Dazel

There is nothing new.... Looking forward....I like where they sit....lots of options. Time to perform that simple. Dazel

They did not take the big shot I thought they might but they took bonds too almost $20b so the composition matters....

Thank you. You have done an incredible job here we have all benefitted from your effort whether the stock moves higher or not.

Thanks. I don’t have anything to add....the past is the past. Fairfax needs to perform that simple.

Cherzeca, In your most speculative way....and no one ever would hold you accountable for wild forecast.... What do you “speculate” the next 3 months look like for lawsuits, Ottings direction, WH position, when Calabria will confirmed? Thanks in advance and great job here along with all of the rest of you!

Shalab, First of all I have benefitted from your work here....thank you. I believe you discovered the share awards which I have a big problem with. I see you on the Berkshire thread which is excellent discussing the value of the holdings and $100b cash....Berkshire holdings were decimated in the fourth quarter. Mr. Buffett has a$20b limit for holding cash. So Buffett has $80b cash on a $500b market cap...and many are excited about his buys despite Apples massive losses as well as others. My questions to you are 1. Are Prem and HW actually that bad that with $20b+ in cash on a $12b market cap and minimal losses in the fourth quarter in comparison to Berkshire....that you doubt they benefit from the opportunity more than Berkshire did? 2. What is Fairfax worth if Mr. Buffett is running the investment portfolio?

Petec, You are correct Quess was the home run.

Shalab, It is higher % of Fairfax common stock portfolio. So Petec....I am buying for the upside of earnings power or PE. I believe that Fairfax is worth more dead than alive and that is my margin of safety. So let’s invert. If I took all of Fairfax assets and had them run the same...but hypothetically Markel Gayner asset management ran the $40b investment portfolio starting September 30. What do you think the perception would be of earnings going forward? Most of Markel’s annual reports start with it was an excellent investment year....they are consistent and they are good. They command an above 20 PE and with an investment portfolio half the size of Fairfax and only 10% cash have earned such a great reputation that the stock trades for $2b more than Fairfax in the market. The investment community would tabulate how much more money Fairfax could make if Markel Gayner were running investments if things were the same with $40b as opposed to $20b!!!! They would double their investment returns and wow there would be sooo much money made over the next 10 years they would be catching Berkshire...okay maybe that is a bit much but you get the point. The earnings power of the investment portfolio is there. The market puts a 0 value on it because it has lost faith in Prem and his team. The value at Markel would be significant. HW needs to perform for the earnings power to show up....I am betting they will. P.S I used September 30 because Markel only had $2b cash going into mini fall crash they would not have been able to do much...what do you think they would have done if they had $20b cash equivalents to go on a buying spree?

Just a follow up....there is lots of opportunity out there Shalab I agree...Fairfax’s advantage is they went into this sell off period with $28 billion of bonds and cash....of note is that interest rates dropped substantially creating appreciation in their large treasury portion of those holdings and allowing them the opportunity to buy into a frozen bond market. In the past this has been their strength. There was a window that if Fairfax acted that they would have seized large near term and long term profits in the investment portfolio....which has been the drag on Fairfax. So when you say there are many opportunities now which there are....many have had to wait for their holdings to appreciate to buy other things because they had little dry powder to buy into the worst December in almost 90 years. Fairfax got a fast ball right down the middle of the plate .... Did they hit that fast ball? Only they know that right now...but I don’t have to pay for that probability right now because the stock is cheap enough that they will do fine if they did not hit that fast ball out of the park.

Shalab, Totally agree....Fairfax India and others are a better bet for sure if you are India focused. $20trillion @2% vs $2.7t that will double likely every 6 or 7 years....is the place to be. Many better opportunities in India and those with feet on the ground would blow away Fairfax or any other investment vehicle. Fairfax gives you exposure to India and particular in the private market they are integrated in the financial system there and will get a lot more opportunities than others because of the trust they have earned there. But as you say being able to play in all of the other world economies is very important ...No one else really gives you that optionality that I see with direct exposure to India of “some” scale. If there is someone I would be very interested in them as an investment. Ironically, Thomas Cook India has been a home run that Hamblin Watsa do not get much credit for...in the equities poor performance hit they are taking publically. What have you done for me lately prevails and that is fair after some of the big stumbles. Ie Apple and Amazon are growing massively in India but will not even move the needle to their world incomes.

https://ca.finance.yahoo.com/news/seaspan-announces-closing-second-500-000000115.html This has been very profitable so far and has increased the investment portfolio’s yield on a billion dollars. I would imagine “any” sort of trade deal would be material to Seaspan and this investment.

