Viking

In terms of a vaccine, Scott Gottleib was on CNBC this afternoon and his best guess is a vaccine that is widely available to the US population will be ready for second half of 2021. A vaccine will likely be approved late this year or early in 2021 for use initially in high risk groups. As more data comes in and production facilities ramp production capacity it will reach more people. But this will take many months to play out.

Here is one forecast from IMHE (University of Washington) of what we may see in the US in the coming months. They expect an increase in cases/deaths by November and into December. Bottom line, the situation will get worse in all Northern Hemisphere countries, driven primarily by seasonality. How well basic measures, like mask wearing, social distancing etc, are followed will be another important factor. - http://www.healthdata.org/sites/default/files/files/Projects/COVID/briefing_US_091120.pdf Projections • We expect the daily death rate in the US, because of seasonality and declining public vigilance, to reach nearly 3,000 a day in December. Cumulative deaths expected by January 1 are 415,090; this is 222,522 deaths from now until the end of the year. • The large increase in daily deaths expected in late November and December is driven by continued increases in mobility, declines in mask use, and – most importantly – seasonality. We estimate the likely impact of seasonality by examining the trends in the Northern and Southern Hemisphere. For example, Southern Hemisphere countries such as Argentina, Chile, southern Brazil, and South Africa had much larger epidemics than expected based on mobility, testing, and mask use. The statistical association between COVID-19 transmission rates and pneumonia seasonality patterns is strong and is the basis for our estimate of the magnitude of the seasonal increase that is expected.

I updated my tracking document for Fairfax publicly traded equity investments. It is not complete but I think covers the largest holdings. So far in Q3 FFH looks to be up about $425 million. Of this total, $50 million is for mark to market equities, $50 million is for Atlas warrants and $375 million is for Investment in Associates ($200 million of this is Atlas). Bottom line is market prices of equity investments have continued to improve in the 3rd quarter. The $1 billion deficit for Investment in Associates (fair value versus book value) should continue to shrink in Q3. Top 7 individual holdings: 1.) Atlas = $885 million (outstanding warrants would increase share count from 90 to 115 million) 2.) Eurobank = $537 3.) Commercial International Bank (CIB) = $334 4.) Quess = $295 5.) Recipe = $223 6.) Blackberry = $221 (outstanding warrants would increase share count from 46.7 to 101.7 million) 7.) Kennedy Wilson = $209 Fairfax India = $394 million (Fairfax owns 33.7%) - see tab 2 in the document below for a summary of Fairfax India individual holdings. Digit is another holding to keep an eye on. Not currently publicly traded but valued at around $400 million I think. Interesting to look at the holdings by business segment and country/region. Pretty diversified. Fairfax_Equity_Holdings_Sept_2020.xlsx

I think a key with real estate is the incredible amount of leverage usually employed. Life changing (in a good way) when prices are going higher (which is what Has been happening the past 20 years in Canada). In a bust, like what the US had in 2008, my guess is leverage hurt lots of families. Another key is time horizon... if you love where you live and you know you are there long term then timing becomes less of an issue.

It is exceptionally difficult to get both the call (of the bubble) and the timing (of the burst) right. For people who own real estate the run up in prices is a life changing event. For those who do not own... If the virus is still around next year the spring of 2021 could be another big step up for single family home prices. Crazy times.

If the US$ is indeed at the start of a multiyear decline then this should be good for EM currencies. What has been a decade long headwind could become a multiyear tailwind.

His view is - oil / nat gas / pipelines are uninvestable - banks are close to being called uninvestable The article is a good read because it likely summarizes why these sectors and stocks are so hated right now. The surprise for me is the pipelines. Yes, some have way too much debt. And some will be impacted should the economy slow further. But some of pipelines should get through the current recession just fine with dividends intact. - https://finance.yahoo.com/m/752765ae-4c54-3d0c-b3f9-d2ebe39404eb/jim-cramer-oil-and-bank.html

