Viking

If it is Tesla and Fairfax books another couple hundred million loss (or more in Q4) then perhaps someone at Fairfax will finally have their ‘see jesus’ moment and finally learn a few important lessons.

Fairfax needed cash. 1.) drive growth in hard market 2.) buy back OMERS stake in Eurolife (stated in 2019 AR this would happen in 2020) so perhaps we get a second announcement soon on this. (Perhaps this transaction results in OMERS getting cashed out of both Riverstone and Eurolife - and the Anchorage transaction is also imminent). 3.) fund January dividend (where they pay full amount) - likely US $10/share 4.) buy back stock - likely trading below 0.75BV as of today This deal highlights a couple of the strengths in Fairfax: - its ability to be creative and find unexpected solutions. I agree with Petec; i am sceptical that a runoff businesses embedded in Fairfax would ever be properly valued by Mr Market. - it has some undervalued assets Xerxes, i was conveniently ignoring Fairfax’s short fiasco in Q3... let’s hope they are not on the wrong side of this rally we are seeing in Q4 because if so it could be ugly when they report results. Spilled my coffee when i read your comment :-) We will all be very happy when Fairfax is officially out of the short game.

I agree. I hope Fairfax is learning that their head office is not equipped to manage healthy non-insurance businesses let alone turnarounds like Blackberry. Flipping APR to Atlas looks like a useful example of what a focussed management team can do to an underperforming business. Hopefully Fairfax Africa finds success merged with Helios. Dexterra is perhaps a slightly different situation with their reverse takeover of Horizon North. It will be interesting to see what Fairfax does over the next year with the various companies they control. I am getting more optimistic with their collection of assets as we exit the pandemic.

I wonder if Fairfax may not put BB on the auction block in 2021. To extract maximum value and facilitate a sale perhaps step 1 is to monetize the patents. Would it make sense to split the car software business from cybersecurity?

Yes, hope all of our US board members have a great Thanksgiving holiday long weekend. Lots to be thankful for :-)

On your factual question i remain sceptical about accounting BV at Fairfax. This is primarily due to what we have seen unfold over the past 7-8 years. People do not trust management; they have simply done and said too many dumb things for far too long. So it will take years for Fairfax to turn this around - and this will only happen if management consistently does the right thing and communicates effectively. And the jury is still out on this (from my perspective). I see some positive moves the past couple of years but the hole Fairfax dug is so deep it will take another 24 months (or longer) to fully deal with many of the legacy issues. The fixes will likely involve a continuation in the write down in book value of the assets like we have seen the last 2 years: EXCO (bonds), Fairfax Africa, Altas Mara, Astarta are just a few that come to mind. We also continue to see negative surprises like the big loss in Q3 on some mystery short position. These continuing issues are not small dollar amounts. They total hundreds of millions every year. And my guess is they will continue to occur in size for a few more years. These ‘one time’ things happen all too frequently with Fairfax and act as an anchor slowing growth in earnings and book value. The good news is Fairfax does appear to understand and they have slowly been ‘fixing’ the problem children. Moving APR to Atlas was a brilliant move (and look at how much Atlas has done to APR since the purchase). Despite brutal timing (not Fairfax’s fault) Dexterra’s reverse takeover of Horizon North could work out very well in the coming years. Merging Fairfax Africa into Helios looks good (needs to close first and even then will be too early to know). Fairfax does appear to understand when they have made a big mistake. And they have been creative in finding solutions. They do appear to be VERY focussed on putting the companies they own in a position to be successful (true for both non-insurance and insurance). That is very encouraging. Of the large equity positions i prefer to use market value as a proxy (over carrying value). Carrying value. Market value. Difference - Atlas $896 $1.059 + $163 - Eurobank $1,137 $619. - $518 - Quess $552 $307. - $245 Do i think 100% of Digit is worth $858 million because 10% was sold for $91 million? I am sceptical. (I like Digit very much; but i have seen this exercise done before by Fairfax to value assets at premium valuations... like Bangalore Airport.) - Bangalore. $1,383. $684. + $699 Do i think the airport is worth $1,383 million today? No. Is it worth more than $699? Probably. So with the large equity positions i like to go with market price (if publicly traded) and if private i like to use a combination of purchase price and Fairfax value (usually applying a hair cut to Fairfax valuation if it looks frothy). Now having said all of the above i am completely ignoring all of the many examples of where Fairfax is doing good to exceptional things and building value for shareholders (particularly on the insurance side of things). Or where it owns companies that are doing very well. Often this ‘value’ is not captured in BV. So weaving it sll together, i am likely not being fair to Fairfax in wanting to discount BV when coming up with a fair valuation. As time goes by and i learn more (informed by what the company does and says) i will revise my thinking accordingly :-)

