Uccmal

Hi Jim, My returns are all in. As I noted in my summary above. In a perfectly efficient system the broker would charge a much smaller spread and I would get 5% instead of 2.5 on the round trip. A.

Al, are you doing straight up currency, using margin or buying dual listed? Ive done it with dual listed shares with decent success. Good way to make some $ in choppy waters (but like all rides on choppy waters will prob need some graval ;D) Hi Smazz, It's a simply process of moving cash in my Margin Accounts between the Canadian and US Accounts. It doesn't matter which account carries the margin deficit as long as the aggregate adds up to enough to cover the positions. When the Cdn dollar rises to around 0.98 cents I transfer a set amount of cash to the US side. When the Cdn dollar slides to about 0.955 or less I reverse the process. I have been doing this over and over and over again. The gain is typically about 1.5-2.5% on a round trip. That doesn't sound like much but I have done it so many times that it adds up over a period of time. Obviously the brokerage makes a good amount on the fees which is partly why I require the spreads that I do. But the volatility has been incredible. Every time there is a panic - about once per week like today the US dollar goes up, then when it subsides the US dollar goes down. I should probably just liquidate my entire account and trade currency but at some point this trade will go long term against me at which point the party will be over. When the party is over I will lose 2% or so on the last round trip which is acceptable since this is just a little extra bonus to my stock investing. Smazz, What shares do you use. Royal Bank?

Already putting the Zenith Float to work eh?

SD, I did a cursory comparison of Pulp producers and combined P&P producers from NA. I dont know what companies you are referring to being more expensive than CFX? It is trading in excess of 2x book in a cyclical business. In my estimation it is priced to perfection right now. SFK I have no issue with. It is cheap for obvious reasons discussed through the thread.

RE: LQW... I held it a few years back. Get this: It was considered a value play at $5.00 when I held it, for about a year. It is just not something I am interested in any longer. You are waiting for some sort of growth or turnaround that is never going to come. Retail space is so dependent on the Jockey and there is no room for error. I went for a walk with my daughter through the local downscale mall the other day. There is a Winners, a Zellers, an Ardene store and an assortment of other low end stores all selling the same sort of garbage. I got to wondering what the point of it all is. They all sell the same low grade crap that no one really needs. In essence they all compete with Liquidation World. The slightest hint of a recession in Canada is going to push half of these retailers off the map and LQW will not be among the survivors. Retailers are really difficult. IMO you want to buy the number one or two in any space when the prices for the stock are depressed. I have held HD since December 2008. LQW could drift along for years and then finally just sort of cease to exist.

They only list a tiny amount of Magna on this statement. I am hoping they kept the 200 M worth into the recent runup. I expect it is not listed on the 13 F.

One has to wonder how much taxes these guys pay..... You aren't going to be able to book any capital losses and you have to pay full taxes on all gains. Not to mention the jobs they inadvertently create for accounting firms, auditors, hardware and software engineers, etc.

Buy the Canadian if you can. You should get a better bid/ask spread on the TSX.

Yeah well, The theory behind it is that there should be more EPS/share which should increase the BV going forward. This of course includes a potpourri of assumptions with it. FWIW - It looks like they intend keeping going as a going concern rather than selling. Finally, we on the board have invoked CFX as the gold standard. Right now it is trading at 1.6 BV. If Fibrek even reaches 1 x BV my stake, including the rights, will have gone up by about 7x. I will have seen my alltime biggest loser become my all time biggest winner.

I think that was the way I understood this as well. The 40 million will create some number of new shares. The number of shares created by the rights will vary but this is irrelevant. That is why I dont understand the market reaction. For 10000 shares presently held I would need to spend about $4400 to keep the same proportion of Fibrek no matter what happens to the stock price in the interim. So without any change in the underlying business economics the book value is increased to 480 M from 440. There are more shares but collectively they now hold a company worth 40 M more than the day before. So two choices: 1) Ignore the offering - I now own ~ 10% less of Fibrek than I did the day before but the whole of Fibrek is worth 10% more. 2) Participate - I still own the same amount of Fibrek but it is worth exactly the amount I put in more than it was the day before. The one caveat is that FFH gets a deal if I choose not to buy rights. Someone above posted that the sell off may be due to some shareholders adjusting their count lower to have cash to subscribe in the offering. There may be some truth to this. I may do it myself. Unless my read on this is completely out to lunch.

