cwericb

Ben, but the point I was trying to make is that Fairfax holds a lot of investments that are outside of Canada. Eg, take two Canadian companies with a share price of $50 CDN. One has all their holdings in Canada and one has all their holdings in the US. If the Canadian dollar suddenly dropped, say 30%, the share price of the company with the US holdings would jump by about 30% in Canadian dollars while the company with the Canadian holdings would remain stable.

“...exact hedge against FRFHF...” Ha, even I am not sure what I was trying to say there! FRFHF is simply Fairfax shares priced in US dollars. What I was getting at and to put it simply, is that if the Canadian dollar sinks against the US dollar the price of FFH shares in Canadian dollars tends to rise by a similar amount - in addition to any increase or decrease in the value of the shares themselves. Because of that - for me at least - it works as protection against a fall in the CDN $ vs the US $.

Well it seems to be an exact hedge against FRFHF of course and it seems to run as a very close hedge against the US/CDN dollar, but I haven’t gone to the trouble to do the math. Also Ben is right. The value of Fairfax is directly related to their holdings which now are pretty well all over the world. But this does protect me against a decrease in the value of our currency. (It will also be a negative as our dollar increases vs the US dollar) The bottom line here, for me at least, is that I find Fairfax to be a comfortable investment for three main factors. First, Fairfax is a good company for various reasons. Second, it’s share price fluctuates with the US dollar and provides me with protection against a fall in our currency. Thirdly, it is also a hedge against deflation. If one or two of those factors becomes a negative, I have hope that the remaining factor or factors will help offset that, at least in the long run. So I see it as a relatively safe place to invest. The biggest concern I have with Fairfax is if we run into several catastrophic events that seriously impacts the insurance industry. However, should that happen I assume that it would precipitate a hard market in the industry that might drive some competition out of the business and would also lead to higher premiums and thereby increase the float over time. Am I correct in that assumption?

Fairfax results and holdings are stated in US funds. So as a Canadian investor, FFH share price will fluctuate in correlation with the US/CDN dollar. If the CDN dollar drops against the US dollar, FFH shares will increase in Canadian funds (aside from any fluctuations in actual share value). The reverse is true when the CDN dollar increases, share price will reflect a similar drop. So when we had the runup in share price from October to March the price rose by about 30% in US$ but rose by about 43% in CDN$. During the same period the CDN$ dropped by 13%. So FFH also works as a currency hedge if you reside outside the US.

I might also add that FFH also acts as a hedge against the U.S. dollar.

Just my two cents worth. Fairfax represents a significant part of my investments. They have done quite well under present conditions and I see no reason why they shouldn’t continue to do so. They are expanding and diversifying constantly with both their insurance business and their investments. Certainly there will always be other companies who will do better going forward, but Fairfax should continue to do well. However, should we encounter a period of deflation, many of those other companies may suffer and give up their gains. Since I'm a bit lazy and don’t consider myself an astute enough investor to hedge my investments, I allow Fairfax to do this for me. I’m not banking on Fairfax making billions with deflation, but I am thinking that if we hit a period of inflation the hedges will, at worst, help protect FFH’s value and at best perhaps help make up for potential losses in my other investments.

Is the Board becoming a victim of its own success? I don’t think so, but the biggest difference over the last few years it that the number of subjects of discussion has increased as the number of posters increases. that is only natural. But times are also far different too. Fairfax is not struggling for survival or to regain its reputation, the dark days of 2009 are behind us, and there is not much exciting going on in the markets right now. Also the board is much more international than it was originally. I check the board several times a day and still find it tremendously useful even if it is a little less concentrated than it used to be. I do notice that many of the older members post very little and on the other hand I am amazed where some others get the time to make so many posts. I wish there was some way to identify poster’s age group, occupation, investing background, or a rough total value of their investments because that can reflect on their credibility. Of course there is no way of checking the validity of the information they offer, but at times I will check to see how long they have been board members. But some kid living in their parents basement maybe posting their profound thoughts or paraphrasing something they read on a subject. However, if anyone is a little disillusioned by the changes here they need only look at the inane comments you will find on Stockhouse or Yahoo boards to see how great the quality of our board is. I also agree that a little more participation by Sanjeeve would be welcomed, but with the number of posts and the number of subjects how would that be possible? Methinks he has a lot on his plate at this time in other areas.

