StubbleJumper

I'm surprised to hear that. All of the Wendy's in my area are very well maintained, clean, and seem very well run. --Eric For some strange reason, Wendy's uses carpet on the floors and padding on the chairs. During a Canadian winter, the carpet gets very disgusting....and the vinyl on the chairs starts to split after a few years. Now MCD or BK have only tiles on the floors (which is very durable) and comfortable, but plastic-like furniture. This is a much better model for a quick service restaurant. SJ

Each one year re-estimate reflects the most recent development from all prior years, nothing is left out or missing. The most recent one year re-estimate includes 1999's 10th year change, 2000's 9th year change, 2001's 8th year change, etc.. All ten years of 1999's 20.8% over reserving are incorporated as they developed one year at a time. All nine years of 2000's...same...and on and on. The set of annual changes will give a good idea about trends, and whether the firm is chronically under/over reserved. That SUR was conservative by 20% for reserve estimates set in 1999 is a good thing (for investors of course). But aside from association, it tells me nothing about what transpired with new policies written in the next decade. It is a dangerous leap of faith to assume because the management team in place in 1999 under reserved by 20%, that the current management has systematically done the same thing in 2009 and therefore current reserves are also 20% too high. Anyone making this assumption is fooling themselves. That's why I like the accident year triangles that FFH added to their AR this year (or was it last year?). You can actually follow how specific accident years develop over time. People should really look at what FFH has done for the last five or so accident years... SJ

Gawd, let's hope that he's not targeting Wendy's. All of the Wendy's restaurants that I have visited over the past 3-4 years have been very shabby. I cannot imagine subjecting the chain to Sardar's modus operandi of chopping maintenance capex. SJ

I regularly attempt to obtain some notion of the fair value of the S&P by running off a long-term trend line for earnings, and looking at historical P/E ratios (Shiller's database is handy for this type of exercise). I typically calculate fair values somewhere in the range of 750-900. Based on this, the valuations of last March would make a great deal more sense to me. Will we drop the required 15-35% to hit an average historical valuation? I really don't know. Maybe we'll just trade sideways for three or four years while earnings trend up.... I am reasonably comfortable in investing right now (unlike Klarman), but I'm being selective, and am not in a hurry to leverage up. SJ

Nope. I'm lazy too. I flip through annual reports in a half-assed way, and try to get some notion of the big picture. The half-assed approach for an insurance company is to take a quick look at the last five years of net written premiums to get some idea of their top-line growth, the CRs for the last five years, investment portfolio composition, the famous loss triangles, BV per share and debt level. This is a 5-10 minute read of the P&L and balance sheet, plus 5 more minutes to look in the notes to find the triangles. For most companies, I toss them on either the garbage pile or the "too hard pile" after a cursory, half-assed review. I make a great many errors of omission by taking this approach, but it only costs me about 15-30 minutes. My rough memory of CNA was that they have mediocre returns on their investment portfolio, they have chronic adverse development, they have a capital structure that is heavily dependent on funds from L, and at the time they traded at P/BV of about 0.70. Frankly, given their long track record of mediocre results, that P/BV seemed roughly right. I might also be making a mistake with Lancashire, by tossing it on the too hard pile simply because they do not have a lengthy loss triangle. But even after 30-45 minutes, I could not get comfortable with it. No damned way am I going to read the quarterly reports or a bunch of annual reports for those two. I'm just too lazy. SJ

Again, I will be specific. Have you read CNA's reserving table? I have read that table, and that's the big reason why I did not buy. The triangles made me want to puke. You don't even need to bother reading all the quarterly reports when there's more than a decade of chronic adverse development.... Will there ever be any light at the end of the tunnel? SJ

Yep, I topped up my BRK.B holding at $70 yesterday. Didn't add much, but I couldn't resist taking another nibble. SJ

Yep. If I were running BP, I'd have my counsel looking at how to move its US operations into a Canadian shell company as quickly as possible. Any attempt to expropriate BP's assets including retroactively applied legislation that increases their liability would then be subject to NAFTA rules, and BP could oblige the Government of Canada to litigate on their behalf to recover losses resulting from the expropriation.... SJ

Mauricie is a fair distance from Saguenay/Lac St Jean, so I wouldn't be too concerned about the current fires. However, if we don't get some rain soon, there's a risk of additional fires popping up. The forecast is for rain this week in the Saguenay, so keep our fingers crossed....

I would tend to think that Jim Pattison or John Irving might qualify for as CEO's with the largest equity stake in very large companies....

