StevieV

I enjoy the letter, but Semper's statement that the share are nearly as undervalued as at anytime in history is stupid. 2x BV growing at 20%+ can be much, much cheaper than 1x BV growing at 10% or 0.5 BV growing at 0%. I don't get caught up a lot in what BRK should trade at. I tend to think that BRK should return 8-12% CAGR over the next 10 years or so (picking a reasonable exit). If that is attractive to you, then it is a buy. If not, it is not a buy. I'm not sure there is much more to it than that. I'd be mildly surprised if BRK trades much above 1.5BV. I'm not sure who'd be excited about it at 1.7 or 1.8.

I certainly agree. Just "switch to quality" is not that easy either.

Sure, the key is to be right. If you can buy down the quality ladder and be right, that is great. I assume those pushing to move to "quality" are doing so because Fairfax hasn't proven that they can consistently be right on the lower quality end. More Seaspans and fewer Blackberrys - easier said than done.

The amazing thing about that article is the list of other little deals Fairfax has done that I know nothing about! @Petec - agreed! I think this is part of the valuation challenge for FFH. As they have grown - they have acquired more and more investments which are hidden deep within the financial statements. Most investors (myself included) would not have a complete understanding of exactly what they own. Its at times like this I wonder if Fairfax would benefit from some providing its shareholders with a condensed view of their empire - similar to Buffett's 5 groves approach. I'm not sure it matters. Are the investments material? At the end of the day, everything shows up in the earnings and book value, and those are largely influenced by the big factors.

Are you asking whether you would then get 3x on a yearly or multiple year basis? If so, no. You get the same thing 3x the daily move. All you miss out on is the change from the close to the open.

Just thinking out loud here. They aren't going to become a growth company. Seems like you'd want to - sure up the balance sheet; buyback shares; steadily raise the dividend --> in that order. I don't think that you want to get caught flat-footed on electric or autonomous, but I am not sure overspending in either area makes sense. Regarding EVs, I'm not sure what GM's plans are, but I wouldn't go rushing into launching all kinds of electric vehicle models. Why rush to launch a bunch of unprofitable vehicles that aren't demanded by the marketplace? Certainly prepare, but I don't think it is necessary to launch huge lines until there is demand and potential profit and battery tech to make them attractive (I am not familiar with all regulatory issues). Launch EVs when you can be successful with them. I'm not sure early unsuccessful generations help. Did the Bolt and Volt help (though I admit, I though that a plug-in hybrid was a good idea)? I may be way off base, but I don't see EVs as a huge technical challenge for the car companies. We've been told repeatedly how simple electric motors are. They aren't developing the battery cells and chemistries (I don't believe). I think AVs are a huge technical challenge and something else you don't want to miss on, but maybe GM should have moved the other way. Let Mobileye or someone else do the heavy lifting. Implement it in your cars. The type of tech needed for AVs aren't what I would consider in GM's typical wheelhouse. That would leave GM in a not great part of the business - car manufacturing. However, it would at least be in their wheelhouse. Anyway, just thinking out loud.

I also thought that was interesting. As Charlie Munger preaches, always look at the incentives. Per the podcast, organic growth is incentivized and cost of acquisitions isn't counted. So, what do you get, an acquisition that costs a lot but can contribute to organic growth going forward. Only the good (organic growth) is counted. The bad (high acquisition cost) isn't.

"There were 26.9 million and 27.6 million weighted average common shares effectively outstanding during the second quarters of 2019 and 2018 respectively. At June 30, 2019 there were 26,881,817 common shares effectively outstanding." One thing that has confused and concerned me is the share count. Looking at the release, the June 30, 2018 share count was actually 27.550 million. In any event, looks to me like about a 2.5% reduction y-o-y. Seems straightforward to me, but would appreciate any comments as I have found the reporting on this a bit confusing in the past. I'd be happy with that pace of reduction. No, it's not Singleton, but meaningful over time. Also liked that combined ratio has remained at a number that I would consider good. Lower rates are a challenge for all insurance companies. I don't see it as any different for Fairfax.

I think in a lot of areas a lack of skill means failure, but having skill doesn't mean success. My fantasy football league was talking about this last week. Easy to lose, it can be done by a lack of skill or on purpose. However, trying and having some knowledge isn't enough to win. There are probably a lot of better examples, and I am sure it applies to business as well. Easy to fail as an entrepreneur, but a smart, hardworking entrepreneur can still fail. Sometimes a combination of skill and circumstances (luck?) are needed to succeed.

