StubbleJumper

My own take is that instead of focusing on who should get it first too much is concentrate on getting ad many people vaccinated as possible quickly. The “who” is less important than the “how many”. Frontline workers don’t like to get the vaccine - “Next one please”. I think this is one thing that Israel gets right : https://www.nytimes.com/2021/01/01/world/middleeast/israel-coronavirus-vaccines.html Agreed, it's insane some places are only vaccinating during business hours when they have doses on hand to administer. In Canada some of the vaccination centers in the most populated province closed for the holidays even though they had vaccine available. Europe seems to have the same problems based on what read and hear from my brother and they are perhaps even worse.Germany has build up vaccination stops in addition to healthcare facilities to increase the capacity to give shots. Those should be open 16 h a day but somehow they are not. Then there was enough of BioNvax shots ordered and the Astra Oxford vaccine is late and the EU decided not to give any emergency authorizations for COVID-19 vaccines on principle apparently. It is quite infuriating to see how states and countries can botch this for one reason or another. I am guessing that this will all run more smoothly in 1-2 month but it sure is painful to watch. Now I start to sound like Gregmal :o. You should be honoured to sound like Greg. In Canada's largest province, these days your likelihood of catching covid during a given 7-day period is approximately 3-in-2000. So, when the health administrators ceased vaccinations of the elderly over Christmas and 30,000 people didn't get vaccinated, it's likely that 45 of them will have caught covid. They are elderly, so their Infection Fatality Rate is 10% or 15%, meaning that 5 or 6 of those 45 people who should have been vaccinated likely died because of that pause in vaccination over Christmas. I wish everybody could take Christmas off, but Jesus Christ, the health system administrators know all of this fully well and are supposed to make decisions based on science and statistics and they completely shit the bed. At this point, this is decision-making under (relative) certainty and they have make rookie mistakes. On this issue, I stand with Greg. SJ

I would think if they did something like that they would almost have some sort of value placed on every house as of today and then tax future increase from that point. If I remember correctly in 1994 I believe they did something like that when they dropped the $100,000 deductible on capital gains Isn't it more likely CRA would simply increase the taxable portion of capital gains from 50% to perhaps 75% or something like that? Something to think about though as I am sitting here waiting for email confirmation on the sale of two small properties and a change in the capital gains rate is something to be considered. You are actually thinking of Valuation Day, which was December 31, 1971. Before that day, there was no capital gains on cottages or secondary residences. If you owned a second property prior to that day, you began to accrue taxable capital gains starting with the Valuation Day value. In practice, over the past 50 years, few people seem to have been paying capital gains tax on the sale of their cottage and the CRA has mostly been unaware when somebody disposed of their secondary residence. Over the past year or two, we have been obliged to report the sale of all real estate and then to take an exemption if it was a primary residence that was sold, so it appears as if the CRA is trying a bit harder to collect capital gains tax on real estate. If the government decided that it wanted to impose some sort of capital gains on the principal residence, there's no reason why the CRA couldn't just implement Valuation Day II on December 31, 2021. SJ

There are many remote communities. Some of those are indigenous communities and some are not. The characteristics of those communities (fly-in, fly out, hospitals quite distant) are what matters, not the genetic or cultural background of the people who happen to live there. Agreed, people are people and all should have equal rights and equal protection under law. But once governments start giving people privileges based uniquely on their ancestry, you have shifted drastically away from the principles of a pluralist society in a liberal democracy. Some of those race based (or if you prefer, ancestry based) privileges are historical artifacts created by our forebears 300 years ago and are thus entrenched in law, but to the extent possible, let's not create new ones. If you start providing preferential access to vaccination on the basis of ancestry, do you finish in a world where hospital beds, waiting lists and organ transplants are not provided to all equally, but rather preferentially to certain groups because of their genetic make-up? That's certainly not a world that I would want to live in. SJ

If the concern is remote communities, then why not simply create a definition of "remote" and then prioritize the vaccination of remote communities irrespective of the race of the residents? It is perfectly legitimate to question the wisdom of governments offering race-based privileges. SJ

