Uccmal

Eric, I absolutely agree with your broad point here and I do think that all multiples will compress in the next crash. I don't expect to make money in Fairfax the first 6 months of a crash. That said, I do think you're picking your dates a bit too carefully! I just (fairly randomly) chose Nov 2006-Nov 2010 to graph FFH CN, and it basically goes from bottom left to top right. The selloff starting March 08 lasted five months, took you back to where you would have been in Sept 07, and reversed rapidly. The same thing happened starting early 2009. So yes, the start of the storm felt shitty both times, and maybe that'll happen again and we'll will get a great opportunity; but all the graph really tells us is that this is a volatile stock that performed extremely well through the crisis. And we all know that what matters far more is how IV trends, and I believe FFH's IV could explode in the next crash if there is a deflationary panic. I think 2008 is not comparable to today in two ways: as soon as the next crash happens people will look to Fairfax, remembering what happened last time, which is bullish; but the starting multiple is higher, which is bearish. P People may look to Fairfax in a crash, but they will be selling none-the-less. The reason is fairly simple: the need to raise money for margin calls, and generalized panic. It absolutely will happan again. Your naive to assume otherwise. Going into March 2009 FFH dropped by 100 on the heels on extremely high earnings. I know because I was buying FFH at the time. Its posted somewhere on this board.

I have no reason to disagree with your logic. Full disclosure, I am a long-term FFH holder. The quote above is isolated because I am not in agreement that the same thing will happen again should FFH's hedges work out down the road. The reason is that things have changed from then until now. In 2008/2009, FFH was a one-trick pony in that they could invest. Their insurance results were sub-par. Now, their insurance are substantively better, very profitable. If the insurance operations continue, then I would opine that multiple expansion overall would take place and that any contraction as a result of a macro bet would be muted compared to 2008-2009. Stated differently, a company with mediocre operations but that kicked-butt on a macro bet is less valuable than a company with solid ongoing operations that kicked-butt on a macro bet. -Crip P. S. I hated for years the usage of "bet" when discussing Fairfax...I thought it misrepresented the hedging aspect. The tune has changed to an extent. It's true that underwriting results didn't look anywhere near as good back then. However... 1) the market put a multiple on the stock while also taking those sketchier underwriting results into consideration. 2) the market crashed and the price to book compressed along with it Correlation is not causation though. MKL's price to book also compressed. Berkshire's also compressed. Coca Cola's valuation compressed. It just looks to me like: 1) pre-crash, every company has a given multiple 2) during the crash, every company sees multiple compression Why would FFH be an exception this time when all other high quality stocks see compression in crashes? Well, you could argue because the hedges would be soaring, but yet that didn't prevent it from happening the last time around... Anyway... I'm not right, it's just how I view it. FFH dropped by $100 cdn top to bottom in FEB/March 2008 (35%) after reporting record earnings for 2007/2008. They will get caught in the tide like everything else in a major crash. And it will have nothing to do with Fairfax.

You said what I wanted to much more elegantly. Canwest baffled me at the time, as has RIM, Torstar, SD, and especially Resolute. Buffett's buys almost never leave me shaking my head. I expect some of their macro bets will do well, at some point. But the returns noted above by one poster (-6% for the last number of yrs) are not enough to make me want to hold FFh stock, even as a hedge. Just because I think I can get better returns in other places doesn't detract from the fact that I admire the wonderful company that Prem has built. I also admire Google, Tesla, and others but dont hold their stock, either. Nor do I hold Berkshire.

Totally agree with you Dazel. Simply inexplicable just how bad their stock picking is. Like you said, it has to be in the bottom 5% over the last few years. I invested in them for that ability yet I truly believe a monkey could have randomly selected equities with a MUCH better chance of not going to ZERO! Both SD and Blackberry, and I'm sure there's others, are companies who's original thesis for buying was thrown out the window long ago and now they're holding on for a Hail Mary. At what point does someone get fired or does the strategy change? One hopes the strategy changes. "at what point does someone get fired" - there is multiple voting shares to prevent that event. There is a reason I haven't held any Fairfax for a few years. It seems you cant practice Graham type investing, and concentration at the same time, and get decent results. Buffett and Munger realized this 45 years ago.

ourkid, There is nothing you can really do at this point. I have slowly converted everything, over 3 years or more so that: 1) There are no US dividend stocks in my TFSA. 2) Lots of US dividend payers in my two RSP accounts. 3) Dividend payers in my taxable US account. I should get a portion of the 15% back due to positioning myself in a lower tax bracket. The suggestion to borrow money is not a bad one, provided with the usual caveats. The RESP for my kids is a sticking point. I get some US dividends there with no recourse on the 15%. Toward the future I lean toward Canadian based companies to reduce this affect but will always lose some here. On the positive side, the dividends right now are being converted from US to CDN in the RESP which more than offsets the 15% at the moment.

