Viking

@maxthetrade i am waiting for: 1.) for the pet insurance sale to close (hopefully Sept Oct) 2.) end of hurricane season I think the table is set for another large stock buyback in Q4. Prem often telegraphs what Fairfax’s plans are during the Q&A portion of quarterly calls. Below is what he said July 29 on the Q2 call. ————— Fairfax thought their stock was crazy cheap 12 months ago and happily paid US$500 for 2 million shares. Fairfax is trading today at US$485 and it is a more valuable company 12 months later: 1.) 20% growth in net written premiums 2.) interest and dividend income run rate close to 2X what it was 12 months ago 3.) sale of pet insurance business for $1.4 billion 4.) sale of Resolute for $600 million 5.) large stable of equity holdings continue to build intrinsic value ————— Tom MacKinnon: Yes, thanks. Good morning, Prem. Just a question with respect to the proceeds that are probably going to be coming in associated with the Pet Insurance deal. It looks to be about $1.2 billion in cash now. You're buybacks, I mean, he did the SIB. But since then they've been still relatively modest. What are your thoughts as to what to do with this $1.2 billion in cash from that Pet Insurance deal? Prem Watsa: So, Tom, we are always flexible, of course, and we look at all the possibilities. We, in terms of acquisitions in the property casualty business, we are not focused on it. Because our business now is running at about $28 billion, Tom, that US dollars, of course, in 2015, it was $8 billion and in 2018 it was $15 billion and now it’s running at for 2022 , $28 billion. And that's not including the GIG, and the Middle Eastern company that we've got, which is another $3.9 billion digit close to $4 billion. So we've got a significant amount of operations decentralized all over the world and running at an underwriting profit, and very good reserving, I may add, so no acquisitions, I mean, small acquisitions here, and then Asia or Latin America, but nothing significant. And so we look at obviously, buying back our stock, that'll be the number one thing that we'd look at, but not at the expense of our financial position. I've said that many times for you, not at the expense of our financial position, but we would look at buying back our stock.

The 'holy grail' of investing is finding a company that is: 1) growing total earnings meaningfully (above trend/expectations) each year 2.) decreasing share count meaningfully each year 3.) getting a higher multiple from Mr Market (as investors, over time, move from hate to love). When one of these happens, investors usually do well. When two of these happen, investors usually do very well. When all three happen at about the same time, investors hit the ball out of the park (#3 can happen with a bit of a lag). ---------- So what has been happening with share count at Fairfax? From 2008 to 2017 Fairfax increased ‘common stock effectively outstanding’ from 17.5 to 27.8 million = +60%. This was done to fund the expansion of its insurance business: Zenith (2010) - and then internationally - Brit, Eurolife, ICICI Lombard (2015), Indonesia, Eastern Europe, Latin America, South Africa (2016), Allied World (2017). These were the years Fairfax was taking massive losses with its ‘equity hedge’ positions so expansion had to be funded largely with share issuance. The surprising thing is the price Fairfax was able to issue shares at. From 2015-2017 Fairfax issues a whopping 7.2 million shares at an average price of... US$462. Not that far away from where shares are trading today at US$485. And all shares issued from 2008 to 2017 were issued at an average price of US$425. Interesting. What has happened since 2017? The share count has fallen for 4 straight years (2018-2021). Share count has fallen by 3.8 million = 14%. That is a meaningful amount. What price were shares bought back at? 2 million were bought back in 2021 at $500 so this is likely a good average number to use. So Fairfax issues shares at $462 to fund a couple of big acquisitions and then buys back a big chunk of the shares 5 years later at $500. Meanwhile i think it is safe to assume the insurance businesses purchased back in 2015-17 are now worth (in aggregate) at least 2X what was initially paid. What will we see from Fairfax moving forward: more issuance? Or more buybacks? The answer is easy: more buybacks… and perhaps one or more large buybacks, like what happened in 2021. Why so confident Fairfax is done issuing new shares? Because that is what Prem has been telling us for years. In the past new shares were issued to fund Fairfax’s international expansion. Today Fairfax is happy with its global insurance footprint. There will be no more large, transformative acquisitions - just small bolt on acquisitions like Singapore Re in 2021. Prem also had this to say in his 2018 letter to shareholders (written in early 2019): “I mentioned to you last year that we are focused on buying back our shares over the next ten years as and when we get the opportunity to do so at attractive prices. Henry Singleton from Teledyne was our hero as he reduced shares outstanding from approximately 88 million to 12 million over about 15 years. We began that process by buying back 1.1 million shares since we began in the fourth quarter of 2017 up until early 2019 – about half for cancellation and half for various long term incentive plans we have across our company.” The pandemic hit in early 2020 and this effectively stopped any material buybacks at Fairfax for the next 12 months. But 2021 saw a big buyback and i think we will see another of size over the next year or two. Prem’s reference to Henry Singleton was done for a reason. Bottom line, owners of Fairfax can expect the share count to continue to fall in the coming years - and perhaps by a lot! ---------- Common Stock Effectively Outstanding Dec 31 change 2021 23,865,600 -2,310,906 2020 26,176,506 -654,563 2019 26,831,069 -406,878 2018 27,237,947 -513,126 2017 27,751,073 4,657,507 2016 23,093,566 879,707 2015 22,213,859 1,037,691 2014 21,176,168 -23,834 2013 21,200,002 954,591 2012 20,245,411 -130,385 2011 20,375,796 -79,451 2010 20,455,247 466,377 2009 19,988,870 2,502,045 2008 17,486,825

