T-bone1

I think Eric is right that you need to either multiply the ORH goodwill by 5X to be consistent (and end up with a meaningless BV number) or remove all goodwill - although I think you should also adjust upward for the value of the investments held at equity. Tangible book value is the relevent metric, but are we not just dancing around the idea that FFH is worth a premium to tangible book value?

It sounds like he is getting off awfully light . . . http://www.businessinsider.com/barry-minkow-insider-trading-movie-2011 Do we think this means he is cooperating in one of the naked-short-and-distort or the major insider trading case? He seems tangentially involved with both, but I'm not sure he would make the most compelling (believable?) witness . . .

New emails from Loeb and others released . . . nothing incriminating, but it sure makes the hedge funds look bad: http://www.businessinsider.com/dan-loeb-fairfax-embarrassing-emails-adam-sender-2011-3

from Jeffries: "at this stage insured losses from the Japanese earthquake appear limited. We are working on the assumption of a $10bn industry loss. The impact on (re)insurer balance sheets is likely to be around 5%. We expect some rate momentum in the upcoming Japanese/ CAT renewals, but not enough for the total industry cycle to turn. Tsunami and aftershocks remain real risks, and this will drag on sector performance"

"European insurance - comments from JPMorgan's M Huttner on impact from the Japan quake - Japan earthquake is big, but costs appear manageable ($1bn-2bn for the European reinsurers we estimate)" It sounds like the damage is very manageable because the quake was offshore

Could someone please enlighten me as to how to add an actual poll to this posting? Ericopoly, I have always found your postings on FFH very insightful, and would be interested to hear what you currently think. The reason I want to know everyone's weighting to FFH (and how large a weighting they would go to at the right time) is that I would consider it very bullish if FFH is under-owned by a group of admitted FFH groupies who go to the annual meeting and post online about the company.

I think Fairfax is an excellent value at these levels (roughly book value), and that their combined ratio is temorarily hampered by an expense ratio that is contributing an extra 5% to the combined ratio (Prem and other managers have said that their insurance operations are currently sized to write a lot more business, and when this happens the expense ratio will immediately drop 5%). There is very little to get excited about this year with regard to FFH, either in investments (hedged) or insurance (soft market). I think everyone on this board think FFH has a very bright future, but it is difficult to come up with a compelling reason to buy today. I am curious what percentage of everyone's portfolio (this being a group of knowledgeable FFH fans) Fairfax is currently, and what percentage it would be today if people thought the market was hardening and long-term historical investment performance would imediately begin again? I hold 20% of my portfolio in FFH and I would go as high as 35%

inflation will likely make the penny obsolete in the near future (ten years or so . . . ?) at this point it will be legal to melt them down, no downside and a lot of upside if you can get them for face value (the pre '82s)

Don't forget ICO . . . up 52% QTD,

I agree Sanjeev, It sounds like Cohen always told his people to "get better information" . . . those that somehow did were given their own feeder funds, those that didn't were fired . . . but he never actually told them to insider trade. I would settle for ruining his reputation, shedding some light on what's been going on, and putting a stop to it . . . hopefully that isn't too much to ask for

I think FFH is very cheap at these prices, but I would bet that their California bonds have declined this quarter, so I wouldn't bet on a book value gain since the last report.

I think they could both be right . . . FFH is a leveraged and risk-averse insurance company that is rightfully afraid of a temporary loss of capital SEAM is a long-only equity manager for clients who want exposure to equities If stocks are cheap right now, but there is the possibility of some bumps along to way to fair value, then both companies are right.

Thanks Myth! I really enjoyed that as well.

