StubbleJumper

They might actually end up having some value, if this keeps up....

Atrocious. I'm not sure that I quite understand the fixation on having "correct" and up to date statistics. What would governments in the US do differently if they had "good" statistics resulting from more prevalent testing? So, suppose that there was more testing being done of people who sought medical attention for respiratory disorders and it came back that there were 1,000 positive Covid-19 cases. If that were true, how many cases would there be that had not sought medical attention because the symptoms were not so severe? Perhaps it would be 1,000 more that wouldn't show up in the official statistics? And then what would the US government do with those numbers? Look, either this virus can be controlled and we can put the genie back in the bottle, or it cannot be controlled and the genie is on the loose. If you are in the camp that this thing has already spread so much that the world has lost control of it, then "good" statistics don't strike me as too useful. If you are not going to impose mandatory quarantines and if you are not going to suspend international travel, what are the remaining levers that governments can pull and how are better statistics actually useful? I guess that I'm in the camp that the genie is out of the bottle and that it's time to focus on managing a situation which is no longer preventable. But, maybe I'm alone in that camp? SJ It makes a huge difference. Investors are supposed to understand exponential growth, right? This means that time matters a lot and early interventions in the right places, in the right ways, giving correct info to population and medical staff so they can act in the right way, etc, can have a tremendous impact on the rate at which things unfold. Since healthcare system capability isn't built for huge peaks, these delays can help it absorb increases much better and will result in saved lives. Also, vaccines and other drugs are being tested and developed, and delays help get more people across that line. In short, bungling the public health response will cost lives, could be your grand-parents or some friend who has a weaker immune system because they survived cancer or have asthma or whatever. So are you in the camp that the genie is *not* out of the bottle? I'm in the camp that this thing cannot be contained at this point because there are too many confirmed cases, and quite likely far more that have not sought medical care. This is not like Ebola, where 100% of cases seek medical attention and therefore offer a reasonable prospect of a trace-back. Investors are supposed to understand known unknowns, right? So what's the unknown of how many asymptomatic cases are floating around and how many mild cases have resulted in people not bothering with the doctor? The general theory is that those categories are larger than the group that has actually sought medical attention which is the only group that could possibly be miscounted. It's like having only half of a P/L statement and pretending that it's useful. SJ

So if this is being "handled" incorrectly, what is your hypothesis? Is it: 1) People in the US are actually getting sick from Covid-19, but are electing to not seek medical help? 2) Doctors across the US (who generally work in private practice and are not public employees) are treating people for respiratory illness, they suspect Covid-19, but are failing to inform local public health authorities? 3) Local public health agencies in thousands of cities in the US are collaborating to not test people to confirm the existence of Covid, and they are also collaborating to not forward presumptive diagnoses or suspected cases to the state public health agencies? 4) The 50 different state public health agencies are in cahoots to hide the real numbers from the federal government and are forwarding incorrect numbers to the CDC? So, in your book, where are the facts being hidden? SJ

So, if you were the premier, what would you be doing? 1) I would probably stop adding new people to waiting lists for medical procedures that can be postponed, and I'd be encouraging as many of my health practitioners as possible to go on vacation in the next couple of months, because it might be quite some time before they'll get another chance to take a couple of weeks off; 2) I'd be thinking hard about the return to school in September. BC will likely scoot through to the end of June without any major problems, but the return to school could be an epidemiological time-bomb. So what's the contingency plan there? 3) If you need surge capacity for respiratory patients, what's the contingency plan there? Hospitals already run at virtually full capacity, so what's the plan for a "flu season surge" in September or October? Usually the flu season surge lasts for a couple of weeks in February and overflow patients are treated in hallways. But, if if a Covid surge lasts for 4 or 5 months beginning in the fall, what's the plan? Empty school buildings might be useful.... 4) Does the health system have an adequate stock of drugs and other materiel for a surge? There's probably 6 months to figure it out... So, yeah, your provincial government could be doing any number of useful things at this point. Are they? At least the testing and statistics make us feel good, right? SJ