Xerxes, i like your optimism on the share buyback but where does Prem get the $ from? Do they dip further into bank lines? My guess is no. They have been adding to debt total all year. To your point, they also need $300 million for the US$10 dividend in January (nice 3% yield :-) if they maintain historic payout and timing. They also may need to take out OMERS at Eurolife (they said this would happen in 2020 in 2019AR). What all this tells me is it sure would be timely to monetize something big. Lets hope the vaccine trade continues as it is certainly benefitting Fairfax. ——————————— I was looking at Fairfax’s valuation the last couple of days. Despite increasing US$80 in 3 weeks (30%) FFH remains very cheap. Here is a goofy kind of way to look at things; some mental gymnastics... For interest i decided to look at how other insurance companies are trading. Most are now trading once again at levels similar to the end of 2019. Markel is a bit of a laggard trading today 10% below where it was trading at the end of 2019. Fairfax? It is still trading 27% below where it was trading end of 2019 (despite a 30% increase in the last 21 days). So at the end of 2019 Fairfax had a market cap of US$12.36 billion. And it was not expensive then (trading close to BV then if memory serves my correctly). Today it has a market cap of $9.02 billion. It is down $3.34 billion. 1.) Its insurance operations are better positioned today than they were Dec 31. We are in an insurance hard market and premium growth is strong (double digits). 2.) the bond portfolio is mildly worse: The yield on the bond portfolio is shrinking but they were able to oportunistically able to buy a bunch of corporates back in March/April which helps. Bottom line the continued steep decline in the shares is likely not due to the bond portfolio. 3.) The equity portfolio is likely responsible for the majority of the current $3.34 billion decline in market cap (and underperformance versus peers). The interesting thing is the equity portfolio is sitting today only about $1.5 billion below where it was trading Dec 31. So we still have a $1.8 billion market cap decline that is kind of unexplained ($3.34 - $1.5). My guess is this amount is a rough approximation of how much Mr. Market is still undervaluing Fairfax. Book value is currently US $442. So Fairfax trading at 0.9xBV is still cheap and discounting lots of bad things = $400. With shares currently trading at $343 i think there is another easy 15% or so to be had in the near term (the next 2 months or so). Mr Market is being overly pessimistic with Fairfax. And if we get more good news on the vaccine front (likely) and the trend to value stocks the past 2 weeks continues in the coming months (likely) then we should see Fairfax trade once again closer to BV sometime in 1H 2021. Amd BV will be growing again in Q4 and it could easily surpass $500 in 2021. Looking to 2H 2021, at todays price Fairfax could provide investors a return of 50%. And the stock would still be cheap (still trading at BV)! RBC says given we are in a hard market Fairfax should likely trade closer to 1.2xBV. I don’t think this is a crazy multiple to pay for Fairfax shares in a hard market and with the wind at the back of their investment portfolio. Yes, there are risks. But in a zero interest rate world the risk return for Fairfax looks good to me. PS: the equities Fairfax owns are not impaired (i.e. Seaspan is performing well etc) and as we exit the virus in 2021 the equities should perform quite well.

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket? Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market. I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value. However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio.... SJ Got it :-) Thanks With the spreadsheet i am trying to group the equity holdings based on how changes in their value show up in Fairfax’s reporting: 1.) holdings where changes in stock price/value flows though to earnings and impacts BV each quarter 2.) holdings where changes in stock price/value do not directly impact BV each quarter ————————— Could be a busy 5 weeks for Fairfax to finish 2020. 1.) Does BAL / Anchorage transaction close? 2.) Does Fairfax Africa / Helios transaction close? 3.) Does Fairfax purchase OMERS stake in Eurolife? (2019 AR said this would happen in 2020) I also wonder if they do not monetize something large to realize some cash. Last year it was Riverstone and ICICI Lombard. Before that it was First Capital.

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?