I think one of the biggest frustrations is not that they are buying 250k acres in the Mississippian which they will be able to hold by production with their ten rig program, but that they have decided to "pull a Chesapeake" and buy more land than they need (500k+ total acres in the Mississippian) in order to flip half of it . . . I own SD and CHK, and I don't mind CHK doing this for the following reasons: 1) CHK is the most active driller and runs 15 "information only" rigs that send core for analysis at the industry's largest shale lab. 2) CHK has the most landmen in the industry, allowing them to quickly snap up acreage that they identify as valuable 3) CHK is a known quantity with multiple sources of liquidity and as one of the best operators, Foreign multinationals may pay a premium to enter a JV with CHK in order to learn about shale drilling SD does not have these advantages, is leasing in a play that CHK already knows about and has publicly delineated, and SD does not have the balance sheet to be doing this crap. I am still holding and the rising oil price (SD is now 80% oil . .. CHK is still less than 15% liquids) will totally bail SD out, but this decision pisses me off. Buying into this play for 100% rates of return is one thing, but to keep leasing when CHK, EOG, and everyone else has the same info - when they will have to flip whatever they lease anyways! - seems stupid to me. Who knows, maybe it'll turn out CHK is desperately leasing up more land right now too . . . but I wouldn't want to be buying up land that the industry leader passed up on in their own back yard. /end rant On the bright side, it sounds like asset sales will be no problem and that they have already had offers. The last few transactions in the Wolfberry have been at very encouraging prices.

Bioval has been ordered to pay SAC $10 million for their "frivolous" $18 Billion lawsuit against the short seller. I don't think this should have any ill effect of FFH's lawsuit, and it does sound like Bioval did a number of things wrong, but I hate to see SAC taking the apparent moral highground . . .

Thanks Tariq! I'd be interested to know what his impression of the "moat" is in specialty insurance. Fairfax is buying a few of these businesses and Markel has certainly done well over the years. As specialty lines typically have much lower combined ratios than more competitive insurance lines, I was wondering: What exactly is the "moat" that allows low combined ratios like this to be maintained? I would think that if MKL had 80% combined ratios in yacht insurance year in and year out that someone would come in, copy their pricing, but undercut by 5%. Is pricing and market position maintained through client relationships (i.e. its a small expense overall for the yacht owner and they like/trust their broker)? Is it through branding and market position (i.e. "everyone know that MKL is the place to go for yacht insurance")?, or is there some actuarial knowledge (other participants aren't sure they know how to price the business properly so they stay away). I would imagine it is some combination of the three, but I am curious because the combined ratios for some specialty lines are some low that I would think competitors would immediataly jump in with both feet. If MKL has an average combined ratio of 85%, why not call all their customer, renew at a 10% discount, and have a combined ratio of 95%? I hope this is clear and thanks in advance

I thought this was an interesting article/report on NFLX report http://www.zerohedge.com/article/reading-between-lines-netflix-ugly-earnings-report

Zorrofan, it will be webcast. there'll be a link on their webpage. Myth . . . considering CHK paid less than $2 billion for the Eagle Ford and its now valued at $6 billion . . . I think they've created $6+ per share in value this year alone on just this one deal, so I don't think you have missed the boat just yet with the sub $1 price movement today

It is dissapointing to see Tom sell . . . I don't anticipate especially good results from SD in Q3 (although after the last two quarters anything short of disaster is probably good). However, CHK has their annual analyst day on Wednesday, where they will discuss their shale plays - including the Mississippian play in Oklahoma. I would think this could be a significant positive catalyst for SD . . . having another company confirm the quality of the play. Maybe this was a pre-arranged sale by Tom, I didn't read through the filing yet, but I doubt he could actively sell shares between the end of Q and reporting (I know 144 plans can be cancelled so its basically active, but the timing just seems a little strange)

CHK has sold 33% of their Eagle Ford shale to CNOOC for $2.16 Billion (half now, the rest over the next 24 months to fund drilling). They leased this land over the last year for less than $2 Billion total . . . so looks like a quick $4 billion in value created along with adding more liquidity.

I think that probably is right. Munger has pretty consistently said that he wouldn't buy Wesco stock and BRK wouldn't take it private because it was overvalued . . . I think BRK is only buying it now to tie up the loose ends

I agree, all of my CHK LEAPS are out of the money, and I think they are attractively priced

Myth, I own the 2013 LEAPS as well . . . I think the potential appreciation justifies buying some LEAPS. Sandridge put out a new presentation today with well results from their horizontal Mississippian play in Oklahoma. As I said before, I don't see any way that this is worth less than $1 Billion based on transactions for leases with similar potential. I spoke to a sell side analyst when they first disclosed their type-curves two weeks ago and he said that they would need to prove the play to the street as the company doesn't have a ton of credibility right now due to their constantly changing plan. I think this new information should go a long way towards that and is the reason the stock is up 5% right now.

