StubbleJumper

I would agree with not improving the restaurants. Montanas is what it is. A quick lunch at modest cost from an unspectacular but reliable menu. Swiss Chalet is one of the cheapest sit-down meals that you can get...it's not fantastic, but it's a good solid lunch. Mass appeal is good. SJ

As long as FFH is issuing new shares, we don't need a bump. Quite to the contrary, perhaps a cut would have been in order a few years ago to forestall dilution. SJ

It was easy being a Canadian in 2015. The year started with an exchange rate of US$0.8527 and finished at US$0.7225. Even a crappy investor like me can do okay with that kind of currency induced tailwind..... Happy new year to all. SJ

An opportunity?

It's not that FFH senior management did nothing during the summer...rather, the top brass was preoccupied with changing the status of the damned multiple voting shares. Why focus on making money and keeping minority shareholders happy when you can simply piss around and usurp their voting rights?

No, it's all supposition that senior management invested some of their time in this. But, to hypothesize otherwise, you must make the assumption that significant authority is delegated to middle management (which has never really been my experience). In a typical organization, middle management has a range of decisions that they can take without obtaining approval. So, for capital allocation purposes, the way you might structure portfolio decisions would be to allow Manager X to invest an aggregate amount $Y constrained by a collection of rules (ie, no single position can be larger than Z, total asset allocation must fall with the range of A%-B% equities and C%-D% fixed income, a maximum of F% from emerging markets, etc). Minor deviations from those rules would require running a quick decision past the bosses. Anything weird, wonderful or exotic would require a more fulsome presentation/pitch to the bosses to obtain their approval. So, is an investment in McEwan just a minor deviation from authority already granted to middle management, or is it wacky enough that it required the whole enchilada? This is why some of us hypothesize that the FFH C-suite must have spent at least a little bit of their valuable time on this investment. SJ

Totally agree. These guys are really starting to worry me. SD, Blackberry, RFP. I could have thrown darts at a board and had a great deal more success than this nonsense. They need to get their eyes checked because I just can't figure out what they're seeing. Truly head scratching picks when there's so many more viable companies out there. They've sold class assets to buy what appears to be junk or small potatoes. I'd be a liar if I said they haven't lost me at this point. I keep hoping they prove me wrong and put egg on my face. So far, all they've done is take money out of my wallet. A chef? Really? That's the best they could come up with? This is going from puzzling to goofy. Maybe they should look at something other than a dying or insignificant Canadian business for a change. Not necessarily goofy, but possibly so. My concern about this investment is the same concern that I had about Blackberry, which is position sizing. In the case of Blackberry, I thought that FFH's position sizing was so aggressive that it was unwise and exposed the company to a material risk of a permanent loss of capital. Now with McEwan, it's the opposite. The position looks like it is too small to merit even 5 minutes of management's attention (that 5 minutes of attention would be better spend on Bank of Ireland or some other investment). So, maybe I am a difficult shareholder, but I am puzzled by the trivial size of this investment. SJ

Personally, I don't give a damn whether Mark McEwan has 0 Michelin stars, or 200 Michelin stars. I just care whether FFH can make some money from this investment. In fact, I wouldn't give a shit if they bought McDonalds shares as long as there is a solid expectation of profit.... I guess time will tell whether the McEwan Group will scale adequately to make this worth FFH's time and attention. SJ

Very strange. It's hard to imagine that this type of investment would be large enough to move the needle. They didn't mention the size of the deal, but would it even be $10m?

Do not be misled: Bad company corrupts good character. Corinthians 15:33

Just received the updated information package. I wish I could vote no a second time, but unfortunately I can only vote no one time...

Interesting. I never perceived this board as being particularly "pro-petroleum". If there were a few threads on petroleum producers and service companies, it might have been because there are so many Canadians participating on this board and oil has been a very big part of the Canadian equity market. But that hardly makes oil a fixation for most of us.

That’s really worked well in Spain in terms of their economy… We're not talking debtors' prison here. If you are truly balance sheet and cash flow insolvent, you can declare personal bankruptcy and start out fresh (but this is not without its downsides). However, in Canada you generally cannot just walk away from a debt because you are underwater on the asset. If you have sufficient assets or income to re-pay your mortgage, you are expected to do so...

The other consideration is that non-recourse mortgage debt is less prevalent in Canada, meaning that strategic defaults should be less of a problem. If you find yourself under-water on your house and choose to use the "jingle mail" strategy to try to just walk away from your problem, the banks can sue you for the shortfall and effectively seize certain types of your other assets and garnish your wages...

Wonder what the value proposition is? I don't know anything about the investment, but the industry is something that does not strike me as part of FFH's sphere of competence. And, not specific to this investment, but is content even a place that offers a reasonable return? How does one make money on this?

