Uccmal

Familiarity...and only so much time to do research. re: recovery - yes I have noticed. Over the long term as there is something of a secular shift in the drilling industry to horizontal drilling of old fields, and more gas drilling, so there should be a big improvement. Strikes me its a fairly good time in the cycle to be buying drillers. The sweet spot is reached when most of the drilling capacity is realized before the expenses go crazy.

Hi Mungerville, I have positions in all of the following. I wont be adding to any positions right now because I have all I want of each: Bought at prevailing prices. Canfor: Most recent addition - pulp side of business is going gangbusters. Once OSB and lumber picks up this will be a homerun. Bought in the $10 range. Jim Pattison is the significant shareholder. Precision Drilling: Still as cheap as dirt. Leveraged and comprehensible way to buy into oil and gas in NA. They are paying back their debt at a rapid clip. Should be ready for the drilling boom, when it starts. Mullen Group: Still cheap as dirt. Have held mostly for 4 years. Transport for the western oil and gas business. Largest independent transport company out west. Incidentally, FFH holds common and debentures - not sure of the exact holdings (not a reason to buy BTW). Seaspan-N: I bought well under $10 - Cant think of a reason why I wouldn't buy at todays prices except I already hold enough. Cash dispenser. Will be particularly valuable if they can self finance the remaining ships. Pays a big dividend to wait. Good track record through various shipping scenarios. Manulife: Bought around existing prices - hold some common and some 2011/12 leaps (wont buy leaps on the MSX again - not liquid enough - once your in/your in. These guys are lagging the market considering the reason they were hammered was due to stock market tied instruments. Gathering cash at a rapid clip and we know they aren't going anywhere. I figure 1/3 of Canadians deals with MFC in some way shape or form. A bit like the Tim Hortons of the health and life business. Permanent holds - but wouldn't buy more at existing prices: Russell Metals, Power Financial, GE (via leaps), HD (via leaps), tiny bit of JNJ, BCE. Fairfax of course: I would probably add at these prices - but already hold enough. A few others that I am slowly reducing. I am starting to build up reserves for a downturn (no hurry). This time around I am trying to stay higher on the quality curve.

I have been seeing a few people pitching buy recommendations around for GS. This completely baffles me. Here is a company that pays out some 70% some years of its earnings as bonuses to its employees. The total return for shareholders (stock price basis) since inception has been 100% (11 years) which works out to about 6.5% return per year. And it was the best performer of all the large investment banks, during the most lucrative period in their collective history. The market mainstream never ceases to amaze me.

I dont think that this is insider information as far as anyone here is concerned. At this point it is more like unverified rumours. Any one of us could call the company and verify the status of inventory and pricing, or you could call one of their customers.

I tried the buy and hold method for years and left money on the table too often, or had opportunity cost too often. These days I reassess everything on a continuous basis. A recent example would be Kingsway Financial. I held it for years. It was long on promise but always seemed to be short on delivery. After a couple of crappy quarters of earnings and more promises to right the ship I took my experience from FFH in the early 2000s and dumped the stock. Managed to keep most of my shirt. This was something I should have done with FFH in 1999 but didn't. Other examples I have handled recently of a more positive nature: AXP Leaps - bought when AXP was in the teens and sold as AXP approached $40. SBUX Leaps - bought when SBUX was below $10 - sold around $20. GE Leaps - bought when GE was in the single digits and teens - still holding -waiting for $23 to start to reduce. Intend to convert some and make it a permanent buy and hold assuming GE raises the dividend. SNS common - It doubled out of what I consider to be a safe level so I sold. One I am waiting to reach fair or intrinsic value: sfk.un. Oldye, I am sure you can concur that you will sell sfk at a certain point. It is in a cyclical and possibly contracting business after all. RE: Buffett and Coke: There is no way he could have sold Coke without losing his gains. He has a bit of a visibility problem now. Buffett was forced to become a buy and holder. I am not. I am sure that at times getting rid of a stock is not a productive way of doing things. I had alot of Leaps on Wells Fargo and sold them all. Converting them may have made more sense but I had to make a decision one way or the other and it was easier to sell than raise extra capital to finance the conversion. Obviously capital gains taxes can be an issue. To try and manage it I take losses where I can. I think this is easier in Canada because we dont have the long term/short term holding issue. I can sell something such as sfk.un, which I did and buy it back a few months later at a much lower rate. I booked the losses, which were my biggest ever, against the significant gains made on other stocks. I then repurchased it at 10 cents on the dollar and have now more than made up the losses. Sometimes we get lucky.

