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“Third, I and many on this board am pretty agnostic when it comes to profits. We count cash and want there to be more next year then the current one.” Look, any way you cut it we are all looking for profits in one form or another. Profits generated year over year increase book value. I would not be particularly intersted in investing in any company that was not interested in profits. Perhaps I took this out of context? “...Mister Market cares about underwriting. Insurance Analysts view investment gains as one time deals...” Unfortunately that is true but one would think that there would come a point where Mr. Market would eventually clue in to the fact that HWIC has built a track record that deserves to be factored into the value of this company. And yes, a serious downturn could adversely effect those investment gains but the same climate would also tend to depress underwriting profits. Those Insurance Analysts might also remember that we had a pretty nasty bump in the economy a year or so ago and FFH didn’t fare too badly - to put it mildly. Perhaps some of those guys should start to “think outside the box”.

I understand that many assess FFH on their underwriting abilities, rather than their investment prowess. But here is where this logic escapes me. In the long run, what difference does lower underwriting profitability make if it is more than offset by the profit produced by their investing side of the business? Isn’t the objective to have a profitable company, who cares which part of the company that profit comes from? Would you give a higher value to a company that didn`t show the profits that FFH has, just because it had better underwriting numbers and yet its overall profit wasn`t as good? What ever happened to `the bottom line`. I am involved in retail. At times we have loss leaders to stimulate sales in other areas. If you look at it in this way, perhaps FFH would be even better off if they lost more on the underwriting side if that in turn generated more customer’s premiums which FFH could use to produce even more profits from investments . I’m not recommending this, just using the analogy.

Speicher suggests that Fairfax fair value should be in the range of $574/ share. http://www.gurufocus.com/news.php?id=101996

It has been quite a while, but "thefrenchguy" has posted again on Stockhouse. We have quoted him in the past and since I believe his father works at the St-Félicien mill he may have some insight not generaly available. He says......... "I do agree with your evaluation of 1.50 $, but there is still concern to be fixed: They have to come with an agreement with workers at St-Félicien mill, they are without contrat for 1 year now. They meet the union the July 22. Apparently, workers are ready to strike. Also, they have to find a new way to buy wood chips and leave Abitibi-bowater (too expensive once supply agreement will be over) I also heard that even if the price of NBSK is 1020 $/ton, they are not selling at this price. They offer 100 $ rebate per ton to best customer.Also, transportation is expensive. I heard the net profit is just 120 $/ton these days. For sure, the share price, rights price and this offering is very dissapointing, I will not exersice my rights Tomorrow... I put everything on Bombardier with the Farnboro show next week and Cseries orders to come...

Yes FFHWatcher, that's exactly the same conclusion I came to. It really comes down to - do I want more FBK? Saving two cents a share really doesn't come into it. However, contrary to some past experiences, I do think that the price has been depressed by the offering so I felt that this was as good a time to pick up some more. I think....

Also exercised most of my rights today, however I hold some FBK in my TFSA and since it is maxed out I would have to transfer those rights out which would take several days and since tomorrow is the last day, I guess I'll let them go. I probably have enough in FBK already. As Uccmal says - here goes nothing! I really feel that the rights offering has artifically lowered the price on FBK and after a couple of weeks I would hope to see at least some increase in share price. The biggest problem that I see is in what goes on with the markets and economy on a global scale. My optomistic side says that we are on the tail end of a correction and hopefully it should level out soon and reverse itself by mid September. Then again, I have been wrong before.

I have two kids who have bounced around in various jobs in a region with a high unemployment rate. They have both faced some tough times now and then, but I don't think either of them has ever been unemployed for more than a week in the past ten years. When they couldn’t find work near home they packed their bags and moved to where the work is. During the pull-back last year one of them was cut from a $100k a year job. Within 3 days he was working elsewhere for $60k. But for someone like this Scott guy, fresh out of collage, to pass up a $40k job and to sit around his parents home waiting for the “perfect” job seems to me like the kind guy that no one would hire. Its not the lack of jobs, it’s the lack of work ethic and the unrealistic sense of entitlement that is the problem. Opihiman: The job(s) he turned down were hardly criminal. One was an insurance adjuster’s position, the other as an officer in the Marine Corp. However one thing is for sure, with his attitude he wouldn’t last long with the Marines. Perhaps you should read before you make comments. Oh and by the way, if I was Scott and my Dad had taken out an insurance policy on my life, I think I would get real serious about moving out and finding a job real quick before Dad started getting ideas about collecting on that policy!

