Uccmal

Uccmal, so you believe we'll be back to positive economic growth by year end (6-9 months)? I disagree... Not sure I said positive economic growth anywhere. At this point all we need to stay out of the recent bottom is neutral or a slightly less negative environment. You will get that as companies actually start to report higher Q/Q earnings as writedowns and layoffs are put behind them. RE:Luk: with Luk you are buying a hedge fund run for shareholders. You get a couple of wineries (real estate), forests, and all sorts of other interesting holdings. They grow shareholder value including periodic large dividends at about 25% per year. These days the stock is very cheap. In the past I have bought LUK in the high 30s and not much has changed except the mark to market book value which will shortly be resolved. FFH is positioned with ICO to take advantage of the bull market in commodities that precedes the bull market in stocks. Undervalued company with an undervalued product = rocket fuel. The other I had was AXP (not ACP), based on the premise that short tail liabilities will work through fairly quickly. GE based on direct or spinoff infrastructure money - I would think the direct and indirect benefit to GE of stimulus packages will be in the multi-billions/Quarter. GE has people in every major market whose sole purpose in life is to liase with government officials and they are very good at it (I worked at GE Canada head office and met the Pres. and head of government affairs). Also bought some BAM common recently.

I would suggest that the likelihood of an upside surprise far outweighs the likelihood of a new low at this point. SPY 100 somewhere before the end of the year. If this was a credit and housing event then the two most significant factors are working themselves out with help. Credit is loosening significantly, and housing in the US has reached a bottom in terms of new builds. After the intitial big bust in housing the price drifts slightly lower for a few years on houses but this is actually more a positive effect, than a negative as people are more able to buy houses and get mortgages. Never forget that the stock market is a leading indicator by 6-9 months. Unemployment can be rising and Main street still deteriorating while the stock market rises 50%. I have been buying when I can LUK, GE, ACP, WFC Prefs, RBS prefs (thanks board members for these). I have also been locking in gains with SPY puts which is probably a contrarian indicator if there ever was one ;)

I could never really understand the value of MTM accounting. It wrongly skews the financial statement in good times and bad times. It simply adds volatility. Canada only went to MTM two or three years ago. I also dont see how it contributed to the downfall of the banking system. Once the defaults started with MB securities then the market no longer had a market for them at all. So they became marked to estimate. If a market could actually be generated it may have proven better since there was still value in many of these securities. I agree with Oldye; It is up to us to analyze the numbers or steer clear when they are incomprehensible.

The real question is who continues to fund this train wreck? When they restructure who is it that will continue to buy the new bonds and/or stock? Well, It wont be me but in one guise or another Air Canada will be recreated. Viking: Intangible reasons to avoid West Jet: 1) I would prefer if they stopped expanding and concentrated on Shareholder value, forever. Unfortunately, they are intent on constantly increasing their size. This is going to have at least a couple of unintended effects: a) It will make them big enough that their business model gets weakened. The existing model will not work as an international carrier. They will shortly bump into competitors of equal capability in the US and Europe. b) It will put them into the sights of the Feds who will want to see them service areas that aren't getting service. That will weaken margins and the business model. 2) The business model itself takes continuous tending. Everything needs to run as a team. It takes extraordinary management to keep planes in the air 18 hours per day, and extraordinary logistics when there are issues. When there is bad weather for a couple of days in a West Jet hub (TO/Calgary) the entire house of cards comes down. Less profitable airlines keep extra planes and staff to soak up the excess created in such a situation. West Jet goes hell bent for days after to catch up. At some point they will need to add excess staff/planes etc to prevent wide scale disruptions. This adds to cost. 3) Related to the other thoughts. With increasing size comes increasing bureaucracy and associated cost. 4) Need to hire more mechanics/maintenance and airport staff. Inevitable labour problems will arise that have always plagued primary carriers everywhere. These staff are highly trained and highly skilled, very important and they know it! 5) An upstart (east jet) will start to erode West Jets intitial markets as West Jet expands to bigger markets. I guess the whole post can be summed up as Bigger is not always better!

