Uccmal

Not for me. I'll happily hold great companies at fair prices, but I try to buy them at cheap prices. Taken to its logical extreme, your argument suggests I'd only ever hold 100% cash or 100% of my favourite investment. I'll very seldom do either because the risk of being wrong is just too high. I concur. I hold a few positions I wouldn't buy at the present prices. There are all kinds of reasons: 1) bird in hand worth two in the bush - redeployment of funds error increases with each new investment, even though it may be cheaper on a comparable basis. 2) good growth prospects but not enough to pay up for. 3) great and/or growing dividend 4) cant find anything better on a risk adjusted basis. 5) concentration - I try to limit my holdings to 20% (SSW). I would like to buy more but if something odd happens, such as fraud, or a combination disaster, then I get creamed with too much concentration.

Mcliu, The thing is it is always something with Fairfax. I dont see that changing. If its not some investment botch-up, or hedging mistake, then there is a soft market (which will be coming quick). Alot of it they bring on themselves. I got tired of the building the company for the long term mantra. Take any starting point from 2000 to 2004 and you get a growth of book value that tops out at 12, maybe 13%, including the dividend. A respectable return but nowhere near 15%, and nowhere near what many other companies earn. That includes the years of the CDs windfall, and the hard markets after Katrina, and one of the worst bears and best bull markets of all time.

Gio, I held FFh shares for 15 years in some form or another so I have really paid attention to FFh over the years. I got so I would cringe everytime they announced a new stock buy. FFh has not shown the same ability by any stretch of the imagination as Buffett has in assessing people or businesses. A few names come to mind: Canwest; sfk/fbk/ resolute; tom ward; RIM (although Chen seems like the real deal finally); TIG/C&f, midland walwyn, lindsey morden. This is not an argument about character or integrity, but capability. I admire where Watsa has bought the company but I think he needs a very strong Munger or Buffett on board these days. We have had this argument before but it is unlikely they will reach their 15% bogey, and they are still a small company. It is getting harder each day. Whatever they have compounded book value at in the last 10 years is likely closer to the norm going forward.

Al, It is a mathematical reality the fact anything that grows BV at a higher rate than its cost of capital has IV higher than BV. Gio Huh, A mathematical reality based on a philosophical definition: http://www.investopedia.com/terms/i/intrinsicvalue.asp http://en.wikipedia.org/wiki/Intrinsic_value_(finance) Are you counting the share dilutions? How are you determining your future returns, and discounting them to PV? It cant be done with FFh. Book value is intrinsic value, and in some cases may be inflated due to goodwill. Also, you are double counting. The book value already includes the gains made from borrowings, and share dilutions. Gary, the easier way to ask the question of yourself is: Can I compound my capital at a better rate than FFH going forward? It's as simple as that.

Hi Gary, In 1998 FFh was trading at more than 3 x book - I think it peaked at $600.00. The better measure is book value. At one of the AGMs around then Prem stated that he thought the stock was over valued. Part 2: I am not sure I agree with your Dad's statement. I might hold a stock at a price where I may not buy for an assortment of other factors - taxes, holding is already large enough, some degree of flexibility on estimates. In the case of pure speculation such as RIM I agree with his/your assessment. Part 3: ( to all) I wont buy FFh at this price because I think one day I might get it at much lower prices. In a major correction for example. Today FFh is getting some tail winds. I dont regret selling down hundreds of shares in the $400-420 range either. The returns on the stock price have been 7-8% per year since then. I dont get this notion of why FFh has more intrinsic value than Book Value. It strikes me as a bit of wishful thinking. I also dont understand why FFh should trade higher than comparable peers: chubb, MKL, or WRB for example. The price was disconnected from the value. Ironically, holding FFh shares when they reached nearly 600, only to watch them plunge taught me more about value investing than anything else. FFh was a strong case against buying and holding without rationale.

I have built a substantial common position in Pennwest so far - around 10000 shares. I am watching and waiting to see what happens. The dividend appears more than covered. The higher commodity prices are an unexpected boon, and will help get debt down quickly. Insiders are still buying here and there. The absolute worst case I can imagine is losing the significant upside to a take out at a 20 or 30% premium.

Al, Which strike JPM LEAPS have you bought? Thanks Vinod 57.50 & 60.00 I am sort of operating with an interim target of 72 by the end of 2015 - low ball

The banks get better interest rate spreads when rates are somewhat higher than they are now. Instead of borrowing at 1% and lending at 3%, they can borrow at 2% and loan at 4.3%. The 0.3% over a trillion dollars becomes significant. At a certain point rates go too high and people stop borrowing as much. Dimon is talking about hitting a sweet spot where soreads and volumes are both good. Historically banks didn't do as well in rising rate environments but most of the bigger banks now hedge off possible interest rate risk. It also has to do with the speed of a rise. That good?