Petec, They are under earning...50% cash and very poor equity performance....I expect that to change. I expect Hamblin Watsa too come through mostly Bradstreet and the bond side and higher yields. Insurance companies are world class and the other income line has quietly risen materially. Cardboard, You sound negative....lol. You and everyone else are entitled to your opinion. I have given you mine... I am not saying I am right I am telling you what I think....and definitely will not be arguing and debating it until the earnings present themselves....which will prove me right or wrong. 2019 is all about earnings....good or bad. It is time for Fairfax to perform...if they do not I will accept it and move on. If it sounds like a broken record I appreciate the skepticism from all “You have not been wrong”!!! Prem needs to once again prove himself through his team or the market is right.

Disclosure: I have put my money where my mouth is and been buying FFH

This year’s catalysts -Fairfax followers are as bearish as I have seen since 2003. -I expect the best bond manager (Brian Bradstreet) in the world to have filled Fairfax Xmas stockings with corporate and other bonds that got trounced in December. We have seen him move very quickly in the past... 2008 he bought $7b in tax free muni’s yielding 7% in less than a month and sold almost the entire US treasury holding that was larger than that at a massive profit during the same time. In the first half of the 2000’s he did very well in corporate bonds where he needed to be nimble before 2007. I am betting on a much higher yield on Fairfax large portfolio which will take operating earnings higher. This and a likely higher shift into higher yielding short term treasuries in the fall will show more of the earnings power of Fairfax as opposed to holding 50% cash holdings. -India’s growth remains the highest in the world and Fairfax is a way to play that -share buyback will accelerate at these levels albeit not as big as I would like! - insurance companies will continue to improve -equity positions are at rock bottom with little downside risk -as previously discussed I am unhappy with share based awards...these will be disclosed in detail by Prem. Most importantly this is a solid business with loads of potential that is selling dirt cheap for all of the reasons discussed here. Is it a redemption year for Prem and his team at Fairfax? We will see. -

https://www.marketwatch.com/story/how-to-light-up-your-brain-like-warren-buffett-2014-07-17 Buffett is wired for the game...everyone sees what he does time and again but are unable to follow. As Mr. Munger says “anyone who says investing is easy is an idiot.” He also says tell me where I am going to die so I will never go there”. Lastly, they both think some of the most important words in investing are fear and greed. Most importantly, though, is what you own and whether or not you are capable of assessing the assets you own. Ie if you are wired like Buffett and able to buy in maximum fear it better be a good investment! This where the real value counts... Contrary to what The public says about Buffett’s index advice is that he does not say buy the index and go to sleep...he says buy the index over time. So you will buy low at times like 2007-2009...he can’t tell you to lighten up when the market is nose bleed high but he would if he had time. (Take a percentage out at high levels and simply reinvest in again over time and when the market is down allocate a higher percentage to your weekly investment plan. Value investors deal with corrections and bear markets all the time...GE....that is definitely not for everyone and nor it should be...if it makes you nervous you “WILL SELL” at exactly the wrong time. You have to know yourself and that is the “Most important” thing (City Slickers for anyone old enough). Muscleman here is what most people do....and for you to think about...everyone wants to stop investing forever, in a correction and more so in a bear market. They say I just want to get back to even where I was before and will never do this again! Fear subsides as the markets recover everyone feels better....Buffett makes another killing...all seems good so they repeat the process they buy in again make money for awhile until fear returns repeat. That IS the market....to beat it you most be wired to handle both fear and greed...otherwise buy the market overtime as the smartest investor of all time told you to do Mr. Buffett and your wealth creation will beat most other options. However, the best advice Mr. Buffett ever gave is invest in yourself only you know what your greatest strengths are. Best of luck! Dazel