I'm curious whether it seemed like a no-brainer at the time, or if people were worried that long term inflation might push rates much higher for extended periods. After buying long bonds at 10 or 15% it must have been disheartening to see rates rise even further and wonder where it would stop. I was a teenager at the start of the 80s so I cant answer but I expect it was the same as always. Skilled value investors recognized it as a deviation from the mean and everyone else missed out. Exactly the same as the stock market lows of last year. Most missed it. To me it seems it may not be a question of skill. Hindsight is 20/20. Last year in February and March there was a lot of talk of a great depression type scenario. We might have entered such a scenario if the government had taken other actions that were less effective or took action that restricted trade. If we entered a great depression then the bargains of Fall 2008 and March 2009 might not have turned out to be bargains at all (i.e. no gains on these positions for the next 10-15 years). I doubled down near the lows last year and did well. But in light of all the economic uncertainty at the time I think it is realistic to view that action as a speculation---a gamble that the US government would get the situation in hand and restore confidence in the banking system. This gets too much into semantics in luck versus skill. Put another way: If you had no value investing background could you have bought at all last March? I say its a skill, and somewhat of a personality trait. At a certain point one had to work on the assumption that the cavalry was coming over the hill. I went all in, in Fall 2008, and even deeper in March 2009 (selling losing positions for the tax loss and buying other positions I had always wanted - I still have $7.50 GE 2011 leaps from March 09). At a certain point last March, if things got any worse we were all going to be wiped out anyway so what did it matter at that point. There was no defense for what happened, only offense going forward. Kind of like pulling your goalie to get an extra man on the ice. In regards to bonds I would have no trouble pulling the trigger on something that yields north of 10% for the long term. Again, where else in such an environment would returns be better and all but guaranteed?

I'm curious whether it seemed like a no-brainer at the time, or if people were worried that long term inflation might push rates much higher for extended periods. After buying long bonds at 10 or 15% it must have been disheartening to see rates rise even further and wonder where it would stop. I was a teenager at the start of the 80s so I cant answer but I expect it was the same as always. Skilled value investors recognized it as a deviation from the mean and everyone else missed out. Exactly the same as the stock market lows of last year. Most missed it.

Agreed, If you had got hold of US government bonds in the early 80s yielding well north of 10% for 20 or 30 years... Thats a no brainer. Right now bonds wont give you much, especially if rates rise.

I am willing to bet him and his wife live on less than 100,000 per year. Most of his travel is covered by Berk. About the only thing he pays for that I dont is probably security. Family gifts would be the other unusual item.

I dont think that you will ever see meaningful buy backs at Fairfax. At a certain price (~0.7 book mentioned above) they might but at that price it is very likely external opportunities will be much more compelling yet. As time progresses they will be more inline with Buffett. Load up cash until opportunities present themselves. Get the A-rating in the process and then buy other cheap companies. There is also the need to finance growth in Brazil, Europe, India, etc.

The dilution has been about 95% from 36 million shares to over 500 million once all the warrants are received. If it returns to former profitability this implies a top share price of $3.00. FFH and Trimark have done what is best for their investment.

So - 45% or so have been successful. If I was the bank and managed to avoid having to foreclose on 45/100 places then I would consider the first part of the program a success, especially when there is no actual write down involved. I am guessing that foreclosure is a pretty expensive process, with legal fees, admin fees, real estate fees, and 65 C on the dollar for the final sale (estimate only). By the time a bank is finished they are likely getting well less than 50 c/initial dollar - probably closer to 20-30%. The next and more obvious step is writing down the mortgage principal 20-30%, as per the Bank of America. For the bank this of course costs a lot in write downs, but it keeps cash coming through the door and is almost certainly cheaper than total foreclosure. It also keeps property taxes coming in for municipalities, which would be pretty important in California right now.

