Uccmal

So correct me if I am wrong You're wrong :-). I will elaborate a bit later. I have been using Leaps extensively for two to three years now, mostly with success. A.

The only way the Can. gov't has ever got that currency moving is by Jawboning it. They tried to raise it in the mid 90s and nothing happened.

It strikes me that while everyone is prognosticating over the impending depression or whatever, the stock market is doing it's customary climb up the wall of worry. There are way too many datapoints to make any kind of reasonable analysis. Recall all the predictions before the crash - I wont list them but the most bizarre was the one about the west becoming economically disconnected from Chindia. I am always amazed by the capacity of people to assume that the present circumstances are going to be the future circumstances. That is not usually the case. A couple of years with 30% returns in global stock markets could set alot of things right including personal debt, gov't debt, corp. earnings, and even the sour housing markets. I am in the rare camp that thinks that this recession is going to come to an abrupt end, and we are going to enter a period of rapid growth. Governments have tossed the fuel on the fire and ignition is at hand. The western world is just like a company that got overextended and is trading real cheap, the kind us Graham and Dodder's love so much.

I managed to read the Q2 reports from the GE website, excepting the 10Q, this weekend. Things are looking reasonably healthy with GECS, and GE as a whole. They gave a nod to the concerns with commercial portfolio in the UK. They have spent the last year reducing the assets at GECS. In the meantime they are looking at huge participation in stimulus packages going forward. The reserves for the mortgage losses seem to be sufficient at this time. Cash flow is quite healthy and EPS is 0.26/share - depressed. I have bought 2011 leaps since March 20th or so, in dribs and drabs. I am now going to sit out until the 2012 Leaps are out. One of my bigger holdings now.

Hurricane season going to be lighter than normal? http://www.cpc.noaa.gov/products/analysis_monitoring/enso_advisory/ensodisc.html Sure looking that way so far....

I think the present structure can work very well: It offers greater financial flexibility. ORH can tap the capital markets on an as needed basis with greater transparency. If FFH deems that the ORH has alot of excess cash it wont use, then periodic dividends can be used to pay all the shareholders, or stock buybacks can be executed as has been happening. When the shares are expensive more can be issued either by selling from FFH, or by ORH from treasury. If FFH has need of capital they can sell some ORH shares, keeping them within a certain range. A good working example of the present structure is Power Financial or Power Corp. Other less tangible examples of the PWF structure are that more than one CEO, CFO, COO get experience running a public company. This helps to create alot of bench depth which we have seen FFH capitalize on in the past. Right now FFH and ORH have the best of both worlds, IMO. One reason I like substantial dividends is that it forestalls the big company growth issues that are now affecting Berskshire.

I am thinking that FFH is also buying back shares. The price pop at the end of the day yesterday looks like it could be them. 8 k shares were traded. This represents 25% of the ten day average daily trade in FFH shares. Just a guess. It's good to see Brian buying. If he is buying then that clearly signals the stock is dirt cheap. He knows what the Q2 results look like.

It strikes me that Madoff is a classic example of a sociopath. He actually doesn't care about what he has done to others. In the money business there are plenty of sociopaths. They flock to the power and money like flies to shit.

I agree Smazz. No offense to my American friends but anything to diversify Canada away from the Buy American movement is a positive.

I have bought two stocks in the past that were in the valuation ranges of FFH: Sino Forest: around $3.00; PE = 5.0 around purchase; sold as it rose; mostly sold out at $10.00 Russell Metals: bought around $8-11 PE=6.0; sold most in the twenties. Still hold some today and have even bought back in. FFH today: PE = 3.2x- say normalized of 6.0; Yield = 3.1%; P/B = 0.9: By any measure it is insanely cheap and will rise a great deal in the not too distant future.

Good points all; I too am not sure we can count on seasonal discounts for FFH. Rather than buying and holding forever, I am buying more when the price is low, and selling some when the price is high. Basically I use the fluctuations to advance the time and lower the strike of my call positions. After the earnings release in late Feb. the stock lost 25%. There is abolutely no reason this could not reverse any time and gain 50 or 100%. or even more. Most investors dislike uncertainty. The SEC investigation was an uncertainty that is now completely gone. The uncertainty we live with right now is primarily the weather related one. It is my feeling that regardless of the hurricane season outcome FFH's ability to thrive through the summer will cause the stock to rise in a few weeks. Even a bad scenario where they eat 400 M in losses could cause the stock to rise since the unknown would now be the known. How Rumsfeldian of me....

Viking, I have book value pegged at around $300 US per share. This is derived by taking the April 21st numbers. Collectively, unless I am missing something major this should be relatively intact since then. I think Watsais... also has it pegged at a low of about 290US. These numbers are without accounting for ICICI and take into account all the CDN equities in the dumpster. Am I missing something or is your post a little confusing?

I am figuring on a $400 pop any day now.... Yup.... The Rodney Dangerfield of stocks.

The argument is way too reductionist. A portion of the money that is borrowed, or created, will be spent on Stimulus packages. Workers will be paid. In turn they will pay taxes. Should the stock markets rebound somewhat in the meantime there will be billions (or trillions) in Capital gains taxes. People will pay taxes on the gov't bond interest. Worldwide, workers are in savings mode. This means that eventually the money will seek higher returns which will lead to the inevitable rise in stocks and the associated capital gains. If inflation becomes rampant then the debt will quickly devalue and become easier to pay back. If the money is well spend there may actually be value added. Fixing the NA transmission systems would reduce future costs. Spending money on more disagnostic imaging machines for all will reduce the amount spent on health care later. ETc, Etc, Etc. Buffett and FFH have spent money on companies that are clearly tied to the success of the US economy such as USB, USG, WFC, GE, and GS. Prem has even stated that they are not concerned about inflation in the near to medium term (AGM). And they follow Grant, Van Hosington, and Grantham.