BV at June 30 for FIH was $14.75. I updated my tracking sheet for FIH (see below) and their publicly traded equities are up about $90 million so far in Q3. Sept 30 BV could be in the $15.25-$15.50 range. This would bring BV to about 90% of where it was Dec 31 ($16.89). Shares are trading today at $7.50, which puts current P/BV < 0.50 For reference, Dec 30 shares were trading at $12.90; P/BV = 0.75 So BV is down about 10% and the shares are down 40%. What gives? Their largest holding is an airport (BIAL). We may get some news on this front in the next couple of weeks as the Anchorage transaction is supposed to be completed by Sept 30 (if I understand things correctly). In the age of Covid what is an airport worth today? FIH investors are answering very loudly: 'not very much'. FIH shares look very cheap and that is likely primarily driven by BIAL. For those who think shares are undervalued the question is one of timing: - buy today when you are pretty certain the shares are cheap but may stay that way for another 12-18 months (if vaccine's fail) - wait for the catalyst to happen (vaccine's are announced) and possibly buy then It is interesting to read what BIAL is doing. My guess is getting metro connectivity with Bangalore will make BIAL more valuable in the coming years and decades. Here are a few articles: Establish 4.95 km airport section of the ORR-Airport Metro: this Metro connectivity to BLR Airport, likely to be commissioned by December 2024, would provide a sustainable and efficient mode of transport to the residents and business commuters from all parts of the city, facilitating the city to realise its economic potential and ease traffic congestion on the roads leading to the Airport. - https://www.bengaluruairport.com/corporate/media/news-press-releases/public-private-partnership-between-bangalore-metro-rail-corporat.html Summary of 90 Day Trend (June, July, August) - https://www.bengaluruairport.com/corporate/media/news-press-releases/blr-airport-marks-100-days-of-successful-operations--since-resum.html Cargo Hub - https://www.bengaluruairport.com/corporate/media/news-press-releases/bial-opens-india-s-first-on-airport-public-bonded-warehouse.html Fairfax_India_Holdings.xlsx

UK website for the ruling, due to be handed down at 10:30am on Tuesday 15 September 2020 https://www.fca.org.uk/firms/business-interruption-insurance#latest-updates cheers nwoodman The Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues. Christopher Woolard, Interim Chief Executive of the FCA, commented: ‘We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market. We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties. ‘Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful. ‘Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps. ‘If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.’ Thanks for posting :-) Largely as expected i think. We will find out more when companies report Q3 results. But looks like UK payouts will be large.

Added to FFH; starter position in FIH (Fairfax India)

Xerxes, I am with you... I do not want to see Fairfax growing its exposure to Blackberry (over what they had in the past). So the fact they have shrunk this exposure by US $170 million is a win of sorts. There is the potential for a solid win for Fairfax IF Blackberry is sold.

Now that the Blackberry deal has closed is it not a solid win for FFH shareholders? The key, of course, is how Blackberry performs moving forward. The timing is interesting (why not wait until November)? Fairfax has reduced its exposure to Blackberry significantly ($330,000 Debenture versus $500,000) but is positioned to own 16.5 versus 15.7% of shares outstanding. I am surprised Blackberry has not been taken out by a larger player given all the hype we are seeing in their business segments. Fairfax is now positioned very well should this happen. On the Q2 call Prem talked about continuing to monetize assets... this one looks like a strong candidate to me. Checks off lots of boxes. Sell asset at premium valuation. Lock in nice profit (where it is currently carried on the books). Raise significant amount of cash insurance subs can use to write more business. Significantly de-risk equity and total investment portfolio. Close the book on the whole RIM/Blackberry drama. New deal: “Fairfax now beneficially owns, and exercises control or direction over, the Purchased Debentures, representing 55,000,000 Common Shares assuming full conversion. Together with Common Shares already owned by Fairfax and its subsidiaries and assuming full conversion of the Purchased Debentures, Fairfax would beneficially own 101,724,700 Common Shares representing, assuming all other Debentures are converted, approximately 16.5% of the total Common Shares outstanding“ Old deal: “Together with Common Shares already owned by Fairfax and its subsidiaries and assuming full conversion of the Fairfax Redeemed Debentures, Fairfax would have beneficially owned 96,724,700 Common Shares representing, assuming all other Redeemed Debentures were converted, approximately 15.7% of the total Common Shares outstanding.” —————————- Fairfax Announces Acquisition of 1.75% Convertible Debentures of BlackBerry Limited After Redemption of Existing Convertible Debentures TORONTO, Sept. 02, 2020 (GLOBE NEWSWIRE) -- Fairfax Financial Holdings Limited (“Fairfax”) (TSX:FFH and FFH.U) announces that it has acquired, through its subsidiaries, ownership and control of $330,000,000 aggregate principal amount of 1.75% unsecured subordinated convertible debentures maturing on November 13, 2023 (the “Debentures”) of BlackBerry Limited (“BlackBerry”) representing approximately 90% of BlackBerry’s private placement (the “Private Placement”) of an aggregate principal amount of $365,000,000 of Debentures that closed today. The Debentures are convertible at the option of the holder into common shares of BlackBerry (“Common Shares”) at a price of $6.00 per Common Share and, therefore, the Debentures purchased by Fairfax’s subsidiaries (the “Purchased Debentures”) are convertible into 55,000,000 Common Shares. Prior to the redemption thereof by BlackBerry (the “Redemption”), which redemption was completed prior to the Private Placement, Fairfax held, through its subsidiaries, ownership of $500,000,000 aggregate principal amount of 3.75% unsecured subordinated convertible debentures (the “Redeemed Debentures”) of BlackBerry maturing November 13, 2020. The Redeemed Debentures were convertible at the option of the holder into Common Shares at a price of $10.00 per Common Share and, therefore, the Redeemed Debentures held by Fairfax’s subsidiaries (the “Fairfax Redeemed Debentures”) were convertible into 50,000,000 Common Shares. https://www.fairfax.ca/news/press-releases/press-release-details/2020/Fairfax-Announces-Acquisition-of-1.75-Convertible-Debentures-of-BlackBerry-Limited-After-Redemption-of-Existing-Convertible-Debentures/default.aspx

