Uccmal

Sigis, I have only tagged your note as an example here. Not personal. In 2013 the S&P returned about 21%. Lots of us had a very good year. I was investing for 7 years in a haphazard value methodology before I found my groove - Learned enough and made enough mistakes to work out what works. That is why I only report 9 years back, in part. the other reason is that before that my portfolio was constantly being added to by me, making annual calculations grossly inaccurate. I feel like we should all put a disclaimer at the bottom of this thread. It is unlikely that I will get a 60% return again this year. My goal entering 2014 is the same as it has been since 2009. I don't want to lose money. I want to make money, but I really dont want to lose money. We are entering a risk off environment so I would expect returns to come waaaayyyy down in 2014. BTW, I never set targets... I manage risk. As BAC, AIG, or whatever rises in value my position will get smaller and smaller, particularly in the leveraged instruments. There is only soft targets. I expect to be totally out of BAC derivatives well before $25.00. like the SGT. Says: let's be careful out there!

I personally find this result (and Nate's as well) just as impressive as the higher gains with the more concentrated portfolio's. With more positions there is a higher probability that skill instead of luck is the driving force behind the returns, and you have a lot less risk as well (especially with the cash position). Kraven and I have discussed "know thyself " on and offline. Whenever I have tried the Graham/Schloss style of of investing I have blown up or at least lagged badly - I have a knack for backing up the truck for loads of crap. So For now I stick to the style that works for me which is similar to Eric's. Do you call it luck that I have held BAc for nearly 4 years, AIG for two, Seaspan for 5. Maybe its luck or maybe its a bit of an intuitive understanding of market psychology. I also tend to load up the winners. IMO, there is a lot of soft skill involved in risk managing a concentrated portfolio. I am certainly adaptable and ready to try a different path, should that make sense. At this point it doesn't. I have had one down year in 10, and it was 2011, not 08, or 09. And it was due to style drift.

Impressive long term results! my own: This year: 60% pre tax - probably about 56% after tax 9 year record ~ 41% after tax Kicking out best and worst year ~ 30% after tax methodology: report after tax because I pay the taxes straight out of my accounts...estimate taxes for 2013 for above numbers hence the approximation symbols. Edited: thought I had 10 year records - only 9 years

Ajc, sorry, I probably over reacted a bit... al Edit: I did over react.

Interesting question. First, fairly account for all the externalities that have gone or go into producing oil, gas, and coal. This will give you an approximation of the total cost that goes into each BTU produced from fossil fuels. If a proper accounting is done then solar, wind, geothermal, should be significantly cheaper in most of the world, than fossil fuels; probably all except Canada, Northern EU, and Asia. You then have the equation: Fossil fuel cost (including all subsidies {military, transport, infrastructural} - alternates (which include said costs already) = D (large positive number) Subsidize alternate development by D. In a significant part of the world the momentum appears to be against fossil fuels whether Anyone here likes it or not. Fracking is perceived as dangerous, oil by rail and pipeline, is perceived as dangerous. Getting and relying on fossil fuels from unstable regimes is dangerous. Dealing with Putin is dangerous. its funny how Buffett has his hand in both sides of the energy pie. Mid-America is growing its alternate energy supplies rapidly, and BNSF is serving the fossil side.

Bad for GLRE and TPRE. Waiting for giofranchie's input :) He must be on vacation. Not good for insurers in general. That's a big drop. If there is an oversupply in Re than the oversupply in general P&C wont be far behind.

