Viking

EQR, FTS, CU, FFH, FIH, SU Happy to lock in small gains (4.5 to 10%). FIH was break even; do like the opportunity long term. Learned it is not a good fit for what i want in my portfolio right now. Sold 25% of SU (recently doubled position size).

So when a pension fund or insurance company has a 5 or 10 year US government bond mature their proceeds are going to end up on the Fed’s balance sheet? My comment was aimed at private organization who currently own US government bonds. As these bonds mature and these organization re-deploy where will it go? Demand will increase for some asset classes.

Added to TRP and ENB. My guess is interest rates will be lower for longer. Dividends look safe with growth potential in coming years. Stocks are trading at prices seen in late March. I wonder where all the money in US government bonds is going to go in coming years...

SU Dropping like a stone again.

Yes, i was thinking about those deals but was too lazy to look them up. On pivot Fairfax looks to me making is partnering with established players to manage some of their assets. Smart. The Blackberry Convertible debenture deal is a big win. So as discussed, the tanker does look to be slowly changing course :-)

Thanks for the questions and for providing your perspective. I don’t think we are too far apart :-). Great to debate ideas and perspectives. I learn something new every time. On a more positive note, Fairfax has done some nice things in 2020: 1.) closing of the European Runoff deal was nice to see. Got very good value and the timing of the cash from the sale was ideal. - https://www.canadianunderwriter.ca/insurance/the-thinking-behind-the-latest-omers-pc-insurer-deal-1004177121/ 2.) the significant bond purchases made after the virus sell off. I think it has already resulted in a couple hundred million in unrealized gains with an increase in dividend yield the next couple of years. 3.) insurance business (Underwriting) is chug, chug, chugging along. Hopefully they will be able to monetize a few more assets this year.

I was looking at each across three metrics: company, industry, country From the little bit of reading i did on CIB last year they appear to have a very good track record over many years (decades if memory serves me correct). The issue for Fairfax has been currency. But even with all the country/currency issues the investment has not been terrible (in US$ terms). Eurobank looks to me to be a much more complicated situation with many more risks. The Greek economy was an issue. The government debt was an issue. Grecce’s path forward in the Euro zone was an issue. All the bad loans on the books of all the Greek banks was a massive issue. The proposed carve out of bad loans was risky (great idea but needing lots of time to play out). The merger with Grivalia had risks (all big mergers in banking do). Throw in the risk of another recession hitting (what we are seeing now) and the risk now is progress made is set back years. Position size also matters. If this investment was small i wouldn’t care. It is a massive investment so position size added more risk. CIB? Solid company with proven business model - need to watch country / currency risk. Chug, chug, chug Eurobank? Solid company? Not sure yet. Proven business model? Not sure yet. Likely years more of more of work to get back to break even for Fairfax. And this assumes things in Europe start to get better. There is a decent chance the Eurozone could be mired in recession for years. Some may say: who could have predicted the pandemic? The simple answer is bad things, like recessions, happen all the time and often unexpectedly. Fairfax is an insurer and one would think they understand how to calculate and manage risks - and carry the learnings into the investment portfolio. Instead they have been messing up badly for many, many years. They need to stop with the outsized poorly considered investments. The position size of Altas is another big, big red flag. Fairfax last year talked about having maximum position sizes as a learning from past mistakes. I think they said they wanted to limit equity position sizes to $1 billion. What do they do? They proceed grow Atlas to well past 1 billion. They better hope Atlas does not mess up, given its size. This swing for the fence mentality is great when it works but can be devastating when it does not work and you are trying to re-build investor confidence. PS: in February of this year I was thinking Eurobank was very close to turning the corner and finally rewarding Fairfax shareholders. The pandemic/recession changed things overnight. But that is sometimes what happens. Fairfax has built a company to knock the lights out when times are good (overweight higher risk investments like Atlas, Eurobank, EM equities). But they missed the monetization phase and now that times are bad Book Value had been ravaged and they are left trying to dig out.

