Viking

FFH = 20% BRK.B = 12% ORH = 6% GVC = 2% (Can small cap) Cashable GIC's = 60% In the last couple of days I sold: 1.) smallish positions in WFC, AXP & GE. I bought these a month ago as short term speculation (sorry value guys) and got lucky. 2.) small positions in BRK.UN & CFX.UN as FFH gives me exposure to same names or exposure to sector via other companies. Yes, I took a hit selling these two. Bottom line is I really like how things look with my current portfolio.

I have been reading his weekly newsletter each Sunday night for the past year or so. I find he can get repetitive at times (who has something interesting to say every week?). Bottom line is I really do enjoy his commentary as it is not mainstream, he educates and he explains his logic.

Al, I agree that I do not understand many of the Canadian investments at the prices that were paid... TS, CGS, ABH, IFP.A, SFK, BRK.UN, JAZ.UN, Mega Blocks etc. All are severely under water. Some have lots of debt... Some have pretty poor management... I am just trying to understand what the common theme is and how they are going to pay out over the medium term (i.e. 5 to 10 years). I am not trying to be an armchair quarterback... FFH has made many, many more great decisions over the past two years. Unfortunately, the above names have done quite a job on Northbridge performance the past 12 months.

Sharper, good question... Why do the interview and why now? I was surprised at how angry he said he was at AIG. Obama is reportedly looking into the bonus payments. In this environment, how does AIG keep its good people? I was also surprised he said he expects the economy to bottom this year and recovery to start next year. If things do not play out this way he has set himself up big time (look at how people are quoted from back in the 20's and how silly they sounded after the fact). It is interesting that he is not from Wall Street, leading one to conclude that perhaps he is less biased than most everyone else. Perhaps he is trying to build his credibility directly with the American people so he has the 'political capital' to play hardball with Wall Street interests as this crisis enters its next phase...

Regarding what has gotten us into this problem in the first place, perhaps Jon should have simply followed the money... The ratings agencies did what they did because of the $ they stood to earn. Companies juiced short term results (leveraged up and too on enormous risk) to get more ever increasing stock options. How does CNBC mke money? Advertising and by getting CEO's to appear on the show, both of which would dry up if they played hardball. End of story...

I just finished watching Jon and Cramer go face to face... I am not sure what Cramer was trying to accomplish by going on the show. Jon provided many examples of how CNBC is blowing it and Cramer just kept agreeing and was unable to say anything that made any sense the whole time. Cramer should have simply said that very few people knew how bad things were. Cramer also should have fessed up that his show has a lot in common with the World Wrestling Federation (is it really real???)!!! I was also surprised at how angry Jon was during the interview (there wasn't a lot of comedy)! Serious stuff I guess. Let's see where it goes from here...

Earlier today I also decided to begin dating the blonde (sorry). Personally, I do not have a problem with the fact I already have a pretty serious relationship with the brunette. But please just don't tell my wife (a brunette) as she is the jelous type (Italian) and likely will not understand!

Broxburnboy, given the very large investment losses we have seen at NB the past two quarters do you not think that most of the losses have not already been taken (i.e. CGS, SFK & AB have been trading in distressed territory for at least the past 6 months of 2008). Yes, given current market levels, more 'other than temporary losses' are likely in Q1. However, offsetting this will be the remaining CDS positions and the higher yield in the equity and muni bond portfolio.

FFH sold off quite dramatically and that got my attention (20% position). In the past week ORH has followed suit. I likely will buy more on weakness and I am trying to understand why I would want to buy ORH. Mungerville, I believe you hold ORH. Can you help me understand why you favour it over FFH? My guess is ORH is much simpler to understand and value and has solid underwriting and better predictability... What do others think?

This article looks like it could have been written by FFH (or BRK). As they continue to invest their cash hoard we likely will hear many complaints about how they are too early... It will be instructive to see what moves they make quarter to quarter. The big changes in Q4 were: 1.) exiting US Treasuries 2.) moving into tax exempt municipal bonds 3.) removing the equity hedges 4.) purchasing more common stocks What opportunities will Mr Market provide in 2009? Quotes I liked from Grantham's article: "Sensible value-based investors will always sell too early in bubbles and buy too early in busts." "Life is simple: if you invest too much too soon you will regret it; “How could you have done this with the economy so bad, the market in free fall, and the history books screaming about overruns?” On the other hand, if you invest too little after talking about handsome potential returns and the market rallies, you deserve to be shot." Here is the link to the Grantham article... [ftp=ftp://http://www.gmo.com/websitecontent/JG_ReinvestingWhenTerrified.pdf]http://www.gmo.com/websitecontent/JG_ReinvestingWhenTerrified.pdf[/ftp]

Interesting that she did not comment on the fact that FFH has been loading up on some common stock positions that match BRK (J&J, KFT, WFC etc)... Unfortunate that she mis-represents what Buffet said... my understanding is he was not 'calling the bottom' but instead stating that purchases made at that time in well managed low debt companies would produce good long term results. I do like all the Buffett bashing (similar to 1999) as BRK has traded down significantly and I have finally been given the opportunity to make my first purchase in the past couple of weeks. Diane, thank you. Cramer, you also keep up the good work! (As I would like to buy more at even lower levels!)

sfwusc, I do not mean to sound disrespectful. Based on you logic it almost sound like one should not get out of bed in the morning. On your way to breakfast, you may slip on that banana peel and bang your head. You may get into a car accident on your way to work.... Insurance companies should close up shop. The big earthquake may hit the West Coast and put all insurers out of business... To not do something because their is a very small chance you may lose is not a good decision. The key is what you are getting paid to take on the risk. 5 billion in premium is not chump change. Yes, there is a risk. BRK likely will do very well with this investment. Bottom line, lets perhaps start evaluating it in about 10 years...

woodstove, regarding strategy and FFH & BRK, I view them each as very different animals. BRK to me is the 800lb Fort Knox. They are so large their investment options are quite limited (although not the case in the current market environment). Buffett also is looking for cash flow machines. And he is looking for companies to buy outright (again he has the size to do this). FFH to me is much more like a shareholder oriented hedge fund. I do not hold them primarily as an insurance company with solid underwriting skills. I hold them because I think they are great investors who care about their partners. The current environment must have them salivating at all the opportunities. Compared to BRK, I think they offer a higher return but also higher risk. Love both companies but hold for two very different reasons.