I hadn't thought of that Mark. I actually bought 2011 Leaps today for 220 Notional plus 58.60 = 278.60 plus $8.25 in fees. Book Value around 300 US. Seems like some kind of deal I guess. It did occur to me a couple of months ago when I bought GE 7.50 leaps at about 3.50 and the stock was just above $11.00 that something was not quite right and in my favour.

As annoying as this stock price behaviour is I always have to keep it in context. The drop from about 320 to 240 is 25%. That I am highly leveraged to the fortunes of FFH's stock price is my problem and not the stock's. Were I more diversified I would experience the exact same problems right now. If I only invested in common stocks, and not leaps the volatility would be much less, but the up side would be dramatically reduced as well. So I just hang on for the ride.

It's one of those Mr. Market things. Funny that ORH is up and stable through this. Obviously the pending hurricane season doesn't explain everything. I am already for 2x book though....

Experience is learning from your mistakes. Experience is also learning to wait for the fat pitches. These things can be learned. The ability to go against the crowd is either learned young or just some sort of trait one has. I for one have very little problem with avoiding the crowd. I think most of Mark Seller's comments are correct. My observation is that most investors try to back their decisions with a huge analytical rationale. Beyond the basics about a company such as debt load, cash flow, management, and basic ratios, analysis can actually become detrimental. A crappy company in a crappy business (sfk.un) can look good on paper at at given point in time but things change. A good company in a good business (GE) is essentially unanalyzable but I know through assorted intangibles that the stock price will at least double from this point. This doesn't mean that I dont make an effort to have a reasonable understanding of the companies ops and liabilities. I always come back to AXP and Buffett in the 1960s. He gathered anecdotal evidence that people were still using the card and travellers checks and bought mostly on that evidence (as far as we know). Where I disagree with Mr. Sellers is on his position weighting. 30 statistically cheap stocks with decent balance sheets can give you a long term 20% return if the investing is disciplined. More than one of the Superinvestors of G&D used this method.

That was an interesting article. Can anyone give me some idea why Morningstar gives WFC a narrow moat and USB a wide moat?

Sanj. et al, My wife works in Windsor, at the University. It is a 3.5 hour commute from Toronto. Since she only teaches 2-3 days a week she usually stays at a hotel in Windsor. We looked into locating there but after I spent some time there I realized what a sorry state both Windsor and Detroit are in. Detroit has been deteriotating in a more or less continous manner since the race riots in 1967 - re: Gordon Lightfoot "Black Day in July". 15 Minutes out of the former downtown area, on the Detroit River, is this vast burned out swathe, several square miles in size, that has never been reclaimed. It is visible from Windsor. The people fled to the outskirts and towns like Ann Arbour and never returned. Right out of the tunnel on the US side are some of the 5 and 6 bedroom mansions you are talking about. Many are unoccuppied and boarded up. The area is a ghost town. It is like something out of a Stephen King novel. Where towns like Toronto, Chicago, and Calgary invested heavily in keeping up their urban infrastructure Detroit somehow missed the boat. The auto industry in Ontario has left Windsor for dead and relocated North of Toronto. Today, this afternoon, we could buy a 4 bedroom house in Windsor for about 100,000 cash, and I could retire and go fishing in the Detroit River. Frankly, I'd rather work a few more years and live in Toronto. A.

JEast, This is the abstract from your link: Synopsis: Conditions are favorable for a transition from ENSO-neutral to El Niño conditions during June - August 2009. Anyways, El Ninos are like bear markets. You never known with certainty until they are in place. Part 2: ragnar: No - but if you look at the FFH-TO chart the stock price has reached its low about now, and persists at this level until mid August- early Sept. regardless of the Hurricane outcome - since 2006.

You wrote 30 put options and got payed for them by someone who thought AXP would go lower, or at least wanted to hedge their position. Keep them until they expire and keep the 7500 before tax capital gain. Buying them back now will leave you paying the capital gains tax in 2009. People sell puts for one reason, and that is for income. People buy calls to get leverage on the upside. I much prefer calls as the upside can be very lucrative and I dont want the income right now. I have AXP $15 Leaps for 2011 that have now tripled. Use the 7500 to buy calls on something else that is dirt cheap now. It is very unlikely that AXP will ever be as low as it was again unless something bizarre happens to the company specifically. Their lendings are short tail and they have battened down the hatches now.

At some point closer to the ten year mark than now I expect that their returns will start to drop below 15%. and Are we collectively overly optimistic?

An El Nino appears to be in active formation over the Equatorial Pacific. An El Nino usually leads to fewer Western Atlantic Hurricanes and more Eastern Pacific Hurricanes. Something to do with alterations in the wind conditions. http://www.guardian.co.uk/world/feedarticle/8553182

I have been picking up small stakes in BAM over the past while, when it drifts down around the $18 level. There is certainly no hurry. The way I see it they have booked some of their unrealized losses against book value such as Norbord. This would be a drop of >2 Billion. With Bam as a shareholder NBD wont go out of business. At some point the market for their products will turn up and BAM will book it as unrealized gains. Power has been cheap through the fall and winter, and the costs are now going up. The real estate division is high end. I read that their lease turnover is about 5% over the next 5 years, so this division will continue to put out cash for the time being. The tenants they have in London and Manhattan are not all going to move out on mass of their head offices. Other assets are near the bottom of the cycle such as timber. From everyone I have talked to and everything I have read management is very good. This company makes a nice juxtaposition to Fairfax since their is almost no duplication in assets.