Uccmal

You don't need to look oversea's for companies that will benefit from huge macro trends I'm gonna go out on a limb and project that women drink 50% more cokes 5 years from now and JnJ sells 50% more lapband surgeries Or all those power plants need GE turbines, or those new Chinese jets need GE engines...not to mention reliable P&C insurance, computers, mobile devices... Some things are just easier to import or allow established multinationals to build.

SD, Thankyou.

Sharper, I need your clarity on a balance sheet item. In the liabilities column Precision has listed 700 M in Future Income Tax Expense. This make about a $3 difference to book value whether I include it or not. What exactly is this expense and will they ever be required to pay it? I looked at the AR and it just confused me more.

Fairfax being, well Fairfax, there is bound to be something in the earnings to ruin everyones perfect day. Since I cant think of any equities to be written down, then it will likely come from the insurance divisions, probably on the volume of premiums and conbined ratios. I bet there all above 100, across the board. I will toss my estimate in as 700 M after tax, which would have really turned our cranks 9 quarters ago.

Non-Reit trusts in general. The drop dead date for the tax benefits they enjoy is 1.3 years away. That being said, many of these businesses have tax pools to carry forward that will last them for years. Along the way they tend to accumulate more. I expect more will follow the route of Mullen Group and convert back to a corporation eventually. The O&G trusts are hard to get a handle on. I hold Arc Energy in RRSPs which is among the best managed. No others need apply. I like PD.Un as a proxy to the O&G business. They are not depended on specific oil fields or a specific commodity O vs. G. When the prices rise drilling will recommence and PD.UN will once again become a huge cash machine. When the commodities peak you sell all your shares. This is a deep cyclical on a tight cycle. This business is not for the buy and hold mentality because in two years the cycle will turn down again. Agreed with SD... they are getting the debt under control and should be an easy triple once the commodity drilling gets going. The other one I have held for years is Mullen Group. These guys provide the majority of the trucking and logistics to the O&G business in Canada. Another is Russell Metals which services both the US and Canada. So I invest in the O&G business via a service supplier (MTL), a pipe and metal suppler (RUS), and a specialty driller (PD.UN). Each of these businesses is simple to understand and all I need to know is that there is plenty of O&G in North America into the distant future. I dont need to know about reserve lives, dry holes, exceptional cap-ex, or other things that can be fabricated by the companies and their suppliers.

Hi Crip, Obviously oversimplified. Should the US dollar get too low relative to the Cdn dollar then the US will import less goods from Canada. Aside from oil everything else we produce can likely be found in the US. At a certain point it becomes cheaper to buy there. At a certain price it becomes cheaper for the US to use homegrown energy as well - natural gas where it can be used. Canada's currency is being driven up by higher prices on a few commodities which each have their tipping points. An adjustment back down could easily happen any time. There are so many moving parts to this that I honestly think no one can reasonably predict the future of the US currency or any others. All I know from my perspective is that every time the Canadian dollar reaches parity it becomes cheaper for me to buy US multinationals that just happen to sell around the world. 20% cheaper than a few months ago in fact.

Correct me if I am wrong: 1) US dollar drops to a lower level vis a vis the commodity markets and Chindia. 2) US loses buying power in international markets including Canada, Brazil, Australia. 3) Commodity prices crash, Canadian exports crash, Canadian goes into a severe recession and our dollar does the nose dive. Same for China, India etc. 4) US dollar rises relative to other currencies. From my perspective the best place to invest right now is probably the US. US based multinationals should do really well in this climate. You can see this theme in WEBs investing and FFHs investing.

The problem with the assumption is that the Canadian government cant do anything about it at all. All past interventions have failed. As indicated it is mostly commodity related. As soon as the commodity rally peters out in a few months the currencies will adjust. The best way for a Canadian to do this is to buy stock in big US based multinationals as indicated on another thread: JNJ, GE, KFT, BRK, take your pick.

