Xerxes

This is a great clip that was posted elsewhere. Just watched it now. Somehow 6 months of discussion in this forum were condensed into 1 hour and delivered superbly. I think it belongs here. https://moiglobal.com/jeffrey-stacey-202101/

Allow Xerxes to reveal to you an new way to measure FFH's rising intrinsic value. In this very forum, there were: - 50 pages in the 2021 FFH Thread; and we are not even in March - 88 pages in the 2020 FFH Thread - 14 pages in the 2019 FFH Thread - 51 pages in the 2018 FFH Thread - 16 pages in the 2017 FFH Thread If this is not a technical bullish signal from the Faithful populating this forum, then i don't know what is.

This guy is genuine, he deserves every penny of his gain (sorry, should say, he deserves every million of his gain) I'll trade him for 1,000 Chamath anyday. And other high-IQ all-about-me characters that seem to be everywhere now in the investment world. If ever retail investor community needed a face as public ambassador, his would be the right one. Just a working man. I like that. My only regret he wasn't on this board and decided to be on Reddit. Opportunity cost for sure, but it is not like I would have invested in GameStop (would have put that in the value-trap pile)

https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-investment-gain-japanese-stocks-trading-houses-2021-2-1030087776 Was kind of wishing these could be a much bigger part of Berkshire.

Seeing FFH is shooting up on the same day that BB plunges, i think, in some weird way indicative that the market is looking past all these little noise about movement of equity holdings quarter to quarter and looking at the whole picture.

Thanks What i did was to sell MSTR this morning north of $1,000 per share. Wish did that last Tuesday when it soared to $1200. Need the dry power in my TFSA for other things. Outside my TFSA, i added more to that pile. So sold it at the premium, and bought the underlying. I prefer the direct exposure. That said, happy about multi-bagger that MSTR was in the past 6 weeks. MSTR was a very unique case, because it had such a low market cap and an outsize bitcoin position that gave it a high-torque, and with a rich premium to the underlying. You wont get that with Square' $50 million investment on its balance sheet against its giant market cap. I just think that there has to be reaction when the capital flows out of "sponges" back to the real economy, when the world re-opens.

I posted this in the MSTR section. Appreciate any comment/feedback from the crypto-to-the-moon crowd: "While all the pro-Bitcoin argument are valid, being deflationary and good hedge etc. etc. The reality is that today as it stands, Bitcoin represents the apogee of liquidity excesses. The real test is when the economy open and tens of billions move from financial assets into the real economy. If Bitcoin can hold itself and go up in that re-opening economy environment with the 10-year bond yield marching higher, I would say it past the ultimate test. The argument that the M2-expanding-money bulls are making is neglecting that key event. Right now, i think it acts as sponge for excess liquidity and in fact maybe the very manifestation of those excesses. That is not to say the bull case is wrong. I just think it is about to get tested. Somehow I tripled that investment over a month and half and in my non-tax account I don't have unlimited capacity. So need dry powder by selling inflated assets. I still hold some exposure outside my non-tax account on BTC, so there is that. Lastly, while the BTC payment adoption is getting traction, I may be wrong, but I don't see another major corporation to convert its treasury to Bitcoin, unless captained by a maverick like Musk or Saylor. Both UBER and Paypal are happy to have BTC as an interface but have no interest to have balance sheet exposure to it. The one company that I think will do it is Oracle. It has a lost of free cash flow, and the CEO is maverick and a going against the trend like Musk and Saylor. If anyone has feedback on these thoughts would be appreciated"

