chrispy

The most important and simple concept is learning to save and not be a borrower. I believe Rockefeller's dad would first tax all of John's income as a kid and then send 10-20% of the remaining to the church. You could put 10-20% away into savings every time they get income. Maybe match it to really prove a point (similar to employer matching 401k contributions) or give them ~10% interest. Provide them with quarterly statements and work through the math.

People hold cash when they are bearish. Some take it a step further and buy hedges. FFH still holds a boat load of cash.

Putting aside the abrupt change of course, I have a couple of questions as I am trying to gain a better understanding of things. Prem has mentioned several times that the indices may not continue to go up but that it is a 'value investors market'. I am trying to grasp this... In the annual report he mentions buying back stock - ' Having said that, we are raising our threshold for acquisitions now so as to benefit from the ones we have already made – and to buy back our stock. Our hero, Henry Singleton, whom I have mentioned before in our Annual Reports, built Teledyne by taking shares outstanding from seven million in 1960 to 88 million in 1972 and then down to 12 million in 1987 – an 87% drop in shares outstanding. ' With FFH priced at a reasonable, but not cheap, 1.3-1.4x P/B, would this be an efficient use of capital? Similarly, Prem mentioned lowering debt - 'We are focused on getting these ratios down as soon as we can'. Fairfax does not have the greatest credit rating. Could they use this as an opportunity to bolster it? Many of the recent investments described on page 23 were put into 5-6% preferreds that are exercisable in 5+ years and totaled ~500mil. Help me understand, is the benefit of this to produce a return but not be subjected to near-term market volatility? Lastly, all of the talk today is about Trumpflation in the US, and therefore the CPI bets are discussed much less (lets just say the US has inflation during the next several years). The weighted average for these CPI bets (shown below) are not very far off for many of the locations. It is very difficult to predict 6 years out, but if France or UK were to meet the strike price, this would be quite a windfall: $bil Strike Dec31,2016 United States – 0% 46.7 231.39 241.43 United States – 0.5% 12.6 238.30 241.43 European Union 43.6 96.09 101.26 United Kingdom 4.1 243.82 267.10 France 3.3 99.27 100.66 Though, if this doesnt happen the unrealized loss is pretty substantial at 586mil. If things works out in Fairfax's favor, would gains from this bet only be realized in 5-6 years? What are the potential outcomes for this bet if any of the locations were to have cumulative deflation? Lastly, nice shoutout to Parsad!

A very interesting thread to read. I have found this method of keeping goals simple and attainable to work very well for me in many aspects of life like exercising, reading, cooking, saving, and staying in touch with family and friends to name a few. Allowing myself to exercise for shorter periods of time, ~30 minutes, has me exercising more often and usually for longer then 30 minutes because it is enjoyable once you get started. On days when I am tired or too busy, 30 minutes is just fine. What most people have said in this thread resonates quite well with me. Hasn't WEB said that he knows within a few minutes if he likes an investment opportunity? He seems to agree with most of the posts in this thread.

Between holding cash and the CPI bet, they are still 'hedged' for a downturn compared to most others. With the cash and focusing on acquiring insurance I think they are in a better position. While I agree it is a concern that they removed the equity hedges at the top of the bull market, something to think about is, if they maintained the hedges during this run up, what would folks be saying? Would we have more or less faith in FFH? He did mention in the earnings call that results have been bad and mistakes were made. I too am hoping that there is some further discussion of this in the letter to shareholders. I thought it was interesting in the earnings call that Prem mentioned something like, "we are also less concerned about hedging our equities because many positions have already dropped ~30% and are less likely to now." Did they drop because they were bad picks or because of Mr. Market? Can they still drop further? Have they hit bottom and will rebound significantly?

If one has the patience and aptitude to buy when stocks go down, that is your best bet. Investing in companies that have a track record of doing this well for their shareholders is the second best option.

