ICUMD

Agree with this. Oil profits going to share buybacks, debt reduction and dividends. Demand destruction? Maybe if we go full blown recession. What's the alternative? Even coal is making a comeback. All those years of ESG. Time to pay the oily piper.

On the balance, with the pandemic over, regardless of inflation and currency issues, I see people returning to travel in 'leaps and bounds'. Also, I don't think Indians are as indebted per capita as their North American counterparts. So, I think the airport will become a cash generating machine. Ditto if they add Rail stations. Same thing can be said for the opportunity in banking. Csb, IDBI etc. Presently, I think there is a great opportunity for Fairfax India to scoop up all these quality infrastructure assets for a steal. Unique alignment of privatization of government assets, Modi and Prem friendship/trust, encouragement of FDI, and rising middle class. With rising technology, wealth and connectivity amongst a billion people, I bet demand for FIH owned assets will grow at an exponential rate. Ultimately, the value proposition becomes ridiculous and too good to pass up. FIH will necessarily need to rise in price. I also believe there is investor demand for these assets ie. Recent Indian Airport auctions etc. At the end of the day, I am satisfied with the ability of Fairfax India in being able to pick up quality infra assets at attractive prices. More than satisfied actually. At this stage, flying under the radar may not be the worst thing. And all of this should occur regardless of inflation, recessions, currency, geopolitics etc. Speed bumps they may be, but I can't see any of them permanently tempering demand. But a long term view, faith and patience is needed. And that is not easy. IMO this is the challenge of value investing. Once the value has been realized, the opportunity is gone. I hold about 7-8% of my total portfolio in FIH.

In my mind, the biggest risk for setback is a major worldwide recession prompted by higher interest rates and higher oil/ energy prices. Inflation would hopefully recede in this scenario. Such circumstances could reduce FDI and put us back another 5 years. But I'm no economist.

Interestingly, huge gap in Prems stated invested capital of 5 billion USD in Fairfax India and current market cap of 1.6 billion. Even if we're trading at a 50% discount, that puts us at ~ 3 billion. Where's the extra 2 billion?

https://www.aircargonews.net/cargo-airport/wfs-breaks-into-india-with-cargo-handling-deal-in-bangalore/

My impression is that inflation has a slow and sluggish response rate to slowly rising interest rates. OTOH, a sudden crash in equities and housing could halt further rise in inflation through wide-spread demand destruction, though not necessarily. It seems to me that currently, people have too much paper worth and feel rich enough to absorb the oil and food inflationary pricing on the whole. Not yet seeing us be anywhere close to demand destruction.

From my review of BIAL developments, they are extremely forward thinking with many partnerships with AWS, IBM and the like. Having met Hari Marar, he seems like solid leader, wll spoken and with a good vision. They are also developing the business park and aero city. The pandemic was a 2 yr setback, but I forsee a lot of pent up demand returning. They will lever technology to maximize passenger volumes. While an aiport terminal may have a rated capacity, such ratings are meaningless in India. (Have you seen their rickshaws, trains and buses? Haha) There are already plans for a terminal 3 and possibly opening up HAL. What will be most interesting is how they stream various revenues, esp non aero, from the travelling passenger volumes. On top of all this, they are supposed to recapture their 16% aero rate of return via user development fees. Let's see what the coming months show in terms of passenger volumes and revenues. Will not be surprised to see overshoot on both fronts.

Thanks for posting this info. Very reassuring that volumes are getting back on track. Maybe they will even overshoot. Hopefully asset impairment is behind us.

Certainly, some headwinds in these regards. However, BIAL was hit hard by COVID, while all the while developing a slam dunk prize asset. (T2, land, etc) IMHO, it's like quitting the marathon that was delayed by bad weather just as the starting gun fires. I'm sticking it out for another 1 - 2 yrs, then will decide whether to pare down my FIH holdings or not. Not too worried by possible recession. This will simply present further buying opportunities. On the brighter side, lots of other assets have been hit much harder than FIH, particularly technology. I don't feel like I've missed out on other major opportunities in this regard. I remain confident in the value of the underlying assets.

Arguable the Fed had to do what it had to do. Perhaps it even made all the right decisions. Of course people are going to be mad the punch bowl is being taken away. The 'mad' emotion is harmless. It's the 'reaction' that matters - both on the part of the Fed and the people.

Well, in my mind that's the question. Are things going to occur in an orderly way? Rising interest rates giving way to a soft landing? Alternatively, the rich may complain about the 2x or 3x increase in prices. The poor may be absolutely crushed by debt such that food and shelter is difficult to afford. And therin lies the problem. Poor outnumber rich by far. Try living in Toronto or Vancouver on minimum wage.

I think there are two issues: 1. Market uncertainty and the Fed managing expectations 2. What actually happens. If there becomes a disconnect between 1 and 2, watch out! I agree, there could be an ugly surprise ahead if fear reigns Supreme. I think of the Kondratieff cycle and wonder if we are entering the 'Winter' just before the credit crunch. https://images.app.goo.gl/w8dZD8kofeSTz71j7

I own land - about 45 acres. Low carrying costs, in the city limits of where I live. Picked it up for a song. Plan to hold it 20+ yrs. Plus, it gives me somewhere to drive my 1965 Massey Ferguson 135 and grow some plants. My home? I'd never sell as it's an irreplaceable waterfront property. I'll continue to buy BAM for all my other realestate needs.