The question of the 20% discount on the rights offering has been debated on the board for several weeks now and I must be missing something. It seems obvious to me that the discount must apply to all shareholders simply because if there was not a discount involved (or some other substantial advantage), why would any shareholder want to purchase under the rights offering? We are being offered the opportunity to buy one right (or share) for every (3?) that we own. There has to be some enticement for shareholders to buy more shares. The way I see it is this. I assume that FBK wants to raise cash to pay off debt. They could either issue more shares on the general market OR give their shareholders (including FFH) an opportunity to increase their holdings at a discount to the market price. As far as dilution is concerned, if they use the proceeds of the rights offering to retire debt already owing, is that really dilution? That is, if they sell $40 million in new shares and reduce debt by $40 million, is not the company then worth $40 million more? Clever idea asking the shareholders to chip in and pay out company debt with the reward of decreasing debt and interest expense in the hopes of increasing share value for all. As I said at the start, am I missing something?

The whole idea of reducing business in a soft market seems a little short sighted to me. All industries have their ups and downs, but one thing we all share in common is that customers are much easier to turn away than they are to recapture when markets turn hard. One soon realizes the value of retaining customers when you look at the cost in advertising dollars it takes to bring in each new customer. Before you start reducing your customer base, you better be darn sure you are not going to need them somewhere down the road.

Thanks IV, that's what I thought was probably going on. Guess if I had a few hundred thousand shares that I had picked if for 20-30 cents, I might want to take the 'bird in the hand' too. Been a lot of shares change hands in the last week.

Couple of points. 1) From SFK's press release: "It is anticipated that the reorganized structure of the Fund as a corporation will attract new investors, including non-resident investors, and provide, in the aggregate, a more active, attractive and liquid market for the common shares of the new corporation .." Are some reading this as a hint that there is a take over in the winds? I read this as simply stating what it says. Converting to a corporation will make their shares more attractive on the open market and bring in new shareholders such as funds and non-resident investors who were previously not interested in units of an income trust. This in turn should increase demand and liquidity and have a positive effect on share prices. 2) Regarding the postings from the "Frenchguy" on Stockhouse. Let's not forget that he has stated that he is a student who's father works in the St Felicien plant. While rumours are sometimes true, they are often just speculation. Some of his posts are indeed helpful like the news about the recent short shutdown - they really do seem very enthusiastic and reminiscent of some "pump & dump" efforts I have seen in the past. 3) I am a little surprised that CFX's 1st Q results and the run up yesterday seemed to have no impact on SFK. Anybody have any explanation for this? There seemed to be a lot of sellers whenever the price got much above $1.90. 4) I would also like to express my thanks and respect to SD for his ever insightful, informative and interesting comments and analysis.

Wondering if someone on the board could give me some insight into how the CDN$/U$ impacts the value of FFH? From a Canadian point of view I would think that as our dollar increases, this would tend to devalue the company (in CDN$ terms) considering the amount of US holdings and operations FFH has - and the fact that it states it's figures in U$. But with FFH becoming more global all the time, I don't have any idea how significant the effect of our rising dollar has on the overall value of the company. Seeing the share price drop these days is no surprise as it seems to be an annual ritual this time of year, but is some of that as a result of the loonies increase?

