Xerxes
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Posts posted by Xerxes
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Seriously guys? This isn't anything amazing, we didn't discover space flight, we've been sending rockets into space for 50 years. This time we just made some money. I'm sorry but it's not exactly a momentous, world shaking event.
RB,
I recall watching an interview with the Boeing CEO Muilenburg, believe it was on Bloomberg, few years ago.
It was a good interview I thought at the time. He was the first non-GE leader at Boeing since the merger from McDonnel Douglas and he rose up through the engineering ranks and he was bold.
In the interview, Muilenburg made a few bold and fun statement (at the time) poking at Airbus and SpaceX. Interviewer (David Rubstein) asked him what he tells his mother. Muilenburg says something along the lines of only flying on Boeing products, implying other products from Airbus are unsafe. He also poked fun at SpaceX (maybe at a different interview) when he was asked about Elon Musk' stunt of throwing a Tesla in space that Boeing will be the company that not only make it to Mars ,,, and will bring the car back on its way back.
Bottom line, fast forward by a few years, we had 737 MAX crashing, the entire fiasco as to how it was handled, and then their debacle Boeing space launch etc. etc.
Muilenburg was just manager squeezing the cash machine through buybacks … he was not amazing.
Elon was and is amazing. Naturally in hindsight his idea of re-using rockets seems like an obvious thing to do.
Airbus was and is amazing by insisting to be boring and risk averse.
Boeing was not amazing.
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But why BB would not want to get rid of the expensive converts.
Would it not be beneficial for BB to have on the right hand side of B/S, newly issued corporate debt at lower rate than the expensive convert.
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With all due respect, i think the Blackberry purchase was a disaster. After Fairfax’s first purchase they had 6 months to learn how challenged the business was amd how poorly managed it was; it was pretty obvious (all you had to do was listen to the quarterly calls to understand the management team was not up to the challenge.).
PS: i actually bought RIM shares back when Fairfax initiated their position. It took me 3 conference calls to figure out the RIM management team was in way over their head (the company was no longer a start up and the industry was morphing fast with strong competitors). I took a small hit when i sold my position. But investing in RIM became one of my best investment decisions ever because it taught me about the cell phone industry. 18 months later Apple got wickedly cheap (the narrative then was Samsung was going to take over the world) and i was able to take my learnings from my time in Blackberry and buy a truckload of Apple over a 4 month period (the stock just kept going lower), which ended up being by largest gain ever :-) Learn...
Looks like I have a short memory.
I forgot BB was a phone company competing with Apple at the time when FFH got in. LOL.
I was thinking cybersecurity and its IP portfolio.
On the positive side, if I forgot about that, that means the 100 year turn around is turning around just fine.
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And interesting that they feel this would be the best use of shareholders capital - versus buying Fairfax shares at a steep discount or growing insurance subs in hard market or buying something else.
Perhaps something is driving the decision to make the purchase now.
I think these are different buckets.
Capital allocated to growing sub-insurance will not compete with the portfolio resources being used to buy portion BB or anything else (if this is even true).
Prem has been clear that he is not buying back his shares, so there is no conflict there as he is not doing it and in any case if he were, that would compete with resources allocated to grow sub-insurance.
You’re right it is different buckets. But Prem is buying back his own stock, slowly.
Not until he has paid back the debt he recently raised on the right hand side of his balance sheet, which he said that it will remain at cash/near cash. That was meant to only to fortify the business. He will not use those dollars to buyback shares. He could do that, then he would have contradicted a clear statement he made in Q1.
But very slowly to your point.
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And interesting that they feel this would be the best use of shareholders capital - versus buying Fairfax shares at a steep discount or growing insurance subs in hard market or buying something else.
Perhaps something is driving the decision to make the purchase now.
I think these are different buckets.
Capital allocated to growing sub-insurance will not compete with the portfolio resources being used to buy portion BB or anything else (if this is even true).
Prem has been clear that he is not buying back his shares, so there is no conflict there as he is not doing it and in any case if he were, that would compete with resources allocated to grow sub-insurance.
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I think unlike Torstar, Stelco or Resolute (why?why?), BB had merits in the right hand. Folks, might bundle all of FFH mistakes into one bucket, but I don't think BB belongs there in the pile of stupid ideas. They should keep it and partner with someone for the privatization.
I don't know if folks noticed, I recall seeing on the news feed somewhere in the Teachers' 13F that they had invested in BB common shares in Q4 or Q1. I ll try to find the source.
What BB should do first is to raise capital at very low rate, to pay off the convert and stop paying that high rate to FFH. that would save it money and allow FFH to get its principal back for better use.
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I just cross checked on Google, the Prem Watsa with Templeton.
I got a book, where Prem calls Templeton, "perhaps greatest investor of all time"
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Having said all the above, there is a good chance that we could see in the next 6 months a devastating number of bankruptcies in this industry. There are lots of mom and pop operators who may not make it. The companies who can make it to the other side might be in good shape. Or perhaps we see a continuation of the long term trend: the industry muddles along and continues to destroy investor capital.