Article in Seeking Alpha today: Fairfax Financial: Intrinsic Value Exceeds Market Price http://seekingalpha.com/article/3184136-fairfax-financial-intrinsic-value-exceeds-market-price

So this investigation should put these questions at rest - from a legal aspect. However, there will still be many former Fibrek shareholders who will feel that Fairfax’s “fair and friendly acquisition” moto is a bit of exaggeration at best and a little self serving or hypocritical at the worst. Perhaps a better motto would be “all’s fair in love and war”. They bulldozed through a deal at the expense of Fibrek’s shareholders that was solely in their self interest and cut off any bidding war that might have developed before it had a chance and then you just have to wonder about the participation of Steelhead. The moral here is to be very careful in buying into any company in which Fairfax has an interest because Fairfax can be just as ruthless in the pursuit of their own interests as any other large company. “There is a difference between what is legal and what is ethical” Some here would prefer to ignore that aspect.

I must be missing something here. How was Fairfax forced into a $1.00 bid? Mercer floated an offer of $1.20 in November 2011. Fairfax countered saying the company was worth $1.50. My understanding is that It was AFTER rejecting the $1.20 bid and declaring that the shares were worth $1.50 that Fairfax entered into the lockup at just $1.00. Then Mercer raised their offer to $1.30 and in April of 2012 raised the bid to $1.40. Despite all the excuses being made, Fibrek shareholders lost 40% of what they should have been paid. In what way does this qualify as a Fair and Friendly Acquisition? And just because something may or may not have been illegal does not necessarily mean that it was ethical, fair or friendly.

Site fixed now. eb

Taking me about 20+ seconds to load a page today on Chrome and forever on Firefox. Is this just me?

Wow what a left turn. Any respect I had for Prentice went out the window when he resigned the seat to which he had just elected. Has that ever been done in Canadian politics before? Talk about gathering up your toys and going home! Probably won’t be nearly as bad as some think and it may have its overall benefits for the people of Alberta. Might have been better to have seen a minority NDP government, but the people have spoken. Hopefully this will not be a re-run of what happened in Ontario. Can’t help but think this is just one more demonstration of the ill will Harper has generated across the country.

Prices still rising.............. CBC News: April house sales surge 17% in Toronto, 37% in Vancouver Huge demand for homes and tight supply make for a seller's market in both cities The Toronto Real Estate Board reported 11,303 house sales in the Greater Toronto Area in April, and a five per cent surge in new listings as buyers decided to test the market. The average selling price rose 10 per cent year over year to $635,932, with a detached single-family home in the 416 area code region selling for an average of $1,056,114. Residential property sales in Metro Vancouver reached 4,179, compared to the 3,050 sales in April 2014, and up 2.9 per cent from March, which also saw record sales numbers. http://www.cbc.ca/news/business/april-house-sales-surge-17-in-toronto-37-in-vancouver-1.3061755?ref=fh,content.ighome.com

“Agreed. Give us at least the 40 cents/share that Mercer offered us and we were denied.” Yup. Fairfax is my biggest holding and they are a great company and all that, but some here believe they can do no wrong. However, there are a lot of us on this board who were stung by what happened with Fibrek and won’t soon forget it. As a shareholder I hope they did nothing illegal, but Fairfax’s moto is “fair, friendly acquisitions” they just never stated to whom. Rather hypocritical in my humble opinion. Thanks Quebec for the references as I look back at those pages from 2011and see how many contributors to this board were involved with Fibrek and who are still active here.