Those really fine GM plants in Oshawa, Ontario, would make a nice addition to Magna International. Whatever anyone thinks of its founder, Magna is at the moment the healthiest, and best managed car company run out of North America. The make complete BMWs in Europe. It's not much of a reach for them to build a high quality GM branded vehicle here. BTW: The comments on this thread about the President's strategy are very interesting. I too am now wondering if GM is going to be the test case for a few of the big financial companies.

But that would be a fate worse than death. :P

I wouldn't think it will be very positive since Air Canada in receivership can rewrite all the contracts as they see fit. I cant believe this is happening again. Somebody should take Robert Milton out back and shoot him.

I have never thought Prem has much of an accent, not noticeable in Toronto anyways.

Have a look at the FFH Proxy this year. Prem made 625 k, excluding dividends of course, which we all got. No options, no stock gifts. Others made double or triple with bonuses. A few got stock options but nothing too extravangant. Alot of insider ownership, some of it dating to before the New York listing when the company could provide low interest loans to "key" personnel. Many of the employees will end up richer than their wildest dreams from owning stock. Is there any reason to pay anyone more than what the FFH people get? Absolutely not. Anything else is just an ego feeding extravagance. FFH is able to keep the people by providing a high degree of involvement, a healthy work environment, and lots of opportunity. Want to help restructure a company, go on ABH's board, or LVLTs etc. If shareholders buy shares with all of the factors in mind, such as executive compensation, return of equity, debt to equity etc. then the high executive paychecks should disappear. But they dont. Most are institutional shareholders and they allocate according to capital allocation models not perfomance. I personally think that alot of very capable people would take CEO jobs for alot less pay than many are now getting. Just so they could be part of something greater. I would run HD if I could handle the stress (I cant), and was bright enough. The best way to vote is with your feet. If everyone did that FFH's stock price would be around 1000 right now, but obviously they dont.

I had an acquintance in late high school who managed to get arrested letting the air out of a Police Car's tires at a local Tim Hortons. For real. So dont you guys go to far...... >:( ::)

I read the article a couple of weeks ago. I think there is a serious factual error: Prem has stated on many occasions that 90% of his net worth is in FFH. To me this adds up to about 300 -400 M CDN, a far cry from the numbers the author was bandying about. Prem doesn't even appear on the hundred wealthiest Canadians list, yet. He was on it around 1998 when FFH closed the year at 540 but fell off subsequently with the decline in share price. The sooner he makes it nearer the top of the list the better, for all of us! :P

How many times did Dick Fuld, Ken Lewis, Ken Thompson, Stanley O'Neill, John Thain, Chuck Prince, Jeff Immelt, etc. publicly state in no uncertain terms that they had no need for new capital and they had no intention of cutting their dividend. Many of them completely missed the scale of the meltdown and really didn't know what to do. I am left wondering how badly Jack Welch would have been hit if he was still in charge at GE. I expect he is thanking his lucky stars he wasn't in charge, if he is humble enough. If anyone wondered if most CEOs are overpaid I think we have probably answered the question in the affirmative.

Yes, Jeff Rubin is a prize find isn't he. Last spring while he was screaming $200 oil I was quietly shorting oil. He made me lots of money. So has Prem et al for that matter & not just on FFH.

A bit of both JackRiver... Black Swan Guy, Krugman, and Roubini are making hay while the sun shines. The cannot possibly know in any kind of detail what is on each banks balance sheets. They have an agenda the same as anyone else. The lecture circuit is lucrative. On the other hand any bank in danger of insolvency isn't going to tell us until they are actually taken over. The stock market is telling us that things are improving. I have no reason to believe that it isn't the best forecaster at this point. Geithner's stress tests will publicly reveal those of the top 20 that are weakest. Others are being nationalized at a moderate clip by the FDIC anyway.

My mistake: Replace the word assured: with the phrase "a basket of high quality companies with wide moats and growing businesses would seem to be a better place to put 530 M US than ABH". That being said there are plenty of investors including FFH who have had greater than 15% past returns over longer periods than 5 years.

I never said risk free! Your just nit-picking. Besides: For a non-institutional investor beating 15% should be fairly easy. Walter Shloss did it for over 40 years, FFH has done it for over 20 in their equity portfolio, WEB accomplished it for 40 years, Leucadia has done it for two decades. Enough said!