Makes sense. But living in Canada i have always questioned why anyone would want to own a white vehicle in the parts of the country where the winters are bad. So my guess, is the ‘best’ colours will vary somewhat by geography.

China is a wolf in sheep's clothing (politically and economically). It is run by a communist government and its core values are diametrically opposed to those of Western nations. This was ignored for decades… China’s political and economic clout was small so who cared? That is no longer the case today: China is a political and economic gorilla. And for some strange reason it has also decided to shed the sheep’s clothing. The wolf is now in plain sight for all to see. Western governments and companies are slowly and finally starting to understand the reality of China. It is a formidable adversary who plays by very different rules (THERE ARE NO RULES in a communist system… think about that). Liberal democracies are at a big disadvantage (in terms of playbook). Over time, political and economic relations between the West and China will continue to get worse. For 2 reasons: 1.) the West has woken from its stupor and recognizes China for the threat that it is 2.) China has decided it will kowtow to the West no more - in economic, political and military terms it has reached ‘critical mass’ So that means game on. With chips, the US is not poking China in the eye. Rather, the US is simply recognizing the current reality and acting accordingly (better late than never). We now have Cold War Book 2. The West vs the authoritarian block (lead by China). Western companies operating in China better get their heads out of their ass. Nvidea is just another example of what is coming for companies who refuse to deal with reality.

A big reason i like Fairfax today is the dramatic increase we are seeing in operating income: 1.) underwriting income: at a 95 CR = $1 billion/year 2.) interest and dividend income: current run rate is $1 billion $500 million per quarter ($2 billion per year) from these two items will provide Fairfax with a level of predicability and stability when it comes to quarterly cash flow that we have not seen in quite some time. The pending deals (when they close)will provide even more cash: - pet insurance sale = $1.4 billion (almost $1 billion after tax gain) - Resolute sale = $600 million (pre tax $200 million gain) A successful Digit IPO would be icing on the cake. And we likely will see more asset monetizations in the next 6-12 months (EXCO Resources?). They could tender their 13 million Stelco shares at $C$35 if they wanted to monetize another asset at a fair price. Yes, the money will need to find its way to hold co. But given we are nearing the end of the hard market i would expect the insurance subs to be dividending more to hold co in the coming years. Given the size of Fairfax today i do think it makes sense for them to hold more than $1 billion at hold co.