Sanj, You need to go back to the posts in approximately February in this thread where we noted that earnings in the past three years have been characterized by a quality problem. It's all fine and good to note that FFH had a 11% ROE in those years, but then you should probably qualify that statement by noting that a good chunk of that consisted of paper gains (ie, marking the airport to market last December, merging Grivalia and Eurobank, Thomas Cook/Quess etc). FFH management should be given full credit for having created value in all three of those companies, but the value was created long before the paper gains were booked. Thrifty's table, while depressing, is a long enough period to smooth out those lumpy transactions. SJ Hi Stubble, you are correct, but that cuts both ways. You have to also assume that Fairfax's insurance businesses are worth a heck of a lot more than they are carried for in their books. In other words, you could assume that book value per share may be closer to $625-650 USD in reality. So you can't take away growth in book value on one hand and not give credit on the other hand. I'm the first one to say that Fairfax has underperformed over the last 10 years. That doesn't mean that the next ten years are going to be the same. I'm buying at today's prices essentially after the pandemic at $380-430 CDN...not two years ago at $650 CDN per share. I never owned BAC until it fell to $5 in 2008/2009...I still own most of those BAC shares...ten years later. I'm not looking in the rearview mirror when I invest...I'm always...ALWAYS...looking forward! Cheers! Sanj, You are suggesting that FFH is worth ~1.4x or 1.5xBV. I might actually believe 1.2x, because most of the value is in the insurance subs. There's really only about three ways that the insurance subs would be worth much more than book: 1) The subs' underwriting results are so spectacular that their ROE is high enough to merit a multiple; 2) Hamblin-Watsa's investment results are so spectacular that the subs' ROE is high enough to merit a multiple; 3) There is a "hidden" asset that is carried on the books for less than BV. So, in your view, which of those three is currently the driver of a 1.4x or 1.5x multiple? I don't doubt that the market will swing and FFH will eventually become overvalued again and might *trade* at some ridiculous level, but we are talking about value, not market bullshit, right? SJ Hi Stubble, No I'm saying that Fairfax is worth 1.1 times. My numbers are based on book today being back close to where it was at year-end 2019...around $486 USD...or about $610 CDN at 1.25 exchange. 1.1 times $610 CDN gives around $670 CDN per share. And as you know, it's trading around $430 CDN. Just getting back to fair value would be a 55% gain. In regards to the value of the insurance businesses, I was simply pointing out that if you say they benefitted in recent years from the realized value of certain assets, then you have to give some unrealized value to other assets, including insurance. What was Fairfax Asia carried as on the books...what was the total realized sale price? What about Riverstone Europe? You are at zero interest rates...you don't think other insurers will pay up for Fairfax insurance assets? Especially now that they are operating so well for nearly a decade? Cheers! Sure, I'd believe 1.1x BV. That's not at all outrageous if Prem stops doing stupid shit with the investment portfolio. All that 1,1x says is that it's worth more alive than dead. I missed entirely the fact that you were talking about Canadian dollars (but in fact, you actually did write that) , but for some strange reason most people in this forum are anchored in Canadian dollars. Just use US dollars and it's a great deal simpler. This is no longer principally a Canadian company even if it is headquartered in Canada. They report in US dollars, the pay the divvy in US dollars, and there is a US dollar based stock price. Why would we even use Canadian dollars on this?!? We aren't in 1999 anymore. So, sure, 1x or 1.1x BV at at some point in the next five years is not at all Bat-shit crazy. But, it's also not indicative of irreplaceable management. SJ

Let's give Dr. Dalal a bit of credit here. He brought the vitamin D issue to this forum back in the spring. I thank both you and Dr. Dalal for that insight. As I have suggested in the past, it's a classic application of Pascal's Wager. Spend $10 on 300 tablets of vitamin D, at worst you've wasted your money and there's no harm, at best it might save your life or at least reduce the significance of a covid episode. Muscleman also brought this forward a number of months ago, so thanks to him too. SJ

