StevieV

I also don't like - "you get the rest for free" analysis. How big is the "Free" part? How sure are you of the valuation of the "fairly valued" part? If you change the multiple of the "not free" part maybe you aren't getting anything for free or the "free" part only represents a small discount. I'm concerned about the value of this $100 B, the ability to deploy it at high rates and the timing of doing so.

I thought that selling out of the airlines showed a lot of discipline that is difficult for most people, myself included. I don't exactly why Buffett bought the airlines, but presumably he though the industry had rationalized so that there were a reasonable number of competitors acting rationally. Air travel seemed like it was on a sustained upward growth and additional capacity was at least somewhat limited. All of those things are no longer true. Seems simple enough - all the reasons he wanted to own the airlines are no longer applicable, so he no longer wants to own them. Straightforward, but not easy.

Testing is coming along. Abbott has a test that can give a result in as little as 5 minutes. I also ran across this article about an at-home test. We could also really use antibody tests. One of the treatments being investigated proving that it helps somewhat would also be a huge plus. I think there is a path to decent scenarios. In the short term, I'm not sure. I'm somewhat optimistic/hopeful that we'll be in reasonable shape to contain it in the fall.

According to this tweet, the CDD is going to start recommending masks. No brainer. Problem is getting the masks out. I've read about the "stigma" of wearing a mask. Sure, 3 months ago if I had worn a mask to work, it would have stood out and people would have wondered what was wrong. If I wore one next month, seems like it would be fine.

Aren't we trading where the economy is in 6-12 months instead of where it is now? Not saying we won't go down further or anything (who knows), but obviously the market is forward looking. Yes, I understand that. The market also doesn’t really care about death and so forth, it’s a cold calculating machine. But my thinking is that the economy in a year will looks substantially worse than it is right now. I am just not buying into the V recovery. In any case, even if you buy the V recovery, it seems already priced in. The longer L shaped or U shaped recovery like we had in the GFC is by no means priced in. This is worse than the GFC in my opinion. Possibly way worse. I don't know if it will be V, L or U. I do think you are right that things won't simply snap back. People won't get new jobs as fast as they lost their old ones.

2019 S&P 500 earnings of $163. So, we are at 16x 2019 earnings. In 2020, things are much, much worse. I continue to think there is huge uncertainty, but that 2019 earnings won't happen for 2020. Does it return in 2021, 2022? What about the growth rate? I agree that the market is trading higher than I'd expect given the uncertainty, so I would guess will see it trade lower, at least periodically. I assume it isn't lower than it is trading now because nobody knows the limits of what the Fed and the US government will do to support the markets; and people (myself included) now expect rates to be super-low for a long, long time.

I've been thinking about masks. I'd be ramping up mask production as fast as possible. But, I've never worn one in my life as far as I can recall, and I'd need one or two a day. Same for the rest of my family. A billion or more a week in the US. I figure it would take many multiples of current mask production. How possible is that? Regardless, I'd push hard on masks. Absent a treatment, this will at the least be around in the fall.

Just remember that the March 2009 bottom was very brief. The "buyable" bottom was -45%. If you were a couple weeks early or a couple weeks late, you'd be buying at 40-45% discount. Everybody counts the rally from March 9, but almost nobody bought then. I was buying in April 2009 at much higher prices. This seems most like 1929, but remember the FDIC, employment insurance, monetary policy, stimulus make this scenario unlikely. Two good points. Impossible to time buying at the bottom anyway. The other thing I sometimes think about is the discussion about being able to stomach 30% or 50% losses or whatever if investing in stocks. I think that actually understates the case. Nobody knows what the bottoms will be. If the market gets to the down 50% level, people won't be only concerned that they are down 50%. They will be concerned about being down more from there. Gov't action is at least one reason that this different than 1929. Not necessarily better in all ways, but at least different.

"Even if the research goes well, a vaccine wouldn’t be available for widespread use for 12 to 18 months, said Dr. Anthony Fauci of the U.S. National Institutes of Health." Well, that's why I said - "Testing doesn't mean close to roll-out or even effective, but better than nothing." 12-months would be way better than 18-months which would be way better than never. Earlier testing starts and the more number of trials, the better chances of closer to 12 rather than later.

Testing on coronavirus vaccines has begun in the US - https://abcnews.go.com/Business/wireStory/coronavirus-vaccine-test-opens-us-volunteer-1st-shot-69624041 Unprecedented speed. Hopefully we'll get some good results for this or another vaccine. Testing doesn't mean close to roll-out or even effective, but better than nothing.

I don't see how a recession is avoided. Can't shut down so much and have the social distancing without causing a recession. I think most else is up in the air. Among other things, depends what happens with the virus, which I think is pretty speculative. Could it recede over the summer and come back strong in the fall? Maybe. Never recede that much? Yo-yo with corresponding yo-yo policy responses? When will a vaccine arrive? Any treatments before that? Why are you very confident we will not see a repeat of 2008? I am hopeful that this is viewed, and turns out to be, somewhat temporary and businesses act according. That government makes reasonable policy decisions, and that we get a short recession with a bounce-back. No confidence of that though, just think it is possible and am hopeful. Wouldn't be surprised by a longer or deeper recession either though, for all the reasons you mention. Many businesses and people aren't prepared for such a quick and large slowdown (some aren't prepared for any at all).

So now estimating 1-1.5 years for a vaccine (the administration and more sophisticated people were saying weeks to months recently). Strange. I thought all the fat margins we'd been handing to pharma for decades would have resulted in tremendous amount of R&D infrastructure to handle something like this more rapidly. Instead, they've spent it on inversion mergers and patent defense litigation. How long is a life saving vaccine supposed to take? How long did it take to develop a polio vaccine? How much of the 12-18 months is safety testing rather than development? If a company is able to develop a life saving vaccine against this in 12-18 months, that would seem to be a miracle of modern medicine, not a failure.

I meant from the weekend pricing of about $230 over moderate to longer timeframes. Of course, just an estimate and endpoints certainly matter. From today's pricing, I am not counting on a big multiple expansion. I do think that I should be able to exit at least at about the same multiple as today and that multiple expansion may provide a bit of a tailwind. The multiple may certainly be lower at various times, but my guess is that they'll be relatively brief periods.

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).