Viking, We need to give an award to you and the rest of the team here for the very detailed analysis you guys provide. Some years in the future, I think we can move away from BV as the measure of Fairfax's intrinsic value. I think BV has a purpose as a proxy when looking as a floor, but when it comes to growth potential of FFH' many franchises, I think that proxy understates its potential. For instance how is India' massive growth potential to the entire Fairfax operations captured in the backward looking book value or for that matter how is the growth in the insurance businesses (the upswing due to hardening cycle) captured in the book value and of course the associates are captured in the BV only when FFH' portion of the associates' earning (net of dividends) flows through its income statement (i.e. you don't register the upswing in the stock price that is discounting future growth). I think these are the elements that makes FFH an interesting holding, cheap compared to its growth potential and disguised as a mere insurance name and valued as such via antiquated accounting book value. On a different note, let me throw a question to the team here: You all know what i think about RFP and Stelco from a position sizing and timing point of view when FFH first got in. The pandemic gave a front-loaded energy bar to the technology sector and rear-loaded energy bar to the commodity, financials, energy, insurance etc. The word commodity super-cycle is now being uttered. I am not surprised at all. It all goes hand in hand with low US Dollar, the rise of emerging market, the CAPEX holiday O&G sector had, and the mother of all pent up demand (synchronized at that) etc etc. People are going to LIVE and spend like there is no tomorrow. We know that Fairfax did not add to its existing RFP and Stelco positions because they were already large enough and they didnt have the dollars. But I bet they are savvy enough to see the same trend that might be in fact powering these two dormant positions. Knowing what we know about their use of Total Return Swap on their shares, is it not inconceivable that they also entered TRS positions on these two commodity related names, using minimal outlay by getting extra juice ?

This was posted before, but best to be posted here. Druckenmiller comment about this is not 1999 makes it related and no can accuse Druckenmiller of not seeing many cycles as he is more a bear.

I listened to this interview on Friday. At that time it was called "King of SPACS, Chamath wants you to know that he is the next Warren Buffet" Today the title is changed to "All things Chamath" My guess is Bloomberg got a call from Chamath that went like this: "Hey guys, the point of this interview was to make me look more like human and less of an a-hole. Can you please change the video title to something more humble" Btw, Erik, the Bloomberg interviewer, is an amazing interviewer.

I get a feeling that OMERS got diamond hands when it comes to holding on those limbs

Hard to say. My way of explaining that to myself is that Prem and his close associates probably have a limited bandwidth with all the stuff and operations that they are managing. Afterall it is a company and not a nimble investment fund so perhaps it all happened to fast (same for Markel and BRK), so their gut reaction was survival, as oppose to profiting on the downside. I am ok with that and can understand. My issue is post-crash, the only shorts that were losing money were anything related to technology. So if you lost money on shorts, that could only mean you were shorting technology names. In any case, water under the bridge. Good news is that while the OTHER segment shows a realized loss of $542 million, it also shows a unrealized of $449 million. Which means they capped their losses at $542 million, but carrying the upside into Q1.

Time to update these tables: REALIZED LONGS 2011: $703 million (equity) + $424 million (bond) 2012: $470 million (equity) + $566 million (bond) 2013: $1,324 million (equity) + $65 million (bond) 2014: $596 million (equity) + $103 million (bond) 2015: $818 million (equity) + $26 million (bond) 2016: ($184) million (equity) + $648 million (bond) 2017: $200 million (equity) + $419 million (bond) 2018: $1,326 million (equity) + $106 million (bond) 2019: $792 million (equity) + ($55) million (bond) 2020: $392 million (equity) + ($102) million (bond) REALIZED SHORTS 2011: zero 2012: $6.3 million 2013: ($1.350) billion 2014: $13 million 2015: $126 million 2016: ($2.634) billion 2017: ($553) million (almost all of it in Q4 2017!) 2018: ($248) million 2019: ($20.7) million 2020: ($311+$542*) million *included Other which I believe are the TRS

Q4 2019 results shows: An unrealized short of ($154 million). That tells me that was the snapshot of how the year ended. In a market, which largely plunged in mid-Feb, they somehow ended up closing Q1 with a ($248) million realized lost in shorts. While having still $122 million unrealized short position open. So that unrealized short of ($154 million) at the end of Q4, somehow exploded into ($248) realized shorts by close of Q1 and with some left over. There is also the THE OTHER segment, which i think captures their total return swaps. I think when Prem says shorts, he means direct shorts as well as when he uses TRS to short. Q1: The Other segment had a ($116) realized losses Q2: The Other segment had a ($249) realized losses Q3: The Other segment had a ($74) realized losses Q4: The Other segment had a ($102) realized losses Total for the year: ($703) million in realized shorts ($542) million in realized losses in the Other segment That is far cry from where the picture started in at the beginning of 2020.