Me three (FFH)

I have put together a list of Fairfax's investments since 2010 (the Excel file is attached below). It is by year with insurance and non-insurance transactions captured separately. It is a pretty eclectic list (stuff I found interesting). It is also a work in progress. And not definitive. And it likely has errors. Bottom line, I wanted to better understand the decisions Fairfax was making with their investment portfolio over the years. As I said in my previous post, I think the collective decisions from 2018-2022 are much better than those made from 2014-2017. And that should lead to improved results from investments (both realized/unrealized gains) in future years (than past years). ---------- The 2014-2017 period also saw sizable losses from both equity hedges and CPI derivatives. The equity hedges were largely removed at YE 2016 with the last position sold in 2020. Sorry to pick that scab... Fairfax Equity Holdings Aug 15 2022.xlsx

My read is Fairfax continues to evolve over time with how it is managing its investment portfolio. Prior to 2018 they had a 4 year stretch where they were making lots of mistakes with their equity purchases (buying value traps/bad companies - some run by poor management teams). For the past 5 years (2018-2022) Fairfax's success rate on new equity purchases has improved dramatically - generally they have been buying value run by good to great management teams. Examples from 2014-2017? CIB Bank, Eurobank, EXCO Resources, APR Energy, Fairfax Africa, Farmers Edge, AGT Food Ingredients, Mosaic Capital, Astarta Holdings. My guess is Fairfax has had to take write downs of around $1 billion on its investments in these companies the past couple of years. Fairfax's initial investment in Eurobank of $444 million evaporated in months. CIB is a great bank (and Egypt has a currency problem), EXCO went bankrupt in 2019 and Fairfax took a $300 million loss over 2 years (2018 & 2019). Both APR Energy and Fairfax Africa each had to have had at least $200 million write downs. Farmers Edge? Fairfax just announced a $107 million write down. AGT? As its financial situation deteriorated it was taken private by Fairfax in 2019 (not sure how it is doing but given there has been very little news on the company the past year I am not optomistic). This is not to say Fairfax did not make some good to very good investments from 2015-2017: 2014: Praktiker 2015: Fairfax India IPO, Boat Rocker 2016: Golf Town (bankruptcy), Davos Brands, Blue Ant Media 2017: Altius, Performance Sports (Bauer)/Peak (bankruptcy) How does the above compare to the 5 years from 2018 to 2022? Clunkers? I come up with one in the past 5 years: 2020 - John Keells. And the issue was not the company but the country - Sri Lanka. Winners? 2018: Atlas ($500 million), Carillion (bankruptcy), Toys “R” Us (bankruptcy), Stelco (post bankruptcy), Ensign Energy 2019: Atlas ($500 million more) 2020: Fairfax total return swap (1.4 million shares + 500 million added Q1 2021); 2021: Fairfax share buyback (2 million shares @ US$500/share), Foran Mining (small bet on copper) 2022: Grivalia Hospitality, BAC, OXY, CSX, BABA ($210 million), Recipe take private ($370 million) Most importantly, most of the ‘problem children’ owned by Fairfax have been dealt with - and the financial hit taken by Fairfax. After years of solid management, Eurobank looks well positioned (let's hope Europe doesn't have an economic crisis driven by high energy prices), EXCO is now a rising phoenix (thanks to spiking nat gas). in 2019 APR Energy was offloaded to Atlas for 22 million shares in ATCO. In 2020 Fairfax Africa was folded into Helios. Farmers Edge was just written down this past quarter. AGT? Bottom line: Past problems in its portfolio of investments have largely been fixed and recent purchases look solid. Fairfax shareholders should see solid growth in its large portfolio of equity investments in the coming years which bodes well for future investment gains. ————— Recipe is perhaps a good example of ‘new Fairfax’: Fairfax wants to take Recipe private today because they think it is crazy cheap. EXCO/APR/AGT are all examples of ‘old Fairfax’: Fairfax took them private because they were in severe financial distress. Today Fairfax is spending money because they see opportunity not because they have to bail out a failing/struggling business. That has big ramifications for Fairfax shareholders over a few years. Fairfax is able to spend new money on growth opportunities (not fixing problems). The more holdings that compound in value each year the more value Fairfax is building…

One key question, likely to be answered over the next year, is will the Fed be able to achieve its goals primarily via communication or will it take much higher interest rates. So Powell gets very hawkish with his communication. Financial markets react and tighten financial conditions sufficiently for the Fed to achieve its goals (lower inflation). This is what we saw happen earlier this year - financial markets did lots of the initial work for the Fed (before the Fed even started tightening). Or, do financial markets not tighten financial conditions enough. Like what was happening up until a week or so ago (bond yields falling and stock market rallying). Moving forward, the Fed might have largely exhausted the communication tool. And will now need to rely primarily on rate increases to accomplish its goals. The Fed might have to raise interest rates higher than financial markets expect or want. The employment report on Friday will be important. Continued strong job growth suggests the Fed has more wood to chop.

