Xerxes

you are welcome. for clarity the answer came in the context question being asked previous Berkshire energy investments (like Exxon) which were rather “trade”

Munger had a few things to say on Chevron and Occidental on Daily Journal AGM. I recommend folks listening to it. They are into the Permian for the long haul

And very well earned !!

i recall few years ago on the call, the guy from Leucadia said something along the lines of personally owning Atlas. I was like WTF ...

If one is in this camp (bold/underlined), 1.5 year or so from now, any Fed rate cut that spoils Fairfax's bond portfolio, could be buying opportunity to buy the common stock on the dip, betting that it is a cyclical Fed cut and that it will not go/stay close to zero ...

On the duration discussion, my view is that Prem & Co. have a very strong and clear multi-decade view on the secular direction of interest rate (notwithstanding the short cyclicality of it). For them the 2018 pivot and the unseen Covid events that took the rate back to zero are either cyclical in the case of former or coming out of the left field in the case of the latter. But the long-term story is one that is marching upwards.

Railroader: The Unfiltered Genius and Controversy of Four-Time CEO Hunter Harrison: Green, Howard: 9781989025048: Books - Amazon.ca The pig that flew: The battle to privatize Canadian National: Bruce, Harry: 9781550546095: Books - Amazon.ca I read the first one, in the same year that came out. I think Buffett also mentioned the book in his AGM couple of years later. The second is great story about all the effort that went to float CN as a public company. I really enjoyed it. Unrelated to railroads, the author of the first book, Howard Green, also wrote about the story of TD Bank went to expand its business in the United States. It is a great story. Too bad, I read it many years after its publication. Banking On America: How TD Bank Rose to the Top and Took on the U.S.A. eBook : Green, Howard: Amazon.ca: Kindle Store Another book by Howard Green, which a new one, covers the latter years of Bronfmans/Seagram dynasty. I have not read this one, but do intend to. Distilled: A Memoir of Family, Seagram, Baseball, and Philanthropy eBook : Bronfman, Charles, Green, Howard: Amazon.ca: Kindle Store

So if you had bought FFH at the same time as Prem did and held it, you would have beaten all the FANGs, and market indices.

I think there was a bit of Karma too.

@dealraker The original Canadian National and CP did have a lot of fat in them. I would argue that the work that Hunter Harrison did was needed but ultimately perhaps taken too far by others. CN was a crown corporation that was privatized in the 1990s. So you could imagine that the journey from crown corporation to a profitable business needed some pushing by none other than Michael Sabia and Hunter and the former BBD chief (whose name escapes me) CP for a longest time owned a string of hotels (the famous Fairmount) and it was run like a royal court. Some of that was taken out pre-Hunter I think. Just to show how unwieldy they were.

I think in Prem's mind those famous table they put, covers what he considers as investment portfolio (be it long term or short term). Funded by the float. Whereas, the typical one-off asset sales that were part of the operating business, do not show up there. I had noticed the same omissions in other operating assets he sold off. Just remembering now.

Shouldn't this be included in their table On October 31, 2022 the company sold its interests in the Crum & Forster Pet Insurance Group and Pethealth, including all of their worldwide operations, to Independence Pet Group and certain of its affiliates, which are majority owned by JAB Holding Company, for $1.4 billion, paid as $1.15 billion in cash and $250.0 in debentures, as a result of which the company recorded a pre-tax gain of $1.2 billion and an after-tax gain of $933.9 million.

Those of you who are interested in the Chinese Re/MAX balloon would probably enjoy this episode on Aviation Week Podcast: Hot Air Or High Tech? China’s Spy Balloon | Aviation Week Network

The Big Short fella Steve Eisman had a great podcast with the OddLots folks. He came back few days later on Bloomberg Surveillance as well, but only for 10 min.

