Parsad

From March 2021 Letter to Shareholders: Last year at this time, it looked like the long drought in value investing was coming to an end. For the decade ended December 2019, value-oriented stocks had the worst ever relative decade versus growth stocks (particularly tech stocks) over the last 100 years. And then COVID-19 hit, and the NASDAQ went up 44% in 2020. The divergence in 2020 was the worst ever in a single year as the spread between growth and value indices averaged between 20 and 30 percentage points. Jeremy Grantham documents this well in his article ‘‘Waiting for the Last Dance’’. IPOs (including SPACs) in 2020 were back to the records set in 1999. Current market conditions remind me of the phrase ‘‘Renaissance of Value’’, the title of a talk Ben Graham gave in 1974 after the demise of the Nifty Fifty – the growth stocks in the late 1960s and early 1970s that sold at P/Es of 50 - 100 times and higher – before they crashed in 1974, after which most never saw their 1972 highs for the next 15+ years. As Ben predicted, value stocks did extremely well over the next two decades. More recently, we had the dot.com boom which peaked in 1999/2000. Many of you will remember Microsoft selling at $60 per share or 170x earnings in December 1999. A year later, in spite of record earnings, Microsoft was down 65%. It took Microsoft 16 years before it saw $60 again. Today, Microsoft sells at more than $234 (40 times earnings) as earnings have increased 16 times since 1999. Cisco peaked on March 27, 2000 at $80 per share at 181 times earnings. One year later, it was down 80%. Today, 20 years later, Cisco still sells at $45 per share (16 times earnings), never having seen $80 again. This, in spite of earnings today being 6 times what they were in 1999. Which brings us to the current period. Just recently, the FAANG stocks accounted for 25% of the S&P500 – never before have five stocks dominated the S&P500 index to that extent. Technology now accounts for about 40% of the S&P500 – a record only last seen in the dot.com era (37%). Zoom had a market value of $130 billion – yes, $130 billion, with revenues of $2.7 billion. Shopify has a market cap in excess of Royal Bank even though Royal Bank earns more money annually than Shopify has revenue. Peloton has a market cap of $40 billion, Pinterest of $50 billion – companies which recently have gone public! And bitcoin hit $53,000 – a market value of $1 trillion – and I thought it was expensive at $19,000 in 2017. Massive speculation! And I can go on and on! As in the past, this will end - and it will not be pretty! In March 2020, because of COVID-19, the whole world was shut down – more than 180 countries closed their economies, something that has never happened before! Because of testing, therapies and more recently, very effective vaccines, the world can see normalcy returning. This is the environment in which value stocks will thrive. We feel our best investing days are ahead of us. Inflation and interest rates have been going down from the early 1980s – we may well have forgotten that they can go up, sometimes quickly and significantly. 10-year treasury rates have gone up from a historical low of 0.5% in 2020 to 1.5% recently. With high savings rates and significant pent up demand combined with U.S. President Biden’s potential $1.9 trillion fiscal stimulus plan, we may see inflation and interest rates rise significantly. As I write this to you, commodity prices, especially copper, have gone up almost to decade highs. From current levels, a 100 basis point increase in rates for a 10-year treasury bond and a 30-year treasury bond results in a 9% and 22% decrease in the price of those bonds. These are very significant risks that we have reduced by having an average bond maturity of less than five years. For bond investors: caveat emptor! Very few people have been correct in every decade...Buffett is one of a very small number that probably could be counted on one hand. But I'm not sure Prem got anything wrong in the above excerpt, and very few were as right as him between then and now about so many things, and just about every critical period since 1985...Japan Crisis, Tech Bubble, Housing Crisis, SPACs/Crypto/Tech Stocks! Who on this message board has held Amazon since 2000? I'm probably one of a handful of people who held Overstock.com (an online retail business and early competitor to Amazon) on and off since 2002...and I did not imagine Bezos taking Amazon to the highs he has. In fact, while Amazon's retail business is a juggernaut, it's really its AWS business that allowed it to scale profitably from 2005 on, while pouring all of the retail money back into the business. So many on this message board read and knew about Google emulating Buffett's Owner's Manual just before its IPO, yet who invested in the Google IPO in 2004 and held their shares? Ahhhh, no one on this message board! My friend who knows very little about stocks, other than what she watches on Jim Cramer's show, was smart enough to buy a ton of Apple at about $16 pre-split and never sell...is she some sort of sage? Nope! Just damn lucky! I know of very few people who actually got things right over the last 20 years. Cheers!

No individual stock is a suitable replacement for cash. If something happens to Buffett tomorrow or a massive catastrophe hits, the stock drops significantly (yes, temporarily, but it could drop just when you need the cash). Berkshire insures some of the largest risks that require coverage and Buffett is 91 years old. Same with Fairfax...Prem is now 71 and we know Fairfax's stock price is volatile with catastrophe losses. Cash is cash! You don't want to hold it all the time, but nothing beats it when opportunity presents itself. Cheers!

According to many on here, my 50% cash hoard that developed over the last 7 months is a burden and blight with inflation. So much for that theory! On top of that, like nearly 40% of my entire portfolio is Fairfax who is also sitting on 50% cash. Christmas is coming very early this year! Cheers!