It’s fair to criticize poor performance....with that comes the emotional disappointment of a falling stock price and often the reaction of humans to kick a star when they are down. NO ONE should invest in something they don’t like or trust. Fairfax like all value investors have been hit by the new momentum driven central bank fueled asset market. I don’t think anyone would be happy at Greenlight capital these days...they likely would like more communication there too. Equity selection on the whole has been bad fair enough....hedges are the worst bet I have ever seen in there result they had many chances to cash out gains and limit losses they did not. They are the past...but the past sensational bets that make Fairfax one of the top performing stocks over the last 30 years more than off set them. What matters where are we headed? If you don’t trust Fairfax don’t buy the stock...and is ok to publically voice these opinions so good on everyone for posting. I have a major concern and that is the issuance of stock as bonuses or compensation...I would like some clarification from Prem in his letter....when you don’t perform you should not get extra pay. I am comfortable with where they are and India will likely be a big win...Bradstreet once again dominated the bond market this year....looking forward to see what he is doing these days. We will see what 2019 has in store...I would speculate it will be a very good year. That is my opinion and everyone else should make their own assessment. If you have not been humbled by the stock market... then you have not been around long enough. Cheers, Dazel

Yep I see it too.... I don’t see any company more equipped to kill it on this mini crash....full of cash and short term bonds.

While this would appear like a massive win to the jr prefs...in a fair conversion to common the jr prefs would make more money over the longer term...I don’t see how or why the treasury would take money out of its pocket to pay off the jr prefs....conversion or dividend reinstatement are non cash items and keep $ in the government coffers...has anyone seen the deficit lately?! Assuming that either proposal is even remotely in the cards of course as Stolen $ from Fannie and Freddie have helped the deficit greatly since the great NWS heist. Is that not greatest theft in history?

I have not been following this closely...and I will make maybe ask a silly question...why would the government do anything with the jr prefs other than reinstate the dividends? These would be paid out of future profits from Fannie and Freddie and would not cost or dilute the treasury’s common stake on conversion?the market would reprice the jr prefs and their value would be determined by the market and not have to be paid out in $ from the pie. Clearly dividends should have been paid to the jr prefs long ago. Unless they are going into receivership...then that’s a different story.

All of the best Sanjeev! Hope you kill it in the Future! Dazel.

This is cherry picking....if you back one or two more years you have a very different result and if you go back 15 years it is likely a better return at Fairfax. Moving forward I would bet a lot of money on Fairfax having a better return.

2016 annual report says they are antidilutive and therefore not used in earnings per share calculation in that year. Fact is I don’t know what the hell they are...what the strike price is...who is getting them. Nothing so they may not be antidilutive in share price fall as they did in 2016. That is an assumption but obviously I have been wrong before! When I get over my pissed off mood I will look some more.

I have not been paying attention to the share based awards that have ballooned at Fairfax this has never been an issue when looking at Fairfax over the 20 years that I have...In early 2017 when I began to look at Fairfax again there were no such awards..0 (2016-antidilutive). After the Allied purchase I did not pay enough attention to the diluted share count to pick up on the share based awards as I assumed there would be shares held back for performance of Aliied after the acquisition that would be dilutive with a successful transition. My comments on buybacks in hindsight are now completely and utterly wrong as Fairfax is buying back stock to try to keep up with stock handouts. I apologize for the oversight...trust me I am pissed at the mistake. My buy back theory is wrong...If I were paying more attention to management rather than the great opportunity that the companies, assets, liquidity and capital structure offer I would not have missed it. Fairfax is still set to out perform but the share count will not be shrinking like I had hoped unless the shares get hit hard and the share awards become anti dilutive.

Shalab, Nice find...very disappointing buyback in light of almost 1m share based award payments...I see the majority were in the year end 2017...But almost 400000 this year!!!! For what? Would like to see Fairfax explain. I missed this as 2016 share based awards were anti dilutive so they were not there...possibly many of the 900k plus awards are antidilutive now? Anyone see a break down of the share based awards...it should be somewhere...I am too pissed off to look right now.

Shaleb where did you get the 28.357m fully diluted share count?