Ultimately, time will tell. On this board and its predecessor, we've been calling for a hard market for about three or four years. The cats have just not appeared to drive the required shortage of capital. Maybe it'll be this year, but the hurricane season will be a big factor. However, my experience in P&C investing tells me to ignore the oil spill and Chile as they are not really big cats (ie, the oil spill is like a bad spring in tornado alley). Who knows, maybe this year will be like KRW? SJ

The author seems to have gotten a little ahead of himself in calling this a perfect storm. To date, we've had two smallish events: Chile + oil spill = impact of one good wind storm in Florida It's a little early to start calling this a high-cat year! SJ

Who cares about the month-to-month or even the year-to-year returns? Really, I'm most focussed on decade returns....

Hmmm...just looking at Friday afternoon trading, and it appears that ORH-A is up over $26/sh. This thing just paid a dividend, so it's not like the market should be accruing something for that reason. Anybody think that FFH will call them at $26? I can't seem to think of any other reason why it would trade that high (given that you might get called next year at $25). SJ

I'm pretty low-tech...I will simply use margin to leverage my account should the S&P decline adequately. Right now I'm down to about 5% cash, but I'd be comfortable going to -25% or -30% cash if valuations justify it. History shows us that the market can decline a great deal and then trade sideways for quite some time, but in general, margining works well if valuations are attractive (and if you don't go too crazy and risk a margin call). I really hope that we will once again get opportunities like what we had last March. SJ

Looking at the metrics that I use for the broad market, the S&P today looks to me like it's still overvalued by somewhere between 10-35%. I'd be a great deal more comfortable if it drops to the 800-900 range. That being said, there are a few issues that may be attractive. I have recently dipped my toe into MFC, and it has since declined slightly. I think that I'll be very happy with MFC in five years. If the S&P returns to the 600-700 range, I'll be leveraging the hell out of my portfolio. SJ

Damn! Sanj, I thought that you had a hot stock tip for me. I could use a quick $20-30k...

Sanj, Sorry to see that you've been hacked. I wish I were more technologically advance, so I'd be able to offer help....but alas, I know more about baseball than web hosting. SJ

Sure, fair enough. To give Prem a modicum of credit (and IMO, he's earned it), FFH makes it pretty clear that the change in BV + divvy should be 15%+, and it is on this basis that they wish to be judged. Frankly, if Prem can do that over the long term, then I'm a happy guy...irrespective of Chilean earthquakes! SJ

I actually was about to write "I wish they would stop doing this..." Then, I just discarded the post :-\ Why is it bad to provide extra information? FWIW, it doesn't bother me at all to know what their Chile losses amounted to. SJ

I've been watching this Greece situation with great interest. At what point is the risk over stated? I fully recognize that Greece will end up defaulting at some point in the next 5 years, but with the IMF/EU bailout is it really that likely to occur in the next 2 years? Also, when sovereign debt does default, it normally takes the form of either a delay in interest payments, or perhaps a delay in interest payments followed by a hair-cut. If two-year debt is yielding 13.5%, it strikes me that there is already a significant hair-cut built into current prices. And, as I suggested, it is not at all clear to me that Greece's problems will come to a head over the next two years given the existence of a bailout package. This feels a little like GMAC bonds from a couple years ago... SJ

We have people on this forum who worked in the private sector, invested wisely and retired in their 30s. Nobody has ever cast aspersions on their decisions (and IMO, nor should we!). They made their choices thoughtfully and courageously, and super-early retirement is their reward for having saved money while others were spending and for having been value investors while others chasing the flavour of the day. The grass always appears greener on the other side of the fence! SJ I am less concerned about the money (which as some people pointed out, you do trade off money for future pension and other benefits), but it's a waste of human capital for people to stop contributing so early. There's really no reason for people to be retired so early in general.

Sure, public employees are insulated from a crashing economy, but they also did not really benefit from the soaring economy which prevailed from the late-90s to 2008. They did not get wealthy from stock options when the stock market was setting records, they did not get ridiculously high retention bonuses when talent was hard to find, and they did not obtain large salary increases by jumping from one company to another. And, interestingly enough, when times were good, they did not bitch and moan about not getting this type of compensation. If people want good (but not fabulous) remuneration that is very low risk, then get a public service job. If you want to make some real money (with some bumps in the road!) then stick with the private sector. Personally, I do not begrudge their pensions in the broader context of their total remuneration package. SJ

I don't get this thread at all. Either you believe that public employees are being overcompensated, or you don't. People point to the pensions as an unreasonable part of their remuneration, but it needs to be considered as part of the broader package. Incomes in the public service are adequate to launch a family solidly into the middle class, but it is most certainly not the path to become wealthy. So, is it acceptable that somebody with a Masters degree who works in public administration should earn $70-80k plus benefits? I would posit that somebody with similar education in the private sector could quite easily be in the $100k+ range, and might have stock options, bonuses or other incentives. The economy has turned south. Nobody wanted a civil service job in 2005. What's with the bitching and moaning now? We make more money in the private sector, but it's a bit of a gamble. SJ

Yeah, I saw that slide too. I guess I like my money too much to hang my hat on the CEO's record alone!