Um... I for one would like to know how the virus is spreading (or not), for my own and my family's health, if for no other reason. How is this controversial? Its not controversial. There are other website that tracks this stuff and plenty of information on cases being updated regularly. There is a difference between that, and say purposely peddling propaganda and fear mongering for no reason other than clicks or hatred of the president. One is useful, the other, serves no purpose. As I pointed out earlier, several of the big left media outlets have entirely reconfigured their websites to play in to these things. How does the "total tested" column have anything to do with your family's safety lol? If you think its an issue, take precaution. If you dont, do whatever floats your boat. Heck, they could test 50% of the population and tomorrow its meaningless because of spread and transmission. The "coverup" part is whats laughable, and you can clearly see the agenda if you spend 3 minutes looking around that fellows page. Greg, here is a real example. The provincial government where i live (British Columbia) published on the weekend that they had performed well over 1,000 tests to date (and 1,400 total as some people were tested more than once). To provide perspective, they said the US up to that point had performed less than 500. The population of BC is 4.8 million. The population of the US is 328 million. To put this in perspective, if the US government was testing at the same per capita rate it would be up over 68,000 tests. It had done less than 500. This informed me of two things. 1.) Our provincial government is testing a shitload more people than the US. That made me feel better about our level of preparedness. 2.) the US has completely missed the boat on stopping the virus from quickly getting established in the country. This is the most important step in the whole ‘deal with the virus’ playbook. WTF? This then helped me decide to not go to Oregon on vacation in March. It also has resulted in me moving my portfolio to cash (as i think this will likely impact the broader economy in the US in the coming months). Maybe there is no impact to the broader US and global economy; i am comfortable forgoing some return until more is known. I hope the US continues to publish lots of statistics. Just like i hope Canada and all countries do. Source data will help individuals understand how their governments are doing and hold them more accountable (particularly when they look to be underperforming). The fact that both sides are going to politicize everything is not a reason to stop the flow of source information. If we are told to trust Donald Trump to do the right thing i think we can all agree that would be another big mistake in trying to manage this virus (and a few have clearly been made already). We all can agree that he is not to be trusted, especially in this situation (and that is not a political statement - we have 3 years of proof). So, what are your governments *doing* about it? Yes, they are testing mainly people who are coming forward with respiratory illnesses. But, has your federal government suspended travel to heavily infected areas such as China, Iran or Italy? Nope. It has issued a "Level 3" travel advisory to those areas and we can choose to travel or not. Are they automatically quarantining us when we return from China, Iran, or Italy? Nope. They are asking people to voluntarily "self-isolate" for 14 days upon return. It's nice that they are running a bunch of tests and finding that most people with respiratory illnesses are suffering from seasonal flu and pneumonia, but in terms of concrete measures to reduce the spread of Covid, they have done effectively nothing. At least, the chief medical officers of health have acknowledged that this thing will likely end up hitting us hard and have recommended that we accumulate adequate supplies to take care of ourselves for 10 days or 2 weeks, should the need arise. So, is the testing actually useful for decision making, or is it mostly show-biz to keep nervous people happy? SJ

Atrocious. I'm not sure that I quite understand the fixation on having "correct" and up to date statistics. What would governments in the US do differently if they had "good" statistics resulting from more prevalent testing? So, suppose that there was more testing being done of people who sought medical attention for respiratory disorders and it came back that there were 1,000 positive Covid-19 cases. If that were true, how many cases would there be that had not sought medical attention because the symptoms were not so severe? Perhaps it would be 1,000 more that wouldn't show up in the official statistics? And then what would the US government do with those numbers? Look, either this virus can be controlled and we can put the genie back in the bottle, or it cannot be controlled and the genie is on the loose. If you are in the camp that this thing has already spread so much that the world has lost control of it, then "good" statistics don't strike me as too useful. If you are not going to impose mandatory quarantines and if you are not going to suspend international travel, what are the remaining levers that governments can pull and how are better statistics actually useful? I guess that I'm in the camp that the genie is out of the bottle and that it's time to focus on managing a situation which is no longer preventable. But, maybe I'm alone in that camp? SJ