Good day folks, i listened to the conference call and here are my comments. Apologies if i am repeating some stuff already mentioned, i did not read all the posts yet. Tone of the conference call Q2 2020: the tone was defiant and bullish; we will survive. I like that conference call. Q3 2020: the tone was complete nervousness; very cryptic, playing close to the vest Q4 2020: very cryptic, playing close to the vest but very bullish and confident Investment return While folks are focusing on the mark to market bounce back, for me the real jewel was this statement in the conference call. Although not captured in the book value (so not talked about greatly here), this is the market validating Fairfax estimation of these associates' intrinsic value. I think that is great. At December 31, 2020, our investments in associates had an aggregate fair value that exceeded the carrying values by $712 million. And due to the equity method of accounting for these investments, this excess of fair value over the carrying value is not included in our book value per share. This is a significant positive change from the March 31, 2020, when the aggregate carrying value exceeded the fair values of the investments in associates by approximately $400 million. In March, aggregate carrying value > fair value by $400 million In December, aggregate fair value > carrying value by $712 million 13F I would classify the equity portfolio into two portions. The Atlas, Blackberry, India investment etc (otherwise known as concentrated positions) are the ALPHA investments of Fairfax, while the rest of stock portfolio, which are made of host of random names (to me) as the BETA of the portfolio. I would argue that a good chunk of the mark to market accounting in Q3 and Q4 were due to the BETA portion of the portfolio bouncing back. I think if they were to replace BETA portion of the portfolio with S&P500, they would probably get the same return. What makes Fairfax so interesting as an investment, is that basket of ALPHA, which makes them at least to me uncorrelated to S&P500, which in turn gets its alpha from its 25% allocation to the FANG names. I feel that investors need to understand that and need to bear with the captain of the ship. You are here because of the dissimilarities that this name has with the rest of the market. Today, any clown (including yours truly) can make the statement that Amazon is a must have in a portfolio. Shorts I, Xerxes, will continue to reserve the right to complain about the shorts. Simply because the captain of ship promised and committed to a set of action in 2016, yet felt seduced by the short-casino again in 2020, and of course doing all of them wrong. I don't believe the shorts in 2020, were all remnants of previous shorts that were somehow unclosed. They were seduced by the dark side. Thank god they got burned. Being right on the shorts in 2008, on one hand provided FFH with a big boost in its book value pull forward from the future but on the other hand gave it the kiss of death, paralyzing them for a decade, in their thinking. For the year, the amazing return that the fixed-income and the rest of portfolio had was largely undone by the casino-shorts. What is so frustrating is lack of explanation that makes it looks like they lost their mind and mindlessly shorting high growth names because their valuation offends them etc. I don't like shorts, and specially don't like them when the investor is not using the short as a hedge, but as a complement to their base-line thinking. If your company is sensitive to the economy (i.e. cyclical), you will do well if your shorts is against your peers, as oppose to shorting technology names, that had the mother of all tailwinds unleashed by the pandemic. FFH didnt need to sell one its limb to get some cash for buyback if it didnt lost so much in shorts. The Rude Gentleman About the gentleman on the conference call asking for Prem resignation, I would say that his comment were mostly assertion. He should have, instead, challenge why Prem Watsa made a commitment on shorts in 2016 only to go back to it. That would have been a good criticism. To say that an institutional investor doesn't do analysis I think is mostly a guess work. Now, the institutional investor can have poor judgement on some investment, and therefore poor results. I will add this. Like any other investor, when you have one or two good winners, that tends to expand your set of optionality, with your equity expanding. When you have one or two investment gone bad that tend to limit your set of optionality. That is what happened with FFH, their oxygen was cut off, compounded by weird shorts and therefore unable to act neither in the bull market nor in the bear market in 2020. Watching mostly from the sidelines. Blackberry I am ok if they didn't want to disclose anything. I trust that they have the same economic interest as the rest of their shareholders in ensuring that they capture some gains from the recent rally. It would have been nice to know. But I can wait. That said, that last exchange about how Wade Burton and Roger Lace liquidating their position and the whole insider thing doesn't square well.

