Parsad

Feeling better that I am not alone watching my FFH holding melting ;) You aren't alone. FRFHF is my largest holding, followed by WFC. I’ve still managed to break even over the past year due to large positions in mining stocks such as NG (purchased in early 2019 and sold recently for 150% gain) and SGGDX (purchased throughout 2019 and up 70%). Now, I’m trying to figure out where to go from here. I’m tempted to keep averaging into my losing positions but am afraid that I’ll box myself into becoming too concentrated. The bearish arguments provided by Viking, Bearprowler, and others are very compelling, and would probably be enough to convince me to sell if I didn't think that the things they point out (terrible investment results, low interest rates, etc) are already factored into the price. Those would have been great reasons to have already exited (as Viking and Bearprowler did I believe, at much higher prices), but they may or may not be good reasons to sell going forward. I've followed Fairfax for about 15 years and have never seen sentiment as negative as it is now. While it could get worse, I wouldn't want to bet on it getting worse, not at these prices. If you ask me - and I am a newbie - I give lots of weight to Parsad's comments. Maybe it is some confirmation bias, but it is appealing to me, credible, and make sense when you have a long time horizon. I do trust they have a great safety net with their valuable assets as Parsad commented. That alone should calm us down a bit and allow us to see the big picture. This company isn't going bankrupt tomorrow. A comment that was also made today is to trust a guy that has built a multi billions dollars company; I also buy that one. Yes, our bearish friends also have valid comments, but I am convinced Prem and his team are working hard to weather the storm and head in the right direction on solid ground going forward. They aren't going to stand still here. I value different opinions and the beauty of it is that is generates a debate of ideas like this one. You then have the information you need to make your own decision. Mine is to hold and maybe add a little as it gets closer to 300 although I hope not ! Parsad said it all when he said it will eventually revert back close to BV. I can afford to wait. I am happy with 2 years ( or a little more!). Always make your own analytical decisions about investing. Doesn't matter what I say, what Prem says or even Buffett! Doesn't matter what we do either. The easiest way to go broke as a value investor is to simply follow what others are doing instead of doing your own research. And if you can't stand behind your own research, buy ETF's and dollar cost average in over time. What I can provide you is perspective, my rational assumptions and how I came to my conclusions. Yes, I've seen this rodeo before...including with Fairfax. Amazing what 22 years of investing teaches you, especially over this last generation where we've incredibly seen compressed cycles of 50% drops in the market 3 times...1999/2000, 2008/2009 and 2020/2021. You generally get one of those cycles every other generation...we've seen three in one generation. Is that due to the internet? Computer trading? ETF's? Massive amounts of competition by hedge funds, private equity, pensions, etc? Recklessness in financial instruments, by the Fed, IMF? Distortions in monetary policy? Maybe a combination of all them! All I know is that I've been given 3 massive swings at the bat in one generation...300% gains over several years. This is probably the last one before I retire, and I'm going big! I expect the stuff I'm buying today to be up 300% or better from my current cost over the next 5-7 years. While I mourn for the personal losses...we've had 4 people we know die from Covid-19 now...the other part of me like Buffett has always said, welcomes this moment of uncertainty and crisis. These are the times that the true value investor benefits from the normal transfer of wealth, because everyone is afraid...including the institutions, hedge funds, private equity guys and general market. Have we seen the bottom...probably not...I would imagine it will hit in the 2nd or 3rd quarter. And then the locked up, pent-up consumer frenzy in subsequent quarters will end the recession and breath new life into a new bull market next year. We'll then face the consequences of all of this loose money flying around. At some point, I cannot imagine how we will avoid some sort of inflation...as good as governments have become at quantitative easing and tightening. Government debt will undoubtedly be of concern at some point...not necessarily the U.S., but probably Europe or South America. Until then, enjoy these prices because this bear market won't last forever...even though they seem like they've been coming fast and furiously! Cheers!