It's not addressed to me, but I don't mind playing devil's advocate if it's all the same to you. I think it's a bad practice just like gaz guzzlers, coal powerstations, clothing factory sweatshops and a bunch of other things are. But, people gotta eat! Here would be my question for you: If you went down - in person - to those oil fields and train warehouses and tried telling a bunch of workers about this great safety plan you have and how the only cost will be 10 000 jobs or whatever. How do you think they'd react? Friendly pats on the back or would we maybe be talking something slightly less welcoming? That to me is the primary issue here. It's all well and fine for civilized value investors like ourselves to hold forth and opine about the state of the world, but when it comes down to it a substantial proportion of the people on this earth will always be willing to risk death or injury if that is what it takes to put some food in their gut, a roof over their head and maybe buy something shiny. Try taking that away from them (even in the name of good intentions) and let's see how far you get? My guess is not very. Not everyone in life can be an educated paper-pusher with consistently and fantastically rational points of view on all issues. What type of privileged world do you live in, if you genuinely think that that is the way things really are for the majority? (Anyway, that - or something like it - is what I'd probably say if I was trying to argue the realities of the other side here. To be fair though, you didn't ask for my 2 cents worth at any point. So, yeah...) What a load of crock. Since when has working safely cost jobs? "Not everyone in life can be an educated paper-pusher with consistently and fantastically rational points of view on all issues. What type of privileged world do you live in, if you genuinely think that that is the way things really are for the majority?" Did I just read this? You have assumed you know all about what I do or have done for a living without ever knowing me. I have worked in the environment health and safety business for 25 years from the dirtiest to the cleanest jobs, have been in hundreds of manufacturing, waste, and construction workplaces. There is no excuse for anyone to not come home from work or have their town blown up because of someone else's greed or incompetence. Having major explosions on rail lines is not acceptable. There is obviously something very wrong with the process of shipping oil by rail. Same as there are major problems with making clothes in a substandard factory building in Bangladesh.

The whole industry gets ever uglier as the product gets ever more inaccessible.

Remember Exxon Valdez, BP Gulf spill? Oil is messy to transport. Any new safety regulations unlikely to hurt BNSF/railroad industry if the incremental costs get to be passed along as cost of doing business. No question. Fossil fuels are a messy business. Thankyou. Saved me the trouble. So rogermunibond, Is transporting explosive oil by rail a bad practice or not.

6 fire/explosions in 6 months. All pipelines ever do is leak. http://www.bloomberg.com/quicktake/oil-by-rail-and-by-pipeline/

First Quebec - 47 Killed now North Dakota.- Bnsf This has to end. http://www.bloomberg.com/news/2013-12-31/train-carrying-oil-in-north-dakota-ablaze-after-derailing.html

I know it says one idea but I have 4: 1) cash 2) BAC leaps or common - discussed elsewhere - fully hedged 3) Aig leaps/common - discussed elsewhere - 20 % hedged 4) Seaspan - should grow itself and dividend at 20% per year- discussed elsewhere Cash - I am slowly raising cash into this year and throughout the year. In the past I wouldn't have bothered but I need this money to live on for at least a couple of years starting soon. Cash - part 2 - This bull market has gone on for almost 5 years. We have gone 1.5 years without a significant correction. The easy ideas are gone. Therefore one must move down the quality curve or raise cash slowly and wait it out. Everytime I have moved down the quality curve the result has been poor. I will cheat and add Pennwest - discussed elsewhere.

This is permanent capital too: Existing company's shareholder equity without insurance float. HWIC manages this equity in addition to pimping out their services managing OPM. here's 4 that Fairfax has had joint ventures with, or previously owned, or own now: Russel Metals -tsx Mullen Group - MTL - tsx H&R REIT Kennedy Wilson- KW has the lumpiness problem We have watched them spend enough money on other things: RIM, Restaurants, Sporting Life, Reitmans to easily have taken one of the above private.