Fairfax India at US$10.15; small anount. My hope is they do another dutch auction later this year ($200 million in cash plus proceeds from IIFL Wealth sale when it closes). The rub is if interest in IDBI Bank is real… perhaps that is where the cash goes. - https://www.thehindubusinessline.com/money-and-banking/prem-watsas-fairfax-shows-interest-in-idbi-bank/article65496966.ece

I see lots of rear view forecasting. It IS clear TODAY what happened over the last year - just to state the obvious. And just to be equally clear NO ONE was predicting anything close to what actually happened over the past year: - tech stock beatdown - lots down 70% - bear market in all stocks - bear market in bonds (worst ever?) - oil prices over $100; oil stocks on fire (best performing asset class) - inflation at 8% - war in Ukraine; Russia a pariah in the West - energy crisis in Europe - Federal reserve are now hawks (aggressively raising rates and QT) - Fed funds forecasted to go to 4% - bond yields across the curve much higher than anyone predicted - housing slowing dramatically - Chinese economic growth slowing (zero covid policy; crackdown on real estate) So my guess is no one really has a clue how things will look in another 12 months (economic growth, inflation, unemployment, bond yields etc). Most investors have seen big declines in their investment portfolio so far in 2022. 2023? No one has a clue how it will play out. And that is one of the things i love about investing…

I think it is very unlikely we get any new mega oil/gas projects going in Canada that require federal approval (like new pipelines/LNG facilities). And this includes some provinces like BC (my understanding is they are not even approving new drilling permits let alone considering any new mega projects). Now the energy situation could get much worse (i.e. oil and nat gas prices could spike higher and stay very high for years). Perhaps attitudes towards fossil fuels will change. And then perhaps governments will start to change their energy policies. But i think this is highly unlikely in Canada in the near term. ————— The main reason i see little change coming in Canada is the policy focus today is on Canada hitting its climate change commitments. The focus is not on helping the world hit its commitments. To hit its climate change commitments Canada will need to shrink its oil and gas production (given what we know today about the path the government wants to take). This will result in much higher coal use in the rest of the world (the non-West world prioritizes cheap energy over climate change). So Canada will hit its commitments and the world will be worse off. Because Canada could ramp production of nat gas - which is viewed as a much better transition fuel than coal - at the cost of Canada not hitting its climate change commitments. It just looks to me like government energy policy (pretty much everywhere) is completely messed up. And i will freely admit i am not an expert on this topic.

When i monitor Fairfax i focus on three broad buckets. Most importantly, what is the near term trend with each bucket: 1.) underwriting income 2.) interest and dividend income 3.) realized/unrealized investment gains Powell on Friday suggested Fed funds would be moving higher in 2022/2023 likely to something in the 4% range. He also said rates would stay higher for longer (perhaps all of 2023). (Not all of Fairfax’s fixed income investments are in the US.) Higher interest rates for longer in the US is very good news for Fairfax. This will also lead to higher rates in Canada (given the economic linkages). Europe is likely a different story (interest rates are likely to remain anemic). Fairfax has a cash/bond portfolio of about $35/$36 billion. Most of it is domiciled in US/CAN. Let’s assume a 3.5% average interest rate is a reasonable estimate looking 1 year out = $1.2 billion in interest income/year = $300 million/quarter. For reference, Fairfax earned $176 million in interest income in Q2, 2022. Fairfax also has an average duration of 1.2 years on its bond portfolio (most insurers are about 4 years). This means about 21% of Fairfax’s total bond portfolio will reset to higher rates each quarter. Each quarter we should see interest income continue to move higher. Fairfax earned $176 million in interest income in Q2, 2022 = 2% average yield. Up from $154 million in Q1 = 1.8%. In Q3 interest income could be over $200 million = 2.3% yield. Will Fairfax get to $300 million in interest income/quarter? It is possible. Another catalyst will be if Fairfax is given the opportunity to shift into securities with higher yields (if we get a significant widening in spreads). And increasing duration could also result in higher yields (should we see yields move higher in 3-5 year duration). So an average yield of 3.5% on the bond portfolio might end up being a low estimate in another 12 or 18 months. ————— This does not include dividends = $43 million in Q2. Or investment expenses = $17 million in Q2 ————— Interest & dividends = interest income + dividends - investment expenses.