Pedro, you hit the nail on the head. Today, no one wants Fairfax or its businesses at 0.6 times book...yet a couple of years ago, Mitsui paid 4x book for First Capital. Like I said, I don't care if Fairfax goes down another $100, just as long as they sell off their assets at 1.5 times book or better in the future. Partner Re just sold for $9B US...I would imagine Odyssey Re would get at least 4.5B-5B US...that's over 75% of Fairfax's entire market cap right now alone. Back in 2003, Fairfax couldn't sell it's insurance businesses because no one would buy them then when they were running at 105% per year. If Fairfax needs money, they have tangible, quality insurance assets, alongside their non-insurance assets they can sell. Heck they, can just dividend up surplus capital if they need it. They could not do these things in the past. Cheers!

I suspect we will have one more down swing here through the 2nd quarter...from the posts above, we are getting closer to capitulation, as the bears are all growling and even some of the bulls are getting frustrated. You've hit bottom when people just give up...probably around high 290's. - People are complaining about Fairfax India and Fairfax Africa...one has been about 5-6 years and one has been about 2-3 years. Do you know how long it took Fairfax Asia to become the fantastic deal it was when we sold...13 years! - I hear complaints about Eurobank...but we saw the same thing with Bank of Ireland which was a winner. - Whining about insurance...we're writing at 96% across the board for several years...do you guys remember when we could barely break 105% for 8 years! - We have a ton of bonds and cash, while debt to equity is below 35%...about $1.5B in the holding company...do you remember when we borrowed $300M from Cundill, Southeastern and Markel?! - While Seaspan is breakeven right now, can anyone deny that this going to be a winner 10-15 years from now? - Yes, we are having challenges with BB, but this is a business that for all intents and purposes should have been bankrupt already...if the board had listened to Prem and hired John Chen in the beginning, BB would be sitting on another $1B in cash and wouldn't have wasted 18 months since Fairfax originally bought the stock. Yeah, they should have avoided it, but shit happens...at least they dealing with it! - You have a young portfolio team but with alot of experience, and you still have the old dogs like Brian and Prem paving the way...I think non-bond investments will do better this decade than last! - It's trading at 60 cents on the tangible dollar...yet people are scared it might go down to 50 cents on the tangible dollar before it eventually goes back to par...that's the psychology right now from you guys! As a distressed value investor, I'm almost always early in and early out...that's just the nature of the beast. So I don't care if Fairfax falls another $100 in the next 6 months...as long as it's back at par 2 years from now! Cheers!

Hi Xerxes, my comparison was how Fairfax is different than the Ford and Eatons...not similar. The Ford and Eatons slowly lost control and ownership. Cheers!

The only one of most concern is Prem...he has 90% of his net worth tied to Fairfax. But pretty much all senior management holds significant amounts or did own significant amounts (they may be selling in retirement or for estate planning). Francis Chou has held all of his Fairfax shares since he got them for $3 and has never sold a share. The Watsa family has no intention of selling their stake either other than for charitable contributions/obligations a la Buffett. As long as the Watsa family controls the votes, the dividend policy won't change. It was controversial when it was implemented and it will remain controversial with some shareholders today, but Prem thought it was the most equitable way for him/family/charities to meet their financial obligations over time, without having to sell shares and give up control like most family-controlled companies...think Ford, think Eatons, etc. With many long-term Fairfax shareholders hitting retirement, including former employees, the dividend gives them additional retirement income without selling their shares...I suspect they will vote with Prem on this one, so those against it should just suck it up. Otherwise buy Markel or Berkshire! You can always take your total dividends and just buy Fairfax shares on the open market...probably at a better price than Fairfax could each year as they have certain requirements on buybacks. Cheers!