Al, of course I already knew what your answer would be. And you might be right. But please consider: 1) You don’t want to compare returns in the midst of a spectacular secular bull, with returns in the midst of a secular bear. 2) Sincerely, I think OdysseyRe is among the best underwriters today. 3) Mr. Watsa + Mr. Barnard don’t have really to be as good as Mr. Buffett + Mr. Jain, otherwise we would be expecting 20%-25% returns, instead of 15%. 4) With all due respect for BRK and all Mr. Buffett has accomplished, in 1993 they certainly weren’t what they are today: net operating earnings were $477.7 million, of which $321.3 were Net Investment Income and $20.1 million came from underwriting. Operating businesses earned: Dexter $28.8 million, Commercial & Consumer Finance $14.1 million, Fechheimer $6.9 million, Kirby $25 million, Nebraska Forniture Mart $10.4 million, Scott Fetzer $23.8 million, See’s $24.4 million, World Book $13.5 million. BVPS increased 14.3% and BRK’s net worth increased by $1.5 billion, which means that stock investments (increase in value + sales) contributed more or less $1 billion… It is clear to me that in 1993 BRK still counted on insurance and investing for most of its increase in net worth. 5) Please, also note that as good as those other operating businesses truly were, they almost count for nothing in today’s BRK. Listen, what I see in FFH is at least two bright and trustworthy people at the helm of a vehicle that could eventually follow in the footsteps of BRK. They have the brains and they have the right mean to achieve such a goal… This being said, I am certainly not saying they will succeed! Nobody of course can be sure about it. Gio Gio, you basically made my case for me. At a similar size BRK was pulling in well over 100 million per year from wholly owneds. The insurers under Buffett have always done better than FFHs insurers over time. FFh has done very well with low probability, high payout situations. Original Mungerville mentioned the nearly 1 b in bond gains they booked in the short days. All of that money went to paying for bad insurance underwriting. The underwriting has improved to the point where it is not much of a drag now. So the big questions going forward I am asking: 1) Is it worth keeping the insurance operations. Should they expand or focus these operations as per Markel, BErk. 2) The lack of stable cash flow is handicapping them now. They cant get the ratings up to AIG, or BRK levels until this is remedied. Lumpy doesn't work well. Because they aren't a double AA insurer they cant Get the best clients and the best combined ratios. 3) Buffett could point his the rating agencies to his incoming cash flow from dividends, and operating companies. FFh cant do this because the wholly owneds are weak as compared to Sees, Furniture Mart, or now Mid-american. I see no sign of a desire to move up the quality curve so far. 4) So we are left with middling insurers, weak operating companies, and some low probability high payout bets. 5) If there is a massive insurance event who will come out of it better: FFh or BRK. if there is another recession who will come out better off: FFH or BRK. BRK on both counts. I am kind of all over the place on this, but it explains why I don't believe FFH will do better than 15%, or even as good as 15% going forward. I have spent 15 years listening to these arguments and have yet to see them consistently write insurance to a significant profit, across most units.

Except they are not as good as Buffett and Ajit Jain. The equivalent time frame would be around 1993. Buffett owned the best underwriters by then. They had a stable of wholly owneds that were pouring out massive amounts of cash, a huge investment in Coke. BRK was getting annual returns closer to 30%. FFh is targeting 15% and barely reaching it over the last 15 years. Unless FFh buys some wholly owneds that really put fuel on the fire they are doomed to mediocre results going forward.

What would FFH's returns be if they relied solely on insurance? Now we're getting to the meat of my argument. How about bankrupt... And no, I am not kidding. The investment gains saved their bacon more than once.

Part of my experience in real time: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/wfc-q1-results/ http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/ge-cuts-dividend-to-10-from-31-cents/ http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-to-do/ A.

Noooooooooooo, there was no agreement by investing guru's or us common folk that financials were going to blow. Sure I heard of people like Einhorn and Whitney, but there is always people on the fringe. Buffett didn't see it, Bernenke didn't see it, so how could I? But you know, even Hollywood knows how wall street works. In the movie Margin Call, the head honcho says after the meltdown, "Nobody knows what's going on, we just react". Buffett got rich from the crisis, because he had a cash cushion, that cash he always had on hand. So he could take advantage. The key is once you have a cash cushion, know to use it. I kept saying to anyone who would listen, this is a once in-a-lifetime opportunity. Because I looked at the DJIA of the last 100 years and I saw that 1932, 1974, 1982 were golden opportunities, I kept thinking man if I could get back to the 80's and bought MSFT. Well I can imagine myself saying the same thing about the market in 2009 if I don't act. Appreciate that insight - thanks. Were financials, in any case, easy to avoid? Not because they were selling for P/E of 100, but more like dividend stocks today? Yielding a pittance for the risk taken. I think the biggest takeaway (even for those who avoided financials) is the blowback and the spillover effect the financials had on all other sectors of the economy. I suppose the only lesson that can be drawn (especially for those running concentrated portfolios) is to have appropriate level of sector-based diversification. Diversification would have made a difference but at what point would you have committed money to 10 year bonds or cash when the interest rates were so low. Sitting for 3 years with no income would have been torture. I do recall a discussion well ahead of the meltdown on the old board about when the crash was going to happen but the magnitude, and the secondary, and worse crash, in March took everyone by surprise. Hell, I had a small position in Washington Mutual in Sept/2008, thinking the worst had past. There was literally only a handful of people still working on wall street who had ever experienced anything of this magnitude before (irving Kahn comes to mind). Dont forget the homebuilders collapsing, and Bear Sterns two hedge funds in early 2007 all preceded the financial meltdown. The mortgage meltdown preceded the liquidity crisis. Nearly everyone thought it was contained. The financials were the final chapter. Everything else had gone to hell by the start of 2008, which incidentally is when the retrospectively dated. The markets kept on going as if very little had happened until rumours of the Lehman liquidity crisis. Those who predicted it, such as FFH, Michael Burry, and the guys in the Big Short, predicted something but had no timing in place. FFH and Burry were years early. Unless one is a permabear, and always in waiting for the next crash then there was no way to be right on that event. The problem with the permabears is they missed the upturn as well, and the greatest bull run since forever. I was in Mexico on vacation during the March crash. I would go to the paid internet service two or three times per day to sell stuff and buy other/better stuff cheaper. I remember that Canadian idiot Kevin O'Leary on Tv saying that Ge broke $10 it was going to zero. I bought GE Leaps that day. Addendum: I will add that bravery would have looked like the ultimate stupidity had things not turned back up so quickly. To that end I kept buying SPY puts to protect my gains for some time as the market recovered. These lost money.