At the end of last week I bought more of what I already hold (MFC, SLF, RUS, SSW) and bought some SPY Leaps as well. I sold most back off on the rebound. For all the stress I put in the payback was minimal, so today I stayed clear, except, I did buy some Canfor. Great balance sheet, continuous dividend from CFX.un, lumber prices have risen rapidly, and border issues are quiet for now. I am going to sit tight for a while because this volatility is nerve racking. I am a lousy barometer for market stress so if its bothering me the chances are its really getting to everyone in non-value land. I have been trading between US and Cdn currency every few days.

Twas not I - I couldnt even remember my password to get in here again. I need some hacking abilities. No kidding. I have two pages of a log book dedicated to passwords alone. And I thought it was fun as a kid to have a secret password...... Well its not fun when your over 40. :-).

Looks like a well put together deal. It has FFH paws all over it. Reducing and refinancing the debt should do wonders for the stock over the relative short term. I can live with that. Whenever you look at FFH influenced companies you see the same MO. Reduce the debt, and advance it out as far as possible to eliminate refinance risk. I am wondering about the dilution factor. It reads a little confusing because the future stock price is not yet known.

Is anyone else experiencing Deja Vu?

I looked at the last 10 years for FFH--they averaged 105, which includes all the "except for's", as it should. I will give them a few more years as they now have a fairly stable group of companies that they can work with to improve their underwriting. Hopefully they learned their lesson about buying trash and will never do that again. If they still average 105 CR's, I maintain that they are far better off just being a hedge fund. Why bother with the insurance side if it does not provide free float, or pay for your float? Along the same lines, if Prem said he was selling FFH and starting a hedge fund, would you give him your money to invest? Would you more likely give him all your money to invest vs. putting all your money into FFH stock? Is he a better investor than insurance operator? To answer your question. Yes, so far they are better investors than insurance operators. I have said as much in posts around a year ago. Some of the benefit of the float is lost in the argument over combined ratios however. During the crash last year the only people with significant money to invest were BRK and FFH. No one else had capital. The insurance float allowed them to keep alot of money in cash for a long time and invest strategically when the time came. Most hedge funds and value funds were frozen due to inability to raise cash at that point in time. Not FFH though.

111 is not 100, more or less. That is very expensive float. You are in the business of insurance, earthquakes are part of the business, so you can't keep saying "except for." Their underwriting cost them a lot of money, plain and simple. The combined ratio is not made in one quarter is it? When there are some major hurricanes or perhaps this coastal disaster you will see combined ratios from Chubb for a single quarter that exceed 111% absolutely, and WRB, and MKL. After 911 and during 2004/2005 every company was reporting CRs in the 100s and higher.

I generally wouldn't buy FFh ahead of the hurricane season. It could get cheaper FWIW. Not advice, just what I would do. RE: Hard Market/CR/etc. I postulate that we may not know the answer to the Chubb vs. FFH vs. MKL argument until a hard market has been in force awhile. Then you may see a difference. By that you could see Chubb's results moderated by reserve add ons during the hard market while FFH enjoys a perfect storm. RE: AIG subs - I am not convinced that they are the source of the soft market. If they are the government wants its money back ASAP and AIG will eventually back itself into non-existence. Since they have isolated the derivatives segment the US Gov't probably doesn't care if the insurance subs go into runoff, as long as they get most of their 'investment' back. Soft markets in insurance are the same as soft markets in oil, steel, or credit. At some point the market will reverse and the ensuing hard market will be a complete juxtaposition of the present state. In the meantime you have an insurer which is breaking even more or less on its CRs. Each 300 Million in capital gains begets more quarterly compound interest and dividends, as it is added to the overall float which is a virtuous circle in the hands of HWIC.