@Munger_Disciple here are some thoughts: 1.) car rental: i can’t really help you here. I would contact the car rental company and ask them. Insurance coverage would be important (especially if something happened while the car was in the US). 2.) what do you in Vancouver. So many good options if you are here only a couple of days. - what kind of a vacation are you after? Busy or more relaxed? - how active are you and your wife? Very or not at all? In terms of Vancouver here are some thoughts that quickly come to mind: 1.) one of my favourite activities is biking/walking the seawall around Stanley Park. Lots of nice beaches/places along the way to stop and simply hang out at. Nothing like it on a beautiful day. 2.) another nice activity is taking the tram up Grouse Mountain (one of the local ski hills). You get a beautiful birds eye view of Vancouver. There is a restaurant up top and some fun activities for visitors (lumber jack show, captive black bears). If you are fitness nuts you can actually do the Grouse Grind hike to get to the top of Grouse Mountain (and take the tram to get back down). 3.) Granville Island Public Market is a nice place to visit for lunch 4.) if you want to shop most high end shops are on Robson street 5.) lots of great hiking options (too many to list, all rated by ability) 6.) if you have time for a coffee during your trip i would be happy to meet up somewhere (schedule permitting) If you are looking for a day trip you might want to go to Whistler. The drive is pretty scenic (sea to sky highway) and Whistler is an all season resort (lots to do). I love the ferry ride to Victoria, Vancouver Island - very scenic. And Victoria is a beautiful city (British charm… tea time etc). The ferries can be a mess (if you are taking a vehicle) especially during peak periods/long weekends but there are solutions (assured loading pass). Another option is to walk on the ferry and use transit to get to Victoria (my son did this recently so i could ask him for details). Anyways, there are a few ideas… let me know if you have any other questions ————— @Xerxes you must be quite the hiker. My wife and i did the Garibaldi lake hike when we were much younger. A friend was a park ranger so he let us stay overnight in one of the ranger cabins on the lake (not sure if they are still there). If memory serves me right it was 11km hike to the lake, 13km hike up to the ridge - with view of the lake below and view of Black Tusk in the distance - and 11km out. Pretty busy couple of days! Great trip.

FFH. < US $505

When Fed Chair Powell spoke at the last FOMC meeting he came across as swinging to dovish. What did the stock market do? It rallied. Big time. Today we got an update from Powell. He is a hawk again. What are financial markets doing? Selling off aggressively. It appears to me that the Fed funds rate is going to 4%. Crazy low interest rates juiced asset prices… big time (stocks, bonds and real estate). As rates continue to increase it only makes sense to me that asset prices will… correct. Especially the asset prices that saw the largest increases (Canadian real estate, high PE multiple stocks etc). Does this mean an investor should be 100% cash? No. It just means making money will be much more difficult moving forward. This has been the case since the Fed started on its tightening campaign. For most people NOT LOSING MONEY will be a very good outcome. Return of capital, not return on capital, will be the new mantra - until inflation is tamed. ————— Most investors the past decade were monkeys throwing darts - to do exceptionally well all you had to do was be all in on risk assets. And the riskier the strategy the better. How has that been working out so far in 2022?

True. We know some amount (probably min US$750 million range) will be spent on buying back a chunk of Allied World. That would be a solid amount. I would like to see another big stock buyback with Fairfax shares trading so low (U$525 today). I do think Fairfax’s stock price is going to pop at some point in the next year or two and likely significantly. So i would like to see another big stock buyback this year (while the stock price is still cheap). I don’t know why Fairfax does not get rolling on the NCIB… perhaps the stock is traded too thinly for them to be able to buy back stock in volume without jacking the price. ————— And i don’t think it gets more expensive for Fairfax to hold off buying out the minority owners in Allied, Brit and Odyssey. I think they just need to keep making the dividend payments each year. But i could be wrong.

