Munger_Disciple

Did anyone else have problems watching the Charlie Rose interview with Buffet? It seems to stop after about 6min into the interview.

Parsad, How did you calculate Bershire's leverage (Assets/Equity) to be 3:1? I get a much lower number. If you consider their insurance ops, it is very small (222B assets, 62B float). I agree with you that one of Fairfax's problems is too much leverage in the insurance ops. Your comparison however implies it is closer to Berkshire's leverage when it is not.

Thanks for the great post, Parsad.

Wow! $2100 is pretty rich.

These numbers are for A shares: BV ~ $85K, IV ~ $125K

Given that "regime changes" in volatility/severity are almost impossible to detect, it seems that it is unlikely that one can successfully predict reliably with this fractal theory.

Can you explain how the fractal pattern theory predict the severity of hurricanes?

Parsad, I heard that Pabrai was down 70% last year, so it implies that he needs a gain of over 200% to break-even when compared to Jan 2008 results (which is probably why he is still under the high water mark). You mentioned all his funds were up > 3% when compared to S&P 500. Is the 3% annualized or total? Also, how many years are his funds in business? Thanks in advance for your comments.

Excellent post, Kiltacular! I agree wholeheartedly. I would also add that Berkshire has significantly less leverage in their insurance ops than FFH (as measured by premiums written/networth) which gives them a lot more flexibility to underwrite a great amount of business when the insurance mkt hardens. Here is my 2 cents: I think Berkshire will outperform FFH in the next 5 years. Full disclosure: I own Berkshire.

Parsad, Can you please expand on Mohnish's comment regarding Berkshire's value? I don't quite get his comment about range widening. Thanks, Sreenr

I don't think Taleb's strategy is so hot. We hear about how his strategy is great now that the market has fallen 40% from its peak, but we never hear about how much money he lost with expired put options over the past 15 years. It is the opposite of Buffett strategy. Buffett is willing to take on CAT risks or put option risks when he is well compensated for taking those risks. Overall, I am not too impressed by Taleb. Most experienced investors knew that markets did and would continue to do weird things from time well before Taleb wrote his books. He seems to think he is a genius and everyone else is an idiot. He is basically peddling his books.

In my opinion, a portfolio with up to 10-12 position is a concentrated portfolio. To the other board members who think they can beat the indices with a broadly diversified portfolio, all I can say is good luck! Just an interesting tidbit about Ben Graham: By his own admission, he made most of his money on one stock! He pointed it out at the end of Intelligent Investor.

Kyle, I agree with your comments. As Buffett pointed out, one should decide if he is a no-nothing investor, or if he is a capable investor. If he belongs to the first category, he should buy a low-cost index fund with a dollar-cost averaging method. If he is a capable fellow, then he should concentrate his investments in a few good companies with zero risk of permanent loss of capital. If the investor's assessment of himself is wrong, hopefully he recognizes his shortcomings in time and sticks to indexing going forward. Sreenr

I will be there also. -Sreenr

Thanks for a warm welcome to the group & valuable feedback.

Oldye: The combined ratio includes charges for estimated losses and underwriting expenses. I agree with you that the combined ratio for any given year, while important, will not tell us the whole story for an insurer. However, a table of combined ratios for the past N years (N>=10) will present a pretty good picture of an insurer's underwriting effectiveness. If the insurer took uncompensated risks, this table will look ugly.

Thanks for your suggestion of accounting for the impact of CAT loss in the underwriting results over a period of time (good as well as bad). I have reviewed Fairfax's underwriting results for the past 10 years, and I think there is room for improvement especially when compared to Berkshire. I think Prem sounds so much like a younger version of Warren that I have no doubt that he will only get better with time. Thanks also to others for their comments.

I am a relatively new member to this board. I have read most of the publicly available information about Fairfax, Prem, etc. I have also found this board to be very informative and the discussions to be of high quality in general. As I see it, the following are the things I like about Fairfax: Positives: 1. Prem is smart, humble and seems a very capable investor. As a fellow alumni from the Indian Institute of Technology, I am very proud of his accomplishments to date. 2. Prem owns ~10% of the stock, his salary at Fairfax is reasonable, and takes no stock options. Therefore his interests are completely aligned with those of the shareholders. I know of very few company CEOs other than Berkshire that can claim this. In most of the companies the management enriches themselves at the expense of shareholders. 3. Prem's track record of increasing Fairfax's book value to-date is very impressive. I have however the following concerns as I evaluate Fairfax as a potential investment: Concerns: 1. The insurance underwriting results appear to be not very impressive. I also did not like the excuses provided in the 2009 AGM presentation (except for this loss and that loss, etc., the results would have been great) for poor underwriting results. i am hoping that (given that Prem is a smart CEO) they will improve upon these results in the future. 2. Fairfax appears to have a very large premium revenue compared to book value (almost 2x). This may put them in a potentially adverse situation in the future if there is a significant loss. 3. While the overall investment results are very impressive, they seem be making (small) investments in very iffy situations like Bowater, Canwest, etc. It seems to me that given the steep drop in equity markets, you can go first-class in terms of quality of companies invested in. I do not quite understand the thinking here. I respect the opinions of all the members on this board, so your feedback will be greatly appreciated. Regards, -Sreen Raghavan