Late to this thread out of disappointment but there is no benefit in not holding myself accountable. Started at the very end of 2014 in my roth: 2015 - -3.3% 2016 - 2% CAGR - -0.47% MKL and FFH knocked me back quite a bit at the end of Q3. Trying not to lose money but also not trying to be outpaced by basic indices! Very happy to have found this community a few months ago as I have learned quite a bit. Always need to remind myself, patience!

Great articles longinvestor. Iceland is capitalizing on what it has abundance of and what it can do REALLY well with. This is great to see and was not the case 10-15 years ago ;) On another note, I just read through a majority of the ZINC discussion in Investment Ideas. If I had read it several days ago I would never had to start this thread! Mohnish investing in the company was all many people had to hear. Point has been taken!

I dont plan on watching Celebrity Apprentice ever again!

This thread took an interesting change of course. Very sad and a good word of warning for sure. My company is anywhere from ~25-75% reliant on oil money and these past years were pretty unnerving as it was my first downturn experienced. Luckily the sequester was over and the Navy/Coast Guard started to build more ships... I was in Iceland about 18 months ago and they are doing just fine now miraculously. As said before, clean energy is amazing. They have also really understood how to market themselves as a short term vacation/adventure spot for those looking to get away, or those flying between north america and europe.

Just came across this video. There is nothing ground breaking here, similar content to other Watsa interviews talking about India:

Thank you for all of the responses. I enjoyed reading all of them and picked up quite a few things. They were detailed and shed some light on what was an eventful period. The takeaway is that like almost all things in life, there is no easy way to success and each has to do their own work! The tech bubble and the housing bubble/great recession all within the past 15-20 years have been great cautionary tales for me. I really like the idea of reading the 2008/2009 WSJ archives.

Munger’s holdings at DJOC consist of ~99% US banks all purchased sometime in 2009. At that time I was still getting my feet on the ground and was not involved with investing at all. Therefore it is hard for me to understand the emotions/anxiety/fear of the time for most human investors. For those that can shed some light on this period: Would an investor have been able to learn about these purchases, and similar purchases by WEB, and had the courage to jump into what were risky businesses? Is it that these purchases weren’t made public until the end of the quarter/year that made it not feasible to do this? In other words, did the stamp of approval by Munger/Buffett make these a no brainer for the educated investor? Part of me is just interested in the history of this period and how things have transpired since. The other part is trying to determine how much it is worth studying the recent purchases by successful money managers.

As everyone has said, it is impossible... My main question is trying to figure out how much cash to hold at all times. I am assuming it is proportional to (overvalued holdings that are sold off) - (high quality deals that can be found and purchased)?

Merry christmas to all! This was quite a find for me only a few months ago and I am very thankful for it. It is a fascinating information center that has provided insightful discussion and lessons. Looking forward to learning much much more. Thanks for sharing your knowledge!

I have been appreciating everyone's thoughts and have two questions probably due to my lack of experience: 1) Isn't increasing the amount of insurnace that can be written in the future at ratio~0.9 a substantial tailwind to the potential for investments moving forward? If equities are well priced right now and interest rates are rising, more insurance is a good place to be putting one's cash, right? It sounds like many respected insurers like Markel were interested in this company recently but at a cheaper price. Even Gayner will say that if you want to continue working with a company and have their respect, you cant beat the snot out of them on a low ball price everytime. 2) I also have trouble digesting Prem's public reasoning for this drastic change at FFH and it is a concern that he may be buying high right now by removing the hedges... I hope he will say something in the annual letter about this ... But, doesnt Prem have good reason to hold his cards close to him and not publicly state what his team thinks and what they are planning on doing right now? After re-thinking about my own question, maybe I am just trying to justify his lack of willingness to admit to his own mistakes and should re-think my position.. I am interested what you guys think regarding these questions as all of these developments are new and of great interest to me.

Agree with both crip1 and globalfinancepartners. Im hoping to be able to purchase more after the new year and see that as a possibility. Seems like most people will need some kind of insight like the annual letter to have renewed confidence. Long term, a good company trading at a very good price.