Fairfax India is a strange animal to me. Given its stock is currently trading below $11 i am not sure it is a value trap at the current price. My guess is a new investor will earn an adequate return on their investment. (Legacy investors who bought at a much higher price… well that is a different matter.) Fairfax India’s managements team’s performance has been very good (book value growth since inception). Their hit rate with investments has been very good. They own an impressive group of assets that look well positioned to grow in the future. They have started to monetize some legacy positions that have increased substantially in value and are re-deploying into new opportunities (like Maxop/Jaynix). Management has been getting more aggressive with share buybacks (no brainer use of cash). They have a high cash balance today and will have much more when IIFL Wealth sale closes. This suggests to me another big buyback is coming (perhaps another Dutch auction). This use of funds is also is very good for Fairfax shareholders (significantly increasing ownership in a very well run company).

The near term set up for Fairfax is looking very good: 1.) benign hurricane season (so far): positive for underwriting income 2.) interest rates are headed higher once again. 4% Fed funds rate later this year is possible; this would likely drive interest and div income to $1.3 billion (run rate). Each quarter moving forward should see a nice increase in this bucket. 3.) monetizations: - pet insurance: $1.4 billion - Resolute: $600 million + - Stelco: do they tender? - Digit IPO: timing? - other monetizations? I wonder how much Exco is worth right now? Especially if nat gas prices spike higher as we get into the fall? 4.) other: - Atlas: how does take private conclude? - Recipe: how does take private conclude? - minority owners Allied ($750 million debt offering): details? 5.) stock buybacks: when and how much? - NCIB or another dutch auction 6.) what else will Fairfax do? Bottom line, given all the tailwinds, i think US$505 is a great entry point. And i won’t be disappointed if it does lower (what do you do when one of your favourite cereals go on sale at the grocery store?). ————— Near term risks: 1.) hurricanes 2.) Sept/Oct bear market in stocks 3.) Ukraine was escalation 4.) energy crisis in Europe worsening; spreading to rest of world 5.) Fairfax specific: one or more announced deals do not close

@Thrifty3000 here are some thoughts: 1.) dual share class structure: has always existed. Didn’t seem to matter to investors in the past. Yes, Prem is getting older… but some would argue Fairfax stock might go higher if he was no longer involved. I am not worried the kids will mess it up (at least for a few years). 2.) NYSE listing: Fairfax delisted from NYSE in 2009. This didn’t seem to matter for many years… Would NYSE listing help? Yes. Demand for shares would be higher. What will help Fairfax shares? Delivering great results. What to do with earnings? With the hard market rolling over: 1.) continue to buy out minority shareholders 2.) buy back stock

Adding to FFH. US$505 is a great price. Continuing to lighten up on my oil holdings today… up 16-17%; single digit weighting now. Love the wicked volatility in energy stocks. Happy to take quick gains with my commodity holdings.

Nice to see Europe has its energy issues resolved. After all, winter is coming. Inflation of 18% in the UK in 2023? Phew… i was getting worried there for a while… My guess is the energy crisis in Europe is no where near resolved and with each passing month the news will likely get worse. Sounds like the UK will have gas… just at astronomical prices. Just like a Monty Python movie we keep hearing… nothing to worry about… “just a flesh wound.” Meanwhile, still no plans to meaningfully pivot government energy policy (short term to address the supply or demand sides of the problem). And with Europe vacuuming up world energy/LNG supplies this will simply push the shortages to other regions. Anyone who understands how all of this is going to play out over the next 6-8 months should get very rich (I have no idea.) ————— UK inflation will hit 18% in early 2023, says leading bank Citi - https://www.theguardian.com/business/2022/aug/22/uk-inflation-will-hit-18-per-cent-in-early-2023-says-leading-bank-citi-gas-electricity Inflation in the UK will hit 18% early next year as consumers count the cost of the deepening energy crisis, one of the world’s biggest banks has predicted. The US financial services group Citi said it expected the consumer prices index to breach 18% in the first quarter of 2023, while the retail prices index inflation rate would soar to 21%. Citi’s prediction is significantly higher than previous modelling of the impact of rising costs. Earlier this month the Bank of England said it expected inflation to reach 13% by the end of the year, while the Resolution Foundation thinktank has forecast it could reach as high as 15% by early 2023. Asked about the possibility of blackouts this winter, Downing Street downplayed concerns. A No 10 spokesperson said: “Households, businesses and industry can be confident they will get the electricity and gas that they need over the winter. That’s because we have one of the most reliable and diverse energy systems in the world.” She said consumers should not panic or feel they should cut down on energy use. “These decisions, in terms of energy consumption, remain decisions for individuals. But what I’m saying is that households, businesses and industry can be confident that they will have the electricity and gas that they need.”