Those of us on this board such as Eric and I, and a few others, took on alot of risk when we had the high conviction with the options on FFH. I did that once using alot of margin. I had held FFh for 6 years to that point and was picking it up at prices lower than Markel, and Longleaf paid, in provate placements. Had it gone to zero at the time I would have been out a year of pay max. We all had to sleep with our risk. It wasn't an easy time. It was even tougher staying the course after big gains had been realized. There have been other times of high conviction but never so great as that: BAc at $5, JPM < 35, SBux <10, GE at 10, AXP in low double digits, etc. Each time, taking a big position has been really uncomfortable - everyone is against you. I see nothing in the market remotely as compelling at the present time. There is nothing with Pabrai's "heads I win big, tails I dont lose much" right now. It is simply a really lousy time to be taking on debt to buy stock, in a big way. Dont worry. The time will come again, and in the interim we will all have honed our skills. My worst mistakes have come when I have gone down the quality curve. Any student of Buffett's knows that he has made this mistake as well. I find the waiting to be the hardest part, but perhaps one of the most important things to try and master. It does not come naturally to ambitious people. I got self sufficient overnight, in the last 15 years.

Amen brother. There are so many things wrong with Jay's scenario. 1) Everything needs to be done by a lawyer, properly, and legally, or there will be trouble. There is no discretion on this point. None! And there goes your margins. 2). Even with a legal document you can kiss the relationship goodbye if things go for a dumper. 3) Getting wealthy takes time, with or without leverage. Count on 15 years to self sufficiency, if your a good stock picker, or Ericopoly. There is no easier way.

He wouldn't rat before his conviction. Lets see what he does now when he's faced with a long sentence vs a possibly much shorter sentence. Should he agree to testify against Cohen as part of a plea deal, Can the DOJ/SEC then charge Cohen, even though the company has settled?

The clothing retailer to older ladies, heavier women, and toddlers. Nnejad, This is one where being on the ground and knowing the stores helps out. Very weak investment in the retail sector. I am disappointed again by FFHs inability to buy cash flow machines.

I just figured out what IIRC means, had to google it. BTW: to google means to type something into your search engine, look at it, and then promptly forget what you looked up. I am 100% certain that Kraven has too much time on his hands today. lol, ;) ::), iirc I wonder if Warren and Charlie would agree? WTF.... FWIW, I think Uncle Warren is the best investor I have ever seen.... lol.

Frequently when I shop at certain places they ask at the cash register if I would like to donate money to some cause (ie. sick kids, reading programs, etc). I find this practice really annoying, but that is just the sidebar. I emailed Investor relations at Chapters/Indigo and Shoppers Drug Mart and asked how this money is accounted for by the corporation. I got no reply. Anyway, can anyone on the board answer this. What happens to money that people donate at the cash register for these "foundations"? Specifically, does the corporation use it as a tax right-off that is financed by the stupid and unwary?

Very smart. As per Eric, I have been 100% invested for 15 years. Perhaps there were times when I shouldn't have been, but it worked out. The problem I have with holding cash for something other than the 3 yrs. packer suggest is: Under what situation would you invest it? We all know people who didn't invest in 2009 because things were going to get cheaper. When I have excess cash I start to move down the quality curve. This will start becoming a problem if the markets begin to overheat. I have been slowly liquidating to pay down household debt, essentially the mortgage. Presumably as the broader economy improves interest rates will rise, making cash to medium term treasuries a better deal. Finally Vinod, in the Gd, if you held many stocks they still,paid their dividends.