As long as we are speculating, I would certainly take the under on 15% compounded over the next 10 years. If you gave me 7% I would take the over. It gets murkier from there. I would not bet real money on this, but I guess that is where I see the likely range of returns.

Diluted number of shares at the end of 2018 - 28.397 million Diluted number of shares at the end of Q1 2019 - 28.5107 million (obtained by shareholder earnings/diluted earnings per share - 769.2/26.98 - page 6 of the report). I have to check these numbers and the buyback numbers above for myself. However, assuming they are correct, that's a big problem. 0.4% dilution isn't too bad considered alone, but it's terrible if Fairfax spent the majority of their highly touted dividend and interest income to keep the share count not even flat. Got to go back and refresh my memory on this issue.

Same math implies the flip side as well, correct? That is, because of the tilt towards fixed income, particularly high equity returns are necessary to boost the overall returns substantially. However, mediocre equity returns shouldn't prevent book value from compounding in the high single digits and worse than mediocre equity returns shouldn't stop book value growth from being positive (assuming underwriting and fixed income performs).

Some unstructured thoughts: (1) The underwriting seems to be under control and going reasonably well. (2) I like the mea culpa on shorting. Good to acknowledge mistakes and learn from them. (3) I generally don't like exclamation points, and didn't care the sprinkling of them here. Just say what you want to say. (4) Nice dividend and interest income. (5) The 15% "target" seems more of an aspirational target than a mid-range or average result target. I'd prefer they communicate this differently. Perhaps a range of possible returns depending upon equity, fixed income and underwriting returns. They achieved neither the underwriting "target" or the investment target. (6) Sort of a swing for the fences portfolio. I own KW myself, and consider that more of a steady performer. But, a lot of the others are more volatile businesses. (7) Also not a fan of the opening - we would have done great, except we didn't. (eight) I think the dividend and interest income, plus reasonable underwriting should be a good baseline driver of returns. Equity returns will be a wild card. ---------------- Edited to write out the "eight". Not sure why, but the board was automatically changing my number 8 to an emoji. It wasn't showing up when I typed it, so I was not sure how to edit. In any event, the last point is simply another of my thoughts, and I meant no special meaning for the last point.

I have four kids, and it is the best thing I have done in my life. As is much discussed, it takes a ton of time and work. Most of the parents I know love their children very much, and do their best to be good parents. So, I generally don't like to specifically criticize other parents, even if I don't agree with everything they do. Also, of course, I make plenty of mistakes myself, and can certainly be wrong in some of my views. That being the case, here are a few quick thoughts on where things can go wrong (IMHO). Interestingly, I think some have investing parallels: (1) Goals: As a parent, I am trying to raise kids with a goal towards helping them achieve their potential and become adults I can be proud of. For me, I would like them to develop a strong faith, good character and compassion. I would also like them to be hard-working, determined, independent and resilient. Those are the types of things I think about. Sounds pretty straightforward, but I think almost nobody else thinks this way. My list is almost totally different than other parents. I believe most other parents look for: (a) good grades; (b) excel in sports or other activity (music, dancing, etc.); © friends/happy. I'd also like my kids to have these things, but as a by-product to the qualities above. The best player on one of my son's soccer teams this fall was difficult - criticized refs, teammates, was lazy at times. I'd rather a hard-working, ok player, playing his best (good thing, cause that is what I had; the coach noticed, was very complimentary and gave him some good chances; plus he had a lot of fun). (2) Short term thinking: This is a tough one. It is often tempting to give in to say whining. You're tired and want to go to bed. But, this generally leads to more whining and much more trouble in the longer term. I sometimes give in myself, but try not to set myself up for longer term problems as best I can. (3) Following the crowd: There is lots of crowd following. What are the Jonses doing? Should we be doing the same? That's just what people do now (without thinking for themselves). An incredible amount of time is spent on kids sports. That's fine. I like sports. However, if you are going to spend all of your time and money on something like club and travel sports, you should do it because you've decided it is the right thing for your kids and family. Not because everyone else is doing it. (4) Pain avoidance: We all want our kids to be happy. We all want to shield them from pain. But, challenges are a part of life. It's ok if they don't get everything they want. It won't make them less happy, and will hopefully help them build some of that resilience and independence I mention above. Also, trying to avoid all problems can drive you crazy and lead to spoiled kids. Anyway, just some quick thoughts. Off to watch the big game.