Sanj, You need to go back to the posts in approximately February in this thread where we noted that earnings in the past three years have been characterized by a quality problem. It's all fine and good to note that FFH had a 11% ROE in those years, but then you should probably qualify that statement by noting that a good chunk of that consisted of paper gains (ie, marking the airport to market last December, merging Grivalia and Eurobank, Thomas Cook/Quess etc). FFH management should be given full credit for having created value in all three of those companies, but the value was created long before the paper gains were booked. Thrifty's table, while depressing, is a long enough period to smooth out those lumpy transactions. SJ Hi Stubble, you are correct, but that cuts both ways. You have to also assume that Fairfax's insurance businesses are worth a heck of a lot more than they are carried for in their books. In other words, you could assume that book value per share may be closer to $625-650 USD in reality. So you can't take away growth in book value on one hand and not give credit on the other hand. I'm the first one to say that Fairfax has underperformed over the last 10 years. That doesn't mean that the next ten years are going to be the same. I'm buying at today's prices essentially after the pandemic at $380-430 CDN...not two years ago at $650 CDN per share. I never owned BAC until it fell to $5 in 2008/2009...I still own most of those BAC shares...ten years later. I'm not looking in the rearview mirror when I invest...I'm always...ALWAYS...looking forward! Cheers! Sanj, You are suggesting that FFH is worth ~1.4x or 1.5xBV. I might actually believe 1.2x, because most of the value is in the insurance subs. There's really only about three ways that the insurance subs would be worth much more than book: 1) The subs' underwriting results are so spectacular that their ROE is high enough to merit a multiple; 2) Hamblin-Watsa's investment results are so spectacular that the subs' ROE is high enough to merit a multiple; 3) There is a "hidden" asset that is carried on the books for less than BV. So, in your view, which of those three is currently the driver of a 1.4x or 1.5x multiple? I don't doubt that the market will swing and FFH will eventually become overvalued again and might *trade* at some ridiculous level, but we are talking about value, not market bullshit, right? SJ

Sanj, You need to go back to the posts in approximately February in this thread where we noted that earnings in the past three years have been characterized by a quality problem. It's all fine and good to note that FFH had a 11% ROE in those years, but then you should probably qualify that statement by noting that a good chunk of that consisted of paper gains (ie, marking the airport to market last December, merging Grivalia and Eurobank, Thomas Cook/Quess etc). FFH management should be given full credit for having created value in all three of those companies, but the value was created long before the paper gains were booked. Thrifty's table, while depressing, is a long enough period to smooth out those lumpy transactions. SJ

Apparently Prem gave a bit of a pep-talk about the virtues of value investing. I wonder whether he spent a few minutes expounding on the effectiveness of shorting: https://www.theglobeandmail.com/business/article-fairfax-ceo-prem-watsa-touts-traditional-value-investing-amid-frenzy/

close .. "We closed our acquisition of Allied World on July 6, 2017 and we welcomed Scott Carmilani and Allied World’s 1,430 employees to the Fairfax family. As you know, Allied World is the largest acquisition that we have done and we pursued this acquisition because of Allied World’s outstanding track record over its 15 years of existence and the quality of its management team. We are very thankful to our financing partners OMERS ($1 billion), AIMCO ($0.5 billion) and two others. We issued a total of 5.1 million shares for Allied World. The effect of this acquisition is shown in the table below, which was previously presented to you at our 2017 annual shareholders’ meeting:" "Not shown in the table above is our investment in Eurolife led by Alex Sarrigeorgiou. As you know, Eurolife is one of Greece’s leading life and non-life insurance companies, created by Eurobank in 2000. We bought our share of Eurolife in 2016 for $181 million, with Eurolife being 40% owned by us, 40% by OMERS and 20% by Eurobank. We expect to buy out OMERS within the next two years, so Eurolife will become a Fairfax insurance subsidiary. Eurolife has earned $111 million (our share) since we acquired it, benefitting greatly from a Greek bond portfolio of about A1 billion. The non-life portfolio had a combined ratio less than 70% again in 2017. We are very excited to be partners with Alex and his team at Eurolife as they build a very successful company in Greece." unless i am reading this wrong, Eurolife is pretty insignificant ref: 2018 letter So, you are saying it's more like: 1.) funding subs in hard market ==> Allied, ORH, Brit and Zenith are okay, but over a few years C&F and NB could use perhaps $300m 2.) funding likely January dividend ==> $270m/year for each of 2021-23 = $810m 3.) take out Eurolife partner (OMERS) ==> $181m 5.) take out Allied partners (OMERS) ==> $1B So, it might be ~$2.3B to do all four. If they have EPS=$30/sh, that basically will eat up three years of a conservative Net Income number. SJ Are you factoring in the tidal wave of extra cash/profits that flood in during a legit hard market? Their discipline/ability to ramp up premium volume by 50% (from which claims will be paid out over years/decades) while at least doubling underwriting margins is a big part of the fun of owning BRK or FFH, and doesn't happen that often. For FFH we’re talking at least a couple billion of extra cash for owners overnight (during a legit hard market). Nope, I'm not counting on anything weird or wonderful happening that results in outrageous profitability. About a month or six weeks ago, I tossed out a pro-forma income statement for 2021 in this forum to stimulate discussion. Working from memory, my assumptions were pretty conservative, with ~6% growth in Net Written, a 94 CR and a 2% return on investments. If price increases remain strong, perhaps the CR might be a shade better, but I wouldn't want to get too ambitious about that (historically a 94 CR is already exceptional). The growth in Net Written could definitely be larger (ie double-digits), but again, no need to go too crazy. With my cautious assumptions, I arrived at EPS of $30, but certainly with a bit of underwriting luck, or a couple of good outcomes on the major equity positions it could be considerably higher. The one thing that I would caution you about is to not go to extreme on FFH's ability to increase Net Written. On page 16 and on page 195 of the AR, there are a couple of nice tables which present the premiums to surplus ratio from Dec 31, 2019. There was much variation in this ratio amongst the subs, but NB, C&F and Brit were of particular interest because they were 1.4x, 1.7x and 1.3x respectively. Usually you don't see that ratio go above 2.0 because the regulators demand that companies keep enough reserves to pay indemnities. So, unless capital is added to those three subs, you won't likely see their Net Written increase by 50% any time soon because they just don't have adequate capital to do so. On the other hand, ORH, Allied, and Fairfax Asia could easily increase their premiums by 50%. The other thing to look at is Note 19 on page 95 of the annual report which depicts the dividend capacity of the subs. If you see a sub that can only dividend $100-150m to the parent, it's capital constrained and cannot crank up it's underwriting (because it needs to keep reserves when it writes policies). SJ

