Parsad

Yes, that's correct. Fairfax is one of the few insurers that benefits from lower asset prices...they thrive when things are tough for others. With their insurance businesses already humming and capable of writing 50% more business, what do you think will happen if they can put the portfolio to work in a down market?! Both engines firing...an awesome one-two punch! Hitting $1,000 USD in book value per share could happen well within 5 years for them...I can see 15-18% ROE years for the next two-three years. Cheers!

I've been a shareholder for over 20 years, and I've read every annual report since 1985. The company has not been this well-positioned in its history...from insurance underwriting quality, portfolio management (cash, bonds, stocks), management depth, balance sheet strength and the sheer expanse of the business as a global insurer. Yes, they messed up on the equity side over the last few years and a couple of the businesses could be walked back, but overall, they are positioned extremely well going forward and have preserved the gains in the last 18 months. As long as they just act rationally going forward and make little to no macro bets, they should be in for a few good years. Cheers!

I've cut back over the years...I only enjoy 1, maybe 2 a year now if that! I've always been partial to Montecristo cigars...especially the Montecristo Especial No.1...my favorite for 20+ years! It's a longer, thinner cigar, but lights nicely and the smooth flavours are great as you go through the cigar. Lasts about 40 minutes to an hour depending on how fast you burn. Great on the golf course, sitting on your deck having a scotch or even a really good cup of coffee! Not sure you guys can get them though...the true Cubans. But based on the quality of Montecristo cigars, I would still buy them in the U.S., even if they come from the Dominican or Nicaragua. The terroir is different, so the flavours will be different...probably a bit harsher and less smooth than the terroir in Cuba from what I've experienced. But they are generally wrapped well and burn smooth. Cohibas are great too! But the flavours aren't nearly as smooth as Montecristos. They are bold, strong notes that really need a good scotch or bourbon. Padrons are good too, but you really have to taste a bunch of different ones to see which you prefer...the flavours and strength really run the gamut. Even the Dominican, Nicaraguan version of these two brands should be nice cigars. I'm of the opinion that if you are going to smoke a cigar, smoke a good one, because you aren't going to do it often and you really want to enjoy it. Cheaper cigars are really trial and error in terms of flavour, how they are wrapped and how they light/burn. You don't want your, once in a few months cigar, to have a bitter aftertaste or it burns irregularly so that the flavours are awful and the taste becomes horrible. If you are going to go cheap and often, then a maduro wrapper will hide some of the deficiencies and smooth the flavour a bit. Cheers!

I agree with that, but he will essentially get control or concessions from the West...via puppet regime or directly. The point is, the Ukrainian people are in for a world of hurt and deprivation for a decade...the West essentially cannot intervene without the war spreading to NATO countries. Cheers!

Putin will win this unless his generals step up and replace him. Why? 1) Ukraine is not part of the European Union or NATO...so they will continue to only get limited support from outside, otherwise we risk a World War in Europe again. 2) Putin wants to protect his border and prevent any further progress of NATO or democracy...so if he gives up Ukraine, he will want major concessions...if he does not get them, he will take over Ukraine after all of the bluster from NATO. 3) Putin has some sort of illness or knows he may be deposed...this is the scenario I don't want to think of...the f**k you to the World after I'm gone scenario. In this case, his generals have to stop him. The comparison to Vietnam is a good one, but probably won't last nearly as long. If they take over cities fairly quickly, I think the World/UN will have to accept Ukraine becoming part of Russia fairly quickly, and the Russian people will have to suffer for 5-10 years as sanctions remain in effect and economic prosperity will continue to elude them...the price you pay for Putin remaining leader. Cheers!

Terrific comprehensive letter! The insurance engine is wound up tight...increasing premiums through 2021, into 2022 and likely 2023...still only writing at 1x statutory surplus (can go to 1.5x)...float and investments per share is enormous leverage if they get it right! $630 USD per share book value, balance sheet in very good position, with investment side ready to pounce better than almost any other insurer...should be trading somewhere between $800-950 CDN per share...right now! Cheers!

Terrific comprehensive letter! The insurance engine is wound up tight...increasing premiums through 2021, into 2022 and likely 2023...still only writing at 1x statutory surplus (can go to 1.5x)...float and investments per share is enormous leverage if they get it right! $630 USD per share book value, balance sheet in very good position, with investment side ready to pounce better than almost any other insurer...should be trading somewhere between $800-950 CDN per share. Cheers!