Here is another update of Fairfax's equity positions Sept 30-Nov 20. In aggregate my math says total equity positions are now tracking up over $1 billion (+26.4%). Big move in 7 weeks. The good news is the increase is broad based (all holdings are up except CIB). I've attached my excel spreadsheet; please let me know if you see any big errors :-) Yes, most of the gains do not flow through to earnings. However, as the gap between 'fair value' and 'carried value' for Investments in Associates closes this makes reported book value more meaningful (shrinking the discount to BV shares trade at). - Stocks + $104 million (mark to market) - Atlas warrants + $71 (mark to market, I think) - Associated and Consolidated equities + $827 - Total + $1.001 billion Biggest individual movers: - Atlas shares = +$254 million - Atlas warants = +$71 - Fairfax India = +$133 - Recipe = +$117 - Eurobank = +$109 - Thomas Cook = +$72 - Blackberry = +$55 - Stelco = +$43 - Quess = +$32 Fairfax_Equity_Holdings_Nov_20_2020.xlsx

I second that. I'm definitely more careful with clients' money than my own. Lots of great thoughts on a wickedly complicated topic with obvious benefits (for others) and large risks (for the manager). As the years go by i have slowly been reducing my contact with family and close friends over money topics (like offering investment advice and stock picks). The main reason is i found it actually added another overlay into my investment decision process. And what i learned over time is this was not a good fit for me (the more complexity the worse the results). A second reason is i find people want the reward and do not want to put in the work. What they want is pretty simple: tell them stocks to buy and when they go up then tell them when to sell. Rinse and repeat. Simple. But not realistic. How you invest is probably a key input to this decision as well. If you are a ‘traditional’ type of investor with an easily explained investment process that you religiously follow then managing other peoples money might be pretty straight forward. My style is not ‘mainstream’. As one example, I like to concentrate my portfolio at times. This works for me (and i am ok with the risk/reward tradeoff) but would not work with other peoples money. Best of luck :-) PS: hat tip to those who are able to do this successfully

I love it when i encounter this type of thinking when it comes to investing. It is like taking candy from a baby. Not so great when in the middle of a pandemic and the health consequences can be extreme. Effectively managing the virus is just a tad more complex than you are suggesting (my uneducated opinion). As i have been saying since March, the virus is in control (until a vaccine is available). Do stupid things and the virus will love it. Develop a fatalistic mind set and the virus wins. It is pretty straight forward. It is not black and white. Not go out or stay home. Not open up or lock down. Not left or right. Not Democrat or Republican. But just like thumb sucking when young i guess this is the easiest most comforting way for most people to think about the virus. Just like trying to play checkers when you are in the middle of a game of chess. Well in regards to both investing during this manufactured "crisis", and handling the virus, I am pretty certain I'm doing quite well in both categories....much better than most I would imagine. It isn't totally black and white, but in many aspects it is. If you run around chicken shit scared or impair your life, well, that sucks. If you choose not to, well, thats your choice. And then even in the worst case, despite the liberal loveliest for headlines like "he dismissed the virus and then he got it!"...most people, even who fall into the later category, end up just fine. Bottom line is if you're so damn scared of this thing, your only surefire way to avoid it is to sit in your house and avoid any contact with people. If you do that, you'll never get it. For the rest of us, its pretty reasonable to just go about living our lives to the extent that the corrupt and power-hungry politicians dont interfere. Not much more to it. Greg, as you can see above, I did change my initial response. Too cranky. As we have been learning for the past 10 months dealing with the pandemic is complicated.... :-)

Effectively managing the virus is complex. There are many layers involved. . As i have been saying since March, the virus is in control (until a vaccine is available). Do stupid things and the virus will love it. Develop a fatalistic mind set and the virus wins. It is pretty straight forward. It is not black and white. Not go out or stay home. Not open up or lock down.

First off I want to say I am of the view that there isn't currently conclusive evidence that masks are effective. There is also not conclusive evidence that masks are not effective. In this regard we may be in agreement (at least partially). Now for the sample size. It is not large. This is clear from the confidence intervals (potential range of possible outcomes in 95% confidence interval is very large). Typically you get large intervals when sample size is small. There is another very important reason why I say this. Look at the sample size of Pfizer/BioNtech or Morderna trials. They are 10X the size of this trial. Pfizer trial had ~44000 participants. The goal was very similar, to assess whether an intervention (in this case a vaccine as opposed to masks) is effective in preventing future infections. The reason why this large sample size (~44000) is needed is to be able to power the study enough to convincingly make a call one way or another in this infectious disease setting. Same is true for any other intervention study (vaccine, therapeutic or non pharmaceutical interventions such as masks). Every country that has brought the virus under control has a couple of common factors. One is widespread mask wearing. It is obvious wearing a mask helps. Now exactly how effective? We will know much more in a few years. (But i think that will be a little too late to help us today :-) Social distancing is a second. Effective contact tracing is a third (this lets you know where the clusters are breaking out and why which is super important to know). Now we could wait a few more years and wait for irrefutable scientific evidence before implementing any of these measures. Kind of like what happened back in February and March in South Korea, Iran and Northern Italy. The virus loves stupidity. Now is wearing a mask a silver bullet? No, of course not. Managing the virus well is your classic example of a multivariable event. You need to get a bunch of things right at the same time for an extended period of time. And the trade offs are difficult and of huge impact. And there will be a need for constant course corrections (as new information becomes available). It totally cracks me up how people completely miss the forest for the trees. ——————————- miss the forest for the trees: to not understand or appreciate a larger situation, problem, etc., because one is considering only a few parts of it