India story seems to be a mirage. Though we have heard many plausible explanations on why India is what China was 20 years ago, the ground reality seems to suggest a very different picture. In fact this is self-explanatory when one looks at the last 10 years, both in terms of the growth of the economy as well as the market returns. The S&P dollex 30 has given less than 20% total return in last 10 years and almost negative since the current government came to power 7 years ago. So much for the supposedly "world's fastest growing economy" !! This performance is with the fantastic global tailwind of low oil prices, low interest rates, flood of cheap money apart from the usual demographics, large market size etc that people talk about. There is no change in the modus operandi of buying political votes by distributing free money at the cost of investment in infrastructure, health, education or other economical development. India continues to run twin deficit, have high unemployment, has trade deficit, saddled with bad loans in the banks/NBFCs, poor infrastructure, heavily dependant on imported oil/gas etc and we don't even want to discuss the poor corporate governance, weak judicial system, bureaucracy and red-tapism etc. I can give concrete examples of industry after industry that are getting killed due to bad policies. Sorry to have side-tracked this post which was about Prem's letter and Fairfax. You may be right, you may be wrong, or it may end up somewhere in the middle. I'm guessing it will be one of those three! :o That being said, I cannot help but wonder what India will be like when true financial services become widely available to the populace, as it has been to most developed countries for the better part of the last century. They have the youngest population in the world, a rapidly growing middle class, and mobile penetration is in the 94-95% range...including villages! I see a company like Quess, IFIL or an airport like BIAL...I think, wow this young population is now getting access to the things generations in our country had. The simple fact that Modi has registered all citizens, opened some 300M bank accounts, and expanded insurance/financial services/capital markets in a dramatic fashion...yes, miles and miles to go, but they are taking that step forward that only Gandhi and Nehru could have dreamed of. Corruption will never disappear...it hasn't disappeared in the U.S., why would it disappear in India. But it can be curtailed...the graft culture and thought process can be changed over a generation if the young people want and demand it. It will be interesting to see how this experiment unfolds! Cheers!

I think this is absolutely right. But I would love to know how you came by the information about Ajit Jain? I spoke to Ajit and I spoke to Prem. Incidentally, I think Ajit would have made a superb replacement for Buffett...genuinely a nice guy, but can be tough like Buffett as well. Cheers!

Maybe RBC was the outfit that extended the $2B revolver to FFH? ::) SJ Interestingly, the author of this report was also pro-Fairfax back in 2006, but working out of a Washington DC firm: Mark Dwelle. Normal to have the same guy following/ promoting FFH over the years....? I have some investigator DNA. Maybe overthinking ;) January 2006 https://www.theglobeandmail.com/report-on-business/rob-magazine/short-shrift/article702684/ "The third quarter served as a real-world 'field test' of the financial strength of Fairfax, a test the company comfortably passed," says Mark Dwelle, an equity analyst with Ferris, Baker Watts, Inc., a Washington, D.C.-based investment bank that has long rated Fairfax a "buy." Fairfax was at $175 when Dwelle wrote that report...Fairfax hit over $700 pre-pandemic...300% gain from 2006, through 2008-2009, all the way to the end of 2019...not 15%, but 11.3% annualized over those 13 years from 2006 to 2019. S&P500 did around 7.7% annualized during that 13 years. And that is with alot of bungling by Fairfax...insurance wasn't running smoothly until 2012-2013...the purchase of BB...lack of investment in equities during the bull market...taking the hit on swaps...purchase of mediocre businesses/cigar butts, rather than the best in class businesses you all complain about. With those mistakes, Fairfax with it's bond portfolio, insurance business and the picks they did get right, combined with their float and leverage, managed to still do reasonably well. I hope Brian teaches Wade and Lawrence everything he knows, because I think the day we lose Brian, it will be nearly as painful as losing Prem. That being said, I think Wade and Lawrence will do better on the equity side long-term. Cheers!

