Viking

Attached below is my tracking file for Fairfax equity positions updated for March 31 stock prices. Please note, I have NOT updated any of the positions to reflect information in the AR (hoping to do this in May). I also added Farmers Edge and Boat Rocker but need to confirm shares owned by Fairfax. Fairfax saw an increase of about $1.5 billion = US$60/share (pre-tax). About $20 of the total is market to market and $40 is associates/consolidated. This is similar to what I came up with for Q4 and Fairfax blew that number out of the water when they reported results; so my guess is my estimate for Q1 is low again. Gains were very broad based. Biggest gainers for Q1: 1.) Atlas = $350 million (shares + warrants) 2.) Blackberry = $183 (shares + debentures) 3.) Eurobank = $166 4.) Fairfax India = $154 5.) Resolute Forest Products = $166 6.) Fairfax Total Return Swaps = $133 7.) Quess = $99 8.) Recipe = $81 9.) IIFL Finance = $65 10.) Stelco = $59 Fairfax Equity Holdings Mar 31 2021.xlsx

The European/japanese investment banks can’t seem to catch a break. $1 billion here, $1 billion there and pretty soon you are talking real money... ————————————- “ CFDs aren’t legal in the U.S. but their usage in other regions, particularly Europe, may be something that regulators weigh as they monitor this margin-call situation, Amy Lynch, a former SEC regulator and president of FrontLine Compliance, told MarketWatch in a Monday-afternoon interview. “Extremely risky,” is how she characterized CFDs. “[u]It’s kind of like being able to go into a naked position[/u],” she said, referring to naked bets where investors use derivatives to gain exposure to an investment without owning the underlying asset. to gain exposure to an investment without owning the underlying asset.

It is interesting to see how leveraged this one fund was and how, when stressed, it impacted not only specific stocks and sectors but also the overall market. Let’s hope this is an isolated case :-) Hard to understand how more transparency would not be beneficial.

Vancouver and Toronto are 2 very different cities on opposite ends of the country. Have you ever tried living in either? It's basically like Chicago/NYC vs Seattle. I purchased a home outside of Vancouver in December. I had to put in a bully offer 4 hours after the property was listed, after getting outbid on a number of other properties. Since then the market has apparently gotten even crazier with fewer listings on the market. The vacancy rate in the city I purchased is currently under 1%. Logically one would think it is a good time to pick up a condo in downtown Toronto with the mass exodus caused by the pandemic, but all of the government bailouts seem to have prevented a significant correction in prices at least for now. There was an article in the G&M a few weeks ago about bidding wars returning at some condo buildings. As others have mentioned the government policy to prop up Canada's lagging productivity is to increase immigration rates to some of the highest in the world. As long as this policy continues it will create pressure on the real estate market. There is tons of red tape and regulatory issues with building new housing units in Canada right now. The interesting thing is immigration numbers the past year are at historic lows (% of population) and housing prices have spiked and at at historic highs. So i don’t think immigration is the issue today. Now, moving forward, if the government does expand immigration to 400,000 per year then this increased demand for housing will impact prices. There are so many one time ‘historically high or low’ factors impacting the economy in general it is pretty much impossible to predict with any certainty where we go from here. Stay inquisitive and open minded (as Druckenmiller likes say).

I took 2 things away from this. 1. Your life sounds very nice and congratulations on this set up. Sounds like a great family setup and overall lifestyle. 2. Holy shit, I knew Canada housing was expensive but that is another level of insanity. That’s like less half the gross rental yield in my area, and many would consider housing in wealthy suburban DC to be “expensive”. From a financial perspective, the housing market in areas like Vancouver and Toronto is predicated on continuing price appreciation. For buyers at todays prices to make money they need to see continued price appreciation for their ‘investment’ to pay out. But it has been happening since 2000 so why would it not continue? The new wrinkle, with the recent price explosion, is they also need cheap money to stay cheap (5 year fixed mortgage rates to stay at 2%). The interesting thing about Vancouver is it is a small city. It appears an enormous amount of money is flowing in from Hong Kong (due to China’s crack down - people are looking to get out once and for all). More money is flowing in from China. There always has been a big amount of drug money laundered through the housing market here. All of these money flows have nothing to do with return; they are all about capital preservation. Add it all up and you get a spike in prices that has nothing to do with the local economy and what the average family earns. Today residential housing is now 9.2% of Canadian GDP; i think the US is a shade under 5% (and was about 6.7% during the 2008 housing bubble). Interesting times :-) - https://betterdwelling.com/canadas-over-30-more-dependent-on-real-estate-than-the-us-in-2006-shows-gdp/

