StubbleJumper

I never particularly like this release because it's not accompanied by a full quarterly report, so it's a bit tougher to get the entire picture. I eagerly await the annual report coming in March. A few preliminary thoughts: 1) What's the deal with insurance operations? Is it just a coincidence that the favourable development for 2018 and 2019 respectively almost perfectly offset the cats for 2018 and 2019 respectively (see the final two tables at the bottom of the presser)? Is that a freakish occurrence, or is FFH pulling from the cookie jar to manage the numbers? Seriously, WEB always said that one of the biggest challenges in P&C investing is trying to assess whether you believe the numbers. 2) What's the deal with the Gross Written and Net Written in Q4 2019? Are we not in the midst of a hardening market? When you look at Q4's numbers, you see a visible bump in their ceding. Why? Is it the case that one or more of the subs is capital constrained, but still has plenty of profitable business to write, and is therefore throwing premium at the reinsurers? What the hell is going on here? If capital needs to be shifted from one sub to another, then do what needs to be done. But, it's not at all clear to me that ceding should have increased. 3) It's nice to see a double-digit increase in Net Written. Fixed income returns might be in the toilet and the CRs might be a little disappointing, but there's still room for growth in operating income if you can push up the underwriting volume. It would be super nice to see a high single digit increase in Net Written in 2020, coupled with the CR being shaved by a couple of points. A hardening market might just do that for you? 4) It will be interesting to read the annual letter and to get some colour from the conference call to better understand FFH's view of financial markets. If Prem and Brian were fussing about broad market valuations three years ago, they must be shitting a brick today. 5) The earnings per share number is nice, but will the market give it any cred? Quality of earnings over the past couple of years has been a bit suspect, but will anyone care? Looking forward to the more detailed release in a few weeks. SJ

Why do you hold the shares on the Canadian side of your account? Ask your broker to journal your shares to the US side of your account and then you will receive your divvy in US dollars. That gives you the option to re-invest the divvy in the US market without having to exchange the money twice (ie, it would be disappointing to receive US$10k of FFH divvies which is converted to Cdn$13.13k if you are just going to convert it back to buy US shares...you would probably only end up with US$9,700 or something). If you receive the divvy in the US side of your account, you can always convert the US dollars back to Cdn at your leisure if you need to in the future.... SJ Thanks. Food for thought. Oh, I forgot one other cheapskate trick. You can actually withdraw US dividends in cash without any fees! 1) Open a no-cost RBC US$ High Interest Savings Account (HISA): https://www.rbcroyalbank.com/accounts/us-e-savings.html 2) Once that account is open, you can transfer US cash from the US side of your RBC brokerage account into your US$ HISA in just the same manner that you can transfer Canadian cash from your brokerage account into your RBC Canadian dollar chequing account. 3) Then, you can search for a RBC ATM in your community that dispenses both Canadian and US dollars (use "Additional ATM features for the search) https://maps.rbcroyalbank.com/ By journalling the FFH shares to the US side of your account, it possible to then transfer the US denominated dividend to your US$ HISA and withdraw US cash from a RBC ATM in your city, all with zero fees. If you spend much time south of the border, it's a good way to get some US spending money without incurring any FX fees or ATM fees. SJ

