StubbleJumper

If history is any guide, FFH will announce its annual dividend on Tuesday. How much are people thinking? I'm saying $10 for the second consecutive year. SJ

Buy BRK....it doesn't pay a dividend.

Where do I get my numbers? Well, check out CIC's statistics on immigration, and check out PWC's personal taxation documents for the income tax burden at any given level of income. You'll find that I'm nicely in the right neighbourhood when I quote numbers. We do get benefits from cheap labour without a doubt, and some folks are upwardly mobile. And some are not. Some are perpetually in the lower income ranges and will persist there for their life in Canada. And for good reason. If you can't speak the language, have limited education, no skills of value in North America, and you don't "get the culture" then it should be no surprise that some people will struggle. Not everybody will want to bring their aging parents to this country, but plenty do. The thing is that old people do not have to abuse the health system to be a burden on taxpayers. They merely have to use it to a greater extent than they contribute. That's a characteristics of pretty much all old folks, Canadian born or immigrant. The difference is that the Canadian old folks paid into the system all their life when their health was better while the aging immigrant just shows up on the scene when its time to use the system. These people make little to no contribution to Canadian society, but they suck up health resources at a significant cost to taxpayers. You get a private benefit from bringing your aging parents here and everybody else get public costs? Nice. Canada's growth IS driven by immigrants. So let's choose the ones that will actually contribute rather than those who will be a burden! SJ

It's not all about economic sense. As a recent immigrant to Canada myself, and with household income well above Canadian average, I'd want to bring my parents here at some point of time, if they agree to it. Would it make sense for Canada economically? Probably not. Would I stay in Canada long-term if I couldn't reunite with my parents? Not sure. If you go strictly by what makes economic sense, it's very rational to round up the economically unproductive bottom 1% of population every year, homeless and elderly, strip them of their citizenship, and deport them somewhere far away. turar, You need to be very objective about this. You have spoken about the private benefits of bringing your parents here....you as a private citizen would like this and benefit from it. How do I and other citizens benefit? We do not! We should not be expected to bear one iota of the cost of bringing the aging and unskilled to this country. That includes medical care costs and Old Age Security. If you get private benefits and there are no tangible public benefits, then you should bear the entire cost privately. Full stop. Turfing the bottom 1% is a non-starter. We can't do it, so no point in discussing it. But that doesn't mean we should import more people to join that bottom 1%! SJ

That may be your view on immigration, but not every citizen would agree with you. I rather like the following excerpt from a poem written on the Statute of Liberty in the U.S.: Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door! This is not true. Plenty of non-skilled, no money immigrants have come to the US and Canada (and other places) and become productive members of society. For that matter, plenty of non-skilled, no money citizens are or have become productive members of society. Do you really believe that everyone who is poor and uneducated is destined to become a welfare enrollee? And is someone who makes only $30K really a burden on society just because the average cost of benefits is greater than that amount? From my perspective, there are plenty of people who make $100K or more who actually provide negative value to society. With regards to the family allocation, there is a good argument that places like the US and Canada could not cherry pick the "best and brightest" from abroad without allowing them to bring over family members (even the dumb ones). Think about the Chinese and Indian engineers in Silicon Valley who disproportionately start tech ventures that have kept the US on the forefront of innovation. Would they agree to come to the country if they were forever cut off from their family members and community that they left behind? Or think about the Mexican immigrants who start value-added small businesses in the US. Would they really be willing to put down roots and grow their businesses if they could not share their success with their family members, whether dumb or intelligent, lazy or hardworking? My own personal definition of "merit" is more expansive than just considering future earnings potential or economic success. Character, creativity, determination and other attributes that are hard to measure just by looking at economic success should be included, in my opinion. We should be willing to take a chance on people who don't look great on paper. IMO, as ValueCarl would say. The statue of liberty quote is nice. However at that epoch, people came to the US and were not supported by the state. They succeeded or failed by their own efforts. In Canada, the state expends large sums of money on publicly funded healthcare. Each new user adds an average of $4-5k annually to the cost of delivering said healthcare (to say nothing of other publicly funded services). In Canada, when somebody earns less than $30k per year they pay well under $5k in income tax. After accounting for tax credits, they pay nearly zero sales tax. A citizen who gets stuck in a go-nowhere job at minimum wage or a shade higher does not pay enough taxes to fund even the health services that the average person uses. The shortfall must be absorbed by those who have higher earnings. So as a country, should we import people who have limited earning prospects? If you cannot earn more than $15/hour your neighbours have to pay for your healthcare! Every person that we add to this country that has limited earning prospects REDUCES our prosperity. Let us rather make better choices and select people who are likely to be either revenue neutral or who are actually likely to be net contributors. You make a number of good points about success immigration success stories...and I have seen them in person. My dentist was trained in another country and has done exceedingly well. Nobody is saying that there should be no immigration, but rather that we should select those who are most likely to succeed (and having no education, no language skills, and no familiarity with the culture are rather large hurdles). The family reunification rules are very loose in Canada. It's one thing to pursue a highly educated candidate and allow him to bring his spouse and young children here. It's quite another thing to allow parents and grandparents! I seriously doubt that eliminating preferential treatment to parents and grandparents would seriously harm our attractiveness to the best and brightest. SJ