Guys, I've deleted like 50+ posts put up in the last few days. Please move any political discussions of the Russian/Ukraine issue and its ilk to the Politics board. Cheers!

Agree. A cringe-worthy topic, but what would happen in the U.S. if they had 1.5B people? Cheers!

The margin Charlie is using relative to the size of the portfolio is actually very low. I don't think there is as much risk as people might think. Also, he's Charlie Munger...someone who for the last 50 years has studied, espoused and practiced extreme risk management...both from a portfolio and insurance perspective. If anyone understands risk and how it relates to capital loss or outsized returns, it would be Charlie Munger. Cheers!

I've got like 14 episodes of Billions on my PVR...when they ended their season like 2 years ago, I ended up watching so many other series and they just kept automatically recording as the new season started. Great show with some wonderful actors, and they get a lot of the Wall Street stuff correct! Cheers!

Only saw the first two episodes of 1883...they were free on the Paramount channel available in Vancouver...not the same as Paramount+. I'm hoping 6666 is available here on the regular Paramount channel or through Amazon Prime when it is released. Cheers!

Obviously the small investor! Every small investor should have some stocks, some bonds, some real estate, some gold and now a little crypto. They don't know why they own it, but they should own a little. And cash...who needs cash? Cheers!

I would imagine Charlie has more insight into China's political situation than most of us do...especially from his friends like Li Lu, etc. I don't think he ever even worries about what other people think of his investment strategy...and if something falls in price, he WOULD be a fool not to buy more, including even levering up if he thought it was dirt cheap. He'll come clean eventually down the road...win or lose...but losing doesn't really seem like Charlie's thing! Cheers!

To supplement Viking's answers: 1) Yes, Andy Barnard. No comparison for Ajit Jain, but Andy is exceptional among insurance executives. 2) Yes, Fairfax on a percentage basis has more long-tail insurance than most insurers. 3) Yes, Fairfax uses both more insurance leverage and asset/equity leverage than Berkshire. Historically, Fairfax's insurers have written very good business from organically grown business, and 5-years out from some of the poorer insurers they bought and turned around. They have a very good record of releasing surplus capital when reserving for losses compared to the majority of insurers. They no longer acquire poor insurers and try to turn them around, thus the quality of the insurance businesses and their combined ratios have improved dramatically. 4) Peter Clark was recently appointed President. Before that, Paul Rivett was President before he retired. If something happened to Prem, Peter Clark would take over with advisement from Andy Barnard on the insurance side and Wade Burton on the investment side. Prem's son and daughter are directors of the company, similar to Susie Buffett and Howard Buffett at Berkshire...they maintain the company culture and directives their father laid out. Most of the directors at Fairfax are highly qualified and have been with the company for some time not unlike the directors at Berkshire Hathaway. Unlike Berkshire, Prem's holding company which controls the multiple voting shares in Fairfax, would retain those multiple voting shares and Prem's estate (likely his family) would retain control...a good thing if you trust Prem's family (which I absolutely do), and something an investor might be wary if if they don't. Cheers!

Wait! Let me get this straight, cuz I'm one of the fanboys: Charlie invested in BABA The stock fell in price and Charlie bought more The stock fell further and Charlie says "Hey this is really cheap!" and bought more Finally, the stock fell to such a lowly amount that Charlie said "F**k, this is crazy!" and bought more on margin He has $30M in unrealized losses right now from his earlier purchases And you think Charlie is on "tilt"? I've got balls...certainly not as big or steely as Charlie's, but if his analysis has not changed, and the stock is getting cheaper and cheaper, wouldn't you expect him to buy as much as he could? Especially if this investment and its potential return (again, based on all of Charlie's experience and analysis) puts DJCO into complete financial freedom, since it is a money losing business. Personally, because of the political risk, I would never have made this bet...but then again, I'm not and never will be Charlie Munger! Cheers!

From everything I'm seeing, I would not be surprised if they write a full-year CR of 93 or better next year. Premium prices are rising, costs at the administrative level had to come down due to low interest rates...which forces better underwriting. But many insurers are going to lose money on the bond side over the next 6-9 months and markets overall are at fair value...this means continued discipline in underwriting and continued tightening on the administrative side. Cheers!

Hey, but as some say on here...apparently Prem has no clue what he's doing...and investors in FFH are just taking a flyer on it. Look at its performance over the last 10 years...that means Fairfax is a permanently stunted investment that will never move up, even at 0.6 of book value! Only a fool would put money into Fairfax! Glad I only put like 60% of my net worth into it when it was at $430 CDN! After a $220 CDN increase per share, I've reduced it to 40% of my net worth and it is still quite undervalued and growing. Buy below intrinsic value and sell as it approaches intrinsic value...you can never go wrong! Cheers!