This investigation was announced last August. Why is it news again in April when it seems nothing new has been released - or did I miss something? August 1, 2014, WSJ, etc: “Fairfax Financial Under Investigation for Alleged Insider Trading” May 1, 2015, CTV News, etc: “Fairfax under investigation for insider trading” Was May 1st a slow news day or something? Given all this, there was a certain bad smell about that deal and at the very least it added a dose of reality to the “Fair & Friendly” aspect of Fairfax. That is the reason why I try to avoid buying companies in which Fairfax has an interest. I doubt there was personal wrongdoing on anyone’s part, but it was a nasty deal. There were a lot of unhappy Fibrek shareholders and I can't help but wonder if some of them have pushed this investigation which, whatever the outcome, doesn’t add anything to Fairfax’s reputation when you keep seeing headlines like the above.

My experience with deflation primarily involves interest rates and the real estate and construction industries. I have seen mortgage rates run from around 8% up to 20% and back down to where they are now. When interest rates were escalating quickly, people were in a hurry to buy or build before the rates went higher. When interest rates began to drop sharply, people would tend to put off major purchases waiting to get a better rate. It was primarily the periods where rates would temporarily stabilize that people would make their decisions. From this experience, my take would be that if prices start to deflate people will tend to delay major purchases waiting for better prices or for prices to stabilize. Of course this doesn’t apply to items like food, but it does apply to things like clothing, household appliances, vehicles, etc because people will try to get just a little more use out of what they have today before they buy. To suggest that people do not wait for lower prices really doesn’t make much sense. How many people will wait for something to go on sale before they buy? Of course there is a certain segment of the population that is wealthy enough that they don’t have to wait - but even those people may say, well if that yacht looks like it may drop from twenty million to fifteen million if they wait a few months, well....

I'm not sure people are being critical so much as being surprised at the move. I for one, look at this as an interesting development because Fairfax knows what they are doing. This may have been the plan from the start or it may be that they have something else in mind. I am sure we will find out what their game plan is shortly. But there is no justification to try to second guess these guys when none of us have access to the information Fairfax has so how could any of us be qualified to second guess them? As far as share price is concerned, it is simply a poll indicating what other investors think - and we all know how inaccurate some polls can be.

Market sure didn't seem to like the news. FFH.TO down 4% today. Wonder what they have up their sleeve?

I usually type the message in a word processing program (which also spell checks) then just copy & paste through “Reply”. But yes, I still will run into a time out when I forget. But “CTRL A” & “CTRL C” Then go out and back into Reply & then “CTRL V” will quickly copy & paste your reply back in.

That graph shows the Canadian house prices went through a period of 10 years where housing prices were stagnant -all during the 1990's? Boy I don't remember that - (edit) I guess that depended on where you lived.

Ben, I am playing devil’s advocate with many of my comments. I also agree with much of what you write. None of us have a crystal ball - unfortunately - the best we can do is make educated guesses. However, I would point out one unique point in investing in a house. Unlike most investments, it is an investment that you can use, enjoy and live in as the market settles out. What I don't understand is why people seem to assume that Canada consists of just Vancouver, Calgary, Toronto and Montreal. Prices in those cities are very high and while some or all of those cities may see a housing correction, that does not mean that the same correction will necessarily take place in all of Canada. Remember that those cities only represent about one third of the population of Canada. Two thirds of Canadians live elsewhere.

Couple of thoughts. It’s fine to sit out what is likely a bubble, but since this thread began (Feb 2012) how much have average house prices increased in say, Vancouver. Lets say 30%? So if prices suddenly drop by 25%, wouldn’t you still have been better off to have ignored Turner’s warning and have bought in 2012? One other thing. A while ago I suggested that one MAY have been better off to investing in a home three years ago rather than in the markets. Some disagreed. However, they may not be taking into account that the “profit” in the market is taxable when you sell. The “profit” in your home is not.

The subject of this thread was Garth Turner’s prediction of the imminent collapse of a real estate bubble in Canada. But this thread and his comments originated over three years ago.

"Maybe do an instructional youtube video on how to rotate your hand 90° for better videos." Great idea !!! AND we could put it on IQ tests. "Show which rectangle fits your TV/computer screen best, vertical or horizontal."