Your observations are perfectly fine, and fit 100% with mine. A sponsor is required, but a sponsor is not obliged to provide financial support for life. A medical exam is required to avoid the worst burdens on the medicare system. However none of this precludes the entrance of unskilled workers into Canada who earn insufficient income to pay adequate income tax to offset the cost of the services that they use. I would argue that ANY Canadian who earns less than $30k does not pay enough tax to cover the average cost of publicly funded health care. We are unavoidably stuck with our Canadian born low-income earners who are a burden on the system, but there is a strong argument that we should perhaps not actively import additional low income earners! I would also observe that brothers and sisters and cousins ARE effectively permitted. The strategy employed by many families to do this is to first bring the grandparents over to Canada, and then you can bring over all the brothers, sisters, nephews and nieces as subsequent family class immigrants. In these cases the grandparents are almost always a net drain on Canada because they almost never earn enough money during their life here to pay sufficient taxes to offset the services they consume. The brothers, sisters, nephews and nieces are a mixed bag. Some are net contributors, and some are net users of publicly funded services. When we allocate 35-40% of our "immigration slots" to refugees and family class immigrants we are making a very clear statement that protecting the economic status of existing citizens is subordinate to some other objective (call it kindness or compassion if you like). Clearly if we were pursuing only the economic interest of our existing citizens, entry would be driven purely by merit, which might include characteristics that are linked to future economic success such as education, linguistic skills, propensity for cultural adaptation, etc. The implication for somebody from the U.S. is that if his profession does not specifically fall under one of the NAFTA categories, he has to get in line just like everybody else...and that line is composed of 35-40% of people who will be the beneficiaries of favouritism on the basis of their country of origin (for refugees) or their family connections. If you want to argue that compassion has value, go ahead (and for refugees, I would even likely agree). But when your immigration criteria are not merit based, you will not be bringing in the very best of the best. SJ

We absolutely see what we want to see. What I see is that about 10% of Canada's immigration takes the form of refugees, and about 25-30% more are "family class" meaning that a cousin, sister or grandpa gets preferential access to the country based on family ties (this is not always a bad thing as there is at least a family support system). That leaves about 60% of economic immigrants who actually need to show that they will make a contribution (it doesn't mean that the other classes won't make a contribution, but it merely shows that we are not very scrupulous in protecting the economic interests of existing citizens). So, yeah, I see what I want to see. And what I see is that a well-educated, wealthy, native English speaker who is familiar with the culture by virtue of having lived in the US, and this fellow would need to get in a very long line and show that he deserves to immigrate despite his unambiguous advantages. On the other hand if he had a sister who lived here..... nep·o·tism    [nep-uh-tiz-uhm] –noun patronage bestowed or favoritism shown on the basis of family relationship, as in business and politics: She was accused of nepotism when she made her nephew an officer of the firm. And Sanj, that sure ain't egalitarian. SJ

Lots of luck on moving to Canada. Instead of accepting immigrants who are well educated, are familiar with the culture, speak perfect English, and have a significant nest-egg of capital, we instead prefer to select refugees and family-class immigrants who often have no education, speak neither English nor French, find the culture alien, have no money and have no prospect of economic success. But, it does make us feel morally superior to select these inferior immigrants... Perhaps you should rather think of Mexico or Thailand? SJ

I've never gone too far wrong by increasing my exposure to CASH. You won't hit the cover off the ball with that investment, but at least you'll still be standing at the plate when the fat pitch comes. SJ

The 10-year treasury is up to 3.5% today, which is about 100bps since the end of Q3 (most of the increase over the past month!). That might be a bit of a hit to book value this quarter. At least it provides slightly better re-investment prospects for FFH. SJ

Second Cup is not just a top-line trust anymore as it acquired the operational side of the cafes earlier this year for a nominal price. Essentially all of their profit was being distributed to unit holders and the losers who held the cafes were making next to nothing. Unfortunately the majority owner of the units was also the owner of the actual cafes, and he made the decision to merge them back together. So now it's a mix of raisins and turds. SJ

Yep, I swung twice at the BRK hanging curveball over the past year and hit two singles. I bought at about $3250/sh and again after the split at about $68/sh. Still holding, but on an annualized basis, it has amounted to a couple of nice little additions. SJ

Yeah, I haven't found any value in that space either. Do you buy a REIT like Riocan that throws off 7-ish percent distributions or do you buy something like BAM? I've bought neither. SJ

Some years I can't even find that. This year I hit a bunch of singles (15% gains) but nothing worthy of a contest.

