Uccmal

Hi Partner, I guess great minds do think alike. A.

great time to make a move assuming you're allright with the increased weighting. Not a chance the volatility is killing me. Its all the leaps. I am also of the opinion that I have had years of chances to buy this stock at a bargain and now want my just reward of FFH. (F- Financial Heaven).

One thing is for sure. Having this circus in the headlines isn't helpng Fairfax stock one bit.

I sold my small stake yesterday with the intention of buying back in at a lower price; perhaps a larger stake in mid summer when gas prices bottom out. Thanks SD.

Smazz, I too am a little in the dark on this topic. I need an english translation. This helps a little: http://business.theglobeandmail.com/servlet/story/RTGAM.20090421.wlawmain0421/BNStory/robLawPage/home

I am guessing that the upside would be pretty good if they make it through the stress tests without being nationalized. What did that guy Ben, something or other, say about margin of safety? IMHO, the stress test and the GM trail run are preludes to nationalizing the worst banks of which Citi would certainly qualify.

I am not convinced on Sam's thesis on coal providing huge growth going forward. Sam's thesis is that coal fired power could be on the upswing. I am not convinced. I do agree that electric cars have to be charged with something but that does not imply that coal will be the source going forward. During the dinner Wayne C. indicated during his talk that he is of the opinion that there is loads of crude and natural gas underlying NA and the bulk of the holdup is in the refining. I have no idea about ICO on a relative merit basis as compared to other coal firms.

oec, I thought it was your question! :)

Oec, A question was asked if Prem was happy with the debt to equity ratios and the capital stucture of the company. He answered by saying that they had 1.5 B in cash and equivalents at year end, and then spent 350 on NB. He then said they bought in 1 million shares of FFH last year. He went on to say that even though the stock was below book they were not going to jeopardize the capital position in any way. REad nother way - he is managing investor expectations downward in this regard. Myself and another board member surmised from this that buy backs, including ORH, were not a priority for now. Having a huge amount of capital was. To be honest it would not surprise me if they issued some long dated debt this year.

I need help to understand something. At the FFH AGM Prem was asked the question: Why doesn't FFH get into Life Insurance. He stated that Life and Health can be a dicey game due to the possibility of a run on the bank. This is particularly possible if the ratings get cut. Can someone help me to understand this better? In lay terms. A.

Sorry, In reviewing the post I realize that I was wrong above. Prem did say that they bought down to 14 and then watched the stock drop lower after that. The average price is probably around 17 if that was the case.

I think that was correct FFHwather. I seem to recall that as well.

Sorry Mungerville, Didn't realize you had already posted. A.

I'll start this off: FFH specific: my comments in italics - Averaged down on US megacaps into the winter - FFH had the highest return on BV in 2008 in the P&C Universe/ AIG one of the lowest - discussed mistakes - mostly ABH, TS.b, and CGS, & sfk.un - I am guessing - all have been written down on the balance sheet at year end - 1.5 B in total equity write downs last year imagine if there were no hedges or CDS or bonds - underwriting ok - looking for better but market hasn't hardened yet - ORH price drops have steadied - some clients are taking prices offered by NB even though they are higher than other quotes flight to quality? - prepared to easily write double the business - do not seem inclined to use capital to buy back shares in bulk or buy in ORH in this environment - wants to have alot of capital for any contingencies - buy backs will use up too much - this is after 400 m to bring in NB - are spending money to develop new aquisitions - small amounts big payoffs - showed chart of the growth of ICICI-Lombard - appear to be preparing to set up Polish Re and Arab Orient as hubs from which to grow like ICICI Economic: - US housing prices still above long term average - infllation adjusted - stock markets have corrected according to market cap/GDP chart - inflation not going to be an issue for years - bought up evidence of past pump priming - 1932, 1990s Japan - there have been no cases of a credit purge leading to inflation. Very interesting perspective - followers of Grantham and Van Housington - Van Housington manages some of the bond money. An aside unrelated to this post: We talked with Wayne C, an analyst from FFH - when he looks at companies he goes back at least 10 years in the annual reports and reads everything - he asked the group later how many people read the auditors report in the AR - a few keeners raised their hands and the rest of us kind of ducked sheepishly. My take overall: The FFH group is so far ahead of anyone else in terms of investing that they can keep a good portion of my money as long as they are around. They will easily get the bogey of 15% going forward for a number of years. Better investors than anyone else excepting the usual suspects (LUK, BRK....). Stock took a jump today. I wonder if announcing that most of the bad investments had been written down cleared away the fog around that side of the business.

A good Interview done after the AGM today: May need to chase on the web site. I believe his first TV interview. http://www.bnn.ca/

Arb, I have definitely handicapped Wells Fargo as a holding which I think I was trying to impart to Basl. I bought a few Leaps near the bottom and some of the WFC.PR.L around 450 so I am certainly not all in. Add to that my holding via FFH. At this price I have no intention of adding to the position in Wells. For now I think the stock has probably run up as much as it will for a while. There are many cheaper things out there which perhaps answers Basl's original question.

arb... WFC has a market cap of 75 B. If they need to raise 10 B to improve their leverage ratios then that's a dilution of 13%. The stock would likely rise the 13% on the news as people became more secure with their balance sheet. By any chance, are you short financials and WFC in particular? It appears the California Real Estate is close to completing a round trip to several years ago on the basis of pricing. Any new mortgages will be for much less individually and carry less default risk, and the same is likely with renewals at lower interest rates. Arb, I grant you were right on on Wamu but we each get few freebees in the prediction sweepstakes. I have never seen anyone consistently predict the markets let alone an individual stock. Just that fact that Roubini is now in the press each day is an indicator to the contraian in me that the tide has now turned.