@wondering i added an edit to my original post… yes, i did not include a bucket for ‘large cap stock purchases/sales”’ as that is a pretty standard type of investment (and there are lots of transactions and its is often hard to get accurate buy/sell information).

Is Fairfax undervalued today trading at US$505? My vote is yes. And probably by a lot. Ok, smarty pants… Why is it undervalued? 1.) i think the primary reason is very poor past performance. This has been discussed quite a bit already so i am going to move on. 2.) another important reason is its misunderstood (and/or under-appreciated) business model. Fairfax has a business model that is unique in the insurance industry. If investors do not understand what you are doing, and you have underperformed for the better part of a decade, then your shares are going to trade at a discount. Welcome to Fairfax 2022. ————— Rather than discuss what Fairfax has in common with other insurers, i am going to discuss what makes it different than most. Do I have the buckets below about right? My goal is to capture the full range / types of investments Fairfax makes. Yes, some positions could be included in more than one bucket. Successfully investing in each bucket requires a very different skill set. Just one example: it has taken Fairfax years to build out its investment team in India; that investment in time and people has been completed and Fairfax shareholders are now reaping the reward. The amount of $ invested in each bucket is also significant. It is pretty interesting what Fairfax has built out over the years. What is also VERY INTERESTING - after hitting a rough patch from 2016/2017 - Fairfax's hit rate (success rate) with new investments has improved quite a bit over the past 5 years... ---------- Not included below is the usual buy/sell large cap US/Can stocks (too many buys and sell to try and list everything). With the list below I am trying to highlight what Fairfax is doing in addition to this traditional strategy. ---------- 1.) Fairfax is a venture capital investor: funding given to startups or other young businesses that show potential for long-term growth ICICI Lombard (1994) - sold for @ $1.2 billion 2017/18 Quess - formerly IKYA (2013) - via Thomas Cook - still owns - home run Digit (2016) - IPO likely coming late 2022 or 2023 Davos Brands, Rouge Media, Blue Ant Media (2016) Farmers Edge (2017) - looks like a big miss Boat Rocker (2018) Ki (2020) 2.) venture debt investor: using warrants as sweetener. pre-2016 i think there were lots of these deals; too many to list. EXCO Resources (I think) APR (2016) Chorus Aviation (2016) Mosaic Capital (2017) Altius minerals (2017) AGT Food and Ingredients (2017) Westaim (2017) Seaspan (2018) - massive $500 million Leon’s (2020) 3.) Incubator/accelerator investor: fostering early-stage companies through the different developmental phases (including funding to accelerate growth) until the companies have sufficient financial, human, and physical resources to function on their own. First Capital - Singapore (2002) - sold for $1.7 billion 2016 Riverstone UK - run-off (GFIC 2010) - sold for @ $1.5 billion 2020/21 Hartville Group (2013) & Pet Health (2014) - sold for $1.4 billion 2022 Others? 4.) distressed/bankruptcy investor: don't have the cash flow to service their debts and are fighting the clock Bank of Ireland (2011) - sold for +$1.4 billion 2014-17 Eurobank (2014) Golf Town (2016) - merged with Sporting Life Performance Sports (2017) - Bauer/Easton/Cascade Carillion Canada/Dexterra (2018) - merged with Horizon North 2020 Toys “R” Us (2018) - sold retail operations 2021 5.) Real estate investor Kennedy Wilson (2010) - ongoing, growing and very successful partnership Grivalia - Greece (2011) - very successful; merged with Eurobank in 2019 6.) asset manager Fairfax India (2015) - ownership has increase from 28% to 42% Fairfax Africa (2017) - merged with Helios 2020 - spectacular failure 7.) private equity investor (via external fund managers) - funds allocated here continue to meaningfully grow BDT Capital ShawKwei Lots more 8.) turnaround investor: not fighting the clock. Many of Fairfax’s investments became ‘turnaround’ situations after Fairfax made their initial investment especially 2015-2017 vintage. Sandridge Energy (2008/09) - bankrupt 2016? Abitibi/Resolute (2008) - sold 2022 The Brick - merged with Leon’s 2012 - sold Leon’s 2021 Blackberry (2011) - still owns full position Torstar - sold Reitmans (2013) - sold 2019 EXCO Resources - bankruptcy - take private 2019 (Fairfax owns +40%) Fairfax Africa (2015) - merged with Helios 2020 APR (2016) - sold to Seaspan/Atlas 2019 Chorus Aviation (2016) - current status ? AGT Food Ingredients (2017) - take private 2019 Mosaic Capital (2017) - take private 2021 (not managed by Fairfax) Farmers Edge (2017) - to be determined 9.) Resource investor International Coal Group (2006-09) - coal play - sold for big gains Sandridge Energy (2008/09) - bankrupt 2016? Abitibi/SFK Pulp/Resolute (2006-09) - paper, pulp & later lumber - sold 2022 Tembec (2015) - lumber - sold 2017 EXCO Resources - natural gas - bankruptcy/take private 2019 Altius Resources (2017) - resource royalty play Ensign Energy Services (2018) - oil and gas services Stelco (2018) - steel play Foran Mining (2021) - copper play 10.) international investor (2014 was a big year) Bank of Ireland (2011) Grivalia (2011) Mytileneos (2013) Thomas Cook (2014) CIB Bank (2014) Eurobank (2014) IIFL John Keells