You suspect 100k+ to be infected. Let's say around 1000 died (10x the official amount to be really skeptical) which would mean that the death rate is still only about 1%. How do you calculate mortality rate when you don't know how many of the currently infected will eventually die (after say 2 weeks)? Isn't the only way to do that accurately to have a controlled population of confirmed, infected patients and then measure how many are dead after 2-3 weeks? I think the only way to get accuracy on that during the outbreak is to have a large group of infected individuals that you monitor. And right now it looks like pandemonium in any city that has a large group of infected cases (so it's hard to measure). That's what the Lancet study did for 41 patients in Wuhan and found that 6 out of 41 died (see under Discussion). Also virus continues to mutate over time and can become easier (or harder) to spread. Early version of "1918 spanish flu" were less fatal in Scandinavia in 1917. More fatal version of the same virus evolved in following year. My point earlier in the thread is that getting a handle on the denominator of the case fatality rate will probably be nearly impossible. The only "cases" that public health authorities know about are the cases where people seek medical attention. But, how many 25 and 30 year-old people became sick, but were not so sick that they chose to go to the doctor or to the emergency ward? The confirmed cases are likely those who are more susceptible to the virus, either due to age or to being otherwise immuno-compromised. The apparent case fatality rate is alarmingly high, but it's entirely possible that the denominator could be off by a factor of 4 or 5 because of people who never sought medical help, which would bring the case fatality rate back down to earth. The other thing that might or might not happen is that the r-naught could come down as public health authorities communicate avoidance strategies to the population and infected people begin to better self-isolate. But, that's just a faint hope at this point. SJ Using this source: https://www.biorxiv.org/content/10.1101/2020.01.27.922443v1.full.pdf The cases are ~27k. The biggest unknown are the lag times/incubation periods. Are the deaths happening from pre-symptomatic infections from 1 day ago? 10 days? 30? I also haven't seen much stating that anyone who isn't susceptible to flu death (elderly, etc) has died. Anyone know if this has been happening? Actually they ran four scenarios, one of which considered the possibiltiy that there might have been up to 100k cases. It's an interesting paper because it provides a framework for thinking about the outbreak, but the authors are by necessity relying on assumptions to parameterize their model. Strangely, the paper makes me feel a bit better about this outbreak. Everything that I have read suggests that it is the elderly and immunocompromised who have the greatest mortality. SJ

Why do you hold the shares on the Canadian side of your account? Ask your broker to journal your shares to the US side of your account and then you will receive your divvy in US dollars. That gives you the option to re-invest the divvy in the US market without having to exchange the money twice (ie, it would be disappointing to receive US$10k of FFH divvies which is converted to Cdn$13.13k if you are just going to convert it back to buy US shares...you would probably only end up with US$9,700 or something). If you receive the divvy in the US side of your account, you can always convert the US dollars back to Cdn at your leisure if you need to in the future.... SJ

You suspect 100k+ to be infected. Let's say around 1000 died (10x the official amount to be really skeptical) which would mean that the death rate is still only about 1%. How do you calculate mortality rate when you don't know how many of the currently infected will eventually die (after say 2 weeks)? Isn't the only way to do that accurately to have a controlled population of confirmed, infected patients and then measure how many are dead after 2-3 weeks? I think the only way to get accuracy on that during the outbreak is to have a large group of infected individuals that you monitor. And right now it looks like pandemonium in any city that has a large group of infected cases (so it's hard to measure). That's what the Lancet study did for 41 patients in Wuhan and found that 6 out of 41 died (see under Discussion). Also virus continues to mutate over time and can become easier (or harder) to spread. Early version of "1918 spanish flu" were less fatal in Scandinavia in 1917. More fatal version of the same virus evolved in following year. My point earlier in the thread is that getting a handle on the denominator of the case fatality rate will probably be nearly impossible. The only "cases" that public health authorities know about are the cases where people seek medical attention. But, how many 25 and 30 year-old people became sick, but were not so sick that they chose to go to the doctor or to the emergency ward? The confirmed cases are likely those who are more susceptible to the virus, either due to age or to being otherwise immuno-compromised. The apparent case fatality rate is alarmingly high, but it's entirely possible that the denominator could be off by a factor of 4 or 5 because of people who never sought medical help, which would bring the case fatality rate back down to earth. The other thing that might or might not happen is that the r-naught could come down as public health authorities communicate avoidance strategies to the population and infected people begin to better self-isolate. But, that's just a faint hope at this point. SJ

Past episodes seem to indicate that those epidemics don’t have much of an impact: https://twitter.com/renmacllc/status/1220761911610019843?s=21 I do recall SARS had some impact on the HK stock market at that time, but it tended to fade away quickly. There was some impact on travel related business in the area that was quite real, but even those recovered within a year or so. Well, the last numbers I saw were a bit alarming. The last ones I saw were 56 deaths for 1,975 confirmed cases. Frankly, if those are the correct numbers, it should scare the shit out of you because that would be a case fatality rate of 3%. But, should we believe those numbers? I suspect that the 56 dead guys is probably a pretty decent number (maybe there are a few more who died from it, but were misattributed). But should we believe the estimate of 1,975 cases of the virus? Or is it really 10,000 cases of the virus, of which 8,000 never came to the attention of public health authorities because they stayed home and got better with no medical intervention? There's a big difference between 56 dead guys out of 1,975 and 56 out of 10,000. One is a pandemic that is scary as hell, and the other is not such a frightening event. That's how H1N1 started out in Mexico. The apparent case fatality rate was frighteningly high. But, the Mexicans couldn't count what the people who never needed medical intervention. So a nasty influenza that looked like a bad pandemic wasn't quite as bad as originally thought. Let's hope that the denominator is wrong in this case too. SJ