On large energy companies, it has become fashionable to say that they are always off on their share buyback program. Buying their own shares at cyclical high (as commodity prices soar) and not doing so when it is at a cyclical low. I think what is being missed is that, energy companies (and I could add mining as well) are always in the business of depleting and replacing their reserves. A barrel of crude produced today (to generate revenue) need to be replaced. Otherwise, energy companies production will just drop. Therefore, it makes perfect sense that the oil majors are investing and leveraging their balance sheet to counter-cyclically invest in assets, organically or otherwise, in a downturn, while foregoing the share buyback programs. Of course in an up cycle, they have that excess free cash, which they utilize to re-charge their balance sheet via de-levering, while the rest is return to shareholders, simply because it is cheaper to buy the one asset they know well (their own company) than to invest in expensive drill bits, assets, labor and acreage when prices are at an all time high. Also, better for the shareholder to decide what to do with the excess cash. This model as seen from the outside, in a vacuum (i.e. without considering opportunity cost), paints a picture of a clueless management team, that does not understand it is better to buy your own shares when they are low. The only reason the Exxons and the Chevrons of the world are still standing tall after a century of being in business is precisely because they are investing through their balance sheet counter-cyclically, and de-levering in good times (of course mistakes happen ex: XTO). It is just that the financial community is over-obsessed about share buyback and ignores the opportunity cost aspect of re-investment which is massive in commodity businesses.

@changegonnacome You are welcome. always a pleasure. On Bolton, he maybe a hawk. But he knows what he is talking, notwithstanding being clever in some of his answers. ref: when asked about US and how it maintains its sphere of influence militarily. He gave the Canada example (that it is Canada telling us what to do) as oppose to his own mess in Iraq. (He was U.S. Ambassador in U.N. then and was banging the war drums pretty hard). He is hawk with an agenda but knows his stuff. I can respect that.

In the last 5 years, it was the Blackberries/Resolutes that drove the headline and with it the optics as it was the only proxy available that outsiders could gauge their investment prowess. The outsiders had no gauge or proxy on the “pet insurance” like organic growth and other internal gems where value could have been crystallized. Part of that it is the investor fault for lacking imagination but part of it is the management fault that likes to play things close to the vest. And just says “trust us”. looking forward to Friday.

Bed Bath Beyond Canada is up for sale !

agreed. That horse has been beaten to death. But one does wonder about the inner working of the company and how ideas and thoughts flow from different asset managers.

you could have made the same arguments in 2006-07. Don’t look and ask for the actual counter arguments as you won’t find them. what could de-rail the thesis is precisely something that you won’t see coming in 2023 and you won’t know what it will be. knowing that you don’t know, the only thing you can do is to stay humble. in 2018-19, there was nothing stopping the aerospace industry. Absolutely nothing. Firing on all cylinders with projection being fuelled by massive expansion of middle class in Asia. And then …

I posted this on the War thread. Perhaps it belongs here. ——— Jeff Curie talks also about the Russian sea-bound crude embargo that went up in Dec as well as the one refined products that went up in Feb. Unrelated to Russia, Jeff has been talking the same line for the past year that energy prices today have the same setup they had in 2006-07 during the Fed hiking cycle (that pushed USD all time high) which in turn kept oil prices in check (notwithstanding its bullish setup) but when the rate plateau and ultimately dropped in 2007-08 or so it uncorked one the biggest rally in crude. The difference of course is that 2008 we ended up with a banking crisis. If 2023 will indeed have a soft landing (as oppose to hard) the rally may just sustain.

Jeff Curie talks also about the Russian sea-bound crude embargo that went up in Dec as well as the one refined products that went up in Feb. Unrelated to Russia, Jeff has been talking the same line for the past year that energy prices today have the same setup they had in 2006-07 during the Fed hiking cycle (that pushed USD all time high) which in turn kept oil prices in check (notwithstanding its bullish setup) but when the rate plateau and ultimately dropped in 2007-08 or so it uncorked one the biggest rally in crude. The difference of course is that 2008 we ended up with a banking crisis. If 2023 will indeed have a soft landing (as oppose to hard) the rally may just sustain.

While at the company level they may have nail the portfolio-duration and having optionality, it does make one wonder why their bond guys couldn’t talk to their equity guys !?! The same pin that in 2022 burst the bond bubble also bursts the growth equity side. Ultimately while their equity short view was not wrong, it was totally wrong in terms of execution, which means somehow the folks in Fairfax did not appreciate (or didn’t figure out) how much of the equity bubble was underwritten by very low rates.

Awesome interview with John Bolton. The “Hawk” nails it. It is part of the PBS Frontline documentary called “Putin and the Presidents” which I think non-Americans cannot watch without VPN. I couldn’t even find it. In any case you can watch the interviews.