I also was wondering what was up with the CDS's. 8 billion notional is still half of what they had at their peak. Nice opportunity given current fall out with global financials...

Mikenhe, to understand what has happened to FFH the past 4 weeks you simply need to look at the industry. All insurers are down and by a lot. The best example is probably BRK.

SFValue, your question has been asked on this board once or twice a year for the past 6 or 7 years and I still do not know the answer. Bottom line is FFH is a very volatile stock. When you look at the price of the stock and compare to book value it is trading at an attractive historical valuation. I was asking myself this morning if the stock at current pricing offers a better value than when it traded at $100 two years ago. It may not be as cheap at current levels but offsetting this is the much better financial position the company is in and the fact it also now owns 100% of NB and 70% of ORH. Can FFH go lower? Yup. Past history has taught me that buying at current levels has been a good move.

It was interesting to see the overlap in holdings with BRK. I must admit to being a little surprised by this given all the choices out there and Hamblin Watsa's historic record.

Woodstove, I agree that going 'all in' on one investment is a risky proposition; fortunately it has worked for me on multiple occasions over the years with FFH (over short timframes). What is also missing from the above analysis is what low probability but wonderful events we may see from management (referred to by many over the years as 'pulling rabbits out of the hat'). I look forward to the future to see what the FFH team will do to grow shareholder value (that we do not see today). Perhaps these somewhat offset the risks to what you mention. I also expect FFH to continue buying back large amounts of shares at these prices (one million plus) should the stock trade this much below book for any length of time. Look at where they have put their earnings last year... ORH, NB and FFH buybacks... then buying NB... I am not sure they will buy the remaining 30% of ORH next. Perhaps the next step will simply involve buying FFH shares to offset all the dilution that took place during the lean 7 years.

Regarding hold co cash, yes NB needs to be paid for. Fortunately, they also should have decent capacity at the subs and runoff to pay another round of healthy dividends this year (based on earning last year). Lots of flexibility and lots of good options... I wonder if FFH was in a blackout period prior to the annual being released?

I think it is also important to remember that volatility is the friend of FFH. They are active managers and have demonstrated they understand the current environment very well. It will be interesting to read the Annual Report this weekend to better understand the protection they have built it. Also remember their competitors are also in the very same environment. As investment portfolios continue to get trashed and capital is reduced at some point the hard market has to arrive. Last year I tried a strategy of piggy backing on the well publicized purchases made by FFH and Buffet. I did OK (roughly broke even). What I learned is their individual purchases were made with the total portfolio in mind and with hedges in place. This year, I am more than happy to be able to going back to buying FFH (and now BRK) directly and let Prem and Warren manage a large chunk of my money for me.

As of last night I was 80% cash and 20% stocks. As of right now I am 60% cash and 40% stocks, with FFH (20%) and BRK (10%) my largest two holdings. I also have initiated small positions in GE, WFC and MKL (and continue to hold a couple of Canadian income trusts). Amazing to me the swings we continue to see in FFH. 'Worth' over CAN$400 a couple of weeks ago. Now 'worth' CAN$282, for a 30% change! The bottom last year was CAN$220 and since then it has reported earnings of US$45. The company is in a much stronger position today and looks to be trading near its lows (adjusting for earnings growth). Regarding BRK, this is the first time I have owned!

Carvel46, thanks for the link... if you follow and scroll down you can also access Jesse Livermore's How To Trade In Stocks (1940 ed). Love reading historical stuff!

I am hoping: 1.) with their recent ratings upgrade this will help them attract business at better rates 2.) other companies (to survive) are being less conservative with their reported underwriting numbers (which we will not know for years... i.e. look at all the stuff that came out of the closet in 2000-2005). I would like to see FFH improve with their underwriting results. That would make this stock a core, long term hold in my mind.

I think Fairfax is a very hard company for most people to wrap their head around. I am not sure how institutions would value the company. Their business model has evolved so much over the past 36 months. You cannot simply look at what has happened the past 5 or 10 years and then simply roll that forward. For insurance companies, most analysts lean heavily on predictable operating earnings. Looking at FFH the past 5 or 10 years on this metric would be difficult. How do you build in investment gains? Canwest? Abitibi? They have made some interesting purchases. Bottom line is the majority on this board feel good about FFH's future because they TRUST management and feel the bets they have made (and will make in the future) will work out (similar to the past 5 years). FFH appears to be evolving into a hedge/mutual fund with their core business being earning above average earnings off their investment float. I expect their share price to continue to have a lot of volatility as Mr Market does its thing.

On Friday I also bought a small position in BRK.B and smaller in Wells Fargo - WFC. I am debating if I should increase BRK to 10% of my net worth. If it sells off, I would double up. Rather than pick up the individual names (i.e. WFC) just go with BRK at current prices. FFH also got my attention today.