First off, on public health I don't know shit from shinola. But, I would take this opportunity to make a quick comparison of this outbreak to the Mexican H1N1 outbreak from 10 years ago. In both cases, you have a novel virus with a relatively modest r-nought but an apparently frightening case fatality rate. But, in the case of H1N1, that apparent case fatality rate declined significantly over time, probably due to to a better measurement of the denominator. Not to be too crass, but we are pretty good at measuring the numerator, because those are the dead guys and it's usually pretty obvious. But, how many people had the virus and got better without ever encountering the public health system? We are not that great at measuring the denominator. Sometimes that apparent case fatality rate isn't as bad as it first seems, and once the virus hits the developed world, things sometimes are not as bad as they seem. It doesn't help anyone whose family is infected, but for those of us who are far from the outbreak, it's worth reflecting on past lessons. SJ

Yes, you really need to do the arithmetic to decide whether margin or derivatives are the better approach to lever the opportunity. When Eric and Francis Chou pointed out the TARP warrants, they were not that well known to the investment community. Options of 5, 6 or 7 years of duration, with the strike adjusted to reflect the value of dividends! All of this applied base securities (the equities) that were objectively undervalued. Those TARP warrants cost us a pile of theta, but who really cared when the bet was so asymmetric? SJ

Absolutely agree. I’ll still most likely refrain from leverage. I avoid most types of debt in my life and choose to live with the loss of potential gains. I guess I mostly wanted to revive it to see what the mentality was alongside this ever increasing frothy market. Thanks You don't necessarily need debt to lever your position. The biggest leverage-fest that we've ever had on this board was probably the widespread purchase of bank LEAPs and Tarp Warrants. Lots of people on this board made lots of money from that opportunity. The LEAPS and warrants were objectively cheap, and it was nice to not be at risk of a margin call if the market temporarily moved the wrong direction. The second biggest leverage-fest on this board was when a smaller group made heavy purchases of FFH LEAPs back when they were objectively cheap. That one was one of my most expensive errors -- I bought the stock for less than US$100, which is all fine and dandy, but other guys harvested 40 and 60 bags off the the LEAPS. The third most significant leverage-fest was BRK options and LEAPs about 4 or 5 years ago. I think it was TWA's thread "The Mother of Easy Trades" that really identified how stupidly cheap BRK had gotten, and how even more stupidly cheap were the LEAPs. Once again, I was stupid and just added shares rather than lever the hell out of the situation... I need a painfully obvious opportunity before I use any meaningful amount of leverage (either debt or options). So far, my errors of omission have cost me a shit-load. SJ Wow that thread is full of interesting stuff. Thanks for the insights. I guess hindsight it always 2020 right? No, the worst thing is that it was foresight! Some very smart guys on this board identified multi-bagger opportunities in both FFH and BRK, and they posted about it for everyone. As I said, the FFH LEAPs were closed out for 40 to 60 bags, and the BRK LEAPs were closed out for 4 or 5 bags after a few months. I scooped 4 or 5 bags off the FFH common, but not grabbing the LEAPs instead probably cost me $100k or $200k or so (can't remember exactly because this was about 15 years ago now). And then Eric's work on the BAC TARP warrants and LEAPs was another opportunity for 4 or 5 bags (I don't remember exactly how mine closed out, but suffice it to say that I made a shit-load). Thinking of Buffett's punch-card, there are not too many opportunities like this that pop up. SJ

Absolutely agree. I’ll still most likely refrain from leverage. I avoid most types of debt in my life and choose to live with the loss of potential gains. I guess I mostly wanted to revive it to see what the mentality was alongside this ever increasing frothy market. Thanks You don't necessarily need debt to lever your position. The biggest leverage-fest that we've ever had on this board was probably the widespread purchase of bank LEAPs and Tarp Warrants. Lots of people on this board made lots of money from that opportunity. The LEAPS and warrants were objectively cheap, and it was nice to not be at risk of a margin call if the market temporarily moved the wrong direction. The second biggest leverage-fest on this board was when a smaller group made heavy purchases of FFH LEAPs back when they were objectively cheap. That one was one of my most expensive errors -- I bought the stock for less than US$100, which is all fine and dandy, but other guys harvested 40 and 60 bags off the the LEAPS. The third most significant leverage-fest was BRK options and LEAPs about 4 or 5 years ago. I think it was TWA's thread "The Mother of Easy Trades" that really identified how stupidly cheap BRK had gotten, and how even more stupidly cheap were the LEAPs. Once again, I was stupid and just added shares rather than lever the hell out of the situation... I need a painfully obvious opportunity before I use any meaningful amount of leverage (either debt or options). So far, my errors of omission have cost me a shit-load. SJ