This market, and every other market since the beginning of mankind, has been manipulated in some fashion by market participants. In the case of oil, I don't think it is that hard to forecast the trajectory. Overproduction leads to lower prices, lower prices lead to reduced production and increased demand, demand begins to increase along with corresponding declines in production which causes tightening of supplies, and tightening of supplies eventually yields increased production. Although the pricing and volume may change, this cycle occurs consistently. So who gives a crap if Goldman starts pumping and dumping, or if the United States starts releasing oil from the SPR, or if a bunch of monkeys in suits get on CNBC and start prognosticating about the price of oil, or if Elon Musk blatantly and frequently manipulates his stock price through Tweets and other social media...this is just noise. The real question is whether or not you can make money in a manipulated market. As a small player with a flexible time horizon, I have a pretty good idea of when to put money to work in the oil cycle, and when to start taking it off the table. My timing is far from perfect (as evident by some of the red in my brokerage account from getting into certain names a bit too early in the cycle), but in general, I think I can use the bulls**t described above to benefit myself, and I think you can do the same. So instead of getting frustrated by the bulls**t manipulation, use it to your advantage to make some money. Well said. Both Cardboard and myself were real early in the oil game (see pwt/pwe thread). Actually a surprising lack of red in my holdings. It can be frustrating getting in too early - value investors curse, as you know. The cycle is normally shorter for oil - at least it seems that way but the view, here, in the fishbowl, may be obscured.

Cardboard, I am a bit confused as to what you are getting at. It strikes me that the US machine is responding appropriately. Strategic oil is partly held in old wells. They know the oil is underneath texas, north dakato, etc. If the US military machine needed oil in the event of war, they could very easily drill, and frack, at a rate that would supply years/decades of oil. Wartime tends to accelerate time frames. If anything It appears to be another arsenal in the US economic war to put their potential adversaries into financial duress. 80 million barrels of oil added to the system over a few years is going to severely damage the biggest producers, one of which is Russia. Welcome to cold war part 2. It will also help North Americas oil dependent oil allies. Isn't going to do much for my oil holdings.

Aint that the truth... I identify more as a liberal but am happy to see the Consevatives keep a good number of seats. Maybe we can get the Progressive back in there without Harper. We made need them after 5 yrs. I want the good old oxymoron party back.

I just hope they dont reduce the TFSA limits.... Best looking first lady anywhere: https://en.m.wikipedia.org/wiki/File:ETalk2008-Justin_Trudeau_Sophie_Gregoire_cropped.jpg

I am going to speculate that this wont end well. These guys have just left themselves wide open to a whole host of problems: - a cocaine overdose seems inevitable. - rich person problems such as security, safety, extortion, for which they are ill prepared. - increasing costs of hangers on and entourages Its much better to be quietly rich and anonymous than have the whole world know that you F** over a bunch of people to get where you are. This article just begs for someone with a resentment, plane ticket, and a gun.

Jeez, Sharper... Have you actually tried going to school at 50? It is not in any way similar to attending school at 25 or 30.

We could argue about whether or not 6 people should be legally allowed to wear Naqibs. Politicians are not always the cream of the crop.

It would help if the OP told us his present occupation and background (student/working). I contemplated doing an MBA at various times but: 1) Over time I discovered I could way outperform the markets and 99% of mutual and hedge funds. 2) Doing an MBA would have meant forgoing two years pay that I used for investing and the upfront costs. Maybe $250,000 3) I was battle fatigued on education from doing an undergrad in Geography and an MHSc in Industrial hygiene (google it). Nothing directly related to investing in there at all - sometimes it shows but it doesn't seem to impede my results. 4) I saved and lived below my means alot in my early/mid 30s transferring excess cash into investing. I stopped putting from my salary 10 years ago (we bought a house/kids etc.). All the investments grew from the money invested to that point. 5) Now I live off my investments. My wife still works but we could easily get her retired - she likes her job and is very conservative and independent. We each contribute equally to the household (more or less - my investment money has helped buy some real estate) 6) Some luck, some skill - during the last 10 yrs money has been insanely cheap - I locked in the mortgage 4 years ago expecting rates to go up. A friend of mine whom I met via this board had an undergrad business degree, taught himself to value invest, worked at a couple of mutual funds, before he applied and got a job at a value shop. The job wasn't listed. He got hired on the basis of a few value analysis he did as a demo for them. I am a strong believer that where there is a will, there is a way. Sometimes my will is lacking or is impeded by fear of the unknown.

Lol

Agree, .the conservatives have been around long enough. Its time for them to be sidelined for renewal. If the Conservatives drop from a majority to a minority my hope is that Harper will have the decency to resign. As much as I hate dynastic politics I think we get a liberal minority. Basically, I approach this election like all the others since J. Chret. resigned - I dislike all the major parties, some more than others. I even dislike the lib. at the riding level, and wont vote conservative 'cause of their leader, and NDP gets only a few percent of the vote in my riding.

Thanks for this useful info. Is there some data available how did the stock market perform during those times, preferable a graph that shows both the interest rate and stock performance, with recession periods? https://research.stlouisfed.org/fred2/graph/?g=1Adu goes upto year 1954. Market went up a bit more than 4x during the 1936-1956 period (dividends reinvested). Interest rates were below 3% for almost that entire time. CAPE in 1936 was 17. In 1956 CAPE was 18. That was the 10 yr. Bond. The period was into and after the Second World War when government debts were very high as well, like now. It was very similar to today. There is no reason for rates to rise for a long time going forward. I don't believe the fed will raise rates this year, or probably in the next few years. Yellen has left herself lots of wiggle room. It is the best time in decades to be an investor focused on dividends.