Somebody pointed this post out to me, and I had not seen it. My responses in "red" after each point. Points I took away from FFH 2019 Annual Letter: 1. The letter lacks integrity. Starts with 2019 was a great year for FFH and continues mostly with unbridled optimism throughout. Reality is shareholder return for 5 & 10 years have been terrible - he doesn't openly admit it and doesn't admit frustration with it and lay out a plan to change it. If one cares for their shareholders, he would be more contrite about the returns he has delivered. I think Prem laid it out clearly as he always does. They did well on insurance which was a good year, but their investment process...the value investment process...has been out of favour or touch for several years. And they aren't the only ones...even Buffett (the master) has struggled. But is should also be noted that Wade Burton's selections did well, and he will probably be the one leading Hamblin-Watsa for the next 10-20 years. 2. Ends letter with : "Over our 34-year history, we have always operated at Fairfax with a small team which, with great integrity, team spirit and no egos, protects our company from unexpected downside risks and which takes advantage of opportunities when they arise". Well, after reading a decade plus of his annual letters, I've changed my mind - he's not showing integrity/honesty and his writing has consistently exhibited egotistical behaviour and FFH has not been able to take advantage of opportunities like others have. Does Prem have a healthy ego? You bet...and like Buffett it is tied directly to his company. Every great leader or CEO has an enormous stake tied to their business. Is Prem egotistical? I honestly cannot say that is even remotely true. He's genuinely one of the nicest people you will ever meet and one of the most supportive, encouraging figures I've ever met. Do you wonder why people like Francis Chou are extremely loyal to Prem? Why someone like Brian Bradstreet never left his side? Or why Ajit Jain has enormous respect for him. He's hands down one of the great business leaders in Canadian history. 3. Insurance business is doing very well, has improved significantly and is successfully generating no cost float and is the jewel of FFH Yes, agree. And we've seen that over the last several years since Andy Barnard began to oversee all insurance operations. 4. I’m glad that he has openly admitted that BB, Exco, and Resolute were mistakes – he is more open about this today than in the past You have to understand. Fairfax will never be Berkshire in terms of buying only those high quality businesses. Fairfax's core is deep value investing or distressed investing. Even guys like Wade Burton and Laurence Chin cut their cloth at Cundill...they will never fully leave Ben Graham's ideas of distressed investing. They will buy good businesses and investments, but they will also buy the cigar butts...that's their ideology and nature...you cannot simply discard it. 5. Believes, “India is the best country to invest in long term”. OK, but no explanation as to why. Not genuine. He's given significant reasoning around this belief. There are a ton of books out there that you can read on why this MAY be true. I've seen the companies we've invested in, and what is happening in India, and it is eerily similar to China 15-20 years ago. I think executing will be a bit more difficult than China, simply because the Communist government said we are going to do this and did it over 20 years. India will have similar success, but I suspect it will come with more challenges. 6. Believes Modi re-election will turn around Indian economy. Again, no explanation as to why especially given that was the thought at time of Modi’s first election and it didn’t come to fruition. Again not genuine in his writing. Again, plenty of comments by Prem in the past and present, and alot of books. I agree with you, this is arguable though, as Modi's tenure is not guaranteed over the next 15 years...only for the next 5 years. 7. Over 5 years intrinsic value has compounded by <5%/yr & share price <1%/yr. Over 10 yrs: IV - 3.2%/yr & share price at 5.2%/yr. Prem’s only comment on stock price is : “In last 4 years stock price has not gone up with intrinsic value, but it will happen again” - with no explanation. What about the fact that IV is only up 3.2%/year over 10 years? Too much focus on macroeconomics and not enough focus on simply investing and deleveraging instead. They spent the first half of the rebound on defense, and then got hit in the 2nd half once they went bullish. Shareholders have a right to be upset on the investment process here, but many value investors were guilty of this after 2008. I think things will be a bit different with more input from Wade. 8. On investments: “shows that Fairfax’s investment results have been consistently very good since inception, with the exception of the 2011 – 2016 time period, when we treaded water” - how can he say “consistently very good” as investment returns over 33 years have been 8%/yr and over past 10 years have been <5%/yr ? Isn’t the point of his investing prowess to do better than the index? How can he say “very good”? Yes, a fair gripe and I think overall they understand it. Most of the underperformance came from the defensive position and a couple of large distressed positions like BB, etc. I think everyone will agree that the bond side killed it during almost every 5 year period since inception...so you have to look at the portfolio in aggregate. Again, I think shareholders have a gripe here, but I don't think things could be as bad every again with the defensive stance after 2008 and then going bullish after Trump looked like he was going to win. I think we can all agree that they should just focus on investing and not focus on macroeconomics. 9. “So when the correction happens (and it may be happening as we speak), we expect value stocks to provide better protection on the downside”. A week after the report comes out, we are in a correction. From what I see, when there is a correction, everything goes down – BRK & FFH are down just as much as tech stocks. He's talking about his actual positions...not Fairfax stock itself. He has no control over that. Fairfax's equity was down 8% in the first quarter...Berkshire's was down almost 12%. 10. Committed to buying back shares over next 10 years Companies should only buy back shares if they are at a significant discount to intrinsic value. I don't think they should buy back their own shares except when they are below 0.85 of book. Being optimistic is one thing. Not being in touch with reality and getting people to invest in you/your business by shrilling dishonest optimism is getting to be on the Ponzi scheme side of things. As a long term shareholder, I am so disappointed in this man. Don't agree with this sentiment. I think Prem's comments have always been forthright with shareholders. Sometimes outcomes aren't in line with expectations or management gets it wrong. But Fairfax has always operated with integrity and the best interests of shareholders. @Sanjeev: You have been a big supporter and believer in Prem Watsa’s honesty and integrity. This website's name is in homage to FFH. Watsa has shown his belief in you and invested in you. I’d appreciate your thoughts to above comments. Would also love it if there was a way to get FFH to reply. I generally don't own any one stock for the long-term. I buy when it is trading below intrinsic value and sell when it is trading well above intrinsic value. I never fall in love with a stock or company, even though I might love the management, culture and long-term objectives...including Berkshire and Fairfax. Yes, my family has held Fairfax in certain accounts for the long-term, and I have held a little Fairfax in my taxable accounts for the long-term. But the majority of my stocks are held in non-taxable accounts where I will buy and sell them around their intrinsic value. I think long-term shareholders will do better than the S&P500 holding Fairfax...simply because of the leverage and float. But we are talking about a 20 year time line. Thus the reason why I buy and sell investments in my non-taxable portfolios. Presently, Fairfax is once again one of the largest positions in my non-taxable portfolios. Cheers!