Tomorrow I think the courts in the UK are supposed to come down with a ruling on contract language and Covid which will impact Brit. Lots of near term headwinds for the insurance industry: - Covid - recession - active hurricane season - West Coast forest fires - very low bond yields - reserve releases shrinking - reinsurance pricing starting to harden I like Fairfax at current prices. But the news flow into Q3 results will likely be pretty bad. The good news is the industry is in hard market which started last year could last for some time. The insurance side of Fairfax has been holding up reasonably well which is encouraging.

I have once again started buying some FFH. I like the insurance businesses and we are definitely in an insurance hard market. That side of the business should do very well the next few years. What is stopping me from backing up the truck? The investing side of the business. Based on the terrible results from the past 10 years. Having said that it does look to me like the worm is slowly turning. Atlas looks like the real deal and it is a massive position within Fairfax. Digit in India looks like another star and the runway is long; this investment alone could be another $1 billion home run for Fairfax over the next decade. I like Fairfax India and am ok with the volatility. Quess looks like a solid long term hold. I like some of the smaller equity positions. Most importantly, the terrible performing holdings continue to shrink in size (Blackberry, Recipe, Resolute etc). They look more than discounted with Fairfax trading at less than 0.7 x BV. It also looks to me like Fairfax has slowly been dealing with its Investing issues. The process started when all the short positions were removed after the Trump election win. Problem children are slowly being dealt with: Fairfax Africa, APR Energy being the most recent 2 examples. I think Prem also mentioned on the most recent conference call that they are looking to continue to monetize some of their assets. (Blackberry would be ideal, especially in this environment.) Fairfax has been VERY creative over the years in this regard. First Capital and European Runoff are two large examples but there are also many smaller examples. I expect more to come in this regard. So solid insurance franchise combined with improving investment results should get the stock back close to BV. Perhaps it will take a year or two. From current prices ($290US) investors might actually see a couple of 10-15% returns the next couple of years :-)

Where you do business (and local norms around policy wording) matters a great deal in terms of covid and financial impact. Looking at FFH, Brit is (once again) experiencing very large losses due to wording on UK contracts.

FFH (sold BRK, which was up 20% from purchase). So essentially a flip of positions.

CVS, ENB, KW

Interest rates in most of the world are zero or negative. This is likely to be the case for many years (according to the Fed). Given bonds are yielding so little why are dividend yields for so many decent stocks so high? 1.) expectation interest rates will be materially higher in the near future 2.) investors only wanting to invest in FANG type stocks 3.) Mr Market has not figured it out yet (market is not efficient) 4.) there is no mispricing; high yields reflect company specific issues (market is efficient) 5.) still to early in the recesssion/recovery to buy economically sensitive stocks 6.) other? The current situation reminds me of 1999. Back then, investors only wanted to own .com stocks. Government bond yields were north of 5 or 6%; lots of old economy stocks had very large dividend yields. And it went on for years. A few examples across different industries: - Telecom: BCE.TO; dividend yield = 5.9% (T?) - pipelines: TRP.TO; dividend yields = 5.3% (lots of other examples here) - Energy: SU.TO; dividend yield = 4% (after being cut 55%) (XOM?) - Financials: TD.TO; dividend yield = 4.9% - Real Estate: KW; dividend yield = 5.9% What are the best dividend yielding stock situations that you see today? ——————————- Just came across an article discussing how dividend stocks in Canada have performed year to date, which ties into my question asked above: “The iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ), for instance, returned negative 11.9 per cent (all return figures include dividends). The BMO Canadian Dividend ETF was down 11.7 per cent. And the Horizons Active Canadian Dividend ETF (HAL) was off 7.4 per cent. Several other dividend ETFs also trailed the model portfolio.“ https://www.theglobeandmail.com/investing/education/article-my-dividend-portfolio-is-bruised-not-broken/ ————————- Durable dividends: Canada’s top companies kept payouts flowing in second quarter https://www.theglobeandmail.com/investing/markets/inside-the-market/article-durable-dividends-canadas-top-companies-kept-payouts-flowing-in/