I am in there like a bad habit. JPMs earnings down a whopping 19% - yawn. WFc earnings up a bit on lending. Curiously BAc should be up a bit next week on the lending side as it is most similar to WFC. Bought WFC leaps, JPM leaps, and rejigged my BAc leaps to lower strike prices. Sold all my BAC 2016 22's at a loss, some 20's. Replaced with 15 and 17s. All before 9:45 this morning. Whew!

Az, That is an awesome and comprehensive post. It describes exactly why I am not invested in Fairfax. Thanks for all your effort. Thanks, Al

That about says it. Nearly 20 years at this has taught me how to filter ideas much quicker.

I didn't vote above because I cant answer the question. Often times I will start with a small position with limited research. I bought BAC warrants 4 years ago the first time, a small investment. Over time, since, I have spent huge amounts of time on it. My position size grew as my comfort level improved. But there is no way I know as much about BAC's operations as the CFO and his team do. The same with seaspan which is my largest position now. I have held since December 2008. Buffett did choose his deputees for their temperment. It is very possible Mr. Weschler is spending 500 hours on an idea, if you include general industry research, phone calls, studying suppliers and customers, etc. He probably narrows his list quickly, and focusses on a set of ideas. The question really should be: Is it worth the time spent? The second question should be 'What is the quality of the time spent? I dont believe anyone can do that kind of work effectively for more than 4 or 5 hours per day. Is he including "backburner" time?

You must be new around here. As opposed to everything else? ^^^^This guy might be the most serious guy on the board. ;) Note: He also gives great dating advice! Last I heard his dating advice was a flop..... I would argue it wasn't the advice, but the execution. Now are you entirely sure about this? I will let the board membership be the judges. advice from Kraven 1. Unbutton 3-4 buttons on your shirt and wear lots of gold chains. 2. If you have various tattoos, make sure to show them off. 3. Order for her and if she says she doesn't like what you ordered shush her and tell her you know what you're doing. 4. Flex your muscles as often as possible. For example, if asked where the ladies room is make sure that when you point you show off the guns a little bit. 5. Talk about various "fantasies" you have and ask her to describe hers. Women enjoy talking about possible escapades on the first date. 6. Get very, very drunk to demonstrate that you are able to hold your liquor. 7. Start a fight with a guy sitting at a table near you. Women love to feel protected. 8. Swear a lot. Women like a man who talks like a man. 9. Talk only about sports and money. Like #8, women like this. And finally, 10. At the end of the date, tell her you had a great time and that she is exactly like your mother and that that is a very good thing (and wink). Side note: You forgot the part about inviting her back to your place in the bedroom next to your parents....

You must be new around here. As opposed to everything else? ^^^^This guy might be the most serious guy on the board. ;) Note: He also gives great dating advice! Last I heard his dating advice was a flop.....

And does this work? Personally, if my investment manager was wining and dining as you describe I would take a pass. I generally dont enjoy that sort of thing anyway, and I dont really want to finance that lifestyle. If I weren't running my money myself I would invest with those who live a little humbler such as Parsad,or Chou. I have a dream of Joel Greenblatt taking me sailing in his dingy in New York Harbour. I guess I fit right in with the Millionaire Next Door type... dirty hiking boots in the car, somewhat used vehicles (family context). House is nice though, more than we need. I suspect you are mostly right though. Michael Burry's inability,or lack of need for socializing, has probably handicapped him greatly. Those who "get" him do really well. Maybe Warren was more like that at one time and learned to hide it.

Thanks for the local colour Jouni. I looked up your flag the other day - Finland, correct? This whole situation reminds me of the good old days. We have pipelines criss crossing the whole region that are very easy targets for sabotage. Russia could be very quickly put out of business for years, and Putin would be dead in the water, executed unceremoniously for stupidity. He is only going to push so far for now.

I dont know where people get this notion that Buffett doesn't understand technology. I am willing to bet he knows more about the economics of technology than most technology investors. That is why he stays away from "pure" technology companies. The earnings cannot be reasonably predicted as far out as Mars, Geico, or WFC. Every one of his businesses is technology intensive. The insurance industry operates on computer models, detailed climatic analysis that can only be done by supercomputers, etc. BNSF uses the latest in communication, and computing to manage its entire business. Mid-america uses switching systems, sophisticated modelling, solar power, wind power. Need I go on. Read Snowball. He was using a computer to play bridge at the dawn of the public internet. He was using a cell phone to negotiate the LTCM deal in 1998, before most of us had one. In Lowenstein he was criticized for not bringing out a Cd version of world book encyclopedia. Probably the proper decision, for the wrong reasons given the advent of wikipedia which killed the paid encyclopedia business. Rest assured he understands technology.

Uhm No.... another head scratcher. Remember the days when the Sunday Star rolled up looked like a tree stump. People still buy the paper but much less. Perhaps the purpose is to control the newsprint contract to assist that other buggy whip Resolute.