Xerxes, for Fairfax to become a long term holding for me i would need to see changes with how Fairfax executes the equity part of their investment portfolio. If they are going to continue putting significant amounts of money in shitty situations then Fairfax will continue to be a short term trade for me. I wish they would tweak their model and simply reduce the number of shitty situation buys and move up the quality chain just a little. So reduce the Resolute, RIMM, Eurobank, Recipe, Toys R Us, Stelco and all the special situation Canadian stuff they have. Right now you can build out a basket of high quality utility, pipeline, telecom, reit stocks that pay a 5% dividend yield (on average). These companies will grow their dividends 4-6% in the comping years. In a zero interest rate world solid, stable, predictable. Would be great for an insurance company to own... maybe 20% of their equity portfolio. Then you have a basket of high quality companies as your core equity holdings. Atlas might fall into this basket (we need a few more years of actual results to know). IIFL companies, Quess, Egypt Bank. Have a few flyers... like Digit in India. But limit these to industries where Fairfax has a deep understanding (like insurance). But please, please, reduce the low quality (company, industry, country... some are all three) ‘investments’. Ben Graham defined investing as: “safety of principle and adequate return. Anything NOT meeting this definition is a speculation.” There has been lots of hand wringing about how value investing is dead. My view is what we have instead seen is lots of shitty investing. Its not value investing and never has been. Look at Graham’s definition of value investing. Fairfax got away with it for the first 15-20 years of their existence so it became hard wired. Mark Twain said “its not what you know that gets you in trouble. Its what you think you know that aint so.” Fairfax has the bones of what can become a wonderful business. But they MUST make one small pivot. Move up the quality tree with the investment portfolio. And become real value investors... PS: recessions happen every 8-10 years... they provide wonderful opportunities to reflect on how successful your investing style is. The insurance side of Fairfax is handicapped right now because they own too much dog shit in their investment portfolio. But this is very predicable. Dog shit companies get crushed in recessions. In 2008 recession Fairfax had these wonderful CDS that masked everything else. Quality is what gets buy and hold value investors through recessions. PS 2: i think we might be seeing a slow shift with the equity portfolio that is encouraging. Reversing the massive short bet and all the commentary afterwards. Atlas has been the largest purchase the past few years and it looks encouraging (although it is still too early to say; and the position size has become too large). Other small examples of dealing with past mistakes: selling APR to Atlas and Fairfax Africa to Helios. Lots more work to be done. But at least to me it appears the super tanker might by slowly changing direction.

Greg, it cracks me up. Much of my family thinks i am a right wing lunatic :-) In terms of Trump i simply cannot understand the logic people use. You ask for proof that he lies at a historic rate. Below is one link. It is irrefutable that Trump lies at a historic rate. Many web sites have documented this (are they perfect? Do they sketch an accurate picture of his behaviour? Yes). Many people have looked in to this. If someone wants to answer this question it is very easy. - https://en.wikipedia.org/wiki/Veracity_of_statements_by_Donald_Trump Anyways, i am just trying to understand the logic of Trump supporters. And until someone provides some i will continue to shake my head in disbelief. But i will try and remain inquisitive and open minded :-) ‘When the student is ready the teacher appears.‘ I am trying to be the student when it comes to understanding Trump supporters. But i guess i am not ready yet. PS: do i think Biden has the onset of dementia? Perhaps. Is Trudeau a poor leader? Yes. Leaders are not perfect. But please, be rational. Call a spade a spade.

No, of course not :-) Your turn.

How does one really know about a person? Great question. Well if you are asking here are some strategies you might want to try: 1.) The best single way is to listen to what comes out of their lips. 2.) Another suggestion is to watch watch what they actually do. 3.) it can also be very informative to watch how they treat other people, especially those they are disappointed with A fourth suggestion is to listen to what close associates/family members have to say - but look for lots of of different sources to get an accurate picture (you will want to avoid the axe grinder types but this can easily be done). If this aligns with what you learned in 1, 2 and 3 above, you might be on to something :-) Anyways, when you layer all 4 of the above together and do so over many years you can construct a pretty accurate picture. Hope this helps :-)

Druckenmiller says stay inquisitive and be open minded. Along this vein, can the Trump supporters (perhaps those who recently posted) please answer each of the 7 questions below. Each is a ‘yes‘ or ‘no’ question. I am hoping your answers will inform and teach me something. Thanks in advance :-) 1.) Trump does not lie at a historic rate - far, far greater than other political figure in US history. This is a yes or no question. 2.) Trump is an ardent supporter of science? Yes or no? 3.) Trump has not tried to intimidate and muzzle the CDC and other departments tasked with handling the pandemic? Yes or no? 4.) Trump has worked very effectively with all states to create a cohesive national strategy to deal with the pandemic? Yes or no 5.) Trump has worked very effectively with the Democrats to come up with a unified approach to deal with the pandemic? Yes or no? 6.) Trump has been a champion in role modelling and promoting the two activities that will have the greatest impact in controlling the virus: wear a mask and social distancing. Yes or no? 7.) Trump has done an admirable job in supporting the 200,000 families who have lost a loved one so far during the pandemic? Yes or no?