I am not sure how this is even a comparison. Where have you lived? Are all of your neighbours of the same ethnicity as you? Do you live amongst immigrants? If you are Asian, then the smell of Asian cooking in your building will be a good smell to you. If you are from the Indian sub-continent, then the smell of Indian cooking will be a good smell for you. If you are from a culture that consumes fish frequently, you might be okay with the strong smell of cooked fish in your building. But, chances are you are not part of *all* of those ethnic groups, so probably at least one of them will come across as a disagreeable odour. In large Canadian cities, there's a good chance that *all* of those groups will be in your apartment building. Seriously, if you live next door to families from other cultures who are enthusiastic about cooking their regional cuisine, it can be quite tiresome to smell it everyday (or it can be quite enjoyable as the case may be). So it is with pot. If you are a regular pot smoker, you might not mind the scent in your building, just as cigar smokers don't generally mind the smell of cigars. But, for almost everyone else, the smell of cigars or of pot is unpleasant and tiresome if it becomes a regular thing. Now that pot has been legalised in some jurisdictions, it is pretty hard to deal with a neighbour whose unit is a constant source of a completely legal odour. What they are doing is legal, just as the Chinese family's and Indian family's cooking has always perfectly legal. If you don't happen to like it, there's not much you can do about it. SJ

Probably a little different in that weed has a bit more chemicals in it which is why people smoke it in the first place Yeah the chemicals won't amount to anything unless they are highly concentrated -- you don't even get much of a contact high if you are in the same room when a joint is being smoked, let alone in another apartment. The odour is definitely a real thing though. In my neighbourhood, I can smell both the pot smoke and some of the stronger ethnic cooking as I walk down the street, which is a full 50 feet away from houses and apartments. You can't really get away from it. If you like it, great, but if you don't like it, there's not much to do about it, other than move.

Isn't this pretty much the same problem that people have had for decades with ethnic cooking? If you have a multicultural city, you'll have a little bit of everything in your building and every day you will smell different cooking than what you eat. There's never been much you can do about it, right?

More likely this is a case of longer-term succession planning. WEB has a successor chosen (maybe Jain?), but chances are that successor is already relatively old. It's not a bad idea to get a couple of other younger guys a bit more P&C experience, which might make them better positioned for a potential CEO role in 2025 or 2028. SJ

Whew! Now I can sleep well at night because obviously I use the same password for COBF as I do for all of my financial accounts! Given the angst and hand-wringing about HTTPS, it would seem that I am one of many who just uses one single password for all of my accounts. :P SJ

Things seem to be going swimmingly well at Torstar: https://www.theglobeandmail.com/business/article-torstar-suspends-dividend-as-loss-grows-to-41-million/

Yes, except that the rules against doing that type of thing have been in existence since 1988. It's called the General Anti-Avoidance rule. If you undertake a series of transactions in Canada for the sole purpose of triggering income tax benefits, you risk running afoul with Anti-avoidance. You can go to Federal Tax Court, and you might win...but you might not. SJ

Pay users to use their apps/sites/tools? Interesting idea. I would say that Google is already effectively giving users a pile of benefits that are not strictly remunerative for the company. So, sure they spy on my when I surf, when I use google maps and Google Calendar, and they also read my e-mails to target advertising. That's all great and profitable for them. But, then they give me things like Google Voice, Google Drive, Google Sheets, Google Keep and a host of other tools where the data collection isn't particularly valuable. Those latter apps/services don't offer much direct-value to Google, but they are value-added components to me, which convinces me to stay with the Google ecosystem. Do the services that don't collect much data from users adequately compensate users for contributing data through the services that spy on us? On the net it's profitable for Google, but the existence of profit doesn't mean a voluntary exchange is unjust. SJ

