Williams406

Forgot to add: Though it may not dovetail so well with their deflation thesis, perhaps they should consider royalties...

Given the hedging/investment results, it's good they righted the good ship Fairfax's underwriting when they did. I owned more Odyssey Re (common and preferred series) than Fairfax before the ORH buyout and was thrilled when Barnard was given charge of insurance subsidiaries. I will be interested to see how and if Fairfax adapts on the investment side. Perhaps both increasing size and recent experience will prompt some adjustments. As has been noted, concentrated deep value can hurt badly when things don't work out. I've lived that. I also see the approach to hedging/deflation bets as fitting in to the category of "you're gonna look like a bum five times before those pay off", perhaps. If memory serves, their CDS bet was put on in 2004 and almost immediately lost half the capital invested. It took several years before it paid off--and did it ever. If concentrated deep value is in their DNA, fine. Take a sleeve of the portfolio and do that. But insurance offers periodic unpleasant surprises even to good underwriters. Timing hedges/macro bets can be tricky and may not pay off for a long time. I don't mind lumpiness, but I'm not convinced current path leads to lumpy 15%. I prefer a smooth 12% to a lumpy 12%. I like a lot of what is going on at Fairfax, but maybe it's time to diversify investment approaches.

IMC (Iscar) Heinz was the half, now Kraft Heinz however you want to tabulate that And Precision Castparts is now in the mix

I'm not sure about the Buffett BNSF top dog quote, but here's a link to a June 2015 article profiling UP and some of the operational improvements in recent years. http://fortune.com/2015/06/04/union-pacific-railroad/

El Dorado 12-year. Perhaps my favorite rum. I balance rum consumption with various IPA's as it's summer.

Grew up in a small town that doubled in size during the summer as it's a beach town. There is a pronto pup stand right on the waterfront with barely room for just two employees and no seating for customers--they use the municipal picnic tables or the lawn on the water. Crazy lines all day starting around 11am and all they serve is soft drinks and pronto pups. Open during the summer only. I'd guess the margins on that place are out of sight. The place looks exactly the same as it did 30 years ago. Also a pizza joint with a somewhat similar story. The restaurant looks like it has had zero capital improvements in 40 years and I mean that. Open year round and busy at night year round. Insanely busy every summer night with lines out the door and tons of carry out business. Family owned since the 1940's.

For those with a lot of resources, the lack of an RMD on Roths is a significant factor. Build up a sizable Roth (if you don't need to take distributions to fund your retirement) that allows your beneficiaries to receive a tax-free "annuity" stream with withdrawals based on their life expectancies can be a neat estate planning option...especially for the beneficiaries.

Cleaning out some files today and came across a couple of power point slides from Dimensional Fund Advisors both entitled: Do Winners Keep Winning? One slide looks at equity funds that outperform over 3-, 5-, and 7-year periods with subsequent performance from 2010-2012. For instance, from 2003-2009, 597 funds outperformed their respective benchmark. Of those 597 funds, only 23.6% outperformed their benchmark from 2010-2012. Just 23.6%-26.4% of the "winning" funds continued to outperform. The other slide looks at fixed income funds. 43.2%-52.1% of "winning" funds continue to outperform. I think Peter 1234 has it. M* is selecting it's award winners from a pool of "winners" defined by good 1-, 3-, and 5-year performance. Mean reversion happens. Also asset bloat as a result of publicity/marketing can really affect how a manager runs money and shrink the opportunity set.

Couldn't help noticing your 'lschmidt' handle with 'Mike' signature. I bet if you offered signed baseballs to someone in Fidelity's custody and currency departments, your two issues go away. I've been around the game a bit and have seen no greater third baseman. Williams406

Halloween 2011 I read 'Born to Run.' I remember asking myself "I wonder how far I could go?" Up to that point I just ran recreationally/to relieve stress up to 12-14 miles for a long run. 25-35 miles per week. My knees and hips always hurt badly after longer runs. Made a gradual transition to landing on my mid-foot with foot under center of gravity over 2-3 months. Definitely worth taking transition slowly. Just got back from my third 50km race in New Mexico, did one at Snowbird last summer, a running camp at Leadville, CO, a 50 mile solo effort closer to home. I've had the opportunity to run in some very beautiful places. Planning a 100 mile race in 2015 and perhaps a running trip to Spain's Costa Brava. The book's discussion of running form definitely resonated with me, but I'm careful not to claim knowledge of the right way to run. That said, my body never could have handled the mileage and terrain I'm running today with my old heel-striking form. I've had some smaller injuries since changing form, but knees and hips feel great. One thing that struck me reading that book is our propensity to limit our thinking of what's possible by how we frame it. The Tarahumara are a fairly isolated subculture that has a totally different paradigm of running. They don't run to get in shape or lose weight. They run because they enjoy it, their culture celebrates it, and in the Copper Canyon, they must to get from point A to point B in a reasonable time. Tell yourself 13.1 miles is far and 50 miles will seem impossible. Existing structures, budgets, old habits can all get in the way of better designs or approaches if you rip it all up and start from scratch.