Every region in the world is going to struggle to manage the virus. And mistakes will be made. Lots. Here in BC (Canada) they have been slowly opening the economy up more and more. And the case count dropped crazy low mid summer so people started to let their guard down (less mask wearing/social distancing especially with young adult cohort). Lots of get togethers in August especially at the end. Kids are now back in school. It was very predictable that case counts would jump when you open your economy up, end of summer parties, lots of people stop wearing masks/social distancing and you send kids back to school. As case counts increase people will get with the program again. And perhaps there will be new restrictions from the government. The gasoline on the fire will be seasonality (winter and flu season); any regions who have a high base case count going in to flu season will struggle mightily. Lots of red flags right now. But governments will respond and people will adjust. With covid you try stuff, learn, adapt and try again. (Kind of like investing.) These things make a dangerous and very difficult situation much more challenging: 1.) your leader lies pretty much every time he speaks - so nothing he says can now be trusted. Please read this point a second and third time. It is REALLY important especially when dealing with a pandemic... for those of you who seem to have forgotten :-) 2.) your leader does not believe in science. Please read this point a second and third time. It is also REALLY important when dealing with a pandemic. 3.) your leader muzzles / intimidates / politicizes the health apparatus normally charged with managing the pandemic. This is also really important then dealing with a pandemic. 4.) your leader refuses to work with all states and local governments to create a unified approach to dealing with the pandemic (communication, actions etc). This is really important. 5.) your leader is unable to work with other political parties to create a unified approach to dealing with the pandemic. This is also really important. 6.) your leader refuses to champion the two activities that will have the greatest impact in controlling the virus: wear a mask and social distance. This is also really important. 7.) your leader is not compassionate: in the US hundreds of thousands of people have died and many hundreds of thousand will die in the coming months... the virus is a humanitarian disaster and Trump is focussed primarily on... getting himself reelected. His actions in dealing with the pandemic are informed by whether or not they are going to get him reelected. Despicable is the only way to describe this. I could go on and on about all of the highly, highly inappropriate things that Trump has done. Yes, other leaders have faults. But the pandemic has demonstrated his terrible faults and his utter incompetence. The pandemic is proving to be Trump’s kryptonite. 1.) Do i trust my leaders here in Canada. Not completely, but yes. Their faults are minor compared to what we are seeing from Trump. They do not lie every time they open their mouth. 2.) Do our leaders believe in science? Yes 3.) Is the medical community largely leading the response? Yes. 4.) Is there a unified federal, provincial, municipal response? Yes. 5.) Is there a unified cross party response? For the most part, yes. 6.) Are our leaders communicating / role modelling mask wearing and social distancing? Yes 7.) Are leaders showing compassion to the families who have been impacted, especially to those who have lost loved ones? Yes. Do i hold local politicians accountable? Yes. When they said early on that mask wearing would not help that was clearly a mistake; but one that has largely been rectified. More recently, the initial back to school plan looked weak; it is being rectified. Will they make more mistakes. Of course. Do i have confidence they are doing their best and have all BC residents best interests at heart (in terms of pandemic response)? Yes.

Yes, there are lots more things that will play into where Fairfax is in 10-15 years (and how well shareholders do): 1.) Succession planning: important, especially for Fairfax given Prem’s voting control stake 2.) Prem’s personality / character: you either are ok with this or not My guess is a fair number of investors (familiar with the company) have both of these as watch outs. Personally, i am ok with the risks with shares trading at current prices (i am being compensated for the added risk). Also makes it hard to make Fairfax a permanent hold.

Added to ENB, TRP & BCE. Started position in SJR.B (Shaw Communication)

Great question. It is very instructive that float, investment portfolio and share count are all up dramatically the past 10 years but BV per share is not. Five buckets: 1.) underwriting... are they able to get company wide CR to under 95 and then closer to 90: a tailwind, given current hard market and improvement at company over long term 2.) returns from bond portfolio: neutral to a headwind in future years (with zero and perhaps negative interest rates offset by solid long term track record) 3.) returns from equities: neutral (my assumption is the massive short bet kind of thing will not be repeated); poor overall record the past 10 years 4.) management creativity in surfacing value (First Capital sale, sale of 40% of runoff being two recent examples); a tailwind 5.) PE multiple Mr Market attaches to company (largely driven by investor confidence in management): a headwind My guess is FFH will do better a better job of growing BV over the next 10 years. If they do this then sentiment should improve and the PE multiple should expand. IF these both happen shareholders will be richly rewarded. —————— Watchout: amount of debt.

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.