Hi Racemize, I don't pay attention at all to whether or not insiders are buying or selling...or other managers for that matter. I bought BAC and AAPL before Buffett on both occasions and I've never owned BB even though Prem does. Remember when David Einhorn was buying up New Century Financial as a director and head of the audit committee! Ha, ha! 100-1 leverage and he was instilling confidence by buying stock as a director. I learned my lesson early over 18 years ago, when I bought a specific stock because Baupost was buying it. I got burned and I've never paid attention to what any manager buys...not Buffett, not Prem, not Mohnish, Francis, or even insiders. But if you are asking me whether I think the preferred are cheap...yes, they look cheap to me as well. Especially if you want to earn secure dividend income with some upside on the preferred price. Cheers!

Paul's departure had nothing to do with anything like that. He was 100% a team guy...worked his way from chief legal counsel to head of Hamblin-Watsa, VP of operations and then finally President. I don't know of anyone who worked harder and bought into the system and culture at Fairfax. He always thought it had the potential to be a mini-Berkshire and thought they were on that trajectory. I don't know exactly what the reasons were, but I would imagine it had something to do with family. If I emailed Paul at 1:30-2am (I'm a nightowl), I would get a response...remember I'm in Vancouver and he's in Toronto...so it would have been like 4:30-5am Toronto time. That type of dedication to a company, to staff, to colleagues, to shareholders...it can take a toll over time. While externally he still looks the handsome, dashing guy he's always been...mentally and physically it can be a grueling workload. I think he just needed to slow things down a bit for himself and his family after like almost 18 years of 24 hour a day dedication. Cheers!

