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ValueCarl, This is the short article...no unusual criticism here, just highlighting the key factors in the YoY change. http://torontostar.morningstar.ca/globalhome/industry/news.asp?articleid=326936 Lackluster underwriting profits were once again displayed in Canadian insurer Fairfax Financial Holding's FFH FRFHF fourth-quarter earnings report. The combined ratio for all insurance and reinsurance operations was 102% in the fourth quarter and 100% for the full year. The company earned $1.65 per diluted share in the fourth quarter as investment gains were muted compared with last year. Fairfax made a great call several years ago and prepared itself for financial market turmoil, which resulted in outsized investment gains in 2008 driving fourth-quarter earnings to almost $20 per share. Not so this year, as the firm recorded a quarterly net loss on investments of $30 million versus a quarterly net gain of $681 million in 2008. Earlier in the day Fairfax announced that it was buying the remaining outstanding stock that it did not already own in American insurance company Zenith National Insurance ZNT for a 31% premium to yesterday's closing price of $29 per share. Because we do not cover Zenith and have no fair value estimate on the stock, we have put Fairfax under review as we determine whether this is a good deal for shareholders.

It's better for the speculator to fail on their own dime than on CMHC's (read taxpayer's) dime. Market stability through curbs is nothing new and a sign of an effective regulator. Sure it dampens some market volume, but it avoids crashing a market that can have significant impacts in the wider economy (viz. US 2006-08, Toronto 1998-92, etc). From the government's perspective, sales taxes (consumption taxes) still arrive at a regular rate from new housing starts at the expense of some capital gains which could be offset by capital losses in a speculative crash. -O

txlaw...thanks, a good read. The recovery is indeed fragile which suggests retaining cash in the portfolio along with selected hedges. -O

http://www.gurufocus.com/news.php?id=84522

Baupost is finding undervaluations in distressed financials and media companies http://www.sec.gov/Archives/edgar/data/1061768/000114036110006076/form13fhr.txt -O

http://www.sec.gov/Archives/edgar/data/915191/000095012310011727/o59479ae13fvhr.txt

http://www.financialpost.com/video/index.html?category=Financial+Post&video=t8eEp3bL2itkxQoDEK0ILdBWCL8iPSfR

I've been following Goodwood for a couple of years. Goodwood has a value investment focus. They largely play in undervalued Canadian small and mid-caps. They're thoughtful and focused on their craft. This should be a good partnership for Westaim. http://www.goodwoodfunds.com/ http://www.goodwoodfunds.com/articles.htm -O

The weak speculators in the market just can't help themselves from self-inflicted errors. When one starts, others will follow. I'm increasingly following the Buffett, Klarman and Berkowitz views for having significant cash holdings in one's portfolio. http://online.wsj.com/article/SB20001424052748704905604575027601300360196.html Pensions Look to Leverage Up State of Wisconsin Investment Board Clears Plan to Borrow to Juice Returns Public pension funds needing to boost their returns but frustrated with hedge funds and private-equity investments are turning to one of the oldest investment strategies—using borrowed money to boost performance. The strategy calls for leveraging pension funds' safest asset—government or other high-grade bonds—while reducing exposure to stocks. The State of Wisconsin Investment Board, which manages $78 billion, became among the first to adopt the strategy when it approved the plan Tuesday. The fund will borrow an amount equivalent to 4% of assets this year, and as much as 20% of its assets over the next three years. Fund officials say that use of leverage could eventually go higher—in theory, at least, up to 100% of assets, according to the staff analysis. ...more at www.wsj.com...

Good point...I was wondering why they filed a 6-K with the SEC today since they should be delisted. -O

Gates reminds me of Michael Jordan during his baseball phase -- passing time, but wanting back in the game. If memory serves, he's the 2nd largest BRK shareholder (~$6B) and he has the skills to replace Buffett when he passes. -O

Kraft and Cadbury agreed to a deal late this afternoon. http://dealbook.blogs.nytimes.com/2010/01/18/kraft-and-cadbury-near-a-friendly-deal/#more-167519

What is that? Subtitles? I thought I was keeping the messages simple... ;D -O = voting machine = short term = weighing machine = long term

NetJets sees a bit of blue sky Chairman expects a profitable year, with stable staffing, perhaps growth through acquisition (hat tip to Shai Dardashti) http://www.dispatch.com/live/content/business/stories/2010/01/18/netjets_update.ART_ART_01-18-10_A8_OGGAAL0.html?sid=101

scorpion, That's the greater fool thinking by the "little guy". BRK will ultimately rise or fall based on Berkshire's ability to increase intrinsic value. A reasonable set of assumptions using the 2-column valuation method shows BRK is slightly undervalued at present operating earnings levels. With a modest recovery in the economy, that undervaluation will become more pronounced. -O

Maida is always a worthwhile read. It's amazing to see his record over the last decade while holding such large amounts of cash. His chart on market capitalization to GDP is probably the driver behind the large cash component in his portfolio. Opposite of the Hoisington view, he sees inflation rather than deflation as the significant mover of valuations. He pointedly sees risk in long bonds. With rising inflation, stock valuations should begin to revert to the long-term mean where cash can be put to work. -O

ValueCarl and everyone, How about if we cool the snippy responses. Otherwise, we're heading into timeouts and bans. Let's keep a civil and respectful tone. Don't drink and post...Happy New Year! -O (puts down glass of wine)