I think the same thing has happened in Vancouver; rents have come down quite a bit year over year. However, the provincial government has announced that all universities will be full in class instruction in the fall (no online or hybrid) so demand from domestic and international university students will spike demand for rentals. Once travel opens up (further down the road) the Airbnb supply (converted to rentals because of covid) will be taken out of the rental market. So my guess is it will take 6 to 12 months for supply to get tight and prices (rents) to spike. The challenge for landlords in Vancouver is the rental market is heavily regulated by the government. Once they drop their rent it is very difficult to quickly get it back to what it was (if you have a long term tenant). Here the government actually sets the maximum allowable rent increase = 2.5% in 2019, 2.6% in 2020 and 1.4% in 2021. Crazy low. So if you are able to find a good rental at a good price with a landlord that wants to rent long term this is a very good time to rent in the urban parts of Vancouver.

My guess is crazy low interest rates are THE key driver of this current mania. Currently in Canada you can get a 5 years fixed rate mortgage (the norm in Canada) for about 2%. Historic low (about). And central banks have confirmed rates will be kept crazy low until at least 2023. So my guess is prices will continue higher and perhaps much higher. Covid has crated a situation where a whole bunch of things are happening at the same time creating a record spike in prices. Over the next 3 to 6 months, as Covid is hopefully brought under control and we return to a more normal situation, the question becomes how will behaviours change again? 1.) will demand to move out of the city and into the suburbs slow? 2.) will supply of houses in the suburbs increase with more people comfortable selling? Demand from Speculators: And now speculators are jumping in with both feet. Real estate has been the gift that keeps on giving (since 2000 in Canada) and NEVER goes down. A one way train = easy money. Demand from immigration: The government in Canada wants to jack immigration post Covid to 400,000 per year and these new citizens will need to live somewhere (buy or rent). Canada’s population is 37.8 milion. Demand from overseas money and money laundering: little data but both are perhaps significant drivers of steady demand and unlikely to slow. Cost for new build: is increasing dramatically (just look at lumber).

My rule of thumb is if you are going to be living in the area long term then buying is an ok option. The key is ‘fit’: personal and financial. Below are details of how my wife and i went through this process. My wife and i have recently decided to move (Langley to North Dunbar area of Vancouver). We will be renting a 4 bedroom house ($5,000/mo) and selling our house in Langley. (For interest, it costs about $3-$3,500 to rent a 4 bedroom house in Langley - located in the suburbs - about 60 minute drive from downtown Vancouver.) The house we will be renting is worth about $2.7 million. We made the decision looking at two buckets: 1.) personal situation - this is the driver 2.) financial situation - also a consideration Our view is we will be improving both our personal and financial situation with the move / sale / rental. Personal: our youngest (of three) is just graduating from high school. All 3 of our kids will be attending the same university in the fall (UBC) located on the other side of Vancouver (from where we live today). We chose to live in Walnut Grove, Langley because it was a great place to raise kids (great schools, quiet, safe, lots of other kids, parks, shopping, community centre, bike trails - most everything walking distance from our house). But now that our kids are gone both my wife and i are wondering what is next for us. So we decided to move to a really fun part of Vancouver - we found a rental that is in an established community and walking distance to beaches, shopping and great restaurants. I’m a biker and there are lots of great options for exercise. Our new place is also 20 minutes from UBC (Langley was about 70 minutes away). Our kids will be living on campus but it will be great to be closer (we are already lining up family dinner night when they are back in classes this fall). Financial: we will net a significant gain on the sale of our house tax free. We will be able to drop about 1/3 of this gain into our TFSA (which we drained the past couple of years). I did the math and we have earned 15% per year since buying our house 11 years ago. If i can earn mid single digit returns on the proceeds from selling the house we will be living close to rent free in our rental. If i do better than mid single digit returns we will be making money. Our current house in Langley is about 30 years old and needs about $80,000 in renovations. I estimate it would have cost us about $2,000-$2,500 per year to continue to live here (interest on small mortgage, property tax, maintenance, needed renovations etc). So spending $5,000 is ‘costing’ us an additional $2,500/month. And i can now invest the proceeds :-)