When you get this much pessimism around Fairfax, then you are approaching the bottom. Unlike most, I expect more of a V-shaped recovery from the pandemic. Yes, the lingering effects will go on for a couple of years, but the amount of capital injected, the strength of the financial system heading into this crisis, and the pent-up frustration and demand from consumers will bode well towards the end of the year and into next year. Most of Fairfax's losses were unrealized investment losses, part of which would have already recovered in April. They did not incur significant impairment, and I can't see how their retail and restaurant businesses would have been hit any harder than Berkshire's or comparable companies. Their insurance businesses are going to enjoy a hard market across the board, and they were already writing at a 96% combined ratio. Brian bought a ton of corporate bonds paying over 4% while U.S. short-term rates are at zero. They did not have to tap into the revolver...as Buffett said, there was a moment in March when liquidity was about to completely dry up...Fairfax like everyone else saw that happening and tapped the revolver to make sure it couldn't be pulled on them. Then they went and raised $650M to make sure they had enough liquidity to get them through another 2008! But the Fed acted quickly this time...they had a game plan they could already use and liquidity returned to the markets immediately. You think Fairfax just stood still after doing all that? I guarantee you that they are doing everything to make sure that if you get an LA earthquake or a massive Gulf storm, they will still be walking around to take advantage of that market. I would imagine they are doing whatever they can to make sure that Fairfax's financials are improving in case the pandemic gets worse. I've been through 1999/2000 with Fairfax, been though 2003-2005 when the hedge funds cratered the stock to $56 US, through 2008-2009 when liquidity ACTUALLY dried up around the world and now this global pandemic. I have not held Fairfax consistently through that entire period, but took advantage of the irrationality of investors each time...swing batter batter...swing! Cheers!

I would just say "I'm a consultant and I take on different contracts and positions from time to time." Get some business cards made up. You would be telling the truth, without disclosing your financial position. If anyone asks have you gotten a contract now...just respond "Just finished one, but I have a few coals in the fire. I might take a break until the Fall." Cheers!

Chanos has done a great job with his main fund. And to the biases on this particular forum, if history had broken slightly differently he would have nailed Fairfax as well. He's been short almost all of the major frauds and even the ones he's been burned on, he's been mostly right in the long run (i.e. AOL). I see no reason not to have total respect and pay total attention when he speaks on specific companies. You're free to disagree but he's usually got a point. I recall Ackman being 100% certain Chanos was dead wrong on Valeant - and Ackman was the one caught dead wrong. Happens to all of us - but it was a good reminder that Chanos' work is usually pretty solid - Ackman works pretty hard and still missed it. Value investors specifically need to pay attention to Chanos because as a group we've missed a lot over the years and he's caught many of them. I've been paying attention to Chanos. I love the guy. I think he's one of the few short managers that has actually generated alpha from his shorts. Anyways, what's the deal with Fairfax? I haven't kept up with FFH for almost a decade now. As an aside, if I hear about a Chanos short, and it's a company I'm interested in, I don't take that trade. It's always good to hear about some short thesis from a well known short. They do way more DD than I ever would on a company. I'm probably the only one on this board who has ever actually talked to Chanos. He's smart, but his ego gets the better of him, as it did with Fairfax 15 years ago. I asked him point blank if he had done the research on Fairfax and why he was short. He said, no...he was relying on information from two analysts...and we know who they are for those that were around then. I asked him if he had ever read a Fairfax annual report or quarterly report, he said "no". He's made a huge reputation out of a couple of significant shorts, and he's made a bundle offering that service to institutions and investors. I didn't like the guy then, and I'm certainly no fan today. Cheers!

It's not that. A wholly owned business is consolidated into the balance sheet and financials, and carried at cost, so it would have little impact on statutory surplus in a market downturn. But if he put $50B into equities, and the price fluctuated dramatically as it did in the 1st Quarter, it has an impact on how much business they can write due to mark to market accounting. The cash is there and not being invested because they would not be able to take advantage of a hard market if LA got hit with an earthquake or you see a massive hurricane in the Gulf Coast. Cheers!

It seems to have taken Chou an extremely long time to learn that you can't just buy cheap stocks without understanding the quality of what you are buying. With all due respect to Francis and Mohnish....no one needs to pay either of them for their investment management "skill" in order to own Apple or Google. I personally do not believe either of them suddenly found this "new" approach to value investing. Francis staunchly defended his former approach to value investing for more than 10 years and now he pivots and buys Apply and Google? Call me skeptical....at best. I wonder how his long suffering unit holders who bought into his previous approach all those years feel now? Why is it criminal if Pabrai or Chou pivot, but when Buffett did it with Apple, it was applauded. I owned Apple before Buffett, does that make me a better investor than Buffett? I don't own any Apple right now...does that make me worse than Buffett? Managers evolve...your investing style evolves depending on how and what you are allocating capital into. Chou allocates capital into an insurance business now as well, which cannot handle the same volatility his funds can, because the funds aren't leveraged and losses won't affect his ability to invest capital. In an insurance business, it directly affects his ability to write insurance contracts. Cheers! Criminal? your choice of words....certainly not mine. You say the change is due to an evolution....I say its more likely due to a capitulation. BTW....I am not saying the move is a bad thing....long overdue if you ask me..... Sure, "criminal" might be extreme. Some comments by others were harsher than yours...thus why I used it. But if you have a choice of buying Apple at a discount or Hawaiian Airlines at 1/3rd of book for your insurance business...you're probably going to choose Apple, so that any volatility has minimal impact on statutory surplus. Cheers!