Great question. There is still so much we do not know. Like what happens if the virus mutates? So while the news from Pfizer and Moderna is certainly encouraging there remain many forks in the road ahead.

And so you should! By way of explanation, I think it will ooze cash in upcycles, not lose much in downcycles, and allocate capital well. I think through-the-cycle cash flows will allow for a 10 (good) to 15% (great) return on the price paid, with very low risk because there isn't much debt; and I think the real estate is a nice option on the side. My view is that Prem paid a very low multiple of peak free cash flow and a reasonable multiple of average cash flow. The reason the price collapsed was that the cycle collapsed just afterwards. That does not make this a bad long term investment necessarily, but it does make it look badly timed. Then again, it wouldn't have happened any other way. Kestenbaum is not stupid and wouldn't have sold at the bottom of the cycle. Just listened to the Stelco Q3 conference call (only 30 minutes; very informative). The company looks to be positioned VERY well. They have spent $1 billion in the past 3 years to get the company positioned to supply the right market segments and be a low cost provider (not funded with debt). Very strategic. Moving forward the company will be shifting capital allocation to focus on shareholders via stock buybacks and dividends. And steel prices have jumped in Q4. Timing for Stelco could not have been better. Earnings should be very good. The general perception when Fairfax made this purchase was it was another mistake. Shitty industry (too cyclical). Overpaid. It looks like Stelco might actually work out well for Fairfax. The Stelco management team looks very good and the strategic plan they are executing is coming together and looks well thought out and is being executed well. Nice to see. We are quick to shit all over Fairfax when it looks like they have made a mistake (i am pointing at me); Stelco is shaping up to be a solid investment. Petec, thanks for keeping it on everyones radar :-) In terms of position size, i think Stelco is around US $145 million for Fairfax. Number 9 largest equity holding in terms of size. Q3 conference call: https://investors.stelco.com/events#past Historical steel pricing: http://steelbenchmarker.com/files/history.pdf