The picture you attached to your post made my laugh like hell. Nice lid :-)

Agreed. However, there are some years when Fairfax will grow BV by 15%. There are 2 key drivers to Fairfax being able to hit 15%: 1.) insurance underwriting 2.) investment results - especially equities Given the hard market in insurance and how they are positioned today with their equity holdings i think they can hit BV growth of 15% in 2021 :-)

SNC - with Dalzel and others pounding the table so hard... time to do do some research.

What is super interesting today is we have so many significant experiments going on. Like QE. And governments spending like (almost) never before. At the same time we have significant one time things going on. Like a pandemic. And then a massive recovery. That is global. And what are the linkages of all these significant events. My base case is we get 12 months where economic growth surprises to the upside. But good luck predicting where we go from there. It depends on what happens to: - virus - is it defeated? What does that look like? - US economic growth - how fast does service sector bounce back? Travel? - employment - how much does it bounce back? How fast? - fed - what will they do as the economy heats up? Will they wait for markets to throw a tantrum before acting? - interest rates - how fast and how high do they go? - federal government - is an infrastructure bill passed? Higher corporate taxes? - global economy - how fast does the global economy open up? Travel? - debt - do debt levels matter? How much and how fast will they grow from here?

When i post on real estate you probably should stop reading. :-) I think interest rates are very important; if they are driven by inflation expectations then i would expect higher inflation leading to higher interest rates leading to higher mortgage rates to matter (impact real estate pricing). How much? It depends on the magnitude of the move in rates, the country and which segment you are talking: residential, office, commercial etc. Talking residential, my read is the US has a long runway ahead for higher prices given the big correction in prices after 2008, current lack of supply (after under-building for years) and consumers who are not over levered. The market is poised for a multi year run. Crazy low interest rates will just turbo charge the ST gains. Higher rates will just result in a slower march higher. Residential in Canada is in a very different situation. We had no big correction in prices post 2008 (just a dip), new supply has been coming on the market (Canada was not under building like the US) and consumers are the most levered they have ever been (by far). Especially the big cities like Vancouver and Toronto. The pandemic is also another overlay. Single family homes in Canada are currently in VERY short supply (no one wants to move out of a house with space right now). At the same time there is massive demand as a massive amount of people are desperate to get out of their tiny accommodation and into a house (especially if they have small kids). And the gasoline on the fire the past year has been interest rates. In Canada the most used mortgage is the 5 year fixed rate (with an much amortization of 25 years or longer). People were able to get 5 years mortgage rates as low as 1.5%; i think they are around 2% today. So we have historically low supply, historically high demand and historically low interest rates. I think it is having an impact of housing prices (‘hottest housing market ever’ was a recent headline). Where i live (suburban Vancouver) prices are going up right now about 10% per month. Would a 1.5 or 2% mortgage rate result in a sudden spike higher for single family homes in the US? My guess is yes. (Now i know the mortgage market is different in the US but just image if a 2% mortgage rate was possible and normal). Now what happens when, post covid, the economic recovery takes hold and inflation starts to tick higher and bond yields/mortgage rates start to normalize/increase to the average of the past 5 years? For residential real estate in the US i would expect price increases to slow or perhaps go side ways. For residential real estate in Canada (in the urban centres) i would expect a correction in prices (remember my opening line). Especially if, post covid, supply spikes (people want to cash out) and demand slows (people decide they no longer need to move into a bigger space). Crazy times here in Vancouver.