Proof will be to how high interest rates need to go to tame inflation. It's quite pervasive and in all sectors of the economy. I'm skeptical the long term average of 6% interest rate will slow this train!

Agree with this. Real-estate ownership is unique in that it's a business in a sense. There are carrying costs and revenues. Even a primary residence helps generate money close to your place of employment. Having a mortgage means the bank owns your capital, which the owner has the optionality of buying back overtime, but also carries the bulk of the risk. Sound like a bad business? I think it is. Its no different than buying a piece of gold or a rolex watch waiting for it to appreciate or 'inflate'. Low interest rate environments are favorable for all asset classes, but watch out when the rates rise a credit tightens.

As per the AGM, I believe they are using a discounted cash flow method to value the airport. It seems like a complex model due to various assumptions and sources of revenue. I would think that once Anchorage listed publicly, there would be a mark to market. It appears that this event may by yet 2 - 3 years away. It seems that their airport valuation models are very conservative, on top of the discount to BV. So patient conaissors will see the deal.

I've had a few days to reflect on the AGM and my Fairfax India holding. AGM further cemented my thoughts as follows: 1. Consistent track record of identifying excellent Indian investments and turning them around in 1 - 2 years with 25% return or way more. (with the exception of NCML) 2. BIAL: again, the gem in the portfolio - really leveraging India's growing middle class, multiple revenue streams and popularity of air travel. This has taken a hit due to COVID, but will rebound spectacularly in the next year as pent up travel returns to normal and likely overshoots. A brand new Terminal 2 will attract new travellers. 460 Acres of land being monetized is the cherry on the cake. The governments plan to push back the aero returns to the second control period - is reasonable. Overall, I don't think the government will reneg on the 16% contractual aero rate of return, as this will hinder further foreign investments. Further, ownership of BIAL gives Fairfax India certain intangible 'privileges' in Bangalore - ex. control of HAL, large land holding, influence over rail transit and profile/influence with the local government. Interesting to say the least. 3. Performance Fees At current discount to BV prices, I think this additional cost is more than baked in. 3. Parallels - The best parallel for this company is really Brookfield Asset Management. Except, these guys have a 'home field' advantage with their ties to India. 4. Shareholder friendly? I think they are. They are doing buybacks at attractive valuations - by both Fairfax India and Fairfax Holdings (even though FFH doing so reduces their performance fee returns). They stated that they will not be doing share offerings at current prices. They are internally raising money (about $450 Million) to do more deals. And their recent deals seem to be solid - Maxop, Jaynix etc. Lots of good developments to come in 2022! 5. Low share trading volumes. This is a wild card. I think, any significant attention to this company will cause it to skyrocket. In many ways, its akin to some of my startup company investments. So, if you have patience, its a good investment in my mind. Its profitable, attractively valued and boasts investments in infrastructure and well established businesses in a growing, developing country. Hard to see any of this not work out overall.

Perhaps it depends on how much of a conspiracy theorist one is. The devils advocate would say: In the past 10-15 years, the most wealthy have been advantaged by being able to leverage their assets with low interest loans and avoid taxes in many instances. Inflation will allow them to pay off these loans with cheaper dollars. Maybe the same folks who run the monetary system? On the other hand, Perhaps Inflation is just an unintended consequence of necessary monetary easing during the pandemic, reaction to the sub prime mortgage crisis, supply chain issues and now the Russian Ukraine war and price of oil. Regardless, I think sticking to the basic tenet of buying quality businesses will help navigate these times.

Not an expert here, but could be by Central bank design. Monetary easing stoking inflation and helping reduce debt loads. Likely unanticipated was the Russian - Ukraine invasion causing oil to spike which is driving inflation across the board much higher. Challenge will be getting people back to work post COVID and filling all the job vacancies. Unless that happens, supply chain issues can remain keeping inflation high. Recession risk is also high. Imo, it will be difficult to get people to go back to work, at any pay.

Agree. I would argue that a FIH share buyback at current attractive prices will be a bigger bet on the airport. The airport is really the gem in the portfolio.

Looks like FIH sold IIFL wealth for proceeds of 190 million USD. Net gain of 65 million. Looking forward to see where they put the proceeds. Share buybacks seem to make sense!

Alphabet - the Berkshire of Technology in my books.

I suspect Fairfax India is keeping its capital for more acquisitions while FFH is buying back simply as a way to deploy cash at an attractive valuation. It will get interesting once Anchorage lists on the Indian exchange.

From today's developments. Can only speculate reasons for the investors to sell at current market prices. OTOH, Fairfax's playback is clear. Buy back aggressively FIH.U while at a tremendous discount to BV. They have purchased back nearly 10% of the company in the last six months. Anticipate ongoing buybacks, if not an outright takeover by FFH.

Thank you. You are correct. Very positive action for the future.