Cigarbutt

Just a tiny addition to what @gfp has mentioned: In statutory accounting (regulatory capital, surplus etc) the US Treasury securities are (still) designated at levels which recognize the securities at (amortized) cost so the 'statutory' value does not fluctuate with market values, so no impact on "flexibility" from that point of view. The idea is that insurers such as FFH tend to match their assets with their liabilities and it is assumed that these high quality fixed income securities will be held to maturity and that the issuer will not proceed to an unexpected restructuring. Historically, FFH has recognized sometimes large unrealized losses in their bond portfolio under GAAP accounting but have also tended to report (sometimes large) realized gains. Post 2008 and then for about a decade, they've positioned their float portfolio with a deflation-hedge skew but now it looks quite neutral but that could change any day.

Basic math addition to help the discussion: Trade deficit (M – X) = Domestic investment – Private domestic saving – Government (or public) saving (fiscal deficit) So keeping domestic investment and private saving constant (note: both have shown a secular down trend), the trade deficit will move in tandem with the fiscal deficit. A national economy is not a household but it's easier to see this link from a household perspective. One way to decrease debt/deficit then is to make imports from neighbors more expensive. Of course, there may reasons as to why you get into debt to buy from neighbors and it's not necessarily 100% the neighbors's fault.. ----- An interesting aspect is that, as Mr. Buffett predicted long ago, absent some reformation, the US net international investment position has moved more and more into negative territory (compared to GDP) but the US net international investment income has remained positive and has been moving slightly higher (meaning the US gets better yields on their foreign investments than vice versa, something which Mr. Buffett may not have anticipated, some kind of (un)sustainable exorbitant privilege?).

It's an interesting question which likely matters only at the margin. From a capital-at-risk perspective which is important for a P+C insurer, there is material difference between rated convertible bonds and equity exposure: The above is from NAIC and not all risk-based matrices are the same and evolving but the table gives relevant perspective. So if a convertible bond becomes equity there is some impact on statutory capital measures. ----- What is more interesting in terms of stress-testing scenarios on the asset side is what they could do (asset swap-type of changes ie bonds, cash to riskier but better priced opportunities including equity) without taking into account other capital-raise initiatives. In the (distant) past, FFH has shown the intent and ability to hold high equity levels versus underlying statutory capital. What is different this time is an already quite large allocation to various equity or equity-like positions. The present 'excess' dividend capacity of about 3B is based on an underlying of 65.2B investable assets. The point is: if already owned assets go down in value, this will have an effect on the statutory ability to deploy funds in securities not owned but looking cheap. This will be a dynamic situation but (opinion) i prefer the BRK setup (now). ----- In reference to the receivables from deposits linked to trade disputes, the chronically evolving softwood lumber situation is both interesting and relevant to the threads 'discussing' the present tariff situation.

i'm not @Viking but a member here ( @SafetyinNumbers ) had asked a very similar question in the Q! 2024 conference call. The answer: Peter Clarke: Right. Our fixed income portfolio is very liquid. It’s essentially our bonds are in our U.S. treasuries, and the average duration is about three years. So we have a lot of flexibility there. Investment portfolio as a whole, it’s very defensive. We have the ability to react to the market, and we’re very happy where it is positioned today. So should something happen on the equity side, we would have the ability to pivot if we wanted to. Given the vagueness of the answer, there was some discussion here: At end of 2024, dividend capacity was 3.16B. A lot of moving parts including the TRS on FFH shares which would tend to move with markets, for better or for worse. One would need to add the unusual degree of financial creativity that FFH has historically been able to deploy in times of 'opportunities'. So anywhere from 3 to 5B in a typical downturn?

Who knows? It's not even clear if this tariff policy will be maintained so... What's clear is that reducing trade, overall, has a net negative effect. Classic thinking suggests tariffs are inflationary but as mentioned before, previous similar historical episodes were associated with an overall deflationary result but then maybe the introduction of tariffs (to protect domestic interest) was more a symptom than a disease and the tariff noise now may be more a symptom than an underlying disease. But you seem to be correct (net exporter vs...) concerning trade-dependent countries (high global trade to GDP). In countries such as Vietnam, despite attempts at adjustments, the deflationary forces (decreased demand etc) would even be larger than net importers. ----- BTW, 19th century history is passé but it appears that President McKinley is a source of inspiration for tariffs (1890). Although not widely discussed presently, tariffs didn't do that well (economically, politically etc) and McKinley eventually realized that his brutal individualistic disruption tactic needed some adjustments.