I guess I am in your camp, but I think the risk/contrary view is quite simple. Given the past decade, what should give an investor confidence about any of these things? Take your number (3) - no artificial restraints on investments. I'm not sure that is the case. It is very much unclear that any of the BB position was sold. Why not? Everyone here was jumping up and pounding the table to monetize. Fairfax was certainly aware. If they didn't monetize, I'd guess it was some type of artificial, shareholder unfriendly, self-imposed restraint on dumping the BB position. How about (4) - Fairfax was done shorting, but managed to lose a cool $704 million in 2020 in short equity positions. More than 6% of the current market cap. Just a massive amount well after they realized that it isn't something they should be doing. Basically, they've managed to screw things up in the recent past. How can one be certain they won't screw things up in the future, perhaps in new and unforeseen ways? What are the big risks in investing today in Fairfax? 1.) crash in equity markets. One scenario is virus mutates into more lethal version; current vaccines no longer work etc 2.) catastrophic insurance event (Much bigger than Texas) 3.) Fairfax management credibility. Below are just a few examples: - makes a big insurance acquisition. And overpays and uses Fairfax shares to pay (trading well below book). - spends $500 million or even $1 billion on a swing for the fence, supposed ‘deep value’ stock in a shitty industry with terrible management. - starts pouring big money (hundreds of millions) into current equity holdings that are struggling to help them make acquisitions and grow their business. Funded by selling the good assets (like Riverstone UK). Peter Lynch called this ‘pulling the flowers and watering the weeds’ I could go on. My eyes are wide open in understanding the risk investing in Fairfax. I will monitor the situation very closely. If Fairfax management does stupid things i will react accordingly with my shares. I like to describe Fairfax as a hairy type investment. So it is likely a trade for me and not a long term ‘buy and forget’ type stock.

StevieV, i agree with pretty much everything you say. And in terms of last year, my big purchase was Nov after the vaccine news came out. My point was more along the line that from March and for much of 2020 investors had lots of opportunity to pick Fairfax up at a very good price. So we agree that Fairfax has been a terrible investment for investors who bought and held for the past 7-10 years. Especially those who bought in US$ 10 years ago. The issues that Fairfax has had with its business the past 10 years have been well documented on this site (each and every year) and i don’t think they have been sugar coated. I am simply of the opinion that Fairfax has been, for a few years now, slowly been dealing with many of the core issues that were causing underperformance. And yes, it has been 2 steps forward and one step back sometimes. I want to learn from the past. But what i care about more is what will happen in the future. Investors often get anchored in the past and it prevents them from being objective when assessing a company, its current situation and its future prospects. I remember investing in Apple in the summer of 2013. The narrative surrounding the company at the time was completely wrong. And the stock was dirt cheap and it just kept going down... so i backed up the truck. The narrative has completely flipped today and people can’t pay a high enough price for the stock. Interesting thing is not all that much has changed at Apple (other than it has execute well). Same thing with the big US banks in the summer of 2016. The narrative at the time was completely backwards looking, and of course, was completely wrong. It completely ignored/discounted all of the changes what had taken place at the companies and on the regulatory front. People could not get 2008-2010 out of their head. And it stopped them from understanding the big banks had completely changed as an investment on a go forward basis. I think Fairfax is lining up the same way. Company has, for the past couple of years, been slowly been fixing issues it can fix. We are in an insurance hard market (only happens every 10 or 15 years). And, as vaccinations accelerate, financial markets (sectors Fairfax is heavily weighted towards: cyclicals, emerging markets, service) are taking off. And the stock is trading (still) close to historically low valuation (it is cheap). As i said, the risk/reward set up looks very good. The key now is execution. Fairfax needs to perform. And in a somewhat predictable way (to re-build credibility with the investment community). But it will likely take time for Mr Market to get on board. It took years for the narrative for Apple and the big US banks to shift and just reflect reality. And in Apple’s case today it looks to me like the narrative is now overly optimistic. But this is often how investors make the big money.