I agree. I disagree. Some can be attributed to luck. Some is strategy. If you are not prepared you cant take advantage of luck. Several of us on this board (actually its predecessor) bought FFH leaps in 2006. I did then, and repeated it in 2007, 2008, and 2009, and have massively leveraged the gains in FFH stock. Like Eric, though, it is no one trick pony. It is more formulaic. Somehow one learns to identify the opportunities.

If I look at my portfolio of companies which includes a 40% position in FFH via common and leaps, the price/book value is below 1. The companies I have invested in for the most part have done their refinancing and are all in the process of strengthening their capital position. This includes SSW, PD.un, Rus-T, MFC, PWF, BCE, HD, GE, cfx.un, cfp, mtl. The weakest position I hold is probably sfk.un which is now my second largest position. This market has been the easiest to invest in during my entire investing career. Every single company that I have listed and everyone in my total portfolio I have held before, or held for over a year so I have gotten to know them well. When I have made money on one company such as cfx.un I sell some and buy more SSW or PD.un, or MFC. For those reasons I have dropped my hedges during the downturn in February. If things rise to levels I consider to be unsustainable I will move to cash. The only thing I have that I consider to be at its top end price is probably cfx.un but it is still paying out 11%, and I am sort of assuming that it will continue to pay out 5-6% when it converts to a corp. The other thing I have looked for is companies that are paying some of their earnings out as dividends. All of the above excepting PD, sfk, and cfp, are paying reasonable dividends. My feeling going forward is that companies that are willing to part with some of their cash as dividends are going to rule. I noticed that FFH is appearing on blue chip dividend grower and dividend payer charts now. I think it is going to become a market where the companies have to show the cash to their shareholders.

Viking, in the same line of thinking: MFC, GE - are both still pretty cheap (I hold both, GE through options right now). Sun Life is also cheap. SLf and MFC have been beaten down by their Equity based annuities business. MFC has been building cash for 1.5 years almost and will certainly start raising the dividend again. PWF which I also hold is a good bet, but it is much more expensive than the price I bought at: Its subs may be cheaper on a relative basis (especially GWO). - you can always count on the Desmarais family to keep raising dividends and keep a lid on risk taking.

Every year for the last five or so I have used the average rate for the year. As mentioned above this is completely legal and up to the option of the trader. I think the important thing is to remain CONSISTENT. Dont change through the year or between years. If you make a change for some reason stay with it afterwards. I changed from transaction by transaction, to annual average, after realizing how cumbersome it was to do it on a daily basis then stick with your change. Some stocks I move in and out of taking advantage of price fluctuations to catch what appears to be a short term gain, or a capital loss. For example I have bought a couple thousand shares of SSW at 8.50, sold 500 at 10.75, and bought another 1000 later at 8.70 (rough numbers). The sheer number of trades and matching the buys to the sells and then matching days to exchange rates gets very confusing and very error prone. I probably have in the range of 300 trades with US securities this past year and I do my own taxes. It makes no sense for me to use an accountant because I am still going to have to work out 80% of this stuff. Something in one of our families tax returns gets audited every year pretty much but it has never involved anything to do with capital gains. It always has to do with some sort of deduction such as medical or child care related. Generally it seems the government is happy to get their extra taxes from me that they get every year.

I cant recall but I think that FFh is the largest shareholder ahead of the Atkinson Trust. If they are now formally backing Torstar they need to request that they have an equal number of A shares plus one. This will clear up the problems with the politics operating between the CEO and the trust. The CEO will then answer to FFH, not the Atkinson Trust. The Trust will only benefit from such an arrangement. I hope FFH is playing hard ball this time around. My main problem with Torstar is not its assets per say but rather the interference of the trust. There is absolutely no reason for Rivett and FFH to play second banana when they are the ones putting up the capital.

I hold a few shares of cfx.un as well. It is trading at a substantial premium to cfp, which owns 50%. I am slowly building a position while in cfp it is below book. At some point the lumber component will start to turn as well.