Humble opinion here, after having discovered and reviewed previous comments made on this Board years ago. Disclosure: I was a Fairfax shareholder then and intensively looked at how money could be made somehow with ABH and FBK. The definitive opinion may change after reading the whole judgement but this seems to be the price to pay for playing the game between legal rules and ethics. There was a conceptual flaw from the start (especially versus the fair and friendly and not hostile culture mindset) by actively pursuing an acquisition where Fairfax was a significant shareholder in the bidder and the target. The relevant National Policy 62-202: Take-Over Bids Defensive Tactics, indicates that “[t]he primary objective of the take-over bid provisions of Canadian securities legislation is the protection of the bona fi de interests of the shareholders of the target company.” Regulatory bodies then focused on a majority concept of the take-over which did not take into account that this majority was possible by the inclusion of a party which had diverging interests and that this basic fact likely contributed to a financial oppression of Fibrek's minority shareholders. Higher Courts eventually deferred to the regulatory body's decisions so that Fairfax got the legal nod to proceed. But one has to consider that this would not have been OK under other legal jurisdictional auspices. It seems that the September 2019 judgement is, somehow, an attempt to correct an unfair outcome for minority shareholders but the Court seems to omit that this process had been anointed with a legal seal of approval in a contemporaneous way and perhaps the judgement is an attempt to bridge the definition of fairness, from legal to ethical. It's not the job of the legal system to do this but it's an interesting side effect and a reminder to legislators. So, the problem is that FFH puffs its chest out about employees conducting themselves with integrity and about undertaking Fair and Friendly Acquisitions (Fairfax), but then doesn't always walk the talk. You now have a judge who noted their shortcomings during the Fibrek takeover, but to make matters worse, if the judge is to be believed, Prem was not always honest and forthcoming during the trial and instead hid behind a series of "I cannot recall" type of responses. Given that Prem has had several years to review his notebooks from that period and to examine his diary to refresh his mind about meetings and teleconferences, the "I don't know" responses leaves me with really only two possible explanations for his behaviour: 1) he is incompetent and cannot take basic notes and review them later; or 2) the "I don't know" responses were a dishonest and unethical approach to concealing his previous unethical conduct. In any case, we shouldn't expect to see any more posts in this forum praising Watsa's integrity. SJ

And if you get it wrong, it's a zero. The industry is littered with the carcasses of former flagship products. After that observation, I will now return to my other work, using WordPerfect and Lotus123 to do some analysis which I will send to somebody using NetScape. :-) SJ SJ

The compensation was 20 million pounds divided by 5 years and probably divided by perhaps 5 senior executives? Somebody will have to explain to me why 20/5/5 is an outrageous annual pay packet for a senior executive. Or, as was the public expectation with Sears Canada, perhaps people expect senior executives to work for free when their company is floundering? SJ

I saw this blog-post about FFH linked on the Stingy Investor website. Nothing profound, but it's nice to see even a modicum of interest in a quiet stock. Since some forum participants are not from Canada, I thought it was worth adding to this forum: https://www.woodlockhousefamilycapital.com/post/the-horse-story SJ

I said it. I was so underwhelmed and really had no idea why it's so popular. To me it was just a sandwich and I do love Montreal smoked meat. That and the fact they seat you at a table with other people was a bit weird. My wife and I were at a table for 6 (with 4 other people we didn't know obviously) and we were across from each other in the middle seats. It just struck me as a place tourists go to say they've been and local go because it's a Montreal institution....... As for going to Mont Royal, we always recommend the double decker tour bus. You can either hop off, look around a get on a later one or the bus stops at one of the scenic lookouts so you can take some pictures or just look out over the city. I don't bother with Shwartz's unless I happen to pass on a rare occasion when there is no line-up outside. I think that has happened perhaps once in the past 10 years. I have found that I am happier going across the street to The Main instead. It's a good Jewish deli where you can actually get a table. Now, parking on St Lawrence is yet another challenge. SJ

It's common in the peripheral regions of the province. As you get closer to the major cities it gets expensive. In the distant past, there were large numbers of English speaking people who maintained summer houses north and east of Quebec City. Now, the English people are largely a thing of the past. SJ

Whether you ultimately elect to visit Ottawa or Montreal, you should definitely consider a half-day stop in Gananoque to take a boat tour of the Thousand Islands. The cruises are about 3 hours in length and on a nice, sunny day it's a great way to see a beautiful part of the world. SJ