What this proves is that the classic economic cycle is in full force. Economic Markets Full Employment Stocks peak - risk taking peaks Consumption starts to drop Stocks start to drop Debate about recession Stocks reach bottom Layoffs increase dramatically Bonds rally - stocks stay low Companies report losses Credit dries up Recession for sure Job losses continue Commodities start to rebound Corporate profits rebound stocks start to rebound Somewhere in here gov't spending goes way up. Job losses stop - economic Commodities continue rallying recovery in progress Stocks continue rebound This is about where we are now! The exact order may not be the same but the general gist is. Government and corporate spending on infrastructure is driving commodities very high. Most money is looking for a place to hide. Soon sidelined cash will start looking for a place to go that provides better yields than 0.01%. Government tax revenues will rise lowering the fiscal deficits. This time around everything has been amplified and extended by the asset crash. Dumb value investors start selling too early, and complain that there are no more opportunities - Thats us!

Not to be facetious but I expect that it is simply a case of no one wanting to sell calls on FFH at this time. It's possible with the new found stability and low trade on the common that no one will want to sell options again on this stock. I guess will see.

How about a good drug or alcohol habit. Usually takes care of idle cash. :P

Quite frankly, If you have something that rises to your estimate of its worth then it makes alot more sense to sell, take your tax hit, and move on. Taking the chance of riding something back down is far more costly. Been there done that!

The other consideration is that of a value investor. When I seek value in a company I look for something in reasonably good shape at bargain prices. Would the US not qualify right now?

Rogers commodity thesis is probably valid for a few more years. I disagree completely with him regarding the state of the US and the state of China. Remembering that I am not an American: Part of what I see from outside is a country that tends to be very public about its dirty laundry. Part of the virtue of the US is its ability to change in response to these very public concerns. Democracies tend to work that way. So the present government has a mandate to get certain things done regardless of what happens in Congress. Obama was elected to fix the problems left behind by the neglect of several administrations. This includes health care reform, social service reform etc. In process there will be deficits run temporarily that appear to be horrendous but really aren't. The deficits that are being run right now will shrink dramatically during an economic runup. The increase in the stock markets from 750 to 1300 or 1400 S&P alone will generate trillion or three in tax revenue. Companies returning to profitability will further fill the coffers. The risk taking culture of the US in terms of entrepreneurism will persist. That will generate future tax revenues. One irony that seems to lost on Jim Rogers is that he lives in Singapore! Singapore is not China. That alone should raise my hackles. Jim has acknowledged himself that the administration in China did not appreciate some of the things he has said. China still has an unelected Government. This is a long term encumbrance. In a country with 3 times the population of North America I cannot even begin to imagine the corruption that goes on by unelected government officials. In Canada it takes an elected government about 5 years to start having spending scandals and 8 years for everyone to become annoyed enough to turf them. IN China this never happens. Periodically they hang (figuratively0 some bureaucrat to make it look like they are clampling down but are they really. If I were a betting man I might want to teach my daughter Portuguese or Spanish rather than Mandarin.

STD, (still like this moniker because it reminds me of well std's) After tax! Actually on an after tax basis this years return is better than I posted since I will either shield future gains from taxes or get money back from taxes paid in prior years from the capital losses to March 8th. I will probably elect to get past cash back from past taxes paid as you never know when the government's generosity will change. Its all part of the plan. The same goes for holding options. I am down to small options positions in KO, AXP, and Home Depot that will most likely become permanent holdings as common stock to avoid taxation and collect dividends in perpetuity.

I just started to notice these ads in the last 3 months or so in a big way. One ad was priceless where a guy was bragging that he was able to sell his gold chain for $300 even though it was broken... Yeah I would think we are in the steep part of the curve where the price rise accelerates up and then will come crashing back down. Too dangerous to buy and too dangerous to short if thats even possible.