FFH holds ABH debentures and other debt. ABH may be having to convert much of its debt to equity to stay afloat. This will leave FFH holding a large amount of common shares of ABH. The risk in this is far higher than the risk in the examples I cited. The whole thread gives the full context of our discussion.

Sanj, This may have been said above already. I dont think it is appropriate to handicap yourself by taking the FFH options out of your pre-partnership investment results. They are an intrinsic part of what makes us better than average investors. We didn't just indentify an under priced company, we also leveraged via options to make those mouth-watering returns. If it hadn't worked out you wouldn't have been saying my past results aren't accurate because I lost 100% on my FFH investment. A.

What in the world makes you say this? There are no sure ways to double your money every 5 years! From these low stock prices it is a pretty good bet. 4% minimun on dividends and 11% capital gains from depressed price levels. Shouldn't be too difficult over the next 5 years. Better downside protection than common stock.

Well Partner, respectfully, Is there no reason we cannot intelligently analyze or complain about the investment? :) Above, I should have said: I am an FFH shareholder not an ABH shareholder. In fact, I am deliberately staying clear of FFH G&D type investments which includes Vikings entire list so I am not double investing.

A follow article by Joyhn Heinzl: http://business.theglobeandmail.com/servlet/story/RTGAM.20090324.wheinzl0325/BNStory/SpecialEvents2/home

I wouldn't get to sad.... Me thinks there will be more opportunities yet. I added some more SPY puts yesterday near the peak to protect my most recent gains.

Hi Partner, Obviously no one knows how this will end up. So I will state my concerns differenty: Buying JNJ, LUK, PFE, etc. assures us of at least an average 15% average annual return going forward 5 years with limited downside from the present prices. ABH offers no downside protection that I can determine with the present debt levels. With the present levels of debt they will be unlikely to remain a going concern. This means at least part of FFHs 530 Million investment (US) will have to be converted. This will give them shares in a company that has low grade forest assets, some other more valuable assets in hydro and utilities, and a number of p&p mills of dubious value. They will sacrifice large interest payments to own a portion of an operation that has a low margin of safety, if any, IMO. The restructured ABH will still have a debt that is probably larger than their actual assets. I have read several times about the value of the Berkshire Mills and properties when the company was sold and auctioned off (the property value was never disclosed since it is still held by BH Realty). I have no reason to believe the assets of ABH, other than hydro plants, have any more value than this. Could I be wrong. Very possibly... but this one is still large enough to make me nervous. If it was a small investment like sfk.un I probably wouldn't care much. But I personally think that FFH is miscalculating the effect of secular changes with a number of their Canadian Investments outlined above by Viking. I fully understand the process of G&D investing but I also understand that there is a time to hit homeruns, such as Buffett did in the 1970s. Anyway, still a shareholder.

oec, Can you carry the excel program over to your tax software and avoid retyping everything. This is my major issue. I tried using quickbooks at one point but a certain number of the stocks I was going to have to imput manually because QB couldn't access them. If I have to do the same with Excel then I might as well do it the way I have been. The ideal would be if my broker gave me statements that could be input directly to the software programs.

Hi Cardboard, Of all the FFH investments I know about I feel ABH has the highest potential for a complete wipeout, and a minimum potential for any return at all. If FFH has to convert their debentures to keep ABH afloat then they lose the high interest payments. If not, it will at least break even in 5 years or so. This really bothers me because there is so much out there at such low prices that is so much safer. The numbers are getting staggering - 530 M by my count so far. That is their biggest non-insurance investment other than Munis - that to me is scary. I truly hope I am wrong but this investment mistake is beginning to remind me of certain textile factories often discussed by Buffett. I stick by my guns that newsprint is a really crappy business going through a permanent secular change that will leave 20-30% of the demand there once was. I think paper in general is going through a permanent secular downturn of less severity. In every part of my life we are using less and less paper all the time. I am sure there is a bottom at some point but I dont know when it will be reached. At work, where we used to give out binders with 100 pages for every meeting, and training program, there is now two sheets of paper and a little jump drive with everything else. And my employer is one of the biggest employers in Canada. My father in law commented last weekend how thin the Toronto Sun, and Toronto Star, were getting. I simply will not invest in this sector on my own no matter how cheap it is, especially when everything else is cheap. Its just not logical. Let the flames proceed!