close .. "We closed our acquisition of Allied World on July 6, 2017 and we welcomed Scott Carmilani and Allied World’s 1,430 employees to the Fairfax family. As you know, Allied World is the largest acquisition that we have done and we pursued this acquisition because of Allied World’s outstanding track record over its 15 years of existence and the quality of its management team. We are very thankful to our financing partners OMERS ($1 billion), AIMCO ($0.5 billion) and two others. We issued a total of 5.1 million shares for Allied World. The effect of this acquisition is shown in the table below, which was previously presented to you at our 2017 annual shareholders’ meeting:" "Not shown in the table above is our investment in Eurolife led by Alex Sarrigeorgiou. As you know, Eurolife is one of Greece’s leading life and non-life insurance companies, created by Eurobank in 2000. We bought our share of Eurolife in 2016 for $181 million, with Eurolife being 40% owned by us, 40% by OMERS and 20% by Eurobank. We expect to buy out OMERS within the next two years, so Eurolife will become a Fairfax insurance subsidiary. Eurolife has earned $111 million (our share) since we acquired it, benefitting greatly from a Greek bond portfolio of about A1 billion. The non-life portfolio had a combined ratio less than 70% again in 2017. We are very excited to be partners with Alex and his team at Eurolife as they build a very successful company in Greece." unless i am reading this wrong, Eurolife is pretty insignificant ref: 2018 letter So, you are saying it's more like: 1.) funding subs in hard market ==> Allied, ORH, Brit and Zenith are okay, but over a few years C&F and NB could use perhaps $300m 2.) funding likely January dividend ==> $270m/year for each of 2021-23 = $810m 3.) take out Eurolife partner (OMERS) ==> $181m 5.) take out Allied partners (OMERS) ==> $1B So, it might be ~$2.3B to do all four. If they have EPS=$30/sh, that basically will eat up three years of a conservative Net Income number. SJ

I’d listen to every call going back to the IPO in 2017 and maybe read the financials. Prem has no obligation to explain his investments in detail, and there is plenty of public information if you want to research it yourself. I don’t differentiate between an X% IRR achieved by traditional compounding or an X% IRR achieved by (say) special dividends coming out of a cyclical. I think we will do well from Stelco over the long term because of the relationship between the going in price and long term cash flows, and the quality of capital allocation. Time will tell. I was also thinking today... ‘what is Fairfax’s strategy with cyclicals’. And do they have an exit strategy? Is it total return? Stock goes up 75% or 100% sell for large gain? Or is it to own it long term and get paid via dividend and increasing stock price? We do know Fairfax is not buy and hold forever. And given their need for cash i would expect them to be opportunistic should stocks like Stelco and Resolute continue to rocket higher in 2021. It's not really the need for cash, because a sale of some of those legacy positions would come mainly from the insurance subs, and they can't just dividend the cash to the holdco without imperiling their underwriting capacity. From my perspective, it's more about recuperating some capital so that it can be redeployed into something with a greater likelihood of providing an acceptable return. For a few of those positions, it feels like Fairfax actually is a buy and hold forever investor! The investment in Abitibi Bowater was waaaaaaay back in 2008, the first money put into Research in Motion was, what, in about 2010, and Torstar was another epic story stretching over a decade or so? A permanent loss of capital is a bad thing, but it's even worse if it takes you a decade to lose your money! As Pete noted, if you think about the time-value-of-money for some of these investments, you had better do so with a stiff drink in your hand! Well, during 2020, the Torstar situation has been resolved and FFH can take the proceeds and the tax-loss, and re-deploy at least a bit of capital. It would be nice to get a "resolution" of Resolute and it would be nice to send Blackberry into "motion" during 2021 or 2022. Conditions are increasingly favourable for dumping those positions and moving on. There are many reasons to be cautiously optimistic about FFH in 2021! SJ