Wonder what concoction of drano they'll be recommending to the public. Wow, supercomputers! This will surely help. This is what happens when Republican rubber stamp "scientists" are put in charge. This one in the famed Trump Dept of Energy, almost as skilled as Rick Perry--must be still looking for that "clean coal" recipe. Science is the pursuit of truth. With this crisis, these clowns have nowhere left to hide anymore and unfortunately for us, they're in charge. Elections have consequences it turns out. Well, on Tuesday, PatofthePig drafted a post for us providing a link to a newspaper article that suggested that chloroquine appears to reduce the length and severity of the coronavirus. I have not read anything else about it since, but it's interesting that a relatively old, off-the-shelf malaria treatment could end up having another use. Interestingly, it's been off-patent for 50-ish years now, so if it is actually found to be useful, it might be a treatment that is cheap enough for use by the world's poor. If the US government is trying to pick some low-hanging fruit by testing the efficacy of a broad range of existing medications, I'm all for it. SJ Malaria is a protozoan parasite. Very diff from a virus. I highly doubt an agent effective against malaria would have effect on this. Coronaviruses aren’t new. The chances that there is a common agent out there effective against them that we do not know about is slim. A lot of noise out there. Strange that Republicans who tout the private sector are relying on gov’t labs to find a cure. Of course the chances of finding an existing drug that works effectively against the coronavirus are slim. But, that doesn't mean that you shouldn't take a look at them. It's a relatively easy thing to do while other labs are working on a vaccine or antiviral. One does not preclude the other. You seem to have a bit of a binary political world view. Personally, I have never met a republican who did not acknowledge that government has an important role in a broad range of areas, including public health. I have spent a considerable amount of time with libertarians, and even they acknowledge that there are legitimate functions for government to play. Maybe you are hanging out with more extreme people than me. SJ

Wonder what concoction of drano they'll be recommending to the public. Wow, supercomputers! This will surely help. This is what happens when Republican rubber stamp "scientists" are put in charge. This one in the famed Trump Dept of Energy, almost as skilled as Rick Perry--must be still looking for that "clean coal" recipe. Science is the pursuit of truth. With this crisis, these clowns have nowhere left to hide anymore and unfortunately for us, they're in charge. Elections have consequences it turns out. Well, on Tuesday, PatofthePig drafted a post for us providing a link to a newspaper article that suggested that chloroquine appears to reduce the length and severity of the coronavirus. I have not read anything else about it since, but it's interesting that a relatively old, off-the-shelf malaria treatment could end up having another use. Interestingly, it's been off-patent for 50-ish years now, so if it is actually found to be useful, it might be a treatment that is cheap enough for use by the world's poor. If the US government is trying to pick some low-hanging fruit by testing the efficacy of a broad range of existing medications, I'm all for it. SJ

I just had a limit order fill at $199.98. Crazy. Same, I wonder what Warren is looking at. Meanwhile stuff SPCE is up 5% ::) edit: Make that 9% Hopefully Warren is buying BRK too. Hopefully WEB is buying BRK in *large volume*. His letter left the impression that he was shying away from grabbing large volumes because he didn't want to push to the price up or to even support the price in a down-market. IMO, it's time to throw all of that out the window. Today you can buy BRK at 2018 market prices, which are quite obviously a considerable discount to current intrinsic value. It's time to stop caring whether re-purchases happen to push the price up by a couple of dollars per share because it's far more important to seize this opportunity to actually grab some volume. These are NOT 95-cent dollars! SJ

But shouldn't their bond gains be offsetting this? They'll definitely have some bond gains, but they have drastically reduced the duration of the fixed income portfolio over the past couple of years, so gains are muted. The unfortunate part of the most recent earnings release is that it wasn't accompanied by a full set of financials, but you can at least look to Q3's filings for a bit of inspiration. At the end of Q3, FFH reported that a 100 bps parallel decline in the yield curve would have resulted in $279m in gains. Well, bond rates have dropped by more like 40 bps, so the bond gains are probably pretty trivial in the context of the hit to the stock portfolio. SJ

Should we begin to drink gin and tonic simply as a prophylactic measure? I'm willing to try... SJ

Yep. It's worth doing as a secondary approach to supplement a BV based metric, but it's not the best choice as a sole approach. This is particularly true with FFH over the past few years with its lumpy earnings and with the varying quality of earnings (some years assets gained value which never hit the books, while other years gains were booked on assets without those assets having necessarily added much value in that particular year). Multiple metrics are a good idea, but a BV based metric is essential. SJ