D, thanks for the heads up; i will add both to my tracker portfolio. EXCO: From the 2020 AR: P29: Fairfax owns 44% of Exco, a U.S. oil and gas producer. Despite weak energy prices in 2020, Exco generated $128 million in EBITDA and $36 million in free cash flow. Net debt fell to $145 million (1.1 times EBITDA). Led by Chairman John Wilder and CEO Hal Hickey, Exco achieved these results through high field level productivity and company-wide cost control. In December, Exco recorded its 73rd month without a lost time incident. Exco’s Chairman, John Wilder, is a great partner. We are well served by his leadership. P 70: On June 28, 2019 EXCO Resources Inc. (‘‘EXCO’’) emerged from bankruptcy protection and settled the company’s holdings of EXCO bonds with common shares, resulting in the company recording a net loss on investment of $179.3 (realized losses of $296.3, of which $117.0 was recorded as unrealized losses in prior years). LEONS: Mr. Leon continued, "In January (2020, i think), Fairfax Financial converted approximately $48.5 million in convertible debentures into common shares of our Company. We have welcomed Fairfax's investment in LFL Group since 2013 and have appreciated the confidence of their team over the past several years. Entering 2020, LFL is better positioned than ever. As anticipated, we have significantly deleveraged following the acquisition of The Brick in 2013 and are now sitting with a net cash position on our expanded balance sheet. We continue to focus on delivering top-line growth accompanied by strict cost controls in order to translate that growth into expanded earnings for our shareholders and executing on our strategic initiatives to position the Company for continued success." - https://www.newswire.ca/news-releases/lfl-group-leon-s-furniture-limited-releases-record-revenue-and-earnings-for-the-fourth-quarter-ended-december-31-2019-and-announces-a-14-3-increase-to-its-dividend-811063897.html

Spek, i can be pretty hard on Prem but i think your criticism of the letter as a ‘joke’ is a little too hard. I appreciated the attempt made in the letter to help shareholders understand the various businesses (especially the equity holdings). But it is difficult to explain complicated stuff in a simply way. And it is complicated. And this may result in Fairfax permanently selling at a discount... not sure... we will see. My view is Fairfax is like a supertanker. It has slowly been making more of the right moves (than wrong) for a few years now. News that another $1.5 billion will be managed by Wade and Lawrence (for a total of $3 billion) looks like another solid move; it looks to me like these guys buy higher quality and are more diversified than Prem. The benefit of this shift has been playing out the past year and should be another tailwind moving forward (for Fairfax shareholders). IPO’ing Farmers Edge, Boat Rocker, Seven Island and Anchorage is another very positive development (for the future of those companies and so also for Fairfax’s ownership position); they are being VERY opportunistic. And i expect more will be done; Fairfax is highly motivated. I also view the disclosure that the final short position is officially, really gone to be net positive - a piece of added complexity that is now gone (and the losses are in the past). The sad truth is Fairfax has severely underperformed for investors for many years. However, for those who bought share after the March sell off, Fairfax has been a great investment. And with Fairfax’s equity holdings up more than $1.6 billion since Jan 1 (just the stuff i track and i am missing a bunch) Q1 is shaping up to be a strong quarter for earnings. The reality is Fairfax’s equity portfolio, concentrated in cyclicals, lower quality companies, emerging markets and service sector was punished especially hard last year. And it is way out performing as we start 2021. So my guess is there is a good chance we are going to see solid BV/EPS growth (of better than 15%) in 2021 and it could easily be much higher. The good news is Fairfax’s stock price is so low it has a very good risk / reward set up for investors. The next important pivot for Fairfax, and others on this board have pointed this out many times, is they need to start to generate more consistent and predicable quarterly earnings. And they need their various businesses start to spin off more free cash flow to Fairfax as a whole. I think we will see this start to happen in 2021 and into 2022. - Their insurance businesses are almost all now underwriting at a CR better than 100; taken as a whole they are now comfortable below 100. This has taken years to happen. And they have said NO MORE ACQUISITIONS. This is a big deal. - Fairfax now seems to be taking a sink or swim approach with their various equity holds in terms of hitting daddy (Fairfax) up for endless amounts of cash to fix struggling operations. And this was during the pandemic. These operations have survived and as we come out of the other side of the pandemic Fairfax’s many equity holdings should start contributing more cash to Fairfax. Stelco just re-instated their dividend of $0.10/share. It is highly likely Stelco will issue a couple of special dividends in 2021. I expect good news from lots of other Fairfax companies. - the earnings from the many equity holdings will also jump in 2021 and the year over year improvement should be outstanding and a material positive to Fairfax’s overall results. - and i expect further monetizations from Fairfax in 2021 and the kind that puts cash in Fairfax’s coffers; these could be meaningful. And it is an insurance company. And we are in a hard market so premium growth should be up double digits in 2021 and the CR should be lower than 2020. I continue to think that the stars are currently in alignment for Fairfax: hard market, solid underwriting, strong performance from equity holdings, rising interest rate environment, more confidence in management today than in years. But to your point, they have not delivered in terms of EPS or BV growth... But i think 2021 they will :-) Having followed Fairfax for a couple of decades, when the stars align like right now they do have a history of hitting home runs (not singles). As with all investments... time will tell.