They have been injecting capital in their insurance before the pandemic started and ever since. Prem will have his "slug" of FFH shares, funded by some of the asset sales from the company's balance sheets. We just wont know when it will happen, but it will be sooner than we think (IMHO), for the simple fact that going-forward, as the recovery unfolds (while 2nd wave is playing 2 steps forward 1 step back), FFH's book value will pull the market value up in an absolute sense (simply said taking more investment $ for buyback), even if on a relative sense the discount remains there say 6 months from now. I’m sure Prem would love to buy back shares at this price. And he will. But I wouldn’t bet on it being big. The only way to sort out the holdco’s sources and uses issue is to increase dividend capacity from the subs, and the smartest way to do that is to put capital into them at the start of a hard market. I can’t really be bothered to debate this but I’ve seen people on here make buyback predictions based on relatively little information before, and then get annoyed with Prem when those predictions didn’t come to pass. The fact is that without insider info on the opportunities the subs have to write premia, you can’t know what Prem will do with the cash. I would be very surprised if they did a large stock buyback in the near term. Now if they sold an asset for a premium valuation (like Blackberry) then perhaps. But this is not likely in the near term. In terms of near term priorities for cash: 1.) funding subs in hard market 2.) funding likely January dividend 3.) take out Eurolife partner (OMERS) 4.) pay down debt (elevated since pandemic started) 5.) take out Allied partners (OMERS) 6.) large stock buybacks Fairfax may make a smaller stock buyback (couple hundred million). Once the economy gets going and they sell off some businesses for large gains and cash starts to build on the balance sheet (also driven by operating earnings) then perhaps meaningful stock buybacks will happen. My guess is we are 6 months away from this becoming a more likely reality. I mostly agree, but I would offer one quibble, but I think it's an important quibble. I don't believe that #4 (debt repayment) is even remotely on FFH's radar screen. I fervently hope that the people at FFH are looking at their debt ratios with a little concern and that the company's experience this spring of basically hitting the ceiling on their revolver covenant will be a bit of a wake-up call. But, I wouldn't expect to see much reduction in aggregate debt. My guess is that the strategy will actually be to grow FFH's equity and income which will improve the leverage ratio and debt-service-ratio. But, I actually expect that they will float *more* debt in 2021 and 2022, resulting in a growth of debt in dollar-terms, but the growing equity will result in a reduction of debt ratios. From a shareholder's perspective, I am hoping to see a couple of boring years where FFH does not make any major acquisitions and instead focuses on digesting some of the acquisitions of previous years. From where I sit, they need to earn a couple billion of income over the next few years and use it to improve the company's financial strength. I don't foresee much debt repayment or significant buybacks in the near future. An interesting exercise is to think about the cash-outflows associated with your hierarchy and compare it to a plausible net income that FFH could generate over the 2021-23 period: 1.) funding subs in hard market ==> Allied, ORH, Brit and Zenith are okay, but over a few years C&F and NB could use perhaps $300m 2.) funding likely January dividend ==> $270m/year for each of 2021-23 = $810m 3.) take out Eurolife partner (OMERS) ==> does anyone remember this amount??? 5.) take out Allied partners (OMERS) ==> working from memory, isn't this one $750m? To satisfy the items above basically looks like it would require more or less all of the Net Income that could reasonably be expected over 2021-23. SJ