Great quarter and year for Fairfax! Everything looks positioned for a successful 2022 as well...hard market continues, portfolio is well-positioned, a number of investments are finally moving (Eurobank, Atco, etc), Digit IPO should bode well, interest income will be higher while debt is lower, TRS should start looking really good as stock approaches $700 CDN, and balance sheet is solid! Should also be noted that Peter Clarke has been appointed as President of Fairfax. Great choice! Cheers! https://www.fairfax.ca/news/press-releases/press-release-details/2022/Fairfax-Financial-Holdings-Limited-Executive-Announcement/default.aspx

Small amount to start...less than 5%. We'll add more each year. It's so that my mother, brother, niece and nephew have someone to turn to for investments if I get hit by a bus...alongside Tim McElvaine and Francis Chou. I haven't invested with Tim and Francis, as they were well on their way when I started to make a buck, but I thought we would put money in with Balkar in the early days. My family knows that if something happens to me, buy some index funds, hold the FFH and BRK, and put the rest with Tim and Francis...and now Balkar too! Cheers!

As we all know, passive investing beats 80% of active management over the long-term. But for those Canadians that are looking to allocate a portion of their capital to an active manager, I would like to introduce White Falcon Capital Management. White Falcon Capital Management Ltd. Run by Balkar Sivia, who started as a part-time analyst with Tim McElvaine, then made his way to well-regarded value firm Burgundy Asset Management in Toronto. At Burgandy over ten years, Balkar earned his way from a junior analyst to Vice-President. I knew him when he started as an analyst with Tim and followed his career since, so I'm very pleased with his success. He recently went on his own with White Falcon Capital. My family will be investing a portion of their investment capital with White Falcon Capital. In Canada, as much as I love all of them, the value investing legends we have are generally older than me and not getting any younger. Sadly, I don't see a lot of young managers taking on the challenge in Canada either, unlike in the U.S. and Europe. Balkar is relatively young, but with a ton of experience, and a good track record. If I'm gone, I know my family can trust him like they could if it was one of my older value friends. His fee structure for a managed fund/account is unique as well in Canada. He has no management fee and charges only 15% of any gains with a high watermark. So down years, he gets nothing. Up years, he gets 15% of any gains. And he only receives any compensation when he's above your high watermark. White Falcon Capital is only open to Canadians. I encourage you to take a look! Cheers!

It's pretty good...more of a conventional western...interesting for the hardcore Yellowstone fans to understand the backstory. Doesn't have the dirty, twisted, scene-chewing script that Kelly Reilly (Beth Dutton) gets to deliver every week. I can't believe she hasn't won any award nominations yet. Cheers!

Contrary to some fans, I actually thought Yellowstone got better and better through the seasons. Taylor Sheridan, the writer and producer, is a terrific actor himself and one hell of a rider! The cast is terrific, and as improbable as some things are on the show, the writing and cast make it incredibly compelling. A twisted cross between Bonanza and Goodfellas! Looking forward to the other spin-off "6666"...Sheridan bought the actual farm used in Season 4 for over $100M and it will be used for "6666" and other productions. Cheers!

These "what if" questions are fun, but not related to actuality. You don't have to pick one, you don't have to swing unless it's a fat pitch, you don't have to even do anything. You have the option of acting when opportunity presents itself...presently it's Fairfax. Doesn't mean that will be the same situation 1-year, 5-year or 10-years from now. Cheers!

Agree. Fairfax has clearly indicated by this point what type of animal they are. And for those that buy below intrinsic value and sell above intrinsic value, Fairfax will give you more opportunities. But for those that want a smooth ride...look elsewhere! Perhaps it will change when Wade, Lawrence and the new breed run the show. But as long as the old guard are present, you can expect volatility, but outsized long-term (and I mean long-term) results! Cheers!

I watched the entire season of "Reacher" last Friday night on Amazon. Not perfect, but perfectly entertaining! Looking forward to Season 2. Cheers!

Sunrider, we had a poll during the feedback request and the majority of people (like 70%) did not want to pay a monthly fee...they were ok with ads instead. That's why I grandfathered all past members without instituting a fee for all of them. I tried a subscription model with only new members paying...my revenues dropped 75% during those few months. So I went back to a one-time fee for new members at a higher rate. I'm not going to moderate this board and do it all for free. Do you do everything for free? Regarding the ad sizes, I've got GoogleAds on auto, so I don't have to control the ads...I just don't have time to play around with it and adjust it regularly. So it adjusts the placement and type of ad automatically. Lastly, as I said, I wasn't criticizing Whitney's ads, but his choice of words...previously "Wall Street Guru"...now he chooses "Prophet". I find that very douche-like! But you're pissed off because your investment isn't doing well (which has nothing to do with this site or WT) and you don't want ads disturbing your FREE use of a site that you greatly benefit from. Cheers!

Brian Bradstreet. He is still there and still running the fixed income side, with help now from Wade Burton and Lawrence Chin. It was probably Brian's decision to go cash heavy. And yes, he is probably a more qualified bond king than Jeff Gundlach, Bill Gross and the myriad other bond "kings" we hear of. I think Brian's record over like almost 30 years beats the global corporate bond index by some 3 to 4 percent annualized. That is some outlier! Cheers!

Markel also announced stellar results for the quarter and year: https://www.markel.com/markel-corporation/news-and-press/markel-reports-2021-financial-results-17186 Bodes well for Fairfax's results! Cheers!