Going down the rabbit hole? No. I would like my business partners to have integrity. I want my business partners to earn money and I want to earn money, but I want it to be earned honestly, fairly and transparently. Integrity is not a matter of degree. On yet one more occasion, I find myself writing that FFH needs to improve its governance practices. Hard to believe. SJ

I don't think it's likely either. But pardon my French, why does FFH always seem to fuck-up the handling, communication and disclosure of these sorts of things? First off, is there, or is there not, a conflict of interest between Fairfax India unit holders and the FFH Holdco shareholders on that BIAL deal? If that BIAL deal was overvalued, I would make out like a bandit because I currently only hold FFH and not Fairfax India, but the Fairfax India holder would be screwed. Given that situation, how should FFH have dealt with it? Well, first and foremost, having a temporal separation (say 6 or 12 months) between those deals would have been a good start. Alternately, disclose the hell out of BOTH transactions to attempt to have some level of transparency, AND release an independent valuation opinion for both assets. Instead, what we got were a couple of news releases that didn't tell us much -- one of them didn't even reveal the counterparty! If you have a set of circumstances that could give the appearance of the possibility of a conflict of interest, you either need to take a pass, or you need to bend over backwards to be transparent. It's the same story over and over again. Hard to believe that they are not getting better about these things. SJ

That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold. So, why did Fairfax sell it? Did they need to drop their stake to 49% to keep the nationalists at bay? Were they desperate for an infusion of $134m of cash? Did they find a partner with specific expertise that they wanted to bring aboard? Was there some other strategic motivation that was not articulated in the presser? One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books. Fairfax India will book a gain of $500m based on a transaction of only $134m. And then what happens? Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020. So, how much wealth will be extracted from Fairfax India unit holders from that little transaction? I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders. Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure? For now, I am wary, but keeping an open mind. SJ https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value Okay, that makes me yet a little more uncomfortable. I had been holding out hope that it was a completely new player to the FFH world. FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff. I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets. There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half. SJ The quid pro quo being a sweet deal on Riverstone? Can’t see why that benefits FFH. Okay, so this is all hypothetical and nothing more. We have no knowledge that would support the existence of any quid pro quo between the two transactions. We have no actual knowledge of any wrong-doing or any other nefarious behaviour. But, the math is pretty basic and that's what creates the risk: The primary impact is that for every dollar that the value of that 5% BIAL deal is overestimated, the mark for Fairfax India goes up by $10. The secondary impact is that the annual management fee (1.5%) to FFH goes up by $0.15 based on the $10 mark and, possibly the performance bonus (20% of everything over the hurdle) could go up by $2 based on the $10 mark. So if you have the same buyer for two deals being conducted more or less simultaneously, and if you could convince the buyer to over-value one asset and under-value the other, you could create value for yourself. There's an argument that the buyer would only care about the combined value of the two cheques that he must write and wouldn't much care about the specific amounts on each cheque, so maybe it wouldn't be so hard to twist his arm. A portion of the $1 overvaluation would be attributable to minority Fairfax India holders, but that would be swamped by the secondary impact. So yes, I am a little uncomfortable with the idea of there being two transactions made to the same buyer at roughly the same time. If it true that the buyers are the same for both transactions, I wonder why there hasn't been better disclosure. And once again, to my knowledge, there is no evidence that anything like this has actually occurred. SJ

That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold. So, why did Fairfax sell it? Did they need to drop their stake to 49% to keep the nationalists at bay? Were they desperate for an infusion of $134m of cash? Did they find a partner with specific expertise that they wanted to bring aboard? Was there some other strategic motivation that was not articulated in the presser? One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books. Fairfax India will book a gain of $500m based on a transaction of only $134m. And then what happens? Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020. So, how much wealth will be extracted from Fairfax India unit holders from that little transaction? I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders. Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure? For now, I am wary, but keeping an open mind. SJ https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value Okay, that makes me yet a little more uncomfortable. I had been holding out hope that it was a completely new player to the FFH world. FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff. I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets. There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half. SJ