I have been expecting to see a bit of tax-loss selling at some point in December because pretty much anybody who bought FFH in the five years leading up to last March is pretty deeply under water. I must confess that I hadn't expected to see it on December 10 as usually people wait until the final few trading days of the year. But, if somebody had the intention to sell, crystallize the capital loss and then re-purchase after waiting the obligatory one month to avoid the superficial loss rule, they might wish to do it sooner rather than later. In 2020, FFH traded X-D on about January 17 or 18, so if somebody wanted to crystallize the loss and still get the US$10/sh dividend, they'd need to dump their shares in the next few trading days, recognizing the T+2 lag. SJ

Don't look now, but Eurobank seems to have doubled over the past month.... SJ

With respect, what exactly is occurring at this very moment? You may choose to accept that regulators would be hesitant to make a vaccine available in the summer on the argument that there was limited proof at the time that it actually worked, but once the November 16 announcement was made that it actually did work, they continued with their risk aversion and are using a population-wide approach to assessing risk. Clearly, that's fine for me personally because for the purposes of covid, I am about as "average" as it is possible to get. But, the risk preferences of the ~15% of the most vulnerable might be legitimately different than those of the regulators. If you wish to go a step farther, it would be unfathomable that the regulatory agencies have not been in close contact with the pharms over the past 6 or 8 months, and they surely had progress updates on the vaccine tests long before the November 16th announcement. You may argue that regulatory rigidity and process are important cornerstones of safety, but that is cold comfort for those who are in the higher risk group. No, don't get me wrong, I meant no criticism of the Government of Quebec. Arruda et al attempted to a few rational moves that were not even considered in other jurisdictions, but they just didn't work. In particular, the province issued a stay-at-home warning to all people age 70 and over back in the spring, which was well-targeted but poorly supported by other programming (eg, the federal government paid young people to sit on their ass all day, while it was a challenge for the elderly to obtain grocery delivery services...was that an opportunity missed?). In the end, the 70+ year-olds in my circle all basically told the government "va chier." No, my observation about NYC was merely that the March/April outbreak demonstrated unambiguously that there was a very, very high IFR for the age-70+ group. There were journal articles published in the summer about it, so my point is that no regulator could possibly claim that the risk to that subgroup was poorly understood or unquantified. What is more, the notion that ~60% of people would eventually catch the virus unless a vaccine were invented has been clearly understood since the spring. The decisions taken by regulators over the past 6 months or so have been taken (for better or worse) with that knowledge. They seem to be comfortable with not offering people the choice of taking Risk A (catching covid with an elevated IFR) or taking Risk B (prematurely taking a vaccine with some unknown level of risk). I'm not certain that I follow this argument -- perhaps you had a sentence or two in your mind which would make it all clear, but did not actually type it out. Yes, in April (and again in November/December), restaurants in Canada were not financially viable because the dining rooms across the country had shut down and they were depending on take-out and delivery. Given the historical margins in the industry, unless there is a return to "normal" a restructuring will be required. That return to normal likely won't occur until mass vaccination is well advanced and governments ease restrictions on indoor dining. You did not comment on that, then in that thread but, concurrently, you put that in the CV thread: I'm surprised Trump hasn't released the vaccine already. You know he's smart enough to get it done. ;) I thought that he made the bleach announcement a couple of weeks ago? SJ i may be just too dumb but i still don't see what was so obvious then. Well, that's quite a diverse collection of thoughts and extracts. First off, you are anything but dumb. The decision of whether to prematurely make a vaccine available to the highest risk segment of the population is a classic decision under uncertainty. The outcomes associated with not making it available were well understood painfully well by the summer (ie, the very high IFR amongst the elderly), and the risk associated with the premature use of a vaccine became better understood as testing progressed, culminating in a couple of announcements last month. The regulatory regime seems poorly adapted to recognize the demonstrably different risks faced by demographic groups. Maybe it cannot be otherwise for practical reasons. Maybe it's merely career risk aversion. Perhaps its the problem of technocrats simply being unwilling to allow individuals to make their own risk decisions. Whatever the root cause, it's a decision under uncertainty which seems to be driven by population level risk preferences that does not make any concession to the specific problem faced by easily identifiable high risk groups. As we have discussed (excessively!?!) over the past 8 or 10 months, governments around the world have adopted policy measures which have either cost lives or saved lives. What is occurring right now is yet another aspect of those decisions. People in the UK are getting the jab right now as I type. In the US and Canada, the vaccine has been approved and the jabs will begin shortly. How many people in Canada and the US will die because our regulators were not as fast as those in the UK? How many deaths could have been avoided by taking a small targetted risk and beginning vaccination of the elderly in November? How many could have been saved by taking a large targetted risk and beginning vaccination of the elderly even earlier? On a personal note, I perceive that I may have triggered a more emotional than normal response from you. That certainly was not my intent, and to be completely clear, in no circumstance did I intend any personal criticism. SJ