I am watching this stock too, but isn’t the relatively small premium to the current market cap ( rumored purchase price is $11B, current market cap is $9.8B) a concern. That’s just a 12% premium to the current price. This seems to be a difficult business to run and really not worth as much than thought. Sold out of Arconic today at 20.20, break-even for me. Deal set to be announced between 21-22 per WSJ. Would expect a decent spread to remain until closing. No loss but still a disappointing premium. Good call Spek. Good call. Deal fell through, and stock price retreated accordingly.

As you point out, 7% is aggressive. Difficult to get there without a change to the mix, and some higher rates. What is interesting is that Fairfax's investment style may make 7% more plausible, while at the same time making a big miss also more of a possibility. I am not sure if that is a good thing. Somewhat higher rates, somewhat more aggressive mix, better underwriting and more conservative stock investments may make 7% investment returns less likely, but it may make double-digit BVPS growth more likely.

I saw a chart on this just a few days ago. I'll link it if I find it again, but GDP to S&P correlation has historically been very, very low. Regarding this thread generally, I have no strong opinion on whether the economy or the S&P 500 will turn over. Doesn't seem like the economy is on the verge of major problems, but who knows. I've got even less of an idea regarding the S&P 500. I tend to think a pause or correction in the market coupled with continued growth in the economy would be fine.

7-15% is a pretty large range. I would expect Fairfax to return a compound return in that range over the next 10 years starting from today. I am not sure what you mean by "any" 10 year period in the future. If the stock rises 50% in the next year, without a corresponding change in IV, I would be less optimistic on the 10-year return from then.

I'm not sure if I'd sign up for the shares being "cheap." I'm more comfortable saying "not expensive". FWIW, I think there will be better opportunities for purchasing shares in the future.

This "talking your book" criticism seems prevalent, but is silly. As oddball notes, when an author owns a position in the stock they are discussing, they are accused of talking their book. When they don't own a position, they are criticized for not having skin in the game. It's silly either way. Better to just read and consider the strength of the analysis. ------------ I also wanted to say that I think this is a very appropriate venue to discuss, recommend and criticize investment blogs. I don't see why any criticism should be limited to the comment section of a particular blog.

Hi Eric, I listen to your podcast. I the DT has some excellent ideas. I've got some general suggestions for your podcast, even though they may not be suggested episodes. I am not sure what your goals are for the podcast, so some of these may not apply. (1) It would put out the podcast on a regular schedule. As a listener, I like that. Also, most of the successful podcasts I am aware of do so. If you are lacking a guest, you could try to do the podcast without a guest every once in a while. I imagine it is tougher, but a simple: This is one of my most recent investments; or this is my portfolio podcast could be interesting. (2) I like hearing guests who aren't on other podcasts, and that's one of the things I like about your podcast. I am not sure this is the path to podcast success. Just a personal preference. (3) I am interested in individual or perhaps small shop investors who have had success over a reasonable period of time. Someone like Packer would fit the bill. I am just interested in hearing the person's record, how they achieved it, how they've adapted, and what they are doing today. (4) I've always thought that concentration versus diversification is an interesting topic. How many stocks should you own? Is it possible to outperform with 30+ significant position? Should you cap a single position at 20%? Higher, lower? Has your weighting changed over time (more or less concentrated)? Why? (5) You put out a general call for guests here. If there is a poster here that you would like to interview on your podcast, I suggest you send them a message and invite them specifically. I think you'll have a much better chance of getting folks from the board if you specifically ask particular members. Enjoy the shows. Keep up the good work.

Styles of investing, including, and perhaps especially, value, don't work all the time. That is fine. But, Einhorn has dug himself quite the hole over the last few years versus the market. It isn't easy to make up that type of under-performance. Perhaps particularly so when long-short. Einhorn H1 2018 - (18%) 2017 - 1.5% 2016 - (0.1%) S&P H1 2018 - 2.7% 2017 - 22% 2016 - 12%

I think so too, but there hasn't been much profit in it yet. In my opinion, the risk/reward for some names has gotten much better as the oil storage situation has improved, the spot pricing of oil has improved, the potential for better pipelines (Line 3 and Transmountain) has improved, and stock prices have remained stagnant. At $30-$40 WTI, you had to be willing to anticipate improved oil prices. At today's approximately $75 WTI, you are only betting on sustained pricing (or course, there will be substantial swings).

Anything in-particular from this year's presentation? The stock seems a bit expensive to me here.

"Across all accounts up about 7.5% YTD, one account up 14% YTD. I'm at about 40% cash overall. So these are decent numbers." I believe you are saying that your accounts are up 7.5%, including the cash. If so, I would call that much better than decent.