2008: up 34% 2009 to date: up 8% OF course that doesn't tell a fraction of the story! By the end of September 2008 I was up about 50% for 08. That got shaved in November. Then I went all in with SPY leaps, Megacap leaps, and FFH leaps in the winter. Then I got crushed like a bug in March. Down 75% on March 8th. At that point I sold off higher strike spy leaps, shorter duration FFH leaps, and common stock at huge losses, turned around and bought different megacaps and different duration/different strike on the spy and ffh leaps. So I captured a tax loss that will pay me back for years to come. That was the smart part. The lucky part was that the market turned around on March 9th and within days I was up 100% from the low. At this point in my investing career I have made about enough to live frugally without holding a job. For that reason I need to shift my focus more to capital preservation and margin of safety than I have in the past. In short I had too much leverage via options and margin going into the downturn. Something Omagh posted a while back showed Berkshires annual growth stats (book value). It hit me over the head like a brick. Somewhere Buffet learned what I consider to be the biggest lesson of investing. Berkshire has had only 3 or 4 years when it lost book value over Buffett's entire tenure. If one can avoid losing periods such as 2008/09 then the homeruns are not as necessary. Intellectually I knew this but experience has made it part of me now. So I learned in my heart and soul about preservation of capital.

Hee hee... That's good... This is very bizarre. As much as I like Obama he has done nothing to indicate to me that he is not going to authorize blowing North Korea off the map. BTW, I just put in a noble prize app of my own for physics. I have almost finished coming up the with the Unifying theory of everything. Just a few more days me thinks. That 1.5 Million should come in handy for a new greaseboard for my equations.

Eric, The bet appears to be that Sears is going to go belly up one way or the other. In addition, You've spotted an irrationality in the market betweent the common and the options market. A.

Doomsayers: Have a look at this: (nod to CalculatedRisk blogspot:) http://www.calculatedriskblog.com/2009/10/jim-realtor-no-shortage-of-buyers.html Eric, That's great copy. That was in the middle of the "greatest bull market in history" as I have heard 1982 to 1999 called now. Shows how much you can predict the future. Viking, FFH and BRK invest when stocks are cheap. They dont invest in forward prediction. They know that either things will rebound or cease to exist all together. If its the latter no amount of money is going to make any difference.

Netnet, I disagree that pipelines such as Enbridge or TransCanada would not do well in an inflation environment. Rather than being asset heavy they are debt heavy, and their debt is long term in nature giving them interest rate stability. Enbridge for example doesn't sell gas. They transport it for a fee. Every quarter or so they renegotiate the rates they charge consumers. This protects them on the pricing end. The assets rest in the form of bonds and preferred debt are backed by the pipe itself. At the end of an inflationary cycle their earning power will have grown with inflation - basically expenses plus regulated profit. The debt will be less since it was issued in old dollars. Maintenance capex on the pipe will rise but is handled in lockstep with the rising transport fees and inflation. Not the best bet but probably better than cash.

Not a business in and of itself but any company that has extremely long bonds and perpetual preferreds. The money is borrowed in todays dollars and never really paid back. Power Financial, Bell Canada in Canada are good examples. Other :Utilities in regulated industries: Pipeline companies such as Enbridge, TCP in Canada. Real estate companies with long leases and mortgages Your own mortgage - with a long amortization

FFHWatcher, There is really no way to know at this point if they will default. This is a basic Graham/Watsa play. If they survive the stock will go up a great deal. If not, I have a few other similar smallish positions. Some of them are going to work out. At this point survival looks to be better, anecdotally, than it did last year at this time.

I started rebuying stock in sfk.un about a month ago. My average pp is 0.40. I have now made more on this stock than I have ever lost and it was my worst all time loser to date. I still dont think that much of the business but it should allow for a 5 bagger at least. Humbly yours.... A.

http://www.financialpost.com/news-sectors/story.html?id=2071243 I guess that one didn't work out very well. I wonder if FFH will get the DIP.