nwoodman

Link to the article for those that are interested http://www.theglobeandmail.com/globe-investor/fairfax-bet-on-bank-of-ireland-averts-government-control/article2111528/ Cheers nwoodman

Top post Myth. The longer I do this the more I weight management integrity above all else. As you rightly point out, this is something that can only be gauged over years. Cheers Nwoodman

Link to the transcript, hopefully the ABC will hang onto this one as it is definitely a keeper http://www.abc.net.au/lateline/business/items/201106/s3234315.htm

http://www.abc.net.au/lateline/business/ "The market is going to be soft: Chronican" worth watching the interview just to see Ticky Fullerton's (interviewer) incredulous reaction to some of the poker faced banker's (Chronican) answers. This interview has made my day :) Cheers nwoodman

I don't dispute the inherent advantage of taking a hands on approach to understanding the issues. However it was more this statement that prompted me to comment "It is easy to look at China’s construction boom, and the real-estate market there, and compare it to what has happened in the US, Dubai or Japan but in reality the market is very different. Spending on infrastructure has a purpose, the trend is towards rising incomes and increased spending power, and property buyers are not exposed to anywhere near the level of risk that led to collapses elsewhere." I too hope China hasn't succumbed to significant misallocation of capital under the guise of GDP growth. Thanks for posting the article.

Is the implication "this time it's different"? ;D Cheers nwoodman

I believe Buffett is referring to a dollar of market value. So, if instead of Berkshire paying out a DIV, the money retained increases the market value of the stock by the same amount the economic outcome is slightly better for shareholders due to preferential tax treatment of capital gains, not to mention the potentially superior capital allocation skills - certainly applicable in my case :) Cheers nwoodman

Hi Ericopoly, as you would know, if you look at real estate bubbles around the world, tight supply is always used as a justification of why it is different this time. It doesn't seem to stop regression to the mean once credit starts to dry up. There are some nice graphs in this post that show this in the US context http://www.unconventionaleconomist.com/search/label/US%20Housing%20Market FWIW here in Australia the two supposed boom states of Western Australia and Queensland are currently getting hit the hardest in terms of declining clearance rates and rising delinquencies. The report below is prior to the recent 25bp interest rate increase at which time the banks put on an extra 15 bp due to "increased funding costs" http://images.brisbanetimes.com.au/file/2010/12/21/2104501/Australian%20Mortgage%20Delinquency%20by%20Postcode%20Dec10.pdf?rand=1292898395690 The real shortage at the moment is finding people able to trump up US550,000 for a median house Cheers nwoodman

This one is pretty close to my heart so I would prefer to draw on some of the local blogs, here in Australia, that might provide a good starting point for those not familiar with the Australian situation: http://www.unconventionaleconomist.com/2010/11/bubble-bubble-on-wall-whos-biggest-of.html http://www.debtdeflation.com/blogs/ IMHO our economy is very dependent on the kindness of strangers. Firstly, a source of foreign credit to finance the high price of housing. Secondly, credit growth and in turn fixed asset investment in China to facilitate the terms of trade. However, it is worth noting, that similar to other Western economies we seem to be sharing some of the precursors to a bursting of a credit bubble. There are currently falling auction clearance rates and retail is taking a dive. Albeit, with a backdrop of 7.5% mortgage rates. I personally think bubble is an inappropriate description. We have a housing stock that is currently valued at 3.3x GDP. To put this in context, at today’s exchange rate of around parity with the US dollar, the price of Australia’s housing stock is $US4 trillion. This is ¼ of the entire housing stock of the USA of $US16.5 trillion. This is an extraordinary feat for a country that has 1/13th of the population, 1/13th the number of houses and 1/12th the GDP of the USA. We have been through three terms of trade shocks in the last 100 years but there is no political will here to try and quarantine any of our good fortune. The one bureaucrat who suggested a little something out of the ordinary was shouted down and has decided to leave the post (just as it looks like debt/gdp is starting to contract). http://www.businessspectator.com.au/bs.nsf/Article/Ken-Henry-Rudd-Gillard-mining-tax-pd20101221-CC5LV?OpenDocument&src=srch One cavet to all of this is that macro does my head in but this seems pretty obvious to me. I feel very confident in buying L, FFH (US exposure), BRK as the AUD is my margin of safety Cheers nwoodman

"TORONTO, ONTARIO -- (Marketwire) -- 12/03/10 -- Fairfax Financial Holdings Limited (TSX: FFH)(TSX: FFH.U) announced today that it has entered into a share purchase agreement pursuant to which it will acquire all of the shares of Malaysian insurer, The Pacific Insurance Berhad, for approximately US$64 million. Subject to the approval of the shareholders of the vendor, PacificMas Berhad, the transaction is expected to close in the first quarter of 2011." http://www.pr-inside.com/fairfax-to-acquire-malaysian-insurer-r2288601.htm

Great site, thanks for posting Cheers nwoodman

Conference call transcript http://seekingalpha.com/article/233885-loews-ceo-discusses-q3-2010-results-earnings-call-transcript?source=thestreet

Hi alertmeipp, as longinvestor suggested I listened in via Skype. I find the best recording program is one called MP3 Skype Recorder http://voipcallrecording.com/ Cheers nwoodman

Sorry guys dialed in a bit late so I may have missed a question or two. Total time 18:59 Cheers nwoodman

Congratulations to the Fairfax Holdings team for passing this milestone I would like to pass on my gratitude for acting as exemplary stewards of our capital. You have provided us with a return on our "diversification" capital that exceeds both the family and business expectations. Keep up the great work! Regards nwoodman