How are you getting 15% with portfolio investments returning 2.5%? I understand you are using $255 stock price as your capital base, but are you taking into account interest expenses, corporate expenses, preferred dividends? Even 3.5% pre-tax return does not get me to 15%. Vinod Not portfolio investments. Fairfax has $1500-1600/share in float/equity/debt. A net 2.5% return in those figures is $37.50/share at the low end. On a $260/share price, that's 14.4% annualized. I'm not talking about portfolio returns, just that they need to net only 2.5% on the total of float/equity/debt after expenses. It doesn't seem like that should be a high bar, particularly if insurance (what the equity/debt supports) is performing well. If people don't seem convinced of 2.5% net on those various forms of funding, then who the hell was buying this at $500-$600/share when the various forms so funding were the same, but the bar for acceptable performance far higher? Normal human psychology. The guys buying at $600 were the ones selling at $350-400! We just heard from Prem in the annual letter that Wade Burton has averaged 19.8% annualized since 2008 for Fairfax, and we all know what Brian Bradstreet can do...yet we're worried that they won't be able to achieve 3-4% annualized on the portfolio over the next 10 years! The only concern would be if we see a massive LA earthquake or the worst hurricane in history in the Gulf Coast this year on top of everything going on. I'm betting against those two happening! Cheers!

It seems to have taken Chou an extremely long time to learn that you can't just buy cheap stocks without understanding the quality of what you are buying. With all due respect to Francis and Mohnish....no one needs to pay either of them for their investment management "skill" in order to own Apple or Google. I personally do not believe either of them suddenly found this "new" approach to value investing. Francis staunchly defended his former approach to value investing for more than 10 years and now he pivots and buys Apply and Google? Call me skeptical....at best. I wonder how his long suffering unit holders who bought into his previous approach all those years feel now? Why is it criminal if Pabrai or Chou pivot, but when Buffett did it with Apple, it was applauded. I owned Apple before Buffett, does that make me a better investor than Buffett? I don't own any Apple right now...does that make me worse than Buffett? Managers evolve...your investing style evolves depending on how and what you are allocating capital into. Chou allocates capital into an insurance business now as well, which cannot handle the same volatility his funds can, because the funds aren't leveraged and losses won't affect his ability to invest capital. In an insurance business, it directly affects his ability to write insurance contracts. Cheers!

His comments are accurate, except for the fact that no one, including McCreath, expected a global pandemic to hit. Look Markel lost like $1.4B as well, but their insurance business was at a 110% combined ratio...it's still trading near book. Berkshire is going to get hit too this quarter, and has plenty of operating businesses that were shut down...it's trading just above book. Fairfax never has gotten the same sort of respect or overvaluation, except in 1998 when it was 4 times book. With insurance doing great, a hard market at our backs, an investment portfolio that should rebound and trading at 0.6 times book...I think McCreath is looking at things with a glass half-empty perspective. Fairfax will do very well over the next 5 years. Cheers!

I have to admit it is very cheap at this level, about a 9-10 year low. Will they ever be back at 660ish again (52w high) in the short or mid-term? I have nothing less than the expectation it does within 12-18 months. Irrealistic ? I think it depends on whether we have rounds of the Pandemic hit us as things start to open up. If we have a V-shaped recovery, I can see Fairfax stock and the market in general, back up around where it was. If the Pandemic leads to a more wider recovery over say 2 years, then it might take longer. Regardless, buying Fairfax at 60% of book value historically has never been anything but a good thing! Cheers!