Can someone explain to me how they are going to finance the Zenith purchase. I count about 700 Million so far (1.7-1.0 B at holdco) out of 1.4 Billion. Where is the rest coming from? Another share issue or will they pull cash up from the subs?

A very well thought out thread and I learned some things as well. But... I personally think you are all overanalyzing why FFH is cheaper rather than just accepting that Mr. Market is handing a gift to those who dont own it, or still want to buy more, and of course frustrating those of us who hold it. It trades at book, will likely show a 20% gain on BV due to investments, dividend, and interest income. That puts the price next January, before my last options close, at $440, excluding a hard market. When a hard market does arrive all of these stocks will rise in tandem, and move to book values of greater than 2 which will pitch the extremely thinly traded FFH over $1000 fairly quickly. The most interesting outcome may be that Berkshire becomes the worlds largest company by market cap. Incidentally, FFHs companies were designed to write more business and their CEOs have been keeping experienced staff on rather than laying off, in anticipation of the future. This type of scenario is where diversity in ones portfolio can help out with frustration. Most everything else I hold has been going up at a rapid clip. That also indicates what FFHs portfolio has been doing on a look through basis.

They have said they wouldn't. They have alot of debt to pay down. It may be part of the reason they are rushing conversion: to avoid payouts - only speculation on my part - I dont know enough about flow through trusts to be confident.

Well things seemed cheaper last year at this time IMHO..... I have pretty much stopped buying for the moment - I am content to watch my various holdings rise, sell a little here and there, to build up a cash position. Lots of time to read and learn about companies for future busts. Were only 22% below the all time highs.

I dont know the answer Grenville. Alot of institutions seem to have restrictions on owning income trusts for some reason. Regarding the rumour. How and why does one make a tender offer for the majority (not the entire) of public company? Sounds a little goofy to me. For a buyout I will hold out for $5.00 which should be adjusted book whence the debt is paid down somewhat.

A few things really struck me this time: FFHs record on bond investment: ~11% over 20 years; bond index ~6%; mind blowing. This group are about the best bond investors in existence. 5 billion in tax exempt partially insured munis. They even got California to agree to a no-call feature on their government bonds. The conviction of Prem that they are going to keep cash levels very high forever. The conviction of the CEO's to wait out the soft market rather than price competing. The worldwide expansion. I am particularly interested in the wholly owned Brazilian, and Polish companies, and also the sheer size of the available market in India. Interesting meeting.

Sanjeev, Thanks for holding the dinner! My haven't we grown. A.

Viking, At the AGM, Mark Ram, and Doug Libby commented on the primary insurance underwriting climate at this moment. To my recollection Mark commented that NBs competitors in Canada were showing revenue increases. At the same time they have been releasing reserves. He seemed to allude in a indirect way that they were underpricing and it was going to catch up at some point. The reason their CRs looked so good is due to the reserve releases. I dont want to elaborate here as I am not clear on the procedure but evidently there is some flexibility in insurance accounting to do this (fudge the numbers - my words). The FFH CEOs and their teams are schooled deeply to reduce the business written when it is not profitable and to take the time to improve their talent pool. Doug Libby discussed C&Fs stance on the whole thing. He indicated that C&F is looking into new lines of business where there is no expertise and less competition rather than trying to compete on price in existing lines. Their reduction in premiums also bears this out. I think Doug also mentioned preparing for the next soft market - after the pending hard market- in such a way that they insulate themselves (I guess similar to Markel) in the future. Finally Zenith's CR has gotten hammered as well for the same reasons as FFHs. I think this is part of the reason that Stanley Zax wanted to sell to FFH. He can get the best of several worlds, as FFH can as well. FFH gets the benefit of Zax's actuarial talent pool, and Zenith gets the benefit of FFHs investment team, and is relieved of the issues of being a public company.