Just another strange day in oil markets… ———— OPEC+ Is Now Almost 3 Million Bpd Behind Its Production Target - https://oilprice.com/Energy/Crude-Oil/OPEC-Is-Now-Almost-3-Million-Bpd-Behind-Its-Production-Target.html The gap between overall quota and actual oil production from the OPEC+ members has been growing for more than a year, with many producers unable to raise production due to capacity and/or investment constraints, while the alliance has added more barrels to its monthly oil production target. Moreover, production in Russia, albeit stabilized at a level from February, just before the invasion of Ukraine, hasn’t increased as it should have been under the OPEC+ agreement. But while the Saudis have been raising production in recent months, Russia has not. In addition, many OPEC+ members, especially OPEC’s African producers Nigeria and Angola, have been significantly lagging behind their respective quotas. ————— Saudi Minister Says OPEC+ Could Cut Production At Any Time - https://oilprice.com/Energy/Energy-General/Saudi-Minister-Says-OPEC-Could-Cut-Production-At-Any-Time.html Citing “disconnect” in the oil futures market, Saudi Energy Minister Prince Abdulaziz bin Salman dangled the threat of potential OPEC+ production cuts that could come at any time. In an interview with Bloomberg on Monday, the Saudi energy minister said that “extreme volatility” was “undermining the market’s essential function of efficient price discovery”, in turn rendering it impossible for physical users to manage the costs of hedging or navigate the inherent risk. “This vicious circle is amplified by the flow of unsubstantiated stories about demand destruction, recurring news about the return of large volumes of supply, and ambiguity and uncertainty about the potential impacts of price caps, embargoes, and sanctions,” the Prince told Bloomberg. Without sufficient liquidity, he said, there is a high level of disconnect, which means the “markets can’t reflect the realities of the physical fundamentals in a meaningful way…”. The Prince described the markets as being in a state of “schizophrenia” and creating a “yo-yo” market that has lent a false sense of security.