Boeing started its corporate restructuring with the ejection of Muilenburg, a bit more a year ago. Way to early. GE started its corporate restructuring with the ejection of Immelt, I think about 3 years ago, so few years into the restructuring. Larry Culp is immensely respected for the work he did at Danaher, and by removing the GE Capital, the last of Jack Welch legacy, General Electric can really go back to its industrial roots. On MSFT, putting aside Gates & Buffet thing, MSFT alongside AMZN are the two of the FANGS (maybe Netflix too) that have the highest multiples on earning, due to them being leaders in the Cloud category. Why would Buffet invest in a high-multiple MSFT. When he got into Apple late 2016, the multiples was pretty low. If anything it could be Alphabet. But my guess, is that two months from now once the mystery name is revealed, it will be a name that people cannot really relate to and everybody would be shrugging their shoulders, and the discussion dies. Wasnt Philipps 66 at one time one of the mystery bet he made. No one is taking about it now.

Parsad Interestingly, the cure to the valuation gap could be new listing in NYSE. FFH is no longer the minnow that it was during the hedge fund bear raid, so it might very well benefit from it. Prem might not want to do it due to the history but once all is said and done with the asset monetization, and restructuring and buybacks ... if the discount doesnt narrow to zero considerably that could be the bitter pill to swallow that could fix the discount. PS: we need to bring in the Americans to close the gap. Always can count on them with their animal spirits unleashed. But before that, it needs to get ready.

Agreed. Don't get be wrong, I believe Boeing is great American icon and will survive and do great things. It is just that i don't see Buffet being interested in a company where shareholders have to take the back seat to bondholders for time being (counted in years).

General Electric is far more possible than Boeing, IMHO. Larry Culp cut his teeth at Danaher and he is well known name. Its aviation exposure is an actual positive with the recovery in Aftermarket and 737 MAX pulling its weight on production side. Think about it. The bulk of commercial aircraft flying out there either have engines from GE, Pratt & Whitney, Rolls-Royce or Safran. With the first two + Safran dominating the narrow-body market. Its health care is a positive as well. The big question mark were on its Power division (they wrote off the bad part of Alstom) and GE Capital, the latter is being dismantled completely except for financing that is needed to supports its industrial operations. Its renewables (which i dont know much about) can only be a positive. In 2012, GE Capital was 31% of revenues now it is less than 10%. Aviation was 13% of sales in 2012 and now it is 34%. Long term debt has gone down from $220 billion to ~$60 billion. I think General Electric will rip and will ride the opening economy and rotation to value trade.

There is an old one. https://southeasternasset.com/podcasts/prem-watsa-insights-on-investing-underwriting-and-the-importance-of-culture/ not aware of a new one

Needs to compound 14% per annum to get to that. At a minimum he needs to get there with all the tailwinds that we talked about, theoretically. If he cannot go over 15% in the next few years to make up for the last few years, the long term growth rate will never average around 15%. the first few years ought to be easy, given that he is starting off a low base.