We have a winner for the cheapest guy on the COBAF message board. After reading your message, I feel like I'm not worthy! SJ Yeah, if only. I live 8 km from Pearson (Toronto International) and the flat rate for coming home is like $45.00. I jave thought of walking many times but 8 km without sidewalks is a bit much. I had a room mate in university who has everyone I have ever met beat on cheapness. All year he ate pork pot roast, with boiled cabbage, and potatoes. He would cook it one day and make it last a week at a stretch. He would only get water at fast food places to save money. Pancakes for b-fast day after day. One day some pals got back at him by putting beer in his pancake mix. Whenever I went anywhere I really had to watch that he didn't stick me with a bill. At a certain point its a pathology.

Amen Brother. Things didn't seem so easy when my FFH options were worthless, or my BAC options were worthless. I generally take a pass on guilt. It is not a productive emotion. After taxes in 2013 I worked at my day job as a volunteer. I no longer have a choice in the matter. My day job is simply not thrilling enough to do it for free. Now to be fair. I was raised in a middle class family, that valued learning and education, and paid for most of my undergraduate degree. I will in turn support my kids the same way.

along those lines: If I and my pals on this board didn't buy BAc at $5, GE at 10, etc. Whatnwould have happened to those companies? We stabilized the market We had nothing to do with their decline but we provided confidence when it was most needed. A company with a stock price of zero will go out of business eventually.

This question can be posed for a whole host of businesses and occupations. When you get right down to it only a handful of things are actually necessary for human survival, and perhaps some extra things for some fulfilment. We need food, shelter, companionship, some security and safety, and some entertainment. So we need farms, storage and food distribution. We need homes and infrastructure to supply our homes with energy and water. Most of us need friends and family. We need a cohesive social group for safety and security. We can entertain ourselves with music, shows, dances, story telling, and playing games. We dont need Mcdonalds et al. We dont need pro athletes, pro musicians, pro actors, Las vegas, Philip Morris, Seagrams, or Budweiser. We dont need Coca-cola, Pepsi, Mars bars. We dont need car dealers. We dont need 95% of the clothing retailers in the average mall. We really dont need as many lawyers as we have. Once you clear out the occupations that dont provide the basics most of us wouldn't have or need jobs. On the other hand it was probably pretty boring sitting all winter on the farm in 1914 in rural Ontario. In fact it was so boring that young men volunteered in the thousands in 1914 to fight in an overseas war - anything to get off the farm. My investing does me good and makes my life more interesting. Perhaps it will enable me to go on and do something really good for society or assist someone else in doing so. Elon Musk is a good example of this, or Bill Gates. The question is really quite philosophical.

Several of us bought calls on FFh from 2005 through 2008, until they delisted on the NYSE. At the risk of starting an argument why would you want Options on FFh when it is at least fairly valued, if not overvalued? I only buy options when there is a clear undervaluation. Finally, a word of advice. Dont buy options on Canadian stocks unless you are prepared to ride them to the end. Once you have got them, you are stuck. I have had MFC options and Celestica expire worthless, after two years of watching them deteriorate, and being unable to sell at any price.

Why should we be surprised? Just go down to your local mega store complex. I am sure it is the same across NA. The number of retail outlets has exploded in the last 30 years. I go to the same Sbux 3 times a week or so and buy the same thing - tall bold, and nothing else. I sit and nurse it for nearly an hour while I read. In line with me are people getting latte this and that and some treat and paying 7-10 and they appear to think this is normal. They ring the purchase through on their Iphone -70 /month, get in their vehicle - 500/month, 150 for gas. Then they go shopping for things they dont need or buy things for people who dont need them. The amount of crap that comes through my door that I dont want blows my mind. Then there is restaurants. The number of these has exploded as well in the last 30 years. We go our for dinner about once a month. Probably the worst thing to ever happen was the advent of easy credit. I am guessing most on this board are like me. I have only ever had one credit card, and I only use it for big purchases. Joe/Jane average (or should I say Joe median) dont live like we do.

On the other hand, if the situation is so great, why is the Fed still injecting $700 billion into the bond markets every year and being so cautious with tapering? I guess if you believe that the current interest rate environment is normal, then there are definitely many signs of improvement. Where is the data that supports that? I'm looking at the latest GDP figures and it shows a big jump in investments from 49% of GDP to 54% while consumption only increased from 48% to 50%. Credit is still growing double digits, probably to finance the increase in investments. The Shanghai index has dropped considerably since 2009 (5 straight years of declines!) reflecting the low ROEs in corporate China. Yet, despite the low returns, overall investments has jumped by 20% yoy. I never said the situation was so great. I provided counterarguments to the same noise that comes out of FFH ever year. They dont know any better than anyone else. Specifically, the running out of bullets argument Is what I was talking about. The way I see it the magazine is being refilled slowly but surely. Have a look at historical interest rates, going way back, if you dont believe they can stay very low for a very long time. Do you really believe anything you get from China at all, either the stats that FFh provides, or the ones you are providing. We are dealing with a great big black hole over there. And the officials in China are dealing with the same black hole. I am real skeptical. The only tangible thing we can see is that commodity prices (ores) have come off from the boom years. That shows me that there aren't Manhattans being built every month.