I would just ask how much has Fairfax lost on shorts since this article was published? I agree that Fairfax has its warts. The question is what size of discount should reasonably be applied to shares to account for those warts. My view is the current discount is too large and likely far too large. Fairfax shares are trading today (US$320) at the same level they were trading at in February 2008. That is simply crazy. Fairfax is not just ‘undervalued’ it is being historically undervalued. My view is the extreme undervaluation today is being driven primarily by sentiment (yes, the pandemic is also a factor). Fairfax has, at certain times in its history, made investors lots of money. 2003 was one. 2006-08 was another. Today looks like another. Why? I look at Fairfax as three buckets: 1.) insurance businesses - it looks to me to be as well positioned today as at any time in the companies history. Odyssey, Northbridge, Crum and Zenith are solid. Allied looks good (after a rough first year post acquisition). Brit has had its challenges but Fairfax seems to understand this and has been working for the past year to improve. Runoff, which historically was viewed as the most ‘shitty’ insurance business within Fairfax (a perennial money loser) has morphed and Fairfax was able to spin a large chunk of it off for a bucket of cash; where Riverstone UK goes from here will be interesting to follow. Most importantly, we are in the beginning of an insurance hard market. And this time Fairfax has good insurance businesses. This is a huge deal that investors are completely missing. Investing is the other key variable. When looking at Fairfax I break this into two buckets: fixed income and equities (stocks, associates and wholly owned companies). 2.) investments - fixed income. Historically, Fairfax has a very good track record when it comes to this bucket. A good recent example of this was the $5 billion? they put to work in corporates in April/May. Bottom line, Fairfax has proven to be a better than average managing fixed income investments. 3.) investments - equities. This is the bucket that for the past 7-8 years has driven long term investors in Fairfax crazy. Bad decisions combined with bad management (of those non-insurance companies they control) combined with poor communication to shareholders = a stock trading at a historically low discount. My view is Fairfax has been slowly ‘fixing’ its equity errors. Part of this fix is the slow recognition that they are not a turn around shop (for equities or wholly owned businesses) - Fairfax head office is not equipped to oversee businesses especially poorly performing businesses. But Fairfax made so many purchases/mistakes over many years it is now taking a long, long time (years) to right the ship. And it is not a straight line (so there will be steps backwards). So we are not seeing the net benefits... yet. To look at Fairfax equities as of Nov 2020, lets start by looking at Atlas. This is Fairfax’s largest investment, by far. This one company is more than 20% of the equity portfolio. And it is performing very well. We are in the middle of a pandemic and it is in a highly cyclical industry and how is its business doing? Very well. Solid top line growth. Solid earnings growth (remember, we are in a pandemic). Future prospects? Very good with lots of growth ahead. Stock is undervalued and every 10% move in shares is a $130 million ‘benefit’ to Fairfax. This stock alone could be a + $1 billion winner for FFH in the coming years. CIB is a solid bank. Kennedy Wilson is a solid real estate company. Quess is a solid company. The IIFL triplets are all solid companies. Digit looks like it could be a home run. Bangalore Airport is a trophy asset. Fairfax India is well managed. Other companies will be interesting to watch. Stelco looks to be well managed (yes, tough industry). Horizon North/Dexterra seems to have stabilized and it will be interesting to watch in the coming year. As we exit the pandemic Recipe will be ideally positioned (lots of mom and pop restaurants have closed so the big chains that Recipe owns will likely be the big winners in the short run). Blackberry debentures were renewed at terms very favourable to Fairfax shareholders. Blackberry the company has value given it is involved in many of the right technology verticals. Of all of Fairfax’s investments, Eurobank has been hit the hardest due to the pandemic. Pre-pandemic Eurobank had been making a great deal of progress (spinning of non performing loans) and the Greek economy was improving. Fairfax continues to deal with its problem children. APR was sold/spun into Atlas. Fairfax Africa will hopefully get folded into Helios. (Last year Dexterra did a reverse takeover of Horizon North). These are examples of admission by Fairfax that they messed up (or the asset they purchased needed a new home to thrive), recognition of the mistake and the remedy. Fairfax has communicated there is more work to be done on this front. So i expect more companies to get spun out of the Fairfax black box and put in a position to sink or swim: Toys R Us/real estate, Performance Sports (Bauer), Farmers Edge etc. And then of course, we have the equity shorts that (again) hit results in Q3 and came up again and again (rightly so) on the conference call. This was an example of the step back. Fairfax messed up. Again. But i think the message is getting though. Bottom line, i think they are making alot of the right moves with the investment portfolio. But Fairfax has said they are not done... lots more work to do. And it will take time. So when i put the three together (insurance + fixed income investing + equity investing) and shares trading at US$320 i see a $20 bill lying on the ground in plain sight :-)

Roberts1001, welcome. Being open minded and inquisitive is a good thing :-) Below is an article I was re-reading recently that i think provides a solid framework for looking at Fairfax as an investment. Fairfax today is trading at a much larger discount to BV than when the article was written. The stock sell off this year sucks for long term shareholders but provides a very attractive opportunity for new investors / new money. Especially if the news on the vaccine front the coming months is positive. The question for me is what combination of CR and investment return will Fairfax need to hit to deliver a 10% ROE moving forward? What do people think is achievable over the next couple of years? —————————— The Horse Story (Sept 2019) - https://www.woodlockhousefamilycapital.com/post/the-horse-story Most of the investors I’ve talked to about FFH will bring up Watsa almost immediately as, basically, someone they no longer trust to make good decisions or deliver good returns. I can understand why. (The baffling macro bets of some years ago cost FFH shareholders billions of dollars. Watsa said he not would make such bets again. But the damage was done.) The insurance side of the operation has been strong for FFH in recent years. But even there, operations are below Watsa’s target of a 95% combined ratio. FFH’s Q2 number was 96.8%. Profitable – anything below 100% is profitable – but below target. So, as you can see, the valuation is not such a cut-and-dried matter. FFH has had some issues. Nonetheless, we own the stock at a price below book value. The most important reason is that the downside seems low. The valuation protects you, the company appears well-financed and management seems honest and well-intentioned. These are not small things. Moreover, I think the assets collectively could generate a ~10%-type ROE. Watsa has made a public goal of hitting 15%. (FFH’s ROE was 15% in the second quarter, thanks to investment gains). He says a 95% combined ratio and a 7% return on FFH’s investments gets to a 15% ROE. But in a low-interest rate environment, and given a large bond portfolio, a 7% return seems unlikely. But possible. Sustaining a double-digit ROE is key. (FFH can reach 10% by following a number of roads. For example, one road requires a ~95% combined ratio and ~5% return on its portfolio. That seems do-able.) Anyway, a consistent 10% would grow book value at a decent clip and then you’d likely get an additional lift from the valuation even if the stock moved just to 1.2x book. As RayJay reports, a comparable set of North American insurers with an 11% ROE trades for 1.7x book value per share. I admit, FFH is not exciting. It’s not fake meat or pot or sending billionaires into space. But it shouldn’t hurt you and has potential to deliver a very nice return. The current disappointing share performance could be, in the spirit of the horse story, a gift.