A couple of random things that i found interesting (after speed reading the first half of the Prem’s letter). 1.) page 7: Digit ownership currently at 49%. Note 4: “74% upon conversion of securities, when permitted under recent budget” Does this mean Fairfax will not need to lay out a bunch of cash to get to 74% ownership of digit? That would be huge. 2.) page 15: “Also in 2019, Fairfax India signed definitive agreements with OMERS, the pension plan for Ontario’s municipal employees, whereby Fairfax India will transfer 43.6% out of the 54% that it owns in BIAL to a wholly owned Indian holding company (Anchorage) and OMERS will pay about $130 million to acquire 11.5% of Anchorage from Fairfax India. This transaction values 100% of BIAL at $2.6 billion. We expect to close this transaction in March 2021 and begin soon after the process to list Anchorage on the Indian stock exchanges, possibly at a much higher valuation.” An IPO of Anchorage should be very good news for Fairfax India and its stock price. The proceeds from the Anchorage IPO (and proceeds from sale to OMERS) could be re-invested further validating Anchorage and its valuation.

It should be today based on Q4 conference call transcript (Feb 12): Jennifer J.S Allen, Fairfax Financial Holdings Limited - VP & CFO “Thank you, Prem. We wanted to let you know that in addition to the press release that was issued yesterday on our year-end results, Fairfax's 2020 annual report will be posted on the company's website on March 5, 2021.” ————————— I am very interested to see how Fairfax discusses/presents its equity holdings (given their importance to Fairfax’s valuation). Another comment from Jennifer in her prepared remarks: “At December 31, 2020, our investments in associate had an aggregate fair value that exceeded the carrying values by $712 million. And due to the equity method of accounting for these investments, this excess of fair value over the carrying value is not included in our book value per share. This is a significant positive change from the March 31, 2020, when the aggregate carrying value exceeded the fair values of the investments and associates by approximately $400 million.” ————————— Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst: “So first question is just around the Farmers Edge IPO. That seems to be -- that will be coming out pretty soon here. Can you maybe talk about some of the other industries or companies that you're looking to maybe tack into this pretty robust IPO market as a way to realize on value in some of those holdings?” V. Prem Watsa, Fairfax Financial Holdings Limited - Founder, Chairman & CEO [35] “ Jaeme, we're not allowed to say too much until they file, and until they are done. So Farmers Edge, as you know, has filed. We'll be filing some more. You'll be able to guess them. And, and we'll be filing them in India -- in Fairfax India. Many of them there. And, we've got some really good companies and we've developed them over. And Dexterra is a classic where the old horizon -- this called Dexterra, we have 49%. And we expect that to be a very successful company over time. So, we have many of them. And when you look at our non-insurance companies, some of you analysts are worried about the fact that we don't make any money. We reflect the losses, but we don't show the gains. And the gains come over time. So when you look at our investment portfolio, you know this Jaeme, we've got common shares. We have more than 20%, they become associates. If you have a 40% interest -- the numbers like that, in the case of Thomas Cook 65%, then you have to consolidate it. So in our Annual Report in 2020 -- for the 2020 Annual Report will come out in a few weeks, we're going to show it to you so that you can -- we're going to take another attempt to show you our common stock positions. And they -- some of them are just common stocks, some are associates, some are consolidated. It gets a little bit guy, but that's the accounting IFRS. We have to follow the accounting rules. But we're going to show that to you in a way that I think will be easier to understand. And over time, all of these investments, some do very well in a short period of time, and some take longer. And we just -- we're patient, long term investors.”