I agree with much of what has been said on Wells both positive and negative herein. Yes, the balance sheet is difficult to decipher and potentially problematic. Yes, the company is fairly well run, and is making money, it has a incredible moat, very sticky assets, and has a huge number of healthy mortgage renewals. There is nothing wrong with coattailing Buffett provided you know he is wrong from time to time. You also need to respect that Wells is a medium investment in the Berkshire stable, and a non-cash generating asset, excepting the dividend. I guess I am saying here that its relative importance to Berky is not that great. Basl, Your reliance on third party analysis is a little disturbing. Why is a Barron's analyst worthier of qoutation than Ben Hacker. IMHO Ben probably has a better handle on this company than a journalist/analyst at Barron's. and I'm sure the professional investors can name more What exactly constitutes a professional investor? Again, the assumption that someone else knows better than you or Ben is a little disturbing. Why would anyone else actually know more about WFC, at this point in time? (except high level insiders). Most professional investors were taken like pigs to a slaughterhouse in the last two years. Nearly all professional investors completely missed the nascent credit crisis. My bet is that most "professional" investors will further compound their errors by sitting too long on the sidelines on the way up.

Sorry Basl, Misunderstood. Anyway, I dont see the use of DCF in any case other than Coca Cola. The numbers Oldye presents are obviously untenable. I have some thoughts I will post latter.

the question is not impossible. The answer, however is difficult and depends on intrinsic values. Surely, some on this list have an understanding of the right answer That's a pretty obnoxious comment. By impossible I meant that it is impossible to answer for you what is the better course of action. I quite clearly outlined my course of action.

That's an impossible question. I am hoping to convert my Wells Fargo Leaps to common eventually and hold it forever. I am trying to manage in a more tax effective manner going forward. But we shall see. It will only be 1000 shares on conversion. The dividend after the reduction is 9%. It is unlikely to go into overvalued territory any time soon! Same with some of my GE Leaps, HD Leaps, Sbux Leaps (I would only do this if they install a dividend), MFC Leaps, AXP leaps, and ultimately FFH leaps.

The beauty of this is that the rising tide raised all boats, especially in the financials. I have a small number of options on WFC, and some PR.L (thanks board members). Everything else I had went up today except my SPY puts. I even sold a small number of SPY calls. This could be the 40% move Buffett talks about in the "cheery consensus" article. Now a 40% move in FFH would make my year.

I see no value in this exercise whatsoever for what a value investor does. I have tried it and decided it was a collosal waste of time. An easy challenge for DCF would be to get the 10ks of 5 "blue" chips from 10 years ago, which are available on the net, and calculate using forward assumptions. Say GE, PFE, BAC, BRK, and KO. Forward test if to see how it stacks up to the cash flow realities for 2008, or 2007. The irony is that doing it for FFH would reveal a fairly high return (from 1998) but no one could have stayed in the stock on the basis of DCF, given all that happened in between. You had to thoroughly comprehend the companies' style to invest. The best way I have determined for investing so far is to get a general estimate of what a company is worth today, determine if it is significantly cheap by one metric or another, determine if it can remain a going concern, and get to know it as well as possible. Getting to know a company well keeps me from getting sold out in downturns, or allows me to buy more. Everyone always argues about whether WEB is a micro, macro, uses DCF, or whatever. I think he is just very bright and loves business. He has studied business 10 hours per day for 65 years and has a numerical aptitude to boot. All of the sayings he has adopted or created such as looking for 7 footers on a basketball court, or looking for 1 foot hurdles in a footrace lead me to believe that his biggest skill lies in avoiding estimates such as DCF and sticking with facts and then adding in a requisite margin of safety.

I was trying to find a chart that shows market action versus recessions for the last 109 years. CalculatedRisk put it up but I cant find it. The graph shows quite clearly that markets precede recessions and recoveries, in nearly every case. The US recession supposedly started at the start of 2008, was announced six months after the fact, while the market peaked in July 07, dropped of alot, and peaked again in October 07. The hallmark of a recession is a shrinking economy ( I hate the term negative growth - double speak). So, we can expect the recession to get slightly worse over the next few months, and then economic growth will begin to resume. The growth of course will resume from a lower point. A bull market occurs when the stocks exceed the previous high (S&P 1562) which may be years off. That has no relevance to an investor who wishes to make money. In fact, I find that bull markets are by far the hardest to invest in. Until we surpass S&P 1562 we are having bear market rallies, which is what this is. So buy alot and hold on for dear life, or buy alot and sell on the upswings, or buy alot and hedge your downside (what I have done - this time). No matter which way you do it you will outperform 98% of investors. The rest will be waiting for the unmistakable signal that markets have returned which will be 3 to 10 years out. They will catch the last 30% before the next bear and then lose it all during the bear. And so history repeats itself.

Block the section you want and then hit the insert quote button on the upper right side of the part you are quoting. Took me a while too. Former techhead... now a luddite. :-[