barsax

Wow!! That US jobs report was pitiful. Rates aren't going up for some time, bonds are still the best asset class...deflation anyone?

September 30, 2015 - 8:09 AM PDT A.M. Best Assigns Issue Ratings to Fairfax Financial Holdings Limited"s New Shelf Registration and Preferred Shares A.M. Best has assigned issue ratings of “bbb” to senior unsecured debt, “bbb-” to subordinated debt and “bb+” to preferred stock of the short-form base shelf prospectus filed on September 14, 2015 (Base Shelf Prospectus) of Fairfax Financial Holdings Limited (Fairfax) (Toronto, Canada) (TSX:FFH). Concurrently, A.M. Best has assigned an issue rating of “bb+” to the CAD 64,176,200 floating rate cumulative preferred shares (Series H Shares). The outlook for all ratings is stable. Fairfax’s issuer credit rating of “bbb”, its existing issue ratings and the ratings of its operating insurance subsidiaries are unchanged. The assigned ratings of securities, which may be issued under the CAD 5 billion shelf registration statement, are consistent with the current issue ratings of Fairfax’s outstanding securities. The new Base Shelf Prospectus replaces Fairfax’s previously existing CAD 2 billion short-form base shelf prospectus filed in December 2014, which Fairfax has withdrawn. Consequently, the issue ratings for the previous short-form base shelf prospectus have been withdrawn. The Series H Shares are related to the Preferred Shares Series G - CAD 200 million cumulative five-year rate reset shares issued by Fairfax in July 2010 (Series G Shares), which were convertible at the option of the holder of Series G Shares by tendering conversion notices no later than September 15, 2015, into Series H Shares on a one-for-one basis (subject to applicable restrictions on conversion), effective as of September 30, 2015. The quarterly floating dividend on the Series H Shares will be paid at an annual rate, calculated for each quarter, of 2.56% over the annual yield on three-month Government of Canada treasury bills. This press release relates to rating(s) that have been published on A.M. Best"s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center. A.M. Best Company is the world"s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. 

It looks as though Prem Watsa has something large in his sights... Fairfax Files Universal Shelf Prospectus 17:02 EDT Tuesday, September 08, 2015 Print this article TORONTO, ONTARIO--(Marketwired - Sept. 8, 2015) - NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION TO THE UNITED STATES Fairfax Financial Holdings Limited ("Fairfax") (TSX:FFH)(TSX:FFH.U) has filed a preliminary short form base shelf prospectus with the Canadian securities regulatory authorities. The shelf prospectus will allow Fairfax to offer from time to time over a 25-month period up to Cdn$5.0 billion of debt, equity or other securities. Should Fairfax offer any securities, it will make a prospectus supplement available that will include the specific terms of the securities being offered. The filing is intended to restore capacity under Fairfax's existing Cdn$2.0 billion shelf prospectus and to provide Fairfax with additional financial flexibility by increasing the total capacity to Cdn$5.0 billion. Upon a receipt being issued for the final short form base shelf prospectus, Fairfax's existing base shelf prospectus will be withdrawn. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction. Fairfax is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management. FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Fairfax Financial Holdings Limited John Varnell Vice President, Corporate Development (416) 367-4941 ©2015 CTVglobemedia Publishing Inc. All rights reserved.

Given that FFH has recently raised cash through the sale of Irish Bank shares, IPO of Cara foods, and now this deal, I think its fair to say that Prem and his team have found something (or believe they've found something) to underpin future compound growth rate. We'll know soon enough.

Despite the 10 $USD issue price I found an insider report posted March 12th on the TMX market site: http://www.tmxmoney.com/TMX/HttpController?GetPage=SearchInsiderTrade&Language=en&Submit=Submit&QuerySymbol=fih.u&x=28&y=18[ftp][/ftp] Someone bought 7099 shares @ an average price of $10.82 per share

Good point on the drop in velocity of money. Pretty surprising PPI numbers this morning...-.5% PPI/Final Demand month-over-month change. This number came on the heels of a -.8% drop last month. Consensus was for an increase of .3%. Excluding food & energy there was also a decline of -.5% month-over-month. Consensus was for an increase of .1%... all of that to say this is NOT all down to falling energy prices. Energy prices are playing a big part, but there's more to this drop than energy alone.