It was a pretty darn good year, and his call on overpriced areas all came true...so bring on the exclamation points! Cheers!

That's nice work Castanza! Looks good. Cheers!

I keep almost everything in tax-advantaged accounts or holding companies, so my tax bill is usually a refund or nominal at most after deducting expenses and the benefit of lower taxes for small corporations. I have very little outside of those accounts other than the equivalent of a year's income, which I keep quite liquid and don't trade much in...emergency funds. But I'm sure many of you bought crypto, which I didn't and you can't keep those in tax-advantaged accounts. Cheers!

Nice job Rk! Yes, definitely worse problems...look at Ukraine and the people who had stable lives and now suddenly nothing. Having no mortgages will let you sleep well at night. Cheers!

Yes, and this gives analysts and shareholders greater visibility of what is going on at the company and how the investments are managed. I think this is the direction they are headed to prepare the company post-Prem. Can you imagine the investment issues at Berkshire after Buffett, even with the two Toms there with the amount of money pouring in every day? Or Markel post-Gaynor...lack of depth on the investment side? We've got very capable people at Fairfax (HW, Fairbridge) and associated with Fairfax (Sokol, Chen, KW, Trott, Dalton, etc) that can manage the huge amount of capital we have and that will flow in from insurance over time. And those associated with Fairfax have very honed skillsets in certain industries that make them among the best. Cheers!

No, Paul is spending time working on his personal ventures and enjoying life with his family. You never know...you may see him back at Fairfax or working with them in some way in the future, but presently he is not involved with HW or Fairfax. I certainly would not be surprised to see some future deal where Fairfax and Paul are involved in some way. Cheers!

That joke has aged well! It's too bad that neither Biden, nor Trump, have a shred of Reagan's charisma and delivery. Cheers!

I know Patrick. I also know Jonathan Johnson who runs Overstock now and is overseeing Medici Ventures which owns all of the blockchain technology companies they invested in. I'm also an Overstock shareholder and have followed the company and owned the stock on and off for nearly 20 years! I've made more money buying and selling Overstock.com than any other stock or idea. Patrick was 100% correct about crypto and blockchain. But it won't be BTC that leads the way. ETH has a place in all of this...but not as a leader. It will be stablecoins backed by actual assets or revenues that will become mainstream and pave a new way for financial transactions. Blockchain will also create instantaneous one-to-one title transactions...essentially eliminating most, if not all, intermediary institutions...think Visa, Mastercard, American Express, Paypal, etc, as well as bank tellers, real estate brokers, ticket stations/vendors, etc! Those institutions will have to figure out a way to remain intermediaries or create their own stablecoins to conduct transactions for a fee. Cheers!

Agree with that. A few years from adoption and a decade or so from ubiquity. Cheers!

You guys are confusing two things: The current crypto batch and portability of assets. Yes, it's easier in terms of portability presently, while investors have faith in it. It doesn't mean that the current batch of crypto can hold their value long-term...as we've seen from their volatility and lack of usability as a currency. I fully agree that future crypto backed by some sort of asset (gold in vaults, land, resources, tax revenue, operating revenues, etc) will work both as a store of value and currency...and will be easily portable. Cheers!

Well, you both might be correct. I don't think Prem is giving the reins over to anyone completely, but we have seen him make considerable changes to 1) lessen the load on himself 2) prepare the company post-Prem and 3) simplify the company. - Added a President to oversee everything - Changes to the board including bringing in family members and younger directors - Narrowing the scope of investments and widening the allocators - Ensuring future control of the holding company Having a go to group for capital allocation is not only a good idea, it is a must now that the core group is well into their 70's and the older ones are getting closer to 80. Notice how the core group is overseeing the burgeoning new recruits or some tenured members...Chandran with Fairbridge, Brian and Prem with Wade and Lawrence, and refocusing their energy back into larger, sure bets, rather than venture capital ideas with the closure of Fairventures and the labs. It's probably the closest its looked to Berkshire or Markel in some time. Fairfax's succession plan may actually be more advanced than Berkshire's or Markel's! Cheers!

I know the reasons behind Paul leaving, and I can 100% assure you it had nothing to do with Fairfax, Prem's relationship with Paul, or anything to do with the company. Basically, he had spent his children's life working 12-16 hour days, and he just needed to spend more time with them before they were gone and had flown from the family nest. He wasn't going to retire, so he made a very tough decision to leave Fairfax and spend more time with his family. Kudos to him! Cheers!