Oh, it's even better than that. Here's a link to an interesting article in New York Mag which notes that we've had the vaccine available since last January, and we elected to not use it: https://nymag.com/intelligencer/2020/12/moderna-covid-19-vaccine-design.html So, what's interesting is that the outbreak in NYC showed a 19% Infection Fatality Rate for people 75 years and older during the outbreak last spring. Despite the fact that regulators knew very well that the IFR was ridiculous for that age group, there didn't seem to be much of an effort to seek volunteers from the highest risk groups to take an untested vaccine when regulators knew very well how lethal the virus was for them. In fact, they were operating under the assumption that ~60% of people would eventually catch it unless a vaccine were available, which tells me that they were completely comfortable with the notion of tossing under the bus 19% of 60% of people who were 75+ years of age. Fast forward to November 16, when the Moderna vaccine was announced, and they still don't seem to be in a big rush. On Nov 16, the US had a total of 11.5m cases and yesterday there were 15.4m. Cases have grown by nearly 4 million since the vaccine announcement. Plug in whatever population level IFR you think is correct -- maybe 0.4%? So, they've basically sat back and watched 16k additional Americans die since that announcement, and most of those will be concentrated in the oldest 10% or 15% of the population. They imposed a population wide risk preference on a sub-group that is at demonstrably higher risk. If they give it another week, maybe there will be another 1 million new cases and there will be another 4k deaths baked into the numbers. SJ Sure, unnecessary delays and institutional inefficiencies should be prevented, identified and improved upon. But why do 'we' have institutions like the FDA? Personal belief: The development of CV vaccines, overall, represents a great achievement and the result is some kind of a bipartisan (bipartisan in the sense of cost-effective collaboration and cooperation). Still, can 'we' do better? You bet. @SJ The assertion that a vaccine should have been used in March and April in the NYC area is interesting. Is it possible that this is a case of retrospective analysis gone too far? (Personal note: i'm still asked periodically to produce motivated opinions about things which happened in the past. A key aspect is that one has to try to travel in time in order to assess what a reasonable person would have done, under the circumstances and given the data set available, at the time. Starting the analysis thinking "they" are evil typically does not produce solid evidence). It's interesting to note that the "they" people (whoever they are) who act as intermediates between vaccine developers and the end users are also the same "they" people who are trying to define the distribution and allocation strategy for the vaccine. Why is that? From a pure free market perspective, the vaccine should go to (should have gone to?) the highest bidders. No? Or at least, from that same perspective, the vaccines should be offered to the potential (super-)spreaders first (irrespective of the disease potential which is low, overall, in this group) so that restrictions are lifted and the economy gets going. How would that go from a cost-benefit perspective? (i remember your previously documented thought process about individual cost-benefit assessment and the vaccine) Why will the allocation strategy be different? Of course, mistakes for allocation are being made at this point and in 8 to 9 months, 'we' can criticize the process. (personal bias revealed: i tend to respect people who work in the trenches) No, clearly "they" are not evil. Rather, they are risk-averse regulators who are concerned that the voluntary premature use of the vaccine by the 10-15% of highest risk people could be a career-limiting-move. The prioritization of the vaccine distribution can be found in any number of documents that have gathered dust in places like Washington and Ottawa (this has been in every pandemic plan since the high-path H5N1 scare). Since April, it has been pretty obvious that if you vaccinate the 10-15% of people who are over 70 years of age, your covid deaths will disappear almost entirely, and your ICU use will be roughly cut in half. There is nothing new about the fact that there is a very easily identifiable high-risk group and there has been a paucity of measures developed to acknowledge the demonstrable asymmetry of risk (Quebec was one of the few that tried and failed badly to address the higher risk of the elderly). But, the regulators are preoccupied with the possibility of an adverse reaction from the vaccine. That surely is cold comfort for the group who face a 10% or 15% chance of dying if they actually catch this virus. For that group, it's an asymmetric risk to volunteer to be jabbed before the paperwork is complete. SJ