SAP.TO, BCE.TO, SU.TO

It is pretty clear to me that the differences between China and the US/West are irreconcilable: - rule of law - human rights - freedom of the press - democracy As China grows in economic size and strength it will bring more and more countries into its sphere of influence. It is also clear to me that the US/ the West has had its ‘ah ha’ moment. I like Druckenmiller’s line from a year or two ago: Trump will go down as the most pro China President of the ones who follow. What i do not understand at all is how some companies, like Apple, continue to be so reliant on China. Apple is supposed to be a progressive company. Yet it produces most of its products in a country that is one of the most repressive regimes in the world. Fortunately, China is starting to flex its muscles and this is providing everyone with a glimpse of what is to come. My guess is companies like Apple understand the predicament they are in. But it will take years to fix. I will give Trump credit for identifying China as a threat. However, his strategy to deal with the threat from China has been an abject failure (like most other things during his term in office).

Castanza, i do agree with you that there are terrible outcomes on both sides of the virus coin. At the end of the day, the virus is one of the great issues every country in the world is grappling with. My point was more that given the terrible outcomes it needs to be managed exceptionally well so you minimize BOTH the negative health and the negative economic impacts. Now if you mismanage the virus BOTH the health and economic impacts get much, much worse (that what they would have been with better management).

Yes, avoiding/mitigating the virus causes lots of issues. There is the other side of the coin which is... the virus itself of course. What are the health (and death) issues for those who get the virus, their family member, their social network, work network and the community where they live? And those who have been around someone shortly before they tested positive? What happens to a family when a member is diagnosed positive. Lots of mental anguish for everyone. First waiting (feeling sick but not knowing if it is the virus). Then getting tested. Then waiting for results (Sometimes a week). Then contacting everyone they have been in close contact with that you may have spread the virus to them and their ‘bubble’. But you do not know. Once results come in, if it is positive, then return phone calls to lots of people. Lots of explanations. Other people then need to decide if they need to quarantine (or physically distance). Testing? Notify others? I can see how individuals can get ostracized over being around a positive test. And it you test positive yourself... not good. Think about all the mental anguish the millions who have tested positive (and their families and their social networks have gone through). And of course there are the tens of thousands who have lost their life to the virus... lots of stress and anguish for everydoby there too. And tragedy of course. Not to mention what all the front line workers are going through every day (health care, food production, grocery stores etc). Soon teachers are going to be in the thick of it. The virus is wickedly complicated. That is why it should be managed by health care professionals and the politicians should stay in the shadows. In terms of how it has been handled by developed countries the US response to the virus is near the bottom of the list. 7 days to get a test result? In August? Gates said delays that long make testing useless. Crazy. But that is what you get with Trump as President. (And yes, it really is that simple.)

Curious -- are you American? Good question. 3/4 of the respondents in this thread live in Canada and are infatuated by a political system they have no input on and constantly shit on the US. Their voice doesn't count Thank god. They cant get enough of it though. They will say its because they hate Trump or cant believe how stupid we are but they really know that the US butters their bread so are eager participants in the discussion. I think a great majority are still butt hurt because Trump had the balls to go after NAFTA or wouldn't share masks! Either way they just come to this thread and bitch about a country that they highly benefit from. If you took out all the posts in the thread of paranoid scared Canadians bitching about Americans it would be probably 15 pages long. Eh? I think Trump is a disgusting person. When i say this i am not ‘shitting on the US’. Just like when i criticize Trudeau when he messes up. I am not ‘shitting on Canada’. I am very happy to have the US as a neighbour.

I am not sure why there continues to be so much debate about pretty much anything Trump says. He has demonstrated over and over again to be an unabashed liar. When he talks why would anyone take anything he has to say seriously?

Lots of people want to own a single family home (at least where i live). They want out of high density no space type places. Especially if they have young kids. Covid is really hitting young families hard. Demand for single family homes is solid. Supply is limited - who wants to sell right now?