Dazel

Bond gains make sense for Eurolife....they are not going to sell it so valuation only matters on whether they acquire the other 37% from OMERS...book value will continue to be understated as with Thomas Cook India. Buy backs makes sense I will be disappointed if Prem does no take advantage of steady buybacks under $700 as I have said...their buy backs so far in 2018 are sadly inadequate and downright depressing. Hopefully they have taken advantage of this latest blip (volumes are up but I do not see any block trades)if it continues at the pace it was at in early March we all should be pissed off!

Yes Omers! Thanks that’s what happens when you rush! Petec...I know the numbers...don’t have to be public to count. Pg 60 annual report Cost $298 share of profit $117m that’s a price earnings multiple of 2.54!!!! They own 43.3% of Eurolife... Agreed swap and sale is a bad idea. Why buy back shares? Because the investment in associates are undervalued by at least $2b because they are being carried at cost. (Eurolife and Thomas Cooke alone are $2b)The insurance businesses are not being valued and everyone thinks Prem is a washed up bum who is stealing the company for his family. That’s why! It’s a 40% discount!! Buyout the haters...enough already....before the stock appreciates to where it should be.

Actually if was Prem i would just swap assets with CPP...Eurolife is more the kind of asset that they would rather hold...steady. They would not have the disaster risk of BrIt and AWH....hint premium for Eurolife!

Ok I have a second...no time to answer questions. Here is what I would do....Eurolife is not strategic to me they bought it because Eurobank had to sell it and they paid a fair price..and Eurolife has knocked it out of the park! FFH should sell their stake that trades at a PE of about 3 on their cost...they could get a PE of 9 at least I would try for 12...This would be a 4 bagger for FFH add about a billion pretax gain.... Take the proceeds and buy back Brit and as much AWH...as they can because they shit the bed last year and they will get a decent price. I would also look at selling the other consolidated holdings that are smaller that they can ge5 premiums for because they do not create enough cash flow for the time they take...the cash sales are better used for FFH buybacks...they are big enough with BrIt and AWH... Use the cash on hand is for buy backs and other opportunities....

Thank you to all for their execellent input into this thread. Wonderful thinking and intellectual discussions. I admit Fairfax is not for everyone...it has been a bumpy road! Want to clarify a few things will be away for awhile...I am a terrible writer so I will do it in point form! -first and foremost the insurance operations are the key to the value of Fairfax..they most perform. -bond and equity prices as whole are not cheap...but that does not mean that Bradstreet will not continue to trounce the index which values bond prices as a whole. Secondly, as we can see from Thomas Cook India share price (look at their recent chart)...not every one cares about Trump and the trade war retoric! There are pockets of value for value guys to out perform...and Fairfax is decade ahead in India where everyone is headed. -when Fairfax says offence they are talking about the economies of the world not the stock markets...ie if India continues to grow at 7% a year Fairfax will make a killing. The Dow doesn’t matter. -your either trust Prem and Fairfax management or you don’t pretty easy...if you don’t you should NOT buy shares -I see large consistent buybacks up until $700 on FFH....after that they will slow substantially -Volatility brings opportunity to those that are prepared...Fairfax is playing offence but they are doing so with a great Defense as well (lots of cash)...would have helped a lot in the first quarter with bond and equity prices dropping. Value investors have been killed for years...Prem and Fairfax have not escaped this fate and many are right to doubt their recent stock picking performance. That is rear view mirror stuff but Fairfax has to prove themselves AGAIN for sure. Thomas Cook India is a good start.

Anyone else watching Thomas Cook India stock? It’s 280...Fairfax cost is 59...it’s a home run on $250m investment.... not in book value as its consolidated. Buy Fairfax shares Prem Back buy them all...when the crowd realizes Fairfax earnings potential and intrinsic value the buy back program will not be accretive and shares should not be pursued in volume over 1.5x book. The market is helping us out right now!