That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold. So, why did Fairfax sell it? Did they need to drop their stake to 49% to keep the nationalists at bay? Were they desperate for an infusion of $134m of cash? Did they find a partner with specific expertise that they wanted to bring aboard? Was there some other strategic motivation that was not articulated in the presser? One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books. Fairfax India will book a gain of $500m based on a transaction of only $134m. And then what happens? Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020. So, how much wealth will be extracted from Fairfax India unit holders from that little transaction? I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders. Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure? For now, I am wary, but keeping an open mind. SJ

That could very well be the case. They would definitely have a gain from exercising the SSW warrants, but it doesn't much change the economic reality (outside of FFH having to add some cash to the existing investment). Keg/Recipe wasn't the correct transaction for me to reference. In 2018 the "accounting" transactions were Grivalia being consolidated, and Thomas Cook/Quess triggering a bunch of paper gains. In 2019, it was Quess triggering a bunch of paper losses and Eurolife/Grivalia triggering a bunch of paper gains. For the past few years, most of us have cooked up an adjusted BV to get an idea of the significance of some of the excess in value over book. But, really it might be time to create an adjusted net income to strip out the impact of some of the one-time transactions to better portray ongoing economic performance. SJ Ah I see what you’re getting at. Personally I care more about BV than earnings so I’m happy with the disclosure they’ve often provided on what BV would be if they marked to market. Agreed that the BV metric is the more important metric for valuing the insurance end of the operations, and it's been important to cook up an adjusted-BV estimate for the past few years to better reflect reality. But, it's also important to try to measure operational performance against any number of metrics, including EPS, ROE, CR and investment return. That's where some of these non-cash items muddy the water. This year, the dollars are small, with Eurobank/Grivalia being $6 or $7 per share...but the Thomas Cook/Quess number from 2018 was absolutely enormous, and the Grivalia consolidation number from 2018 was a smaller number added to it. A large head-line EPS number is nice to see and it definitely feels good, but... SJ I’m not against the idea. Although it does make me smile - the BAM thread is full of suggestions that “management metrics” like that is a red flag for fraud. Sometimes feels like management can’t win ;) Also - I initially read your comment about low quality earnings as a criticism of FFH management for massaging the numbers. But on reflection maybe you’re just saying that accounting treatment doesn’t always reflect reality. Is that right? No, it's not at all about massaging the numbers in this case. If you are worried about numbers being massaged you should be looking for a cookie jar. If a cookie jar exists, you should focus of the reserves because if something is hidden that's where it will be. Despite the supervision provided by the various regulators, we should always squint a little bit when we look at reserve levels, reserve releases, reserve bolstering, U/W profit and CRs. The truth about those numbers can only really be verified over a period of 5 or more years.... IMO, a little suspicion, a dose of skepticism and a great deal of scrutiny are appropriate. SJ

"Net gains on long equity exposures of $1,631.1 million in 2019 was primarily comprised of unrealized appreciation of preferred shares of Go Digit Infoworks ($350.9 million), the sale of the company's remaining interest in ICICI Lombard ($240.0 million), a non-cash gain on the merger of Grivalia Properties into Eurobank ($171.3 million) and significant unrealized appreciation of common stocks." Sorry - I doing a very poor job of expressing myself (possibly because I’m also trying to feed a 3 month old!). What I meant to say was: 1) I couldn’t remember whether they booked a gain on the Eurobank/Grivalia deal, but 2) if they did I’m pretty sure it did reflect economic reality in the sense that it moved book value closer to the mark-to-market book value. Until the deal Grivalia was consolidated so the rise in the share price since acquisition wasn’t reflected in FFH BV. I may be remembering wrong - don’t have my notes to hand. Agreed that the only way to move the BV measurement closer to economic reality is to book the gain -- that's a fact of accounting. But, when you see an EPS number with that kind of gain baked in, it's essential to not view that number as a sustainable measure of annual economic performance. FFH's PE is now <7, but does that metric mean anything at all? Has it meant anything at all for the past two years when the paper gains have been so important? It's also an interesting thing for FFH's target of growing BV by 15%. A "successful" year would be more or less like 2019 when BV grew by 14.8%. But, really, you'd probably want to strip out those one-time paper gains to get a better sense of how successful 2019 truly was (unless we believe that paper gains of that magnitude are sustainable and repeatable). I don't want to make it seem like FFH has done something wrong here. I'm just suggesting that people should take that headline EPS number with a grain of salt. And, I wonder how the market will end up viewing it. SJ