When looking at comparables, in the years that followed previous unusual episodes of tariffs and global trade limits (conclusion of Gilded Age and Roaring 20s), there was a relatively significant increase in purchasing power for the few (oligarchs, deflation) but this time is different? Personal note: In the recent past, many here tempered questions about QE and related experiments (just shuffling government liabilities around for the owners of capital) and they (posters with perspective) were correct in the sense that these from-the-top 'money' experiments were absolutely inconsequential compared to present day gambles?

i had to look up what mofo meant. The first definition i came across was from the cryptocurrency world: it says "Master of Financial Operations and then i found the slang definition. Interesting ----- Another way to look at this, from a portfolio perspective, keeping in mind that a regular poster mentioned today he had built a 40% cash allocation at this time to meet the mofo's consequences. When holding BRK, one can look at the look-through leverage (similar to look-through earnings) and also the look-through cash and then confirm that someone else is doing the capital allocation adjustments for you. But then again, there's the Yoda definition: Missing out, fear of.

Your post is a typical example of what @nsx5200 describes in her/his first paragraph. Ignore is always a last resort (and most insulting) solution (IMHO). ----- i've been looking into the possibility of using 'intelligent' bots in online 'discussions' that would help to prevent argumentative slippage. Some work has been done by 'experts' and, in some patterns, this can result in less human communication but sometimes what's left occurs at a deeper level, whatever that means.

For perspective and in the spirit of the first post of this thread, Mr. Pettis had this to say in 2019: https://carnegieendowment.org/posts/2019/10/why-trade-wars-are-inevitable?lang=en It's an interesting perspective and (opinion) a useful base for constructive conversations. The idea of a tax on capital from excess-saving countries is interesting. The saving-investment angle is also useful. One of his basic points (relevant to most here?) is that capital owners have largely benefited from increasing global trade over the last few decades and reversing this trend may be disadvantageous (several antonyms available but the mildest sounding one used) to capital owners.

... Across various US states, there has been (mostly unrecognized) progress, some spearheaded by Pacificorp and some not, to limit, somehow, wildfire liabilities. As long as the (imperfect) rule of law persists.. Example: https://www.governing.com/resilience/utility-company-pushing-bills-limiting-wildfire-liability-in-multiple-states

Growing trade deficits is an issue. How to deal with this? What negative (unintended) consequences can occur? In the last few weeks, there was a question about the method used to define tariff levels. Now we know. Here's some info from a quite balanced source which ranks high in factual reporting: https://www.cfr.org/article/how-countries-stack-trumps-reciprocal-tariffs Global trade since WW2 has been subject to an unsustainable path which is getting closer to price discovery, now with some catalysts in place. As far as Canada-USA bilateral trade, on a net basis, both countries have largely benefited and the 'free-trade' contracts have been negotiated and venues exist to deal with frictions so it's hard to understand the intent behind the offensive noise. ----- A way to appreciate the trading-capital imbalance is from the saving-consumption point of view (this was widely discussed here years ago). The US consumes more now versus later and many other significant trading partners consume less now versus later. For sure, tariffs, as presently stated , with expected retaliation and all will help decrease domestic consumption in the US and potentially help with the balance but, in general, is decreasing trade this way a good idea? Is it time to save more? In personal relationships, it's been said to focus on personal growth and self-improvement instead of forcing change upon others, especially if sustainability is a determimant factor. Countries are different with the significant component of power struggles but there's got to be a place for (collective) self-awareness? ----- And yes, under certain scenarios, some bonds could do really well going forward?