Viking, http://www.rationalwalk.com/?p=281 http://www.loschmanagement.com/Berkshire%20Hathaway/Financial%20Tables/8.%20Two%20Column%20Valuation/2008%20valuation%202%20column.pdf This is probably the model that you'll want to look at -- the 2-column model which Buffett has suggested as an approach in his annual reports. This model will show that there is a modest undervaluation in the range of about 20-30% depending on assumptions. You'll also want to consider the range of values that Buffett was willing to use in the BNSF purchase where stock was a component of the deal. He put a collar on the upper and lower ranges (I just don't have it at my fingertips, but I did see it in the last few days) which give an indicator of intrinsic valuation. At 100K for an A share, I recall that it was about dead centre in the collar ranges. Hope that helps... EDIT: http://www.bnsf.com/investors/berkshire-hathaway/pdf/berkshirehathaways4a_20091223.pdf If the merger is completed, each of your shares of BNSF common stock will be converted into the right to receive, at your election (subject to the proration and reallocation procedures described in this proxy statement/prospectus), either (i) $100.00 in cash, without interest, or (ii) a portion of a share of Berkshire Class A common stock equal to the exchange ratio, which is calculated by dividing $100.00 by the average of the daily volume−weighted average trading prices per share of Berkshire Class A common stock over the ten trading day period ending on the second full trading day prior to completion of the merger (the “Class A average trading value”); provided, however, that if the Class A average trading value is above $124,652.09 or below $79,777.34, then the exchange ratio will be fixed at 0.000802233 or 0.001253489, as the case may be. Fractional shares of Berkshire Class A common stock will not be issued in the merger. Instead, shares of Berkshire Class B common stock will be issued in lieu of any fractional shares of Berkshire Class A common stock and cash will be paid in lieu of any fractional shares of Berkshire Class B common stock. To facilitate the merger and related transactions, Berkshire is seeking stockholder approval to effect a 50−for−1 stock split with respect to its Class B common stock. Shares of Berkshire Class A and Class B common stock are listed on the New York Stock Exchange under the stock symbols “BRK.A” and “BRK.B,” respectively. -O

Pof4520, I'm currently reading Klarman's book and re-reading Graham, so this question is top of mind -- Are you a speculator or an investor? If it's undervalued in your valuation model and you've diligently researched your assumptions, why do you care what others think? Is MCF undervalued based on future cash flows or are you hoping for someone to buy it at a higher price? -O

Viking, BRK is selling at a discount in my valuation model. The operating businesses have a significant upside when the US economy recovers. US$/CAN$ trade will always have CAN government intervention when the CAN$ affects export markets. There is usually some reaction around parity. Buying a depressed BRK in CAN$ should raise the margin of safety in your favour. -O

Watching the growth of core positions and additions purchased at discount prices in 2008 and 2009, piling up new cash inflows, and finding depressed cyclicals for tack-on minor positions. 2010 will be a focus year for expanding the watch list, developing a deeper understanding of a select few companies, and watching for mis-valuations in under-followed FCF-generating small caps. Hopefully, 2010 will be a slothful year, but I'm prepared for more. -O

Cdn real estate market is overvalued compared to historical valuations - sell, trim holdings, raise cash... Cdn banks may not be as profitable in the next couple of years and their balance sheets will be under siege. http://www.financialpost.com/story-printer.html?id=2368846 Piet Eichholtz, a professor of real estate finance at Maastricht University in the Netherlands, came to a similar conclusion when he studied real estate prices in an Amsterdam neighbourhood from 1628 to 1973. He found that home prices required 350 years to double in real terms. If you assume home prices should rise in line with inflation, you come to a dire outlook for Canadian real estate. Taking figures from 1990, 1995 and 2000, and boosting them by inflation during the intervening years, suggests the national average home price should check in around $200,000 -- a third less than the current figure. More sophisticated calculations arrive at similar estimates. David Rosenberg, chief economist at the money manager Gluskin Sheff in Toronto, examined home prices in relation to personal incomes and residential rents. He concluded that prices are between 15% and 35% above levels that are consistent with fundamentals. "If being 15% to 35% overvalued isn't a bubble, then it's the next closest thing," he writes.

More from Ben Stein http://money.cnn.com/2009/12/18/news/warren_buffett_stein.fortune/?section=magazines_fortune This, however, said Buffett, was not a reason to doubt the stock market's 2009 comeback. Buffett noted that the biggest gain the Dow had ever notched in the postwar period came in 1954 when, according to him, the unemployment numbers were dismal (although nowhere near as bad as today's) until late in the year, when a rapid recovery began. The same thing could be happening now, he said. (I checked this later and as usual, Buffett had it right about the recovery from the 1953-54 slowdown.)

http://www.gurufocus.com/news.php?id=79254 http://video.foxbusiness.com/#/12584632/ben-stein-and-warren-buffett-getting-it-done/?category_id=1292d14d0e3afdcf0b31500afefb92724c08f046 markets are not overvalued nuclear proliferation a bigger threat than inflation

Chris Browne left behind a good legacy of investment research. The last item is a speech he gave at Columbia in 2000. I recall reading their paper on "What has worked in investing" a few years ago -- dry, but a worthwhile read. http://www.tweedy.com/research/papers_speeches.php -O