watsa_is_a_randian_hero

"GE said that the market value of GE increased by "hundreds of billions of dollars" during Welch's tenure. " How about this for an exercise - if Warren Buffett wanted to be paid more - how much could he be paid before you would sell the stock and no longer own? Now I'm talking TOTAL comp (to your point with Welch), including perks. $10 million? $50 million? I think he could be paid $500 million or more per year and it would still be a good deal for most shareholders. Look at it this way - how much alpha do you think Buffett creates? Lets say he is able to create on average 3% alpha per year (an extremely conservative estimate). With a market cap of $140 billion, that is $4.2 billion of value created on an annual basis by Warren Buffett, and he definitely deserves to be paid more than he is. The same goes for Prem Watsa, the same goes for Schmidt/Page/Brin (GOOG), Jobs (AAPL), Mackey (WFMI). On a lighter note, Jerry Yang is paid $1 but he is not worth one dime.

BTW - I checked all the proxies of the dow, it took about 30 minutes, because i was interested. Of the dow components 24 out of 30 had shareholder measures regarding compensation or other governance measures that could have been voted on this year. This is evidence that shareholders have already been GIVEN the opportunity for change, but have DECLINED (because most institutions don't vote proxies). These included: AA - Share based comp approval AXP - Advisory (non-binding) vote approving executive compensation BA - vote on a management proposal to approve an amendment to The Boeing Company 2003 Incentive Stock Plan BAC - Item 3: An advisory (non-binding) vote approving executive compensation; Item 5: advisory vote on executive compensation, Item 11; Consider a stockholder proposal regarding limits on executive compensation C - approve Citi’s 2008 Executive Compensation DD - 3 — STOCKHOLDER PROPOSAL ON SHAREHOLDER SAY ON EXECUTIVE PAY DIS - Approval of an amendment to the Company’s Amended and Restated 2002 Executive Performance Plan GE - Shareholder votes on both Executive Comp & golden parachutes GM - Stockholder Proposal Regarding Performance-Based Equity Compensation & Stockholders proposal on advisory vote on comp HD - Shareholder Proposal Regarding Management Bonuses & Shareholder Proposal Regarding executive Comp IBM - Stockholder Proposal on Advisory Vote on Executive Compensation JNJ - ITEM 3: SHAREHOLDER PROPOSAL ON ADVISORY VOTE ON EXECUTIVE COMPENSATION POLICIES AND DISCLOSURE JPM - Advisory vote on executive compensation KO - Vote on Comp MMM - Vote on options vesting MRK - Stockholder Proposal Concerning Management Compensation MSFT - to approve material terms of the performance criteria under the Executive Officer Incentive Plan PFE - 5. Shareholder Proposal regarding Advisory Vote on Executive Compensation PG - Shareholder Proposal #2 - Advisory Vote on Executive Compensation T- 8. Advisory vote on compensation. VZ- Proposal against options WMT -8. Advisory Vote on Executive Compensation and 6. Recoupment of Senior Executive Compensation Policy XOM - Vote on Comp The only ones that didn't have any measure were CAT, CVX, HPQ, INTC, KFT, MCD, UTX

"You and i know how difficult it is to get a board to listen to you if you are a major shareholder with clout, let alone a small one without clout." Yeah, but this would all be solved if shareholders actually voted proxies. So many institutions just vote with management recommendations.

BTW - Here is where I DO SUPPORT a compensation law being enacted. Nassim Taleb argues (and I agree with him) that large systemically important financials should become like heavily regulated utilities. Society should no longer tolerate capitalism on the upside and socialism on the downside. Where pure capitalism FAILS, in an instance such as this, I do support a law that would force large, systemically important financials to have compensation policies for executives focused on the long term. Perhaps no more options, only restricted shares, that must be held for 10+ years from when issued.

UhuruPeak is right. Intelligent debate is good - but we should not forget the principles of this board. Sorry for coming off insulting before. I know where you are coming from - and I WOULD SUPPORT it - if it were a shareholder measure. I DO NOT support enacting a law that forces companies to do so. If its a large enough issue, shareholders should put it up to vote to change corporate charters so that compensation is voted on. This has already happened at a few companies

BTW...I am not canadian - I just saw that now.

My point is that there are plenty of companies that do have good governance. Warren commented that many don't. You don't see him investing in those. Your comment was you were complaining you couldn't find any other companies to invest in besides FFH & BRK that had good governance. Maybe you aren't looking hard enough and should try doing more extensive research. High pay does not = Good governance There is this thing called supply and demand, and this other thing called free markets. Some people believe they do a good job of allocating capital. They are called CAPITALISTS. There is a supply and demand for CEOs, with very limited supply. Go higher joe the plumber to manage GE if you have a problem with it.

"You obviously haven't studied this issue much." I have considered the issue extensively, on a philosophical level. Its a matter of individual rights. If you've figured out a way to be paid $30mm, you should be able to earn it. There have been numerous studies that have shown companies with poor corporate governance have higher costs of capital. The free markets allocate capital to companies with better corporate governance measures. One study from the 90's showed that the announcement of a private jet for executives had a -2% effect on a stock price. If you think there are no options to own a diversified portfolio of equities, than buy treasury bonds. If you are unhappy with the returns of treasuries, than think about that. That very fact is an indication that executives in general might be compensated at a level they deserve. Sure, there is an agent-principal conflict. But if you are concerned, than invest in companies with better corporate governance, or require a great required rate of return. There are more than just FFH & BRK. I can prove it. Every year, BRK manages to a half dozen companies, all with great corporate governance. How come warren has no problem investing his money? Warren invested in Goldman and GE, both with extremely highly paid employees and executives.

