Packer16

Typically an MBA or CFA is what we look for starting valuation analysts. Packer

I use TD Ameritrade. They are fine if you want to invest in US securities. I do find that most of my trades appear at the back of the queue in terms of execution and they started charging me a fee they waived last year and never got back to me about changing it. Since they have no foreign capability (whats up they are a Canadian bank that also sells services to customers in Ireland and the UK ??) and this additional fee issue, I am planning on switching to Fidelity, Vanguard or IB. Packer

I am also a Bval person. You can PM me also. Packer

With country music and Saskatchewan Roughrider football, what more could you ask for? Packer

Given the international nature of the fund you are looking at I am not sure earnings is the metric you would want to look at due to accounting differences of what is in the earnings number. A cash flow multiple may be more helpful. And I am not sure what the FN in the Morningstar data means (forward looking based upon historical data). Packer

SJ, Thx. Packer

As you can tell from my username I am a big Green Bay Packers fan. Last year I watched a few CFL games on NBC Sports network and really enjoyed the game. It has the strategy of US Football, a quicker pace and even more "big play" moments the US Football. I have stated to like the Saskatchewan Roughriders but have had a hard time finding a place to watch the games. It appears that NBC has a preference for the Hamilton, Toronto and Montreal games in their coverage. Do you know of place on the internet that I can either listen watch Roughrider games? I live in Rochseter NY closest to Hamilton so at some point I would like to see a live game. Is there a way to but tickets for games other than directly from the team. Thanks. Packer

Morningstar should have that data. Packer

I think the more pertinent question is not whether the market is fairly values but are some stocks undervalued. I believe the later to be the case. Packer

I guess it depends upon how you look at 2008. Marks and others think it is a once in 50 years event, Fairfax a more often occurance. One of Marks comments has been if you build a portfolio to live through 2008, you will not have much a portfolio and it think to certain extent that is what you have with FFH's portfolio today. I have seen this picture before (Growth Stock Outlook in the late 1980s and 1990s) and the ending is typically not to good for follower. Packer

I think it may blast off at these levels due to: 1) sentiment, 2) 12 year of sideways action while GDP and earnings growth, 3) best market system in the world, 4) modest valuation but cheap relative to other asset classes (bonds). If you look at the bulls you have Berkshire, Monish Pabrai and Howard Marks. The bears Fairfax and most of the rest of the financial media. Oaktree's latest letter sums it up nicely: http://www.oaktreecapital.com/memo.aspx Packer

I think they will change but until I see that I am not going to invest more in FFH. I have a position today. If they stated they were going to change tommorow, I would definately invest more given the current valuation with proceeds if I sell some of my holdings. Packer

I think they are human just like the rest of us and it may take time for them to change. They made great calls/timing moves in 2008/2009. The CDS bet and pulling off the hedges at the bottom. To think these did not make them feel more confident I think is naive. I have had my greatest fall (2008) after my greatest outperformance to date (2006/2007). I purchased a subprime mortgage lender because I thought was it was safe and Monish was a holder. I was wrong. Fortunately, it was a small portion of the portfolio. In FFH's case of hedges it is not. Time will tell but I think over time I think alot of the analogies to the 1930s and Japan in the 1990s will not be the case. Just my 2 cents. Packer

I 100% agree on the hedges. When you look at the other successful float insurance companies, Berkshire, Markel, etc., have they ever hedged their equity exposure? No, as a matter of fact BRK has been on the other side of a declining equity bet (sold puts). With equities these firms have had the tailwinds of equity appreciation and stock selection out performance. If we look at the ERP today (assuming an earnings yield of 6.25%), we have about 500bp versus bonds (assuming a ST bond interest rates will rise to 100bp at some point). This is about as large as it has even been. If FFH can outperform the market buy 500bp (which would be great given the amount of money they are managing), they are hedging away 50% of their stock returns. Given low returns on bonds going forward, then how does FFH get close to their book value growth target by hedging away 50% of their equity returns? I think they had good insight in the last swoon and confirmation from other smart investors like Howard Marks. If you read Marks today he has suggested that there will be modest equity price increases to correct the large ERP. If this occurs, then FFH will continue to underperform unless they can pull a rabbit out of the underwriting hat. Packer

I agree. I have not added to my FFH position and probably will not until they lift the hedges. With the hedges they have hedged away their competitive advantage. I hope they realize this soon. Howard Marks' Mar letter has a great view on the market and if this view is true then FFH will continue to sputter. If they would just raise the hedges, they would be able to overcome so much of the negative underwriting they have today. We will see. Packer