On the question about luck or not. I tend to agree with the camp says luck is part of the equation. Prem had a long string of being unlucky in some bets. After the fact, of course we can piece together a story that explain that the initial bet was wrong and has nothing to do with being unlucky and it was so obvious etc. etc. i see it as he tends to have lumpy results, he also tends to have lumpiness in his luckiness. If Covid was the pinnacle of bad luck and how it affected almost all of his businesses (even the venerable airport in Bangalore), than he is allowed to have the rising tide of rotation value lifting all of his boats in late 2021-22, and have the rising tide of technology help him out with some of his more tech oriented names (few that are). Lastly, when one invest, one does need to believe that things will be different. It is an obvious statement to make, i know, but one that i have to say to myself all the time. On FFH, i am capped by what i can put in my RRSP, i bought what i could with 60% of current shares bought post-March 2020 and 1/3 of my FIH shares bought below $10 USD. -------------------------------------------------- FFH needs to understand who they and who they are not. They are not an operating business managing the left hand side of the balance sheet of their investments. That is not in their DNA. They are not Brookfield and they will never be. Brookfield came from the operating side and now is in asset management business. FFH' expertise when it comes to investment, is the financial aspect of it. I have seen a lot of engineers that go do an MBA (myself included) but never seen a person with a B.-Commerce go do an Masters in engineering. I was listening to Brookfield Business Partners conference call for Q4. Brookfield is a complicated beast to understand, but really each of the subs on their own are doing exactly what they need to do, without going too much outside their area of competence. How amazing is that. "The strong cash flows generated by our largest businesses also provide us recurring distributions that we use to fund our growth. As an example, at year-end, Westinghouse paid a $265 million dividend, of which BBU received $115 million. Later, Denis is going to talk more about what's going on at Westinghouse, but I'll just say this continues to be a phenomenal investment for us. In about 2.5 years, and importantly, with no increase to Westinghouse's debt levels, BBU has received more than $370 million in dividends, which is nearly all of our initial equity investment, just 2.5 years ago. Westinghouse truly is a great cash generator."

They got to get this on Prime Time either on WSB or ARKK. Why is it that they cannot disclose how much FFH will have post offering. "Immediately following the Closing, the Fairfax Shareholders will, directly or indirectly, have an approximate % interest in our Company through ownership of, or control or direction over Common Shares. If the Over-Allotment Option is exercised by the Underwriters in full, the Fairfax Shareholders will, directly or indirectly, have an approximate % interest in our Company through ownership of, or control or direction over, Common Shares. The Fairfax Shareholders will have a significant influence over us "

i would be shocked if it was Boeing. Of all the assets in aerospace that entity is the one you don't want to own. It has the brand, but shareholders will be taking the backseat on that asset for a longggggg while, after being showered by tens billions in the past decade. Total of $43 billions returned via buyback since 2010. Total of $25 billions returned as dividend since 2010. On a cumulative free cash flow of $59 billion since 2010. Long term debt is up from $9 billion (pre-MAX) to +$60 billion today (yes a whole bunch of its cash on B/S). Far better, to own tier 1 assets that get their revenues in MRO and Aftermarket, than Boeing which is dependent on production delivery. Aftermarket will recover when the flight returns en masse, production deliveries will still trickle. Lastly, in this multi-decade zero sum game that is being played between Boeing and Airbus, the former has lost this round big time. I believe the ramification will be multi-decade. As a trade, BA is probably ok, but as a long term pillar of Berkshire, i am not so certain.

Results of the Poll: hares/convert not sold and puts to expensive to buy significantly (partially done) 2 (2.1%) Shares/convert not sold and and no counterparty to sell significant calls to (partially done) 0 (0%) Redeem the converts and sold; but did not sell any of the original common shares 4 (4.3%) Was able to buy(sell) ~50 million shares worth of puts(calls) on the position 10 (10.6%) Sold the common shares partially (~25 million shares); kept the converts untouched; no derivative was used 9 (9.6%) Shares/convert not sold; Used swapped contracts to lock-in some gains (but not meaningful) 7 (7.4%) Did absolutely nothing 59 (62.8%) WILD CARD: bought more on its way up 3 (3.2%)