That could very well be the case. They would definitely have a gain from exercising the SSW warrants, but it doesn't much change the economic reality (outside of FFH having to add some cash to the existing investment). Keg/Recipe wasn't the correct transaction for me to reference. In 2018 the "accounting" transactions were Grivalia being consolidated, and Thomas Cook/Quess triggering a bunch of paper gains. In 2019, it was Quess triggering a bunch of paper losses and Eurolife/Grivalia triggering a bunch of paper gains. For the past few years, most of us have cooked up an adjusted BV to get an idea of the significance of some of the excess in value over book. But, really it might be time to create an adjusted net income to strip out the impact of some of the one-time transactions to better portray ongoing economic performance. SJ Ah I see what you’re getting at. Personally I care more about BV than earnings so I’m happy with the disclosure they’ve often provided on what BV would be if they marked to market. Agreed that the BV metric is the more important metric for valuing the insurance end of the operations, and it's been important to cook up an adjusted-BV estimate for the past few years to better reflect reality. But, it's also important to try to measure operational performance against any number of metrics, including EPS, ROE, CR and investment return. That's where some of these non-cash items muddy the water. This year, the dollars are small, with Eurobank/Grivalia being $6 or $7 per share...but the Thomas Cook/Quess number from 2018 was absolutely enormous, and the Grivalia consolidation number from 2018 was a smaller number added to it. A large head-line EPS number is nice to see and it definitely feels good, but... SJ SJ

"Net gains on long equity exposures of $1,631.1 million in 2019 was primarily comprised of unrealized appreciation of preferred shares of Go Digit Infoworks ($350.9 million), the sale of the company's remaining interest in ICICI Lombard ($240.0 million), a non-cash gain on the merger of Grivalia Properties into Eurobank ($171.3 million) and significant unrealized appreciation of common stocks."

That could very well be the case. They would definitely have a gain from exercising the SSW warrants, but it doesn't much change the economic reality (outside of FFH having to add some cash to the existing investment). Keg/Recipe wasn't the correct transaction for me to reference. In 2018 the "accounting" transactions were Grivalia being consolidated, and Thomas Cook/Quess triggering a bunch of paper gains. In 2019, it was Quess triggering a bunch of paper losses and Eurolife/Grivalia triggering a bunch of paper gains. For the past few years, most of us have cooked up an adjusted BV to get an idea of the significance of some of the excess in value over book. But, really it might be time to create an adjusted net income to strip out the impact of some of the one-time transactions to better portray ongoing economic performance. SJ

Perhaps gains on SSW have something to do with the APR merger. That's the sort of thing that I was alluding to in my comments from yesterday about quality of earnings. There have been a few transactions over the past couple of years which have triggered accounting gains without any real change to the economic reality. Keg and Recipe are an example. Eurolife and Grivalia is another. SSW and APR might be a third example, if that transaction has already hit the books? It's almost worthwhile inventing a pro-forma income statement to strip out some of this. SJ

That’s worrying. Petec, given he is going to continue to be involved with FFH in a small way i am not worried. Yes, it is unfortunate to lose a good person. My guess is Fairfax has a deep bench to pick a replacement from. It’s not the loss of a good person. It’s the loss of the heir to the throne. Weird, perhaps, rather than worrying. I haven't seen anyone say it yet, so I will say it: "Did he jump or was he pushed?" Frankly, in situations like this, my instinct would be that he was pushed. SJ

Re 2: I think we know for a fact that some subs are capacity constrained, and I don’t know how easy it is to move capital between them. Does anyone? Many ways to do it, including: 1) Use the dividend capacity already approved by regulators to send a divvy from the capital-rich subs to the holdco and then it's no trouble at all to shift if from the holdco to the capital-poor sub; 2) If the capital poor sub operates in the same jurisdiction as a capital-rich sub, merge them; 3) Float another holdco bond issue for $500m, and sprinkle the proceeds into the subs that require more capacity; Maybe it's just a one-time freaky thing in Q4 that they were laying off premium on the reinsurers? But, that's not exactly how I imagined the company attacking a hardening market. SJ