If you truly think Watsa has gone “off the rails”, then you should sell your shares. Because obviously nothing else will be beneficial to your financial health. But of course you already know this. ;) Cheers, Gio Maybe I was a little unclear in my last post (it occasionally happens :D). The underlying premise for Prem's need to change the multiple voting shares is that he needs to retain control for the Watsa family. The sub-text for this is that he is imagining some future situation where FFH management makes a decision or takes an action (or series of actions) which is perceived badly by non-Watsa shareholders. This is the notion of Prem going off the rails. He is explicitly worried that these minority shareholders will come together en masse through some sort of proxy fight to wrest control of the company from the Watsa family. I have pointed out quite clearly in previous posts just how challenging it would be for any "rogue" shareholder to amass that kind of support (ie, if Prem's family controls 40% of the shares, that means a rogue shareholder would need to obtain 50/60=83.3% support amongst minority holders to win a proxy fight). It is somewhat insulting that Prem would think that 83% of us would chuck him under the bus at the first sign that he goes off the rails at some point in the future. SJ

WTF. They don't have enough of the vote, so now they need to go shmooze some of the institutional holders to put them over the top? How about just acknowledging that minority shareholders have rights and that we *won't* chuck Prem under the bus in just any capricious manner. Like seriously, after all of these years, Prem's partners will cut him some slack, even if we think he's gone off the rails. He doesn't need to increase the number of votes for the multiple voting shares, and this proposal borders on insulting. Given a few more weeks, I am virtually certain that Prem will convince a couple of the institutional shareholders to come to his side.... SJ

Yes. And long-time shareholders are saying that this proposal makes us trust management less. And some long-time share holders actually did cut their position to reflect their lack of support for this.

I've been a shareholder for 16 years. I voted against.

41.8% is probably not a problem. The problem is that this will continue to drop if they continue issuing shares. So this is a proactive change, not a reactive change. So do some sensitivity analysis. Hypothetically add 2 million shares which would raise $1 billion. Even if that occurred, what percentage of non-Watsa shareholders would need to oppose him to overturn something that he would want to do? It would still take a large majority of non-Watsa shareholders to counteract one of his decisions. And, again, if somebody is able to put together a large majority of non-Watsa votes, then Prem needs to step back and reflect on why so many of his partners disagree with him. But, you are right, this is a prospective change. This is all about giving his son long-term control of FFH. It is all very well and good that Prem has such confidence in his son, but the rest of us have no reason to entrust him with long term control. One could argue that Prem has *earned* our trust and might merit such a dilution of our voting power, but his son has done nothing that would make me want to dilute my voting power to give him long-term control of FFH. Sometimes Prem is just a little too slick. SJ

I'm not quite sure that I understand why 41.8% control represents a problem for Prem. By my arithmetic, any group wishing to oppose Prem through a proxy fight or some other means would require 50/58.2 of the non-Watsa votes. Basically, you'd need 86% of the non-Watsa shareholders lined up against Prem to out-vote him. Frankly, if somebody is able to secure 86% of the non-Watsa votes on a particular corporate governance issue, then Prem should step back and ask himself what the hell he's doing wrong to have so many of his partners lined up against him.... SJ

Yes it's stunning. Albertans have elected a socialist government. We should expect that Alberta will now be a fiscal basket-case, with indiscriminate levels of spending, inadequate levels of tax, and a sense of entitlement amongst its populace. Wait a minute....that's how the province was described before the election!

This one reminds me of WEB's promise to divest a percentage of BRK shares annually to the Bill and Melinda Gates Foundation. He gives away the shares, but the dollar value of WEB's ownership in BRK doesn't go down because the share price is increasing faster than his number of shares is decreasing. Even with Prem selling 10% of BKIR, I would be surprised if FFH's holding of BKIR in April 2016 is worth less than the current holding...sell 10% of the shares, and if the stock price increases by 11.1%, your holding is steady. Overall, I agree with the strategy of trimming this holding as the price increases. SJ

+1 Quiz: which of the following will increase your life expectancy more? A) Get a thorough physical exam every five years. B) Buy a new car. Well, without doing the arithmetic, I'd say that both A and B are virtually worthless. In the case of A, I recall there there were a couple of papers written that demonstrated the cost of an annual physical exam exceeded the benefits -- not sure if those results are applicable to 5-year intervals. In the case of B, if you buy a new car with better safety equipment, your likelihood of dying in a collision might decline marginally (ie, from 1-in-10k per year to perhaps 1-in-11k), but it doesn't really change your life expectancy meaningfully because the risk was so small to begin with. So, if a typical male currently has a life expectancy of 77 years, and assuming that his driving career starts at age 16, his life expectancy number has already baked in a 61-in-10k probability that a collision will send him to the next world. If he elected to *never* get in a car over the course of his life, his life expectancy might be 78 years instead of 77. By regularly purchasing new cars with better safety equipment, he might at best buy back a few months of life expectancy. Injuries, however, are another story.... SJ

I confess that I use a BB and that my old Android is gathering dust in a drawer. About the only thing I do with my 'droid is put in a SIM with a US carrier so that I don't get raped on roaming charges. The BB's mechanical keyboard is awesome. The messaging "hub" is a nice way to manage my various accounts. The web browser is so-so, but I don't make much use of it anyway. For day-to-day use, it's a great workhorse, even it makes me look square. SJ