Hi SJ, I don't have answers for all of your questions, but I do have a response for #6: I'm comfortable with them piling into Atlas. I think Atlas will be a wholly-owned Fairfax Company one day like Mid-American became under Berkshire. With Paul Rivett showing signs of moving into semi-retirement and spending more time with family, Prem and the old guard aging, Andy Barnard not being much younger than Prem, I like the idea of Bing Chen and Wade Burton sharing future duties at Fairfax in terms of a succession plan. One handles operations and one handles investments. That may change depending on what happens, what acquisitions are brought in, what leaders emerge, but I think shareholders could be comfortable in that pairing. Cheers! Parsad Hypothetically speaking, why would the Washington family would want to let go of Atlas, if it is a great bet? FFH would be better off in having a controlling position but probably no more as that type of business in not in their circle of competence. Going to mid-American comparison, if a potential intent is the get the whole of Atlas, and if that bet is a function of David Sokol ability to stay and continue the good work, shouldn't Sokol have a Atlas-only stake, like Greg Abdel does with BRK Energy. For the record, I personally believe in Sokol and his work and Atlas. Do you really see Kyle Washington running and overseeing all of the Washington family's holdings? If you live in Vancouver, you know that would be a bad idea! Dennis Washington is like 86! Over time, their stake will shrink to 20% like it did with Mid-American when Berkshire first bought...eventually they will sell out completely or take Fairfax shares to minimize tax and retain interest. Kyle will oversee the family trust like most wealthy families do with someone managing all of the assets. Cheers!

I have never heard anything related to this. I'm just going by what I see...the amount of mutual respect between David Sokol, Bing Chen and Prem, and the fact that Paul has said that he wants to step back. It was pretty clear that Paul and Andy Barnard would have led Fairfax previously if something happened to Prem. Now with Paul stepping back and Andy getting older...I think they've probably put some recent thought into succession. From this year's letter, it seems clear that Wade is being pushed as head of Hamblin-Watsa, and Bing would be a natural choice to take over in terms of operations. The bench is deep enough where it could be possibly someone else, but the fact that David is at Atlas, he understands insurance as well as anyone. To me, after watching Fairfax for 20 years, it seems that if something happened to Prem, David would be a natural choice for Chairman, Wade overseeing Hamblin-Watsa and Bing overseeing operations. Cheers!

Hi SJ, I don't have answers for all of your questions, but I do have a response for #6: I'm comfortable with them piling into Atlas. I think Atlas will be a wholly-owned Fairfax Company one day like Mid-American became under Berkshire. With Paul Rivett showing signs of moving into semi-retirement and spending more time with family, Prem and the old guard aging, Andy Barnard not being much younger than Prem, I like the idea of Bing Chen and Wade Burton sharing future duties at Fairfax in terms of a succession plan. One handles operations and one handles investments. That may change depending on what happens, what acquisitions are brought in, what leaders emerge, but I think shareholders could be comfortable in that pairing. Cheers!

I'd rather not lump one group of society as invaluable while the rest are considered selfish, useless or unnecessary. I would remind critics that many value investors/entrepreneurs allow businesses to survive, thrive and support valuable endeavours that normally might not get financing or support. They also provide funds to non-profit organizations, spend personal hours working with those organizations and donate to hospitals, research, churches and organizations supporting first responders. Yes, the real heroes in this battle are the doctors, nurses, supporting staff, government officials, grocery workers, pharmacists, researchers, first responders, etc...that doesn't make the rest of society useless...including the poor, lowly value investor. Cheers!

They also said premiums wouldn’t grow for a few quarters. I found that a bit contradictory. But overall it was positive. I think he meant that in the short-term we are seeing a contraction, but will see premiums increase as the expansion restarts later on. I think alot of insurers are taking a significant hit presently...can't see how we do not see a hard market when premium pricing renews around November. We were already starting to see dramatic increases in some lines before Covid-19. I know that strata fees on the West Coast had jumped 300-700% and insurers were no longer offering coverage for many or deductibles had jumped 200-300%. I'm also seeing huge increases in D&O Insurance and some other non-casualty lines. Cheers!