Holy moly Batman! Boat Rocker should be next. It will be interesting to see what Fairfax reports as its cost base for Farmers Edge when they report Q1 results (and what the size of the realized gain is). Bottom line, it looks to me like Fairfax is executing exceptionally well right now being very opportunistic. Their equity holdings are on fire :-) And yet the stock continues to trade well below BV (which will be jumping again when they report Q1 results, even after accounting for the US $10 dividend payment). ———————— Farmers Edge jumps 18% in Canada trading debut after IPO - https://www.bnnbloomberg.ca/farmers-edge-jumps-18-in-canada-trading-debut-after-ipo-1.1571590 Agricultural technology startup Farmers Edge Inc. surged 18 per cent in its Toronto trading debut after raising $125 million (US$99 million) in its Canadian initial public offering. Shares of the Winnipeg, Manitoba-based firm jumped to $20 at 9:30 a.m. trading, above its IPO price of $17 a share. That gives the company a market value of about $814 million, based on about 40.7 million shares outstanding.

Fairfax has three very large equity holdings: 1.) Atlas - including warrants 2.) Blackberry - including debentures 3.) Eurobank A 10% move in Eurobank = about US $80million for Fairfax. The market value of the position is now worth about $900 million. The carrying value is $1,137. If the move in Eurobank continues, given its size, this will be very good for Fairfax’s equity holdings. Yes, the position is not mark to market. However, for the consolidated equity positions taken as a group, it is a positive to see the market value exceed carrying value. This in turn supports Fairfax’s stated BV. There have been times when the market value of Fairfax’s consolidated equity holdings was far lower than their carrying value. When this is the case it makes sense to me to discount Fairfax BV (to be conservative). As fair value grows in excess of carrying value then perhaps a premium to BV is warranted. Fairfax wants to get out ahead of this issue and this is a primary reason they have promised additional disclosure in the upcoming annual report.

Buffett may have chosen to stay tight lipped on lots of topics in this years annual letter because we are still in the middle of them. Often the best time to comment/best learnings (via the letter) is a couple of years after the fact once the dust has settled. Regardless, he will get lots of questions on all these topics at the AGM so investors will get more information shortly. ——————— From my perspective the biggest news was the meaningful buybacks of BRK stock. With continued purchases in Q1. That is a big deal for shareholders.

As in Prem needs a Charlie? More the ah-ha moment finally understanding the importance of ‘buy wonderful businesses’ that can ‘run themselves’. I would be VERY happy if Fairfax moved more in this direction.

I read this section and could not help but think of Fairfax... ——————————— (From page 4): Charlie and I want our conglomerate to own all or part of a diverse group of businesses with good economic characteristics and good managers. Whether Berkshire controls these businesses, however, is unimportant to us. It took me a while to wise up. But Charlie – and also my 20-year struggle with the textile operation I inherited at Berkshire – finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and far less work than struggling with 100% of a marginal enterprise. For those reasons, our conglomerate will remain a collection of controlled and non-controlled businesses. Charlie and I will simply deploy your capital into whatever we believe makes the most sense, based on a company’s durable competitive strengths, the capabilities and character of its management, and price. If that strategy requires little or no effort on our part, so much the better. In contrast to the scoring system utilized in diving competitions, you are awarded no points in business endeavors for “degree of difficulty.” Furthermore, as Ronald Reagan cautioned: “It’s said that hard work never killed anyone, but I say why take the chance?”

WOW. Great summary. Thanks for posting. I have never read anything in detail on Japan’s experience in the late 80’s. This book looks like a solid place to start. A question: was there a way to ride out the storm? I am thinking a large cash position would have worked out very well. (Miss the massive drop in real estate and stock market prices; although it looks like it took years - and decades in some cases - to play out.