Myth, sorry to just see your message now. I read periodicals like oil & gas investor, oil & gas weekly etc. Sell side research, and company presentations (drillers like HP, service like HAL, and almost all the E&Ps, along with 10Qs and 10Ks). My viewpoint is largely based on what I see the smart money (IOCs, CHK, MCF in my viewpoint) doing with their money, not on what they say. Total said that shale was in a bubble, then went ahead and gave CHK a few billion for a piece of their Barnett acreage. CHK says that gas will stay low for a long time, but they have only sold calls on 10% of their production and they aren't actively selling gas assets or hedging. XOM hasn't said a word, but they bought XTO, etc. I think the smart money is betting that gas gets tight in N.A. again, otherwise you would probably see a much larger and more accelerated push to build LNG export capacity (instead of the small amount being built over the next 5 years off LA and BC). In short, I think Ken Peak has it right, but I think CHK will be the big winner. Zorro, welcome to the club (and to owning the only stock we know Prem has in his personal account)! Lets see what this stock can do over the next few years.

NEW YORK, Sept. 27 /PRNewswire-FirstCall/ -- Terra Nova Royalty Corporation (NYSE: TTT) ("Terra Nova", "we" or "us") announced today that it has entered into an agreement with Mass Financial Corp. ("Mass") for Terra Nova to acquire all of the issued and outstanding shares of Mass by way of a take-over bid (the "Offer"). The Offer is one Terra Nova share for each Mass share, valuing the transaction at approximately $225 million. The Offer is based upon the adjusted book value of each company and values Terra Nova shares at $8.91 per share. All monetary amounts herein are in U.S. dollars. Mass's business encompasses a broad spectrum of activities related to the integrated combination of commodities and natural resources, including trading, commercial trade, proprietary investing and financial services. Highlights: * One Terra Nova share for one Mass share * Unanimously recommended by both companies' Boards of Directors and Special Committees * For the purposes of the Offer, the adjusted book value of each party is approximately equal; $9.00 per share for Mass and $8.91 per share for Terra Nova * Creation of a significant well capitalized company with enhanced growth opportunities and global capabilities * Creation of value for Terra Nova through integration of complementary businesses and eliminates overlap in resources segment * Permits future tax-efficient dividend policy for Terra Nova * After completion of the Offer, Terra Nova intends to effect a fourth distribution of the balance of its shares of KHD Humboldt Wedag International AG ("KID") (the "Proposed Fourth Distribution") on a tax free basis to shareholders. As the issuance of shares pursuant to the Offer and the agreement exceeds 20% of Terra Nova's issued shares, pursuant to the rules of the NYSE, the same is subject to approval by Terra Nova's shareholders. The Terra Nova Board recommends that Terra Nova shareholders vote in favour of the share issuance pursuant to the Offer and the agreement. The Terra Nova Board received an opinion from its financial advisor, Raymond James Ltd., that the Offer is fair, from a financial point of view, to Terra Nova shareholders. The Mass Board has recommended that Mass shareholders tender to the Offer and has received an opinion from its financial advisor that the Offer is fair, from a financial point of view, to Mass shareholders. The Offer is part of a multi-step transaction, which includes the subsequent merger of Mass and a Terra Nova subsidiary, designed to effect a combination with an exchange ratio based upon the fully-diluted net book value of each company adjusted in the case of Terra Nova to reflect the fair value of its Wabush royalty interest, the after-tax recovery for past royalty underpayments, excluding pending claims for interest and costs (the "Arbitration Award"), the recently completed rights offering (the "Rights Offering") and the distribution of KID shares on September 23, 2010 (the "Third Distribution"). In the case of Mass, its net book value was adjusted to reflect the fair value of its resource interests. Based upon the foregoing adjustments, for the purposes of the Offer, the Terra Nova shares were valued at $8.91 per share.