Oh, it's even better than that. Here's a link to an interesting article in New York Mag which notes that we've had the vaccine available since last January, and we elected to not use it: https://nymag.com/intelligencer/2020/12/moderna-covid-19-vaccine-design.html So, what's interesting is that the outbreak in NYC showed a 19% Infection Fatality Rate for people 75 years and older during the outbreak last spring. Despite the fact that regulators knew very well that the IFR was ridiculous for that age group, there didn't seem to be much of an effort to seek volunteers from the highest risk groups to take an untested vaccine when regulators knew very well how lethal the virus was for them. In fact, they were operating under the assumption that ~60% of people would eventually catch it unless a vaccine were available, which tells me that they were completely comfortable with the notion of tossing under the bus 19% of 60% of people who were 75+ years of age. Fast forward to November 16, when the Moderna vaccine was announced, and they still don't seem to be in a big rush. On Nov 16, the US had a total of 11.5m cases and yesterday there were 15.4m. Cases have grown by nearly 4 million since the vaccine announcement. Plug in whatever population level IFR you think is correct -- maybe 0.4%? So, they've basically sat back and watched 16k additional Americans die since that announcement, and most of those will be concentrated in the oldest 10% or 15% of the population. They imposed a population wide risk preference on a sub-group that is at demonstrably higher risk. If they give it another week, maybe there will be another 1 million new cases and there will be another 4k deaths baked into the numbers. SJ

There would certainly a good motivation to IPO AGT because the holdco owns 15 or 20% of the outfit, with the remainder scattered across a half-dozen or so insurance subs. If you IPO only the portion of AGT owned by the holdco, that would shore up the holdco cash situation (between the Riverstone sale and an AGT IPO, they would probably fully satisfy their holdco cash needs in 2021). What is more, if your IPO price is sufficiently high, it would enable you to mark to market the positions owned by the subs, which would improve their premiums:statutory-capital ratio and enable them to write a bit more business during 2021. This is of particular importance for the Crum. But, as I would still find it a bit strange to take it private and IPO it again within a two year span. SJ

AGT would be a good candidate to IPO, but it would leave me (and possibly others) scratching my head. FFH took it private in 2019, so it would be really, really strange to turn around and take it public in 2021. It might, however, be a good candidate to sell outright to one of the mega-agricorporations out there. So, would Richardson-Pioneer or Viterra have an interest in it? Would some large foreign player have an interest (Chinese buyer, ADM, Cargill, Conagra, etc)? Personally, I don't expect to see it IPO'ed, but stranger things have happened. SJ

So, by the time this transaction is finalized, OMERS will have held their stake in Riverstone for one year and will once again have gotten their ~9% annualized return? The same annualized return that they got from the Brit transaction? Is that a coincidence or was it engineered? SJ

Thanks, Pete. So the total position is still deeply under water, to say nothing of the time value of money. Oh well, at least it's moving in the right direction. SJ I would strongly suggest never including the time value of money in your assessment of Fairfax's investments, unless you have a stiff drink to hand. Atlas may be an exception. Yes, a potential investor would be well advised to simultaneously initiate a position in Fairfax Financial and Corby Distilling. SJ

Thanks, Pete. So the total position is still deeply under water, to say nothing of the time value of money. Oh well, at least it's moving in the right direction. SJ

Especially when you rewrote your convert. This.... 7$/share wouldn't have been anything previously with Fairfax's ability to convert to 50 million shares @ $10. But now Fairfax gets to convert into 55 million shares @ $6 - meaning they're ~$100 million in the money for bonds that wouldn't have been worth more than par back in September. Have you (or has any board participant) calculated FFH's break-even on its full investment in BB? It's mostly irrelevant because you cannot change your entry price, you can only choose whether to exit, but I am a bit curious. My mental guess would be about $10/sh, but that's just the result of faint memories of past discussions and accounting for the new conversion privilege for 55m shares. The prospect of exiting the BB position on a break-even basis (or gasp! a profitable basis) is encouraging. It's been a long ten years. <EDIT> Answering my own question, here's a bit of work that Valuehalla did a few years ago: https://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/fairfax-2017-15646/msg320753/#msg320753 SJ

How are you getting $80B 10 years out?? Assuming another large deal? Growth in operating businesses would have to be in the mid-teens (using 2019 as a base assumption) to even have a shot...what am I missing? Cash from Ops has been $46B, $37B and $39B from 2017 to 2019. Hitting $80B would basically be a double over 10 years, which is about 7% annually, compounded. Without undertaking a nuts-and-bolts analysis of how a 7% growth actually would occur, the notion doesn't seem outrageous at first glance. SJ