"Giving the owners of a company more say in who they hire. Communist? , lol." You are the one advocating for government intervention with respect to compensation. I am saying it ALREADY IS IN THE HANDS OF THE SHAREHOLDERS. Jeez, I know for sure that the CFA program tells you that you should vote your proxies. If you don't like a company's comp structure, sell it. This whole argument is stupid. You ARE advocating for communist russia. Its the same as when people say Lebron James is paid too much. If you don't like it, don't buy the tickets or watch the games on tv. If you don't like executive comp, then don't buy the stock.

It doesn't matter if they have a "say on pay" policy." You still vote the BOD in, and the BOD has a compensation committee that determines compensation. If you don't like a company's compensation policy, then don't buy the stock. End of story. This isn't communist Russia.

"I think it should be up to the owners (shareholders) to decide on how much and in what form to pay their executives." No offense, but it is up to the shareholders. Do you vote your proxies? If you don't like the comp committee, then vote them out. If you don't succeed, then sell the stock. Nobody holds a gun to you head to make you buy a stock.

About 50% FFH common 10% FFH Options 7% ORH Preferred 5% WFC Preferred 3% IBN Smaller positions in A Chinese Beverage Bottler Beijing International Airport DELL Leap spreads GE Leap spreads EBAY Leap spreads TGT Leap spreads SPY Leap spreads BAC Preferreds Carmax Overstock

Bank of America Preferreds selling at 20% of face. That is a 5 bagger

this looks like a typical TRUPs filing

wish i could be there. saw prem @ the CFA conference in toronto in December. will not be able to make it this year again to the AGM

Christopher1 - after looking at it again, I think you are right. I think that is common, not preferred.

On page 43 of the filing it saying they acquired $42 million at cost of "Various" WFC preferreds on 11/24/08. That is ORH. That means FFH probably has $100mm+ of these at cost.

The most ridiculous thing was WFC preferreds selling for 17%+ yields. BTW, FFH has been buying these too (its says so in ORH's NAIC filing). That could explain why WFC was a smaller position than Kraft/JNJ yet still listed with them as his favorites, he not only holds the common but also preferreds.

Yet even Buffett has said there are risks he will never take, regardless of what he is paid to take it on. Assuming sfwusc's analysis is correct** for the sake of argument, going long with BRK with your entire net worth is no different than Citigroup's risk managers ... one is getting paid to take a 1 in 100 year event risk and completely brushing it off. I am always worried when people bet against Black Swans with their entire institutions/portfolio. ** Big assumption What makes WEB's S&P & CDS plays bets against black swans with their entire institutions. I disagree with this. Its not as though the risk is unlimited. There is a limited amount of risk here. WEB has the funds to pay if need be.

The numbers i used were from ORH. To be honest i did not really investigate crum's, it may have altogether different holdings.

Yeah I have a terminal right next to me. Like I said, if someone can crack that pdf to get all the cusips, I can provide an update on the Municipal portfolio as well. The PDF is locked though and wont let you copy/paste out. If anyone here has computer skills that you think will let you crack this, let me know, I can email the file to you.

if you search "mortgage" in the FFH AR, they reference it in there too. Its about $160 million.

StubbleJumper - All of these mbs you can type in a cusip and get any type of info from bloomberg you would want - delinquency buckets, foreclosures, types of mortgages, prepay speeds, fico score stratifications, geographic origin, etc.

As far as the MBS are concerned - I pulled a few up on Bloomberg. It looks like its not a question of will they default - it is a question of when. Watsa bought these for pennies on the dollar though. Most are sub-tranches in leveraged structures - the value of which is very sensitive to the timing and levels of foreclosures. If foreclosures come in less than anticipated, or recoveries are higher, it may be possible for these investments to double (bought at 5, receive 10 cents worth of cash flows, then default). For example, one bond I pulled up (a Citi MBS), using a 10% CPR, 10% CDR% (high), 40% recovery, and a 15% discount rate, the security is worth about 3 cents on the dollar and defaults in September. Changing the recovery rate to 60% though results in a value of over 8 cents, about 2.5 times higher. They are so sensitive - these are basically call options on the housing/mortgage market.

Here are the CDS spreads. I'm calculating about a $5 per share gain based on the duration. About half of this is coming from Bank of America, JPMorgan, and Aegon. If someone wants to figure out a way to get all of the MBS and Muni cusips in to excel, I can give a value for that too. Spread Spread 12/31/2008 3/6/2009 Allianz (used senior) 134 159.125 Societe Generale Senior 89 136 Hanover Re 84.5 150 XL Capital 865 1049.25 Barclays 154.5 230.327 Aegon 409.5 639.311 ACE 103.25 132.625 Bank of America 112.357 410.959 Munich Re 65 117 JP Morgan 100.167 300 Zurich 149 203 Deutsche Bank 138.375 145 Citi 201.938 645.417 Capital One 291.3 570.394