Having said that...the best investment Fairfax can make right now...is in their shares. Hoping they are actively looking for block share purchases from those want to get out of the AWH buyout and those that need to raise cash. If we stay here in price or drop below these levels for awhile it will be very beneficial to get a boat load of stock purchases. I have not seen Fairfax this cheap since 2003 at that time they were unable to take advantage of the price with big buy backs. Excited.

Lower long term interest rates only happen if there is a pot hole hit...have we hit one now? If we hit a pot hole corporate spreads blow out...longer term treasury yields fall...the opportunity is in a spreads blow out and refinancing problems with the massive global debt load reaching maturity. When the 30 year treasury hit 2.5% in 2008....Bradstreet sold most of Fairfax long term treasuries at a huge profit and bought I believe $5b in Berkshire guaranteed tax free Muni’s yielding 7%. Maybe the bond trade of the century... This will not happen again obviously but when the credit market tightens- freezes...opportunities come quickly to those with ready cash. Libor’s rise is causing funding problems so who knows what the credit market will serve up Fairfax! 2.3% in 3 month money is a pretty good start. If rates continue to ride higher the opposite of a blow up Fairfax wins as well.... My bet is a rise that gets high enough to cause a credit event...where Fairfax buys both corporates at great prices and higher yielding treasuries at good yields...brings a nice yield to the portfolio for many years and adds billions in capital gains....as rates come back down.

Petec, Hope I did not come across the wrong way...in summary this is the type of market that The Fairfax investment team does very well in....volatility and value are coming back into vogue. Cash is king and they are loaded with it....I think the credit markets are a lot tighter than people think...and Bradstreet is the bond king. Interest rates in treasuries do not matter in times of panic...will we get more I am not sure but it feels like the season has changed.

Petec, I just told you that 3 month USD Libor is 2.26%....it depends who you are and where you are what type of spread you get see Seaspan etc. Money is tightening as is liquidity hence the U.S and European banks are all down around 10% plus this week. No one has really discussed libor going straight up because they don’t want to...tight money means rolling over debt will become harder and commercial paper programs will have significantly higher costs.That’s why to buy the “right” corporates hopefully with warrants if the opportunity presents its self. Fairfax-Bradstreet has made a lot of money on corporates in the past....by having tons of cash and liquidity when it was needed. This is turning into one of those times. As for Fairfax euro offering...awesome move...and it becomes a natural hedge for Greek investments.

3 month Libor has been up 32 days in row.

Hosington is right...long term US treasuries yields will fall...but all other interest rates will rise substantially....flat yield curve for treasuries. Any better way to play it than Fairfax...other than having cash to buy high yielding debt? Fairfax gets the magic of the float so they have an advantage on that strategy.

The credit markets are getting strained...3 month Libor is now 2.26%! This is the kind of market that Fairfax wants to deal in....would expect deal flow to get larger...its likely that Bradstreet will stuff the portfolio full of higher yielding corporates...this is what Fairfax has waited for. There will not be a calamity but in a leveraged finance world there will be forced liquidation’s which happened 1994 which is where I think we are (a flat stock market year becoming a stock pickers market but credit markets become wild)..the tide is heading out in the credit markets...many are now scrambling for their suits. Cash is king.

I would agree with your number 1. There is a constant seller in the market that is knocking down the price and it is likely former AWH holders that waited for 2018 to sell for lower tax rate on their capital gains. To be honest this is like looking a gift horse in the mouth I would like Prem to pick off all of those shares being sold.

If you listened to Charlie and Warren over the years you know the answer to your question of who is smarter. The answers being given other than the last one refer to investing smarts and networth. They are not correlated. Buffett has told you that high IQ has nothing to do with investing success. Bill Gates and Warren Buffett played a game with Bill’s dad by writing down one word on piece of paper that was the reason for their success...they both chose one word. “Focus” Munger is smarter because he wants to be rounded and is interested and curious of the world. Buffett is focused on being the best investor in history and making money. Buffett is the better investor.

http://www.business-standard.com/article/companies/thomas-cook-to-spin-off-quess-within-a-year-to-simplify-business-structure-118031301063_1.html The stock price continues to rise as does FFH unrealized (not in book value) gain. I would expect Prem to discuss this at the annual meeting...they will have realized (if Thomas Cook is de consolidated and sold)....almost $3b after tax gains from consolidated companies in a little over a year without losing any cash flow at all. Impressive!