Fairfax might be tempted to double down with Recipe. There will likely be lots of opportunities to pick up other restaurant chains for a song. Or expand existing concepts (as better locations come on the market). But do you give Recipe more $ when they have not demonstrated the pre-covid model even worked? Would there not be lots of ‘synergies’?
They might need to go in the opposite direction. Start to sell off some of their concepts to other operators who are more focussed, passionate, motivated, nimble and better able to execute in covid world.
I think the above makes it clear, how time consuming are these "FFH platforms" from capital allocation point of view. Not even the operating aspect of it, which you can leave it in the hands of a great operator, if you find one. So good thing that they didn't keep Torstar. Less bandwidth on the collective brain trust.
Folks, lets move up from the weeds and trenches to a nice cruising altitude of 50,000 feet.
I have listened to many interviews (well few) with Prem Watsa, and my takeaway has been always on the following two statements that he always repeat, (1) he very often talks about John Templeton and is obviously very much fond of him, I believe he once stated on BNN that he even has a Templeton bust in his office (2) he very strongly believes in one outperformance going a long away to compensate a few laggards and then some
On (1), on this board we often compare Buffet and Watsa, shouldn't we compare Watsa to his own idol, which is John Templeton. Not saying if it is going to better, but just to have the right baseline
On (2) while the statement sounds obvious, maybe all FFH needs is a Seaspan going right
Hopefully, with the value of his holding shaved off 40-45%, he has the right incentives now ...
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Pershing also has no leverage to make any recommendations or changes to berkshire. They can buy a qsr at 20x + and still seek margin expansions, buybacks, acquisitions etc and still do better than keeping berkshire which is basically tied to the economic recovery with no alpha so long as buffet is resistant to buying dips or buying back stock. You really need to ask the question, what is berkshire really worth if buffett isn't buying back a languish stock in the 170s if he was willing to do so at 220. How much instrinic value does warren think was impaired? I'd imagine in feb he probably thought it was worth 250/260 at least? What is it now if he isn't pressing the buy button here. No excuses for it moving too fast either considering it was in the 170s for a good 2 weeks
Buffet is probably waiting for Fed to pull the rug out so that he can go to work. Fine by me.
And what leads him or anyone else to believe that they will? People having been saying these same things about the Fed, and the music stopping, and the "stock market doesnt match the economy" for the past decade. For a 90+ year old dude, Im not sure thats a great game to be playing. Or, as we've seen from time to time in the markets, the Fed may in fact do that, and the story doesnt play out the way the pundits think it will.
Ive become more and more convinced that the rallying cry of "the markets are overvalued" is just a convenient and pride saving way of admitting "I missed the opportunity".
From what I've seen generally the bunch that point that "ABC" has missed the opportunity just because the markets went up tend to correlate well with the bunch that claim that nobody could have seen "XYZ" event coming when asked why they don't have any money anymore.
Also, pretty sure Buffett doesn't give a shit about "the game" or how he should play it.
Like who? Can you name any?
Because once again, we saw most of the guys on top of their game, even some of the more prominent bears buying stocks in March. We saw BX and BAM buying RE hand over fist. We saw the Saudi Wealth fund buying hotels and entertainment companies. And we saw the guy who invented "the game" who "doesnt give a shit" about it now, capitulate at the bottom....
Gregmal
Saudi wealth fund invested less than $10B at bargain price, while they got hoodwinked into investing $45B to SoftBank vision fund. That $45B is now value trapped.
The game is about doing less stupid things and knowing the downside risk over the long term.
It doesn’t help that they did one right thing after one large stupid thing.
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Pershing also has no leverage to make any recommendations or changes to berkshire. They can buy a qsr at 20x + and still seek margin expansions, buybacks, acquisitions etc and still do better than keeping berkshire which is basically tied to the economic recovery with no alpha so long as buffet is resistant to buying dips or buying back stock. You really need to ask the question, what is berkshire really worth if buffett isn't buying back a languish stock in the 170s if he was willing to do so at 220. How much instrinic value does warren think was impaired? I'd imagine in feb he probably thought it was worth 250/260 at least? What is it now if he isn't pressing the buy button here. No excuses for it moving too fast either considering it was in the 170s for a good 2 weeks
Buffet is probably waiting for Fed to pull the rug out so that he can go to work. Fine by me.
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As an investor, would one rather pay high performance/mgmt fee to Ackman to buy BRK on one’s behalf or does one directly buys Berk, and implicitly pays $100K salary to Buffet as CEO.
Ackman thesis was that Berk will deploy its cash. That didn’t happen. He can buy it later. and keep in mind that as Fed ramps down its support there will be distress opportunities both for Berkshire and Howard Marks from Oaktree.