... It's simple and not-so-simple. Let's say Cigarbutt (American in this example) buys stuff (goods and services) from beerbaron, beerbaron may tend to accumulate some money (USD) for various (reserve) reasons but will also tend to exchange this money for something that earns a return. In a closed circuit (the world is a closed circuit in a way), beerbaron would buy an asset from me in exchange for this money. beerbaron would negotiate for a debt or equity contract. For the most part, foreign participants maintain a positive trade balance with the US and maintain a balancing positive balance in the capital account with the US and most of this money going through the capital account is used to buy Treasury debt. Look at the following recent release (Current account = trade account with some stuff): https://www.bea.gov/news/2025/us-international-transactions-4th-quarter-and-year-2024 But it's not so simple because people tend to see a cause and effect from trade to capital but it's also possible to consider the cause and effect from capital to trade (foreign saving glut). Maybe the cause and effect goes both ways and is complicated by 'unfair' practices... ----- FWIW, i've enjoyed, over the years, reading Mr. Pettis' work on China. It's been helpful to understand (concepts, debt-driven growth, unsustainability etc) but his work does not seem to help with precise foresight. Concerning the recent publications about global trade, it seems that Mr. Pettis' case for tariffs is weak. He describes a conceptual production subsidy. But that's not really what present tariffs are or will be. The present recipe is equivalent to a subsidy to domestic production competing with importers. The result will likely include higher prices, lower exports, lower demand and lower overall global trade. This would entail a decreased global demand for US public debt but this environment may actually increase (globally and domestically) the appetite for US public debt. ----- The effects of Smoot-Hawley tariffs have largely been forgotten: It's been fairly well established that the progressive tarif implementation did not cause the Great De****ion. It just accentuated the economic difficulties that would have likely happened anyways. ----- What's special about today's environment is that tariffs are implemented in a growing (still) economy with full employment..

The whole thing appears...to me. You're not the only one (about recent populist bullet points): What has been missing is not the raw data: https://www.cbo.gov/system/files/2025-03/61187-Long-Term-Outlook-2025.pdf https://www.pgpf.org/wp-content/uploads/2025/03/chart-pack-us-budget-2.pdf What has been missing (for quite some time now) is the (relative and growing) absence of bi-non-partisan conversations.

This thread is not labeled (yet) p*l*t*c*l and i will try, constructively, to walk the thin line. There appears to be some kind of plan to devalue the dollar (there are rational arguments behind such plan) and a public debt restructuring is in the cards (personal note, when doing the CFA stuff, everything seemed to revolve around the so called golden standard risk-free rate so i guess a few chapters need to be rewritten..). One of the strategic underpinnings is to bring manufacturing jobs back and some of the first-level thinking behind this is to consider a close inverse correlation between the strength of the USD and the manufacturing job index. *Part of the title was obliterated in order to avoid unnecessary personalization of the conversation So the basic idea is to weaken the dollar (can be done in various ways) and then expect manufacturing jobs to come back. How likely is that to happen and to result in a net positive result for modern capitalist USA? Something i came across (some people actually try to rationally make sense of all that noise) is the following (details available upon request): The persistent trade deficits have had a disproportionate negative effect on certains categories of individuals but data shows that it's not only trade and manufacturing related. Nostalgia, by itself, will not do the trick. My (humble) take: there are other factors to consider . ----- All that to say that if this trade experiment continues, there is potentially a bright future for USA-based dollar stores, private prisons (Corecivic etc) and private drug rehab centers. ----- Apologies from an international fellow Board member: as a Canadian, i will do my best to stop the fentanyl shipments crossing the border to your great country and then, in exchange, hope that the retaliatory tariffs will ease some.

Thank you for the interesting answer. The root specific topic was about government employees reporting statistics concerning employment (or crime) and a presupposed "idea" that those employees, as a group, systematically try to mislead or 'fake', isolating those employees as part of the "they" group, the "they" group to be hated. In answer to this question, there is no substantial facts supporting the 'evil' conclusion and Spekulatius is likely right, ie it's part of the process, collecting data and revising as needed. ----- Relevant to investing? When spotting an opportunity, there is a process whereby info is selected from a diversity of sources and conclusions are made, requiring to positively self-correct wrong information. ----- The government employees collecting and reporting statistical data are imperfect and make mistakes but there appears to be some kind of self-correcting mechanisms. Would you rather not bother knowing about this information even if imperfect in nature? ----- As far as media in general, like many other similar topics, quality of reporting may have gone down but there continues to be some kind of self-correcting mechanism. A free press (independent media) is crucial in modern civilized societies. Has it gone too far? in terms of poor information circulating? Maybe or maybe not but what is clear is that, with social media, poor information circulates faster and more widely than good information. Poor information, especially when politics or power is involved, instead of self-correcting through circulation, gets amplified (opposite of self-correction). Some people seem to be ready to take advantage of that. ----- Here's an extreme example but it's used as an illustration of the phenomenon. This paragraph assumes that you don't believe that the earth is flat . There's been a growing number of people who believe or consider the possibility that the earth is flat. Why? Because if you think so and surf the internet, you're likely to enter echo-chambers that will tend to reinforce tribal thoughts, some of which are not correct and the self-amplifying phenomenon may not appeal to the better angels of our (human) nature. 'Political' discussions on this Board often reflect that..