FIH.U.TO trades in Toronto in $USD

On March 4th, the day after the equity issue closed, CIBC resumed coverage on FFH, rating them a sector under-performer with a target price of $475. What were they thinking?? Of course, the stock is just under an all-time high, and the Brit acquisition (Q3 close) will bring FFH investment portfolio up to about 30-32 billion $USD. Decent investment returns, combined with improved insurance results should produce some pretty hefty profits throughout 2015...looking forward to Friday's PPI numbers. I understand China's PPI numbers were pretty soft last night.

Varoufakis may be an expert in game theory, but he is pretty good at dishing out inflammatory rhetoric too. This is from an article in today's Globe & Mail (Toronto, Canada): “Clever people in Brussels, in Frankfurt and in Berlin knew back in May 2010 that Greece would never pay back its debts. But they acted as if Greece wasn’t bankrupt, as if it just didn’t have enough liquid funds,” Varoufakis told the documentary. “In this position, to give the most bankrupt of any state the biggest credit in history, like third class corrupt bankers, was a crime against humanity,” said Varoufakis, according to a German translation of his comments. It was unclear when the programme was recorded. Although strident criticism of the way Greece has been treated is typical for Varoufakis, a Marxist economist, the remarks caused a stir in Germany where voters and politicians are increasingly reluctant to lend Greece money."

Packer: 1. I think some of the increase in wages came from recently enacted minimum wage raises..one time effect...possibly. 2. I think the trade weighted $USD (DXY) - currently at around 96 - continues on a steady climb to 120 over the next couple of years (deflationary) 3. I think the Chinese would love to drop the value of their currency - which is (was?) tied to $USD - that would be deflationary. 4. As much as folks have been focused on Greece, I think Japan is worse off - huge debt, shrinking demographic. 5. Risk of Chinese hard landing is increasing. 6. At some point the recent international currency volatility will cause some linkages to snap...will it be contained? Then what happens to the bond market? For sure US bonds will rise (falling yield - increase in Fairfax bond portfolio). That said, I agree with the points you make...it's a tough call.

OK...here goes: the investment logic is simple. Prem makes a bearish call on oil. But, in keeping with his investment history, he lays off some of the risk to the company's capital by taking out a hedge against his position. That hedge, in my humble opinion was purchasing SDR. Any cursory financial analysis would have raised alarm bells with respect to debt levels. The market hates SDR so they trade it down...it's cheap, and for good reason. Therefore, SDR is a HIGHLY leveraged bet on a rebound in oil prices. In effect Prem bought a call option on a rebound in energy prices. And like all call options it has limited time value. If oil prices rebounded sharpley - counter to his original investment thesis - then it would be a profitable trade. But, Prem was right, no rebound...SDR goes down to almost zero...just like a call option expiring worthless. In a nutshell, that is the logic. Prem takes out hedges against long equity positions all the time. By definition it means he buys things that - in all likelihood will go to zero. Why? Because if he is wrong he wants to protect the firms capital. BB is a completely different kettle of fish. Long term BB will pay off...full stop.

Luckyone: Just from reading your posts it appears to me that Berkshire is the stock for you. I'm quite comfortable with FFH.

Prem Watsa has been bearish on oil prices for quite some time, so I view the SDR purchase as a hedge against his bearish oil call. Yes, SDR is well on it's way to zero. C'est la vie, but other parts of the portfolio profit from the oil drop. As for Blackberry...it's too soon to throw in the towel on BB and John Chen. Every person on the planet knows BB will never threaten AAPL, Samsung or Google for handset market share, and yet the market is full of super confident, super intelligent hedge fund managers shorting BB on that premise, even though its already priced in. John Chen is skating to where the puck is going, not where it already is...