Garychen, Morningstar.com has a 10-year price/book stat on the free portion of their site. Type in company ticker. Click "valuation" on the horizontal tab and you'll have 10-year P/E, P/B, and P/S. 406

One other consideration wrt roth/traditional question is that I believe Roth IRA's have no required minimum distributions at age 70.5 like traditional IRA's. 406

I realized around 2004 that housing was out of whack. The appraised value of my rental property kept going up, though I couldn't raise rental rates. I sold it summer of 2004. I suggested to several would-be landlords that the then-current environment was not normal. What I missed was how real estate was linked with the financial system through securitization. Having looked at Fannie, Freddie, MBIA, Ambac, and the ratings agencies earlier in the decade, I don't have any good excuse. Intellectual laziness, I suppose. I avoided banks and thought Nygren was nuts for concentrating in WAMU. I owned MBIA around 2001/2002 if memory serves and sold because although I liked their muni insurance business, insuring CDO's and MBS's struck me as a different thing entirely with their risk models lacking real-world stress tests. I knew that subprime mortgage originations had spiked, I just never bothered to really understand what it would mean to the financial system if those loans began to fail. Failure to connect the dots. I viewed subprime as a discrete bubble and thought I had largely avoided it. I wasn't seeking to profit from that bubble blowing up, which clearly was the thing to have done as Fairfax and Burry proved. The broad market didn't appear to be overvalued to me but I also didn't feel like I owned "the market." But my prior bubble experience was the 90's tech/blue chip bubble which I had mostly side-stepped (I was buying Berkie B's around $1500). I liked the Oakmark Fund when Sanborn was running it. I bought Longleaf Partners in 1998. Not buying Wal-Mart at 50 times earnings in 1999 seemed obvious. In 2008, I owned a lot of Berkshire Hathaway, a couple of Canadian Oil companies, a bit of Fairfax thanks to this board, and obscene amounts of Contango. And felt pretty smart for doing so. Maybe 15%-20% cash with no portfolio leverage. In the aftermath, I added to Berkshire and Fairfax positions, and bought Odyssey Re, including ORH common and preferreds A and B. My energy exposure really killed me in 2008/2009, especially Contango. Bought it at $30 in May 2007, rode it to the mid-90's middle 2008 and back into the 30's during the crisis without taking any profits. A resulting rule: if I triple my money in less than a year, sell enough so I'm just playing with house money. Still waiting to exercise that rule... Good idea with this thread. 406

Brilliant stuff here, laddies. I've been married for 16 years and even I found some material I can use...No doubt Gio is executing brilliantly. 406

ItsAValueTrap, I don't disagree with your point about how CEO's respond to activist criticism, but note that the intended audience for a letter extends beyond the parties to whom the letter is addressed. They can serve as a way to communicate with other shareholders as well. How would you handle communications differently if you were a large shareholder seeking a board seat and a CEO change? I ask honestly because I hope to be a large shareholder of almost any size company someday when I grow up and it may be necessary to oust the CEO. I've always just envisioned inviting the CEO to my office and saying calmly and evenly: "You're out, Tom." It might be tougher than that, though, if you need to garner support from other shareholders. 406

Going with GrizzlyRock's thought: How about Callinan Royalties? Small cap? Check. Resource stock? Check. No debt? Check. Cash flowing? Check. The stock is a lot cheaper than it was when I posted the idea, as any of the crickets chirping over there will tell you. 406

One could use the $100K to acquire industrial quantities of cheerios, then "convert" them to higher and better use by selling them as donut seeds.

Related to Fairfax's bond position, I came across a good interview of Lacy Hunt, of Hoisington Investment Management, by Kate Welling, courtesy of John Mauldin: http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2012/02/13/face-the-music.aspx

Although spending and tax multipliers are not my bailiwick by any stretch of the imagination, this discussion reminded me of some comments by Hunt/Hoisington in their third quarter 2009 review: http://www.hoisingtonmgt.com/pdf/HIM2009Q3NP.pdf On page three: "In previous letters we have discussed the fact that the government spending multiplier is zero (read Professor Robert Barro’s book, Macroeconomics—a Modern Approach, p. 370). This means there is no long term income benefit from stimulus programs. According to the latest academic research, the most recent $800 billion stimulus plan will boost economic activity in the short run, but will surely depress economic activity over time. The government problem is complicated by the fact that the tax multiplier is 3, meaning that a 1% change in taxes will change GDP by about 3% over time." Richard, I note that you were speaking of job creation rather than GDP, so I run the risk of posting apples to your oranges. But, in case it furthers the discussion... I am also curious about the source of the stat of $1 of government spending creating $1.7 worth of jobs. Williams406

Mr. Stockwell, I'm in a similar position to yours with client accounts held at TD Ameritrade. I just spoke with the trading desk and was told that holding and trading securities on the TSE is no problem provided U.S. dollar denomination. So we're good on this score. However, there was a question about the mechanics. Would there be a seamless transition of FFH (NYSE) to FFH.U (TSE, U.S. dollar denominated) or would FFH (NYSE) would need to be sold prior to buying FFH.U. Did you heard anything definitive on this aspect of the delisting? Williams406