... The idea is to undermine the trust in institutions that need to be constantly 'revised' but not exterminated. Unrevised data also suggests a strong correlation between beliefs in malignant institutional intent and most conspiracy theories.

Hello from Canada, a region now under threat . Somehow, some kind of Resistance has become necessary but, in this space (this Board), the idea is to make money, opportunistically, on a personal level. If interested (Musk-type propaganda, democratic drift, modern imperialism etc), i've recently found the two following books useful. https://www.amazon.com/Nexus-Brief-History-Information-Networks/dp/059373422X The author wrote Sapiens and suggests that humanity has become civilized because of the human capacity to think, communicate and collaborate. https://www.amazon.com/Wizard-Kremlin-Novel-Giuliano-Empoli-ebook/dp/B0BTL6NSZT This second book is fiction but has been inspired by the true life of an individual who, somehow, played a significant part in the rise of the Great Vladimir the Conqueror..

This is interesting but what governments "spend" vs gdp is a relevant measure which is an indicator of government size versus the economy. One of the main reasons for the apparent decoupling of both measures has been the growing size of deficits/debt to GDP. i'm not saying the Doge way is the way to go but i'm suggesting that there's been a bipartisan "accord" to dodge the issue that led to a situation where enough people think that Doge may be a good idea.. My basic training is not economics, finance or investing but i've been told to look for (and deal with) root causes and not symptoms when trying to 'solve' a problem. For those tempted to criticize CBO numbers, please remember that, historically, they have tended to underestimate (sometimes wildly) the debt to gdp decoupling that has been under way.

What you describe is correct and may help, for a while, to result in incremental 1-3% additional ROE points but what @Hoodlum may refer to is the excess capital that may result (with everything else being equal, no guarantee) from building excess capital at the (re)insurance subs if/when premiums growth slows down or reverses. FFH has often mentioned that they will buyback shares in a value sense but only when excess capital is available. Situation at end of 2024:

History does not repeat but may rhyme; with the latest control-the-narrative duo, it's not a traditional imperialist movement, it's a modern and high-tech one, misinformation, divisive rhetoric and unchecked (?) power in action.

Thank you, i often have difficulty with what's obvious. Tying to this thread and other related (and relevant?) threads, on a first-order level of thinking, some think that dollar-type stores may suffer from trade wars: https://edition.cnn.com/2024/12/04/business/dollar-tree-tariffs-business/index.html (apologies for the low quality CNN reference) i wonder if domestic dollar stores would not have a bright future if beggar-thy-neighbour 'global' policies go on for a while?

Which gains? I'd like to know, if possible, before my jurisdiction becomes your 51st state.

See pages 13-14 of their report: https://www.fairfax.ca/wp-content/uploads/2023-Fairfax-Financial-Holdings-Limited-ESG-Performance-Report.pdf Overall, it seems that they have done well over the last few years with the risk 'appetite' aspect and maybe they are getting better? It may take something like 250 years to know with more certainty though.

A quick follow-up note on the possibility to "reengineer" the dividend rate paid to Omers for the Brit financing 'transaction' that was concluded on Dec 13th 2024. The FFH-buying-back-Brit-minority-interest part of the deal happened on Dec 13th 2024 with a 383M cash consideration which, i'm assuming now, includes an 8M cash component (383-375 (principal)) for a residual accrued dividend. In 2024, FFH paid a total of 33.3M (last dividend accrued on Dec 11th 2024, 20.4M) to class A (Omers) shares. If above is correct, the dividend rate on capital lent was about 7.5%, likely reflecting a tighter spread vs other previous similar deals and quite well correlated to a generally lower interest rate environment and a slowly but surely improving credit profile at FFH. But 7.5% was the hurdle in August 2021, a time when FFH was not a natural issuer of 30 year bonds.. Note: compared to other previous similar temporary financing 'transactions', it's relatively difficult (even looking at separate sub (Brit) filings) to get a precise and fully reliable answer for the dividend rate resulting from shareholders' agreement.

yes