaming-wall-street-why-hbo-gamestop-stock-documentary-must-watch.html/

Yeah, I think we can put the IPOs in the "icing on the cake" bucket. Digit, Ki, Anchorage, etc...any increase in book value due to IPOs is a bonus...as well as any increase in value of the insurance subs, since we know Odyssey is carried on the books well below fair value. Just on the existing insurance earning power and allocating the investment portfolio, they can hit their 15% ROE mark as long as they keep it simple. 2-3 years of that and I'm a happy camper! Cheers!

I would like to see less debt as well. Not because they are overleveraged by debt, but they have plenty of leverage from float and investments. They just don't need to have as much debt as they do to still hit 15% ROE. That being said, debt to equity is still in great shape...I just want it to be in excellent shape! Cheers!