Paul was at Fairfax for about 15 years...and he was President of Hamblin Watsa during the financial crisis. Meaning approval of the portfolio moves, including buying CDS, would have to be run by him and Prem. So if you are going to say things have gotten better after Paul left, then you better point out some of the greatest successes happened with him there too! Also, all of the successes that everyone is cheering about now as part of the turnaround...Atlas, Eurobank, Resolute, Brit, Fairfax India, Fairfax Asia, Stelco, etc were all under Paul's watch. Cheers!

How is crypto (in its present form) any different than a Monet or Ferrari in Russia? You cannot use it at the local Perekrestok to buy bread. You may be able to trade one or the other for some gas at your local Lukoil station! Store of value and tradeable currency are two very different things. Crypto will have a place in the future...but as I said before, just not as it is now. Cheers!

Be careful! This is the problem with political risk...it's immeasurable. Shareholders in SBRCY will probably get wiped out, even if the sanctions are short-term. Bondholders would more likely make some money here, but only if sanctions are short-term. The only hope is some Chinese bank walks in and buys it, since Russia cannot nationalize a bank that has no prospects under essentially a worthless ruble. If you are trying to take advantage of this situation, look for businesses outside of Russia that have been hit because they do business there, but have no risk in terms of most of their assets being situated outside. Cheers!

Yes, I totally agree with this. That's kind of my point. That distortions created a period where massive growth occurred, but for traditional value investors, the normal collapse of the cycle (both tech bubble, housing crisis and now the pandemic) never were fulfilled because governments simply kept reinflating. Thus the eventual rebound in the cycle of traditional value stocks including commodities. Buffett is no longer a traditional value investor. Munger and Phil Fisher's influence has made him more of a hybrid...traditional distressed value investor who pays up for growth...essentially just an "investor" now...and that may be the best model and what we should all aspire to. But it is hard to change when you've done the same thing for so long...Buffett and especially Munger are incredibly unique in this way. Fairfax remains a Ben Graham distressed value investing firm...they have not changed, nor are the old guard likely to ever change...so damn hard to go against your nature. I personally have an incredibly hard time paying up! Wade and Lawrence may have some influence on Fairfax, but the team that was together for nearly 50 years won't change their stripes. So we have these cycles where Prem will be right and Prem will be wrong as distressed value investing moves through time. Cheers!

Not quite accurate. The level of monetary and fiscal manipulation implemented using modern economic theory has been extraordinary during the last 20 years since the beginning of the tech bubble and well into the pandemic. Outside of Japan during the 90's and early 2000's, the level of manipulation of interest rates and capital injections, alongside completely unprecedented asset purchases used since the housing bubble crash...all of this was done for the first time. We don't understand the distortions this created or the massive bubbles (3 times) in 20 years we have been exposed to. Sure, some of us have benefited from these rapid cycles, but no one has experienced this before. This is not dissimilar to when interest rates spiked in the late 70's and early 80's...outlier events and the eventual unpredictable outcome...except in hindsight. And I think that's where alot of the reflection of Prem is coming from...hindsight! I don't know of a single investor on this message board that got it right over the last 20 years. Even Buffett didn't get it completely right. Were there mistakes? Absolutely...shorting, lack of quality targets, etc. Were there winners? Also for sure. Could they have done better? Well, let's measure that over periods...the last 10 weren't good...let's see how those numbers change progressively over the next 5 years. Cheers!

I would also say that the reason no one got it right over the last 20 years is because of the distortions monetary policy created. Those that got the tech bubble and housing crisis right, didn't get it right from 2015-2020...so many, Prem, Rosenberg, Grantham, Klarman, Gundlach...pretty much every hard-core distressed investor. They expected continued fallout and a full blown correction, but monetary policy refueled the bubble. Those that missed the tech wreck and housing crisis, were generally non-value investors and got the growth aspect correct. Then came the pandemic and really no one other than perhaps Bill Gates and Steven Soderbergh saw that coming! Again, many missed the reinflation trade with all of the money pouring in from governments. And growth investors all bought into crypto, SPAC's, meme stocks, pandemic winners, etc. Those that were fat on the hog on those investments, completely missed the coming correction. Cheers!