Very interesting and informative way of putting it Parsad. It will be interesting to see what they do with all of that $$$

Wow. Quite the week.... My guess too is that they have been wanting to wind down these equity hedges and this provided a convenient time. In the grand scheme of things, the S&p500 is at the same level as ~24 months ago (increased by ~5% in 2 years)... I believe international has done less. So, if measured against the broader market, one could think of it as removing the equity hedges 24 months ago. We all know that Prem manages an active portfolio which does not always agree with the S&P. Is there a chance over the past year or two that his equities have under performed and therefore over the short term, maybe the hedges were beneficial? This recent move though boils down to two things for me; the past and the future. Past - 100% equity hedges was quite a confident bet. Prem surely didnt win and he may or may not have lost depending on how you look at things. He didn't lose money but he didnt make any. There were times when the hedges appeared to be genius and others when they did not. We all know what the current book value is, and this represents the past up until today (or end of Q3). That is a fact which then brings us to trying to predict the future... Future - We need to remember that FFH is still 50% hedged. If the markets continue to rally then FFH has done well and unleashed earnings power (we can think of it as getting out of a bear market). If the markets tank... well, they are still 50% hedged but PW will probably slam his head against the desk. The future is simply unpredictable and I am in favor of less hedging and more buying undervalued stocks/bonds. I personally prefer the BRK or MKL method of knowing that securities bought at a fair or cheap price will gain value in the future. That is simply the most cost efficient and proven method to compound money trading equities. Prem has proven he can do this very well, especially in the bond market. Now he has $10b from his bonds sale and removed 50% of his hedging. Many folks are raving about BRK having $100b in cash, as am I, so we should be welcoming FFH new position if we think in the long run that capitalism will prevail. Lets get excited here about the future. As many folks have said though, you invest in companies like BRK or FFH because you have faith in WEB or PW. I have faith that PW can produce a better return than I can. That is why I chose to invest. I understand that buying low and selling high is very difficult, I probably would not be the best at it, but that PW has a great track record of doing just that. My only concern is that he may have just sold low and bought high.... Only time will tell. Looking forward to following more of this journey with everyone here!

I agree that fiscal stimulus in things like infrastructure is required and will be beneficial to many sectors/people. It is way overdue. But, it was only a few days ago when people were saying the market was overpriced and now everyone is willing to purchase stocks for a greater price? We still hardly know what the guy will do or what other republicans will push him to do. Today, deflation seems less likely. If he says that we are no longer trading with ½ of the world and closing our borders, deflation looks very possible. Who knows.

Would you guys be able to post your notes and observations from this? I would be very interested to read them.

Why not purchase a mix of berkshire, fairfax and markel for the long term and cost average? If you buy around the average P/B and let it ride, avoid purchasing much when P/B~2, it seems like you would have superior returns to the market. Buying at P/B~1 or 1.2 is ideal but if you purchase at the average price and the company compounds at a rate greater than the market, you have outperformed the market. This would require only a little more of your time then simply throwing your money into VFINX. Thoughts? My grandfather put money into VFINX for me in the early 90s and it was never looked at except to pay taxes on. No one paid enough attention to it during the past 20+ years to panic and sell at the bottom and therefore it did pretty well. Listening to Bogle a few years later made complete sense.... Of course I wish my pop wouldve chosen BRKA though!

I am an employee and do not run by own business but have been trying to find ways to make additional income that isn't selling my time on the cheap. Was thinking about possibly tutoring kids in math but haven't pursued it yet. I was curious as to what sources of additional income people have outside of their investments and primary business?

The more I read and hear, the more intriguing FIH is. The prospects in India sound fantastic and with their knowledge and experience in India it appears to be a great opportunity at a good price. The quality businesses already in place have a major moat plus large growth opportunity. Now I need to get an account with a brokerage that charges less for foreign exchanges (US citizen). With all emerging markets, it will be a bumpy ride. FIH would seem to be lucrative in the long term though.