Here is an update of Fairfax's equity positions Sept 30-Nov 11. In aggregate my math says total equity positions are tracking up almost $600 million. Big move in 6 weeks (and larger than I expected). I've attached my excel spreadsheet; please let me know if you see any big errors :-) Yes, most of the gains do not flow through to earnings. However, as the gap between 'fair value' and 'carried value' for Investments in Associates closes this makes reported book value more meaningful (shrinking the discount to BV shares trade at). - Stocks + $69 million (mark to market) - Atlas warrants + $50 million (mark to market, I think) - Associated and Consolidated equities +$471 million - Total + 590 million Biggest movers: - Atlas shares = +$181 million - Atlas warants = +$50 million - Recipe = +$129 million - Fairfax India = +$97 million PS: I added Astarta, Atlas Mara and Horizons North to the spreadsheet. Fairfax India is in tab 2; I have NOT updated yet Fairfax_Equity_Holdings_Nov_11_2020.xlsx

Big chunk of FFH. With insurance hard market, despite the recent run yp, the stock is still cheap. If vaccine news is positive in coming weeks then stock is crazy cheap (if there is a reasonable chance life/economy will get back to normal in 2H 2021 this should be positive for their equity holdings).

The Fed will remain on their current path until unemployment is much, much lower. The vaccine will be the first step in a long, long road back. My guess is Fed does not change much until 2022 and only then if the economy is on fire.

Crazy 1 day moves. Atlas + 11% Eurobank + 26% Fairfax India +10% Recipe + 10 Should see a spike in Indian investments overnight. If this shift in equity positioning has legs (if the news on the vaccine front continues to be positive, my guess is yes) Fairfax will do exceptionally well moving forward. Can we put a pitchfork in the ‘7 lean years’ trend?

SAP.to

My view is the virus news today is very encouraging. Very. If other companies report similar efficacy results then we will be in a good place. My guess is we will limp along until spring or perhaps even summer. But if we are able to get to a new normal by May or June that will be phenomenal. There is a lot of pent up demand out there. The sectors that have been crushed should do very well (perhaps by mid 2020). Near term the virus and economic news will be terrible. However, my guess is that will not matter much IF the news on the virus front improves from here. I will likely continue to add to my equity positions.

John, i am sitting at a little over 50% cash as of today. I have been opportunistic this year moving in and out of positions (mostly BRK, although i do not own any right now). Lately i have been building positions in pipelines, utilities, and companies i view as pretty safe (SAP the most recent example). I am in no hurry to get more fully invested as i have had a good year (return wise) and, as i have said before, capital preservation is more important to me right now than portfolio return. I am struggling with two competing narratives: rising virus case counts and a slowing economy (double dip) versus positive news on the vaccine front. We also are in the honeymoon phase of a Biden Presidency. The risk is if Republicans and Democrats continue to war and we get limited fiscal support moving forward. Looking out a little further i am also trying to understand the secular disinflation/mild deflation trend. My current view is i think rates will be much lower for longer with the very real possibility rates could go negative in the US. I think there is a scenario where we get: 1.) continued spike in virus numbers into January or February 2.) slower than expected news on the vaccine front (delays and/or not very effective) 3.) gridlock in US resulting in limited fiscal stimulus 4.) a second economic contraction as we begin the new year No idea how this all plays out. I will continue to be cautious with my portfolio until i get some more clarity. If i was younger and holding down a full time job (with growing savings) i would likely be fully invested and aggressively buying more with new money on any big sell offs. Buy my current positioning fits my objectives and allows me to sleep well at night :-)