Us, the individual BRK shareholders, are just doing time arbitrage while the above takes place (real distress opportunities)
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Ackman, the hunter, will be going for a few kills before coming back to BRK. He is paid to hunt. That is his job.
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I think Ackman did the right thing.
A hedge fund should be actively looking for opportunities rather than invest into a long-term hold.
Folks don't pay Ackman his fees so that he parks money into Berkshire.
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Did Prem got the best return for his shareholder (I.e fiduciary duty) under the present condition for Tor Star.
The optics looks weird with Paul but if the answer to the above is Yes, than we are all good.
At least in my simple mind.
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Thanks Thrifty
That would be awesome, though given that he was referring to the dividend, it kinda tells me he was thinking as an equity position and a contributor to his $1 billion interest/dividend target.
Those equity swap seem like an interesting way to take a directional bet on the market with minimum upfront outlay, but if a market bounce is your bet, I think the swap are best employed against the overall market, rather than individual names. What is the point of doing that unless you were doing on technology "stay-home" specific names.
Anyways, these swaps are completely outside my plain vanilla area of expertise, not that I am an expert in plain vanilla investing either.
but I do know common sense.
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Good news is that as Resolute marches into oblivion it represents an ever smaller portion of the equity portfolio, so less damage going forward.
Bad news is that Resolute is not marked to market, so its quarter to quarter valuation never really hit the bottom line in a good or bad way.
Good news is that it has seen a few write offs and those had already hit the book, so unlikely to see more.
I never looked at Resolute earnings in the past ten years, no clue if the earning it contributed diminished in a massive way.
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Absolutely, he even referred to the exact same CNBC interview that the Exxon CEO was talking about the dividend. And I had watched that interview prior.
Funny thing when 13F came out last week, although I did not see Exxon I did see Chevron as part of their holding. And was just wondering if between Prem and his managers if there was a mistake on what exactly they bought. I hope that is not the case but with these guys losing money on their shorts in Q1 ... who knows what’s going in the black box. I hope that there is a perfectly good explanations for these snd that my biases are just biases.
Unrelated to 13F mishaps, buying Exxon and Chevron at their cyclical low is the right way to invest as a value investor. Buying Stelco at its cyclical high is a bad value investment as a value investor.. No margin of safety will protect you when the denominator “earning” collapses in a recession. In fact often times, (Not related to Stelco) the stock value drops less than the earning collapse, in which case, you actually get multiple expansion even as the absolute dollar value of your investment goes down and your ROI gets to the cleaners.
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I am new, didn't get to read most of your RE views in the past 10 years.
That said, Enjoy the time off !
All the best and enjoy the summer.
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Ok so it is really a yield thing. Getting higher yield, which was otherwise unavailable prior.
I thought credit spread snap back would mean meaningful capital gain.
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They’re fairly short duration bonds, so the price doesn’t move much when the yield compresses. It will be a benefit, but not a game changer.
It says average age of 4 years for the corporate bonds.
In their pre AGM memo update.
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Folks
Would it be fair to say that the $2.9 billion that FFH invested in March when credit spread blew out, now that Fed stepped in and closed opportunity for distress fixed income investor, those spread have narrowed, so ... does it mean that a significant portion of that capital gain would be marked-to-market as unrealized gain by close of June (Q2). I think that capital gain is front-loaded where you see most of the snap back happen in Q2 ... and the rest panned over several quarters.
This is 7% of the $39 billion portfolio. The position is significantly larger than Blackberry, Resolute and Seaspan combined. This fixed income unrealized gain on its own might in turn snap back the discount between market and BV.
What am I missing here ?
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you guys are absolutely right.
I recall at one point Buffet saying that he is not disclosing his foreign holding because he doesn't have to and that those names are Berkshire's internal information not available for public disclosure. i am paraphrasing.
and that if SEC didn't require him to disclose U.S. holdings, he wouldn't.
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^They have a small arbitrage position in Tiffany & Co.
These arbitrage operations (small versus the size of their portfolios) have appeared for a very long time.
i wonder who is in charge of these investments and what kind of return they've achieved over the long term.
I also recall Red Hat and IBM merge arb from way back when.
They got to do more of those, lever to the hilt, but not screw up as bad as Long Term Capital
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Also - there are some known holdings missing, like Stelco, Eurobank. I don't spend a lot of time with 13F's. Does this include all the subsidiary holdings? Because if not it's basically useless.
Funny thing, off memory I don't ever recall seeing Recipe, Stelco or Eurobank on 13Fs prior to this one.
Though I could be wrong.
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Here is a better link
https://www.holdingschannel.com/13f/fairfax-financial-holdings-ltd-can-top-holdings/
odd, there is -500 next to Blackberry !
Fairfax stock positions
in Fairfax Financial
Posted
I figured since a cruise line can get debt at +6%, a company like BB that is not impaired can do better that.
Even debt raised in the market for the same rate as the FFH convert (3.75%), but without the call option embedded within, is worth more than the FFH convert.