I see that they're sticking to their previously expressed views on long term treasuries. "Four percent nominal rate, one percent current inflation, therefore treasuries will rise over coming months/years." These guys are way smart, so they know about the central importance of inflation expectations and they know that the current year's inflation means bugger-all for a long term treasury. Despite QE2, they still seem to think that deleveraging will drive low inflation or disinflation. Interesting. Let's see what Prem & co do. SJ

Yeah, I was just looking at the share price this morning and thinking that it's reasonably priced at 99% of the stated Q3 BV. There may be some opportunities to scoop up a few bargains this month as people dump their losers to trigger tax losses, but unfortunately FFH is unlikely to fall into that category.

It's very easy in theory to balance the budget merely by cutting the subsidies for all the unproductive stuff. Everything from tuition subsidies for flower arranging to agriculture subsidies and bribes for placing hazardous solar panels on the roof. Attic fires anyone? Yep, I've heard that before. Usually it's during an election campaign, be it municipal, provincial or federal, and some candidate or party develops a platform that includes new spending initiatives that will be financed by "savings from cutting the fat." What most of these candidates/parties find is that it's very easy to talk about cutting spending when they're on the outside looking in, but it's a great deal more difficult to actually find fat that can be cut. Despite all the stories that abound about wasteful government, most of the spending programs have an underlying policy goal and constituency group. It's a lot easier to mentally chop numbers on a page than to disavow an existing policy objective and alienate a particular constituency group. I get your point, but it's much more difficult in practice than in theory! SJ

Make that a third article: http://www.theglobeandmail.com/report-on-business/canada-not-prepared-for-major-earthquake-insurers-warn/article1823164/ If Prem is becoming a media darling, perhaps it's time to sell! ::)

How about Laurentian Bank, it much much cheaper then CWB on a PE and PB ratios... and is not going down if RE in Vancouver goes south. BeerBaron Ummm... Because its operations are primarily in Quebec? Because it's unionized? Sometimes I've done ok by buying the "Quebec discount." But banque laurentienne? Not sure. SJ

Or maybe rating agencies look at it this way: No new business, ergo. . . They may see some tail risk even though they're profitable. Maybe tail risk will be greater than the cost of their ongoing expenses less the cost of writing new business. Could there be reserving issues or are they just being cautious about writing new business? Could this company be put in runoff or might it be sold to a less creditworthy buyer? (parsing S&P's words indicates this is probably their chief concern) Let's find out more about what's going on. ??? Is Clearwater related to Clearwater Florida? Perhaps, they don't like the rates the state currently allows, and don't want to write new business until they get rate relief. Florida's new governor may not be as unreasonable as Crist has been. Doesn't matter whether it's put in run-off. FFH has been categorical about it's subsidiaries' obligations. They are Fairfax obligations, full-stop. The risk of being sold to a less credit worthy buyer is also rather amusing. Perhaps we ought to whack GenRe's credit rating for the same reason? Or perhaps we ought to whack the ratings of Wells Fargo's subs as well? IMO, the rating agencies are gun shy. They embarrassed themselves during the 2000s through lack of diligence, and now they are embarrassing themselves again through excessive conservatism. SJ

So let's see if I've understood this correctly: 1) Statutory capital actually increased over the past year. 2) No new business was written. 3) One would presume that there would have been some paids over the past year. 4) Due to a combination of (2) and (3), one would presume that claims reserves should have decreased, and BV should be characterized by a greater level of certainty. Therefore, Clearwater is riskier this year than last year and deserves negative implications????? Ratings agencies do not get it. QED SJ

I am no longer in this category, but you also need some categories for margin. So -50%<x<-20% -20%<x<-10% -10%<x<0 then have the positive cash categories that already appear. SJ

Just looking at Toronto price this morning, FFH is trading pretty much bang-on with their reported Sept 30 book value. Tack on half a quarter of earnings plus some undervaluation of a few assets, and you might conclude that it is actually trading at .90-.95 x book. Looking better and better all the time! SJ

Damn. I thought you were going to ask for more of BenHacker's insightful posts. ;D

Wow! I am surprised that there are so many people who find that it's worth ~$10/month. I really must be a cheapskate! :o :o SJ