Not really , for the most of the most part even their Emerging Markets investment exposure is hedged back to USD. I tend to think of them as a Bermuda based US company that just happens to be listed on the LSE . As always happy to be corrected by far more knowledgeable board members FWIW nwoodman

I wonder if Schiff has taken into account Australia's own particular set of challenges. "At 3.2 times GDP, Australia's housing bubble has surpassed both the United States and Hong Kong housing bubbles, but remains below both the Japanese and Chinese bubbles. Nevertheless, it is clear that Australia's housing market has entered dangerous territory and, based on HSBC's analysis, a fall in home values of more than 30% could be expected should our housing bubble deflate." http://www.unconventionaleconomist.com/

Thanks Bronco, I thought these comments from Jim Tisch gave a little color to what it could mean if CNA paid back the preferreds "The Berkshire transaction significantly de-risks the CNA balance sheet by taking hopefully forever CNA’s, the fastest liabilities off the table, and I think that a number of CNA’s regulatory and rating constituencies understand that as well. We Loews, are hopeful that CNA will pay down the preferred. Its nice to receive the 10% dividend on that preferred, and it will be missed when the preferred is paid down, but remember once that preferred is paid down then depending upon a lot of factor, but CNA could be capable of paying a dividend to all its shareholders, and so Loews could receive cash flow from a CNA dividend on its commonly stock as opposed to dividend on its preferred stock. So, I heard the CNA call, I heard people worrying that the repayment of Loews preferred had to be mutually agreed by Loews and CNA and I’ll just remind everyone that CNA has already paid off $250 million of that preferred by mutual agreement of the two companies." Cheers NW

http://www.lancashiregroup.com/lre_group/media/releases/2010/2010-08-05/ Qtrly EPS 0.48 CR 51.5% "Following the Deepwater Horizon loss, premium rates in the worldwide energy market have increased by between 10% and 30%. Demand for Gulf of Mexico deep water energy wind coverage has strengthened, resulting in a corresponding improvement in premium rates. As anticipated at the beginning of the year, our property catastrophe book, particularly in Florida, came under sustained rating pressure in recent weeks. We have therefore reduced our property catastrophe exposure to windstorm in the South East and Gulf regions at both the June and July renewals. Pricing pressures also led us to decline, or reduce our participation on, several of our retrocessional accounts and we have also scaled back our direct and facultative account exposures." A thing of joy and beauty! Cheers nwoodman

Results were pleasing. Although I must confess to being disappointed that they didn't buy back more of their shares during the qtr . In the CC, they stated that this was due to the CNA/NICO deal. Can anyone explain why this would be the case? Is it considered insider trading? Also can this issue be resolved by outsourcing the buyback (with limits) to a third party similar to what LRE does? Thanks in advance nwoodman

About 8-9 mins in length, Prem discusses Soft market - never know when it will end CPI linked derivative contracts - provides protection, contracts with strong counterparties who will be there in 10 years time TIG acquisition - runoff duration 3-5 years, they have looked at many runoffs and have finally found one that meets their crietera, he sounds pretty excited Cheers nwoodman

No problems at all and a nice touch. It certainly makes the seven lean years just that bit more obvious vs BRK as the benchmark. I guess it goes without saying that they are all pretty good answers, but if you can cop the lumpiness, then 18% compound plus divs certainly makes you just that bit richer vs the 15% :P. I just wish I had perservered in my initial research on FFH when I first started to notice them back in 2002-2003. This and the previous board certainly helped me get my head around them, so thanks Sanjeev. Still even if the returns might not be as high going forwards I am ultra comfortable with management and I certainly share their view of what the investment landscape might look like over the next few years of deleveraging (possible debt deflation) followed by an almost inevitable period of inflation. Also thanks Myth, I think it might have been one of your posts that helped me join the dots on Loews.

The recent decline in Diamond Offshore and discussions on this board got me thinking about Loews as an investment possibility. I thought it would be interesting to compare it to my two benchmark companies in terms of book value growth over a period of approximately 20 years (1991-2010). I realise that past performance is no guarantee how any of these companies will do in the future. Company Comp Book Growth Ave P/B Current P/B Disc from average book Loews 10% 1.1 0.8 -25% Berkshire 15% 1.7 1.3 -21% Fairfax 18% 1.4 1.0 -29% ---------------------------------------------------- S&P Index during period compounded at 5% plus divs P/B is a very coarse metric but on the whole the market seems to have normalised valuations of these companies to around a 10% return if you bought at the average book multiple (give or take). It goes without saying that the real value was to be had when the prices departed from their average multiples of book. Going forwards it is unlikely that Berkshire will be able to achieve the same level of compounding that it has in the past, although I wouldn’t be all that surprised if they came close. I ascribe a valuation of around 1.6x’s which gives an answer inline with many other intrinsic value estimates ($130-140k). I am reasonably comfortable with a fair value on Fairfax at 1.4x’s book and will be looking to buy more sub book. I also believe if CNA can be fixed then Loews offers good value at current valuations, as in the longer term it should trade at around 1.3 to 1.4x’a book. I picked up a small stake in Loews on this basis. I realise this won’t be all that illuminating to many of the keen minds on this board but after reading so many great posts I thought I would upload it anyway. Spreadsheet attached and apologies in advance for the sea of spaghetti in the graph.

Julia Gillard - Prime Minister Wayne Swan - Deputy Gillard won unopposed, so Rudd chose not to contest. An incredible turn around for a prime minister that had one of the highest approval ratings of all time. Now we get to see whether Gillard will pull the Resource Super Profits Tax. Interesting times indeed.

Caucus is currently voting (9am AEST) but it sounds like Julia Gillard has well and truly got the numbers and will trounce Kevin Rudd.