I have felt the same way because when I am investing in something there is usually something wrong or it would not be trading for a cheap price. If I listen to the comments from Wall Street analysts, I am usually on the opposite side if it is a larger company or an unknown if a smaller company. This is a part of the market. You are only going to make excess returns by buying when the consensus is wrong (too negative) and you are correct. In the end it is a probability game as you will not have a 100% batting average. If you are over 60% you are doing great since your upside should be greater than your downside. The hardest part for me is being picky on what deals to invest in as I have an upside target of 100%. Another tool for me is purchase and turn-off the stock quotes and if the stock continues to decline (which is typical) then review the thesis and buy more. A current example is OIBR. Remember the name of the game is to take advantage of pricing mistakes in the market. This is most likely where people do not want to invest and in most situation there is hair on the merchandise. You just need to find out what kind of hair you are comfortable with. I rarely invest in clean companies because most of the time they are fairly valued or over valued. Packer

If you are or relative is former military, USAA has been great for me and since it is a mutual the more you pay the more you own. Packer

Isn't most of Condruil's work in Angola and Mozambique? Working with some clients who have EM customers, I have seen some work done that was never paid for because they did not receive advance payments. Given that has does anyone know if these countries pay in advance or if Condruil does the work before they get paid? TIA. Packer

Happy B-day this year and to many more. This has been a great place to learn. Packer

Although I agree earnings per capita may decline why would earnings decline overall? The reason earnings are not declining is because the inputs for goods and in some cases services are not increasing or increasing less than output. I think earnings will decline if these inputs increase at a faster pace than productivity and price changes. Right now there is a surplus of inputs and until that changes I don't see profits going down. One other aspect in the US is that many capital intensive commodity businesses have been offshored. These products are being made in China and other developing countries. So you will have a bias of higher margin firms here in the US as more of the commodities are outsourced. I do agree that negative GDP would to a lead to a decline in profits. I was impressed buy how little the real US GDP declined in 2008/2009 and how fast it recovered. It feel 0.3% in 2008 and another 3.5% in 2009 and is now 2.8% higher than the peak in 2007. Personal Consumption has also recovered to 2007 peak levels with less debt. If the GDP plods along at 2% growth then why shouldn't profits continue to increase. As to excesses, I don't see that as many as in 2006/2007. The only exception is gov't spending and debt but they have other alternatives to deal with the debt like financial repression. I see the beginnings of some excess in the credit market but nothing like the levels of 2006/2007. I am not saying we will not get there and this is an area that requires close monitoring. Packer

I am surprised. I thought we would be closer to 60/40. As to conviction about IV, I am coming up with rough approximations and have stayed focused on a few market segments (See ask Packer section for details).

Why would earnings decline? Is somebodies wealth or wages going to decline to cause the earnings to decline? Is there going to be price competition in excess of input cost declines to cause the decline? The GDP is still growing (albiet at a slow rate) so why wouldn't earnings grow? Now wages per capita have been flat but the capita has been increasing so doesn't that mean more earnings overall? I would agree if GDP was declining but we are talking about a declining rate of growth not real GDP are we not? Just 2 cents. Packer

Interested to see CF&B investors approach to concentration. By focus investor I mean 35 to 45% in top 2 to 3 securities, 80 to 90% in top 10.

I guess I questioning your assumption that the market level is based upon QE. It may be partially based upon that to the extent IR are lower than normal but I think financial repression is here to stay and therefore lower than normal rates will be here for a long time. This in combination with the worldwide savings glut will keep rates low. Do you disagree? I think the only way out of the debt burden is to have interest rates low so the debt can be monitized. This is what the US did post WWII to reduce the US debt coming out of the war. If the rates stay low then what is going to cause stock prices to decline, in light of the fact that it is not a loved asset class right now (based upon fund outflows)? I agree there may be a shock but its not like sentiment is great like in 2007 where you get both a shock and sentiment change. So if there is a shock I would think prices would recover quite quickly. I think the market will continue to rise unless there is a large spike in interest rates. Packer

My question is why given you are measuring an change variable (GDP growth, % workforce participation) versus a non-change variable (stock prices)? Couldn't money flow from what most consider overvalued bonds (esp, with financial repression) or commodities to stocks? This is an allocation issue. Over the past few years we have seen huge outflows of stock funds into bond funds and over the LT I would expect that change. This would cause an increase in the value of stocks with no increase in GDP or workforce participation required. If the GDP grows at a slower rate then it will add to the increase in stock prices. I see the biggest danger to higher stock prices as the end of financial repression or inflation (as either would increase interest rates and suck funds from stocks). I see neither of these two playing out over the next few years. Packer