Well, AIG just sold a crown jewel (Life Insurer) to Prudential. We have no idea what pressures they are under to generate cash to repay the US government. There is certainly a lot of moral persuasion going on. Ultimately, if they are writing bad policies the entire enterprise will have to be put to death. I sure wouldn't want to buy a P&C (especially the C portion) unit from AIG if they have been selling policies on the cheap. Competitors are more likely to pick and choose the pieces they want like Prudential. A couple of years of lowballing policies will have AIGs Casualty lines in runoff for a generation. I expect that is what Uncle Sam will be left with. Ultimately they will have to tax other insurers to cover the runoff. Aint life grand. I am also thinking that the government is pressuring AIG to clean up its derivatives books so they no longer pose a systemic threat.

I am not sure a turning point would be an apt description. I am of the opinion that the very best thing that ever happened to FFH and Prem, from a business sense, were the purchases of TIG and C&F. Had they not had those Learning experiences at the time their risk taking nature and growing hubris would have taken them out completely in 2008. It pushed a new conservatism onto the balance sheet, and among management. It also taught them that buying insurers you dont understand below book value is the gift that keeps on giving, in the sense of genital herpes, rather than compound interest. A quick look at Kingsway shows what becomes of serial acquirers who dont really know what they are doing. I would prefer that they expand existing worldwide opportunites and just do bolt on acquisitions rather than look for big giant opportunities, excepting Zenith which is a one off. An insurer such as Zenith that you have owned in a prior life is a hell of a catch. I expect had PRem not needed the cash a few years ago they never would have sold Zenith.

Alertmeipp, I wouldn't get too uptight about it... I bought another 10000 shares at $1.02. I am sort of assuming this thing will at least reach 80 or 90% of its book value eventually.

I have had results I don't think are a result of personal skill the past 8 years. More lucky I think. I've bet huge on the right things is all. That's BS Eric. Part of the luck is having developed the skill to recognize when good opportunities exist. My luck seemed to have gotten dramatically better as I have learned more and more, and learned from my mistakes as well. I just listened to the presentation by William Berkley from WRB posted here. He contends that the hard market is coming and presents stats to that effect. He says that insurers are looking well capitalized but aren't really because they have been releasing reserves and many are now under reserved. You need to give it a listen. I am with Oldye on the real value of this company. It's at the absolute bottom of the P/BV cycle right now. So is WRB come to that. The moment you here that the cycle may be turning look for the share price to double very, very quickly. Daphne, as another long term shareholder I hear your frustration....

From a business standpoint, aside from the outage, it seems to me that RBK prices were the biggest headwind facing the company during Q4. Does anyone have any market data on the trend for RBK prices? Has anyone been able to point out any other major issues/headwinds from the Q4 release? Thanks Renkane for your inquiry. I guess I was wrong about exchange rates. RBK prices - From what I gleaned from SFKs own report they produce nearly 50% of the total so there is not really a trend. If seems to lag NBSK by a certain amount. I have never seen it referenced anywhere else but for these mills. The key to that puzzle seems to be the cost of the waste paper input. Major issues - I have no idea how fast capacity can be added back to the world supply, or at what price it will be added back. Once capacity returns then the prices may drop back off. My major concern and the one that really keeps me from buying any more stock, at least at present prices, is that sfk will have barely got back to break even and things will drop off a cliff again with prices. Fuel prices are not going to be a concern to the same extent going forward at least at the Canadian Mill.

Renkane, I believe the discrepancies have to do with exchange rates. For the Quarterly report they use the Q-end rates, and for the annual they use the year end exchange rates. The year end rates are the ones used to determine everything else so I would consider them to be the more accurate ones. Very sharp eye BTW.

I think you are on the money on that Cardboard. It is probably has to do with having to hire resources, and a little bit of anxiety on the part of the trust managers. On the other hand there is no legal requirement to convert at all, so what's the hurry, especially when you have an enormous amount of tax loss carry forwards to shield your income. Renkane, I haven't had a chance to look at the accounting concerns you have bought up. I want to do that today. Suggest you call the company's IR person or the CFO for the answer.