Value2...short it...hopefully the price drops for you. Gotta love the stock market.

That's $10b in bond gains...Bradstreet was buying more shares in August...the Fairfax team is putting on the foil! They are a competitive bunch a couple of strong years will put them in performance in per share book value growth and market appreciation of a handful companies in history have achieved. Bradstreet's record alone to me is just amazing. Make no mistake this is a tight team though. They are bruised not beaten. I have been loud and proud...but it's the numbers that matter...we will see.

Cardboard, Wouldn't that be nice if Prem et all retired! Then we would have that new culture we are looking for! LOL. Bradstreet has another $10b in him before he is done...the math is on his side! Cheers!

There was a lot of discussion on bond losses that Fairfax would possibly take on their bond portfolio after the sell off that has occurred in the bond market. Fairfax hedged the portfolio in 2016 and again in 2017...100 basis point rate increase would be $150m loss (page104 2017 annual). As suspected they are in a position to take advantage of higher rates unlike many others with large bond portfolios that will take large losses to their principal. Most reached for yield....their earnings of the past will be inflated where as as the earnings power of Fairfax has been hidden by their large cash balance and hedging of rates. Great job once again Mr. Bradstreet! 2018 looks very promising.

Gundlach is the bond king....tell me that his portfolio has not had the opportunity to similarly weight to Bradstreet’s....so take the bench mark out compare their numbers. https://doublelinefunds.com/wp-content/uploads/core-fixed-income-fund-fact-sheet.pdf?c=1520932995 Fairfax who have supposedly lost their touch because most want to forget their long term record...have missed the fact Bradstreet has remained at the top of his game in any time period you want to look at over the last 32 years (In 1999 and 2000 he would have underperformed) the dismal last 9 years for HW he has destroyed Gundlach’s Double line record since inception it’s inception. Bradstreet is the bond king! P.s I love Gundlach and listen to all he has to say...

Fairfax used the 2007 and 2008 CDS winnings to buy back ORH, NB, Zenith and others....they were some of the best investments Fairfax has ever made (I have recently seen other posters still calling Prem a thief because of how good the deals turned out for Fairfax). They are the reason that FFH is undervalued. I believe they will do the samething going forward but buybacks will be the priority. If they make a extra couple of billion on Blackberry or Greek investments etc...Then you will see them buy back more of Brit and Allied. Are we not all glad they did not own all those two companies last year! For some reason memories are short right now with Fairfax....nature of the beast. Can someone please comment on Brian Bradstreet’s bond record it’s astonishing And there is no one close globally over 5,10,20, 30 years!!!!! No one. He is a legend and no one will comment on it... Someone do the work and try to find someone close please! Crazy.

Fairfax closed the first capital, deal on Dec 28 2017....we have not seen any buy back numbers since that deal closed. They are limited in what they can buy back per day. I would like to see consistent buybacks at these levels....to the maximum they are allowed. Once again there are different opinions on where Fairfax is....and that’s great it makes a market. The longer we stay cheap the better for a Singleton type buy back plan. Long term shareholders win...hard to imagine that anyone would be upset if Fairfax bought back enough stock so that the Watsa family once again owned the majority of the shares! If Fairfax operates like the plan is set out...shareholders will once again be very happy if not well....everyone will be grumpy including me! I have been around for the grumpy and I have been around for the euphoria. I made ton of money during Grumpy times and would like to do it again! “You can’t buy what’s popular and do well in investing” Warren Buffett

The letter was Pure Class. Watch out Fairfax is back! Cheers, Dazel

Looks like Fairfax has a approx $850m pretax gain in Thomas Cook India...not bad for a group that has lost their touch. LOL