Its mostly tax related. The US could go along way to getting rid of this as an excessive practice by fixing its tax code. It used to be that dividend payout ratios were much higher in the US. It was before my time when the US started double taxing dividends. I personally dont like buybacks. I would rather have the cash and the choice. A number of Cdn companies have DRIPS which is as good as a buyback under our tax code. I personally dont bother - it used to matter when trades where $49.00 each but at $7.00 per trade, pre tax, it doesn't have much effect. If I think a stock still has value In it I will buy more on my own volition with the dividends - nice to have a choice.

Seems like a real cluster f**k. The whole world is trading this commodity on incomplete, inaccurate data from chronic liars, and cheaters. Take your 90 m bbl/day worldwide usage +- 2 m (alleged excess). These numbers give us a 2.2% difference from a supposed supply/demand balance. All this using data that is as precise as the Drake equation. It really makes me think that oil pricing is a trading game with no basis in the real world. We need a real live explanation from T-Boone Pickens such as his: "Its cheaper to drill for oil on the floor of the New York stock exchange".

Hi Meiroy, No reason in particular. I already had some 17s. Either way the effect will be the same. I figure BAC is worth at least $21. I wont have these to expiry, anyways.

How would you distinguish a real mistake from a hindsight bias? :) When I see a lot of risky stuff that didn't work out I'm going for the bias option. Perhaps it was still a mistake, but probably for a different reason than "it didn't work out". SpecOps only post that is the exception IMHO. Who are you to assess what a person considers to be a mistake? Why dont you share something of your own rather than being an ongoing critic. I dont write puts any longer because they have never worked out, so writing puts for me would be and was a mistake. My bad bet on RIM was a mistake caused by hometown bias... I didn't realize how much Apple or Android had infiltrated the world.

this is part of their strategy...not just get rid of current production, but create fear of future collapses thereby suppressing investment thereby keeping supply tight for years to come. Makes sense. Scare away the investors for a good few years and no one wants to drill anything that cannot be profitable at $40.

That's true. They pump about 10.5 Mbbl, but only sell about 7. The rest they basically give away for free at home. Hadn't thought of that. Tx.

What happens in China market tonight will be entertaining. they cut the rate as requested/demanded by the market. Now if it drops a further 10%, then are we going to see china do QE? Will fed have the balls to raise rates in a month? or will they fold and go for QE4? We live in interesting times... The reason this could get ugly is the Fed can not do a uturn immediately towards QE4. First they are going to come out and say something professional sounding like "Hey, you know about that rate raise, we were just kidding - again!". They may even think that will make a difference to the market, but at that point they may be bringing the equivalent of a knife to a gunfight. In which case, they will be caught off-guard by how little they actually helped the market. Remember, these are my humble prognostications only...odds of them all turning out to be correct is very low. Personally, I think they can absolutely do a u-turn. Running the Fed isn't a job for people who can't take criticism. If the Fed felt more QE would somehow help the economy get some legs, I see no reason why they shouldn't or wouldn't accept some criticism and make that choice. The problem is really that QE may not provide much for economic stimulus. Along with not raising rates, Yellin should take a more vocal approach about Washington's failure to implement meaningful stimulus. We probably shouldn't use the word "balls" when referring to today's fed..... Yellen has had a child. Did anyone seriously believe rates were going to be raised anytime in the next few years. .the best you were ever going to get was a 1/4 to 1% as a token. We had a hundred year event 6-7 years ago. It appears things will take a little longer than our mayfly perceptions to normalize. The bank stocks are pricing in no increase. The big guys are all dirt cheap at 11-12 times earnings. They are going to make tons of money going forward either way. For the purposes of a bear market definition being 20 %. The S&P is down 12.5% and the Dow is off ~ 14.5. Not much further to go. The TSX is down about 16%, and the energy stocks are deep in a bear.

rb: http://www.bloomberg.com/news/articles/2015-07-13/saudis-pump-record-crude-as-opec-sees-stronger-demand-in-2016 10.5 m/ day

What the Saudi's are doing doesn't make alot of sense in the long term. Simple Math: 10.5 million 45/ barrel ~ 475 mill $/day Cut production by 2 million barrels and drive price to 80/barrel = 8.5 x 80 ~ 680 mill $day its become a bit of a pissing match at this point. The reasons to continue: 1) Break high cost drillers - might give them two yrs of breathing space. Cheaper US and other drilling will just pick up and create a sawtooth pattern for pricing. 2) Want to get rid of as much oil as possible at any price while the getting is good. Maybe they have decided the writing is on the wall and the long term prognosis for petroleum is poor. 3) They have lost all grip on reality and dont really understand the capitalist system of bankrupt, cleanse and repeat. I dont know how good the Saudi's are at long term planning. I am a bit dubious. They are spending billions on a couple of super mosques rather than diversifying their economy - or maybe that is diversification