The Stockhouse posting was made in the evening of April 7th and I saw it the following morning.. That day I was wondering if the posting might have any impact on share price but on April 8th the stock actually dropped several cents to close at $1.26 so obviously there was no effect. However, when the same message was re-posted here yesterday, the stock priced jumped by over a dime, in fact up about 15 cents at one time. Coincidence? The same person made another SFK posting yesterday and for everyone's interest here are the last three postings from Stockhouse ---------------------------------------------------------------- huge profit coming thefrenchguy 4/7/2010 10:27:10 PM | | 99 reads | Post #28112661 Hi SFK fellows !!!! This stock is underevaluated. Let me give you the numbers for Q1. Thrust me, I have worked at the St-félicien mill for 2 years as a student and my father worked there for more than 30 years now (since the opening in 1978). I have discussed with him during Easter holiday at St-Félicien. Note: those numbers and facts are only for the St-Félicien Mill - Average Production was 1000 tons/day for almost everyday during the Q1 (lets say 28 days x 3 months) = 85 days x 1000 tons = 85 000 tons. - Average sell price was around 900 $/ton (will easily reach 1000 $/ton this year according to him) - Production Cost around 600 $/ton = 300$ profit per ton x 85 000 tons = 25 500 000 $ profit for Q1. This is without the inventory. Inventory was 70 000 tons last year during summer and are now less than 10 000 tons. Storage places are almost empty, everything is sold. I suspect that they will had some profits from those sells in Q1 results. The regular spring shutdown will be shortened to only 4 days to minimize the impact on production. The demand is too crazy. Workers overther expect the share price to reach 4 $-5$ by the end of the year. With the new compagny to be created (Fibrek Inc.) management will obviously try to make the SP reach this level to offer some more shares on the market and raise money. The ultimate goal here is to by some sawmill and be self-sufficient in wood chips. Right now, they buy wood chips to Abitibi-Bowater at high prices. Good luck -------------------------------------------------------- RE: huge profit coming oddykog 4/13/2010 2:43:51 PM | | 51 reads | Post #28131479 I agree with you on mot of what you wrote. Possibly the target for the shares is a bit high, but I will settle for $3-4/share. I think the recycled pulp mills in the US should also be doing well with their end product. What I don't know and will wait to find out is whether they are able to get enough recycled paper to keep those mills humming. Basically in the pulp industry at present you can sell all you can make. ------------------------------------------------- RE: RE: huge profit coming thefrenchguy 4/13/2010 9:35:07 PM | | 28 reads | Post #28132891 you're too, the US mill are doing great, in fact, I asked my father: Are those new mills profitable ?? He answered: Apparently that without them, year end results would have been worst than what they are. those USA mills saved SFK pulp. They only black cloud for SFK is the contract with the union that is due for more than 1 year now. But my father said that at LaTuque and at couple of other mills in Québec, they have obtained easy agrement with the union. SFK will probably base their offers on what has passed over there and hope for a positive respond. They cannot close St-Félicien mill (for a strike) with prices close to 1000 $/ton. I accumulated big time since 2 week Good luck --------------------------------------------------

This might be slightly off topic, but I see something else in the value of Fairfax that is not necessarily reflected in the short term share price. Contrary to most public corporations, for a long time Prem Watsa has paid himself an exceptionally modest salary - $600k - (not that I would turn it down mind you). His wage depends on dividends and his wealth on the value of the company. This gives shareholders confidence and trust that Mr. Watsa’s goals are the same as those of us who wish to own part of this company. This is the way it should be. How many public companies are run in such an honest and fair manner? I too get frustrated with the fluctuations in the share price, but the bottom line is that I have confidence that management’s goals are essentially the same as mine. He and the rest of us are all shareholders. That makes it a lot easier to sleep at night and handle the ups and downs. Not only do I not have this same faith in many other companies but I personally believe that the ludicrous incentive plans that were given to many CEO’s led to the rape of their companies and in turn was the leading cause of the recent meltdown. While company officials prospered, shareholders lost their shirts. When Mr. Watsa does well so will I.

Well you gotta hand it to Dundee, eh. That's quite a risky prediction saying that SFK might actually run all the way up to a buck. Oh yeah, the last trade was at $1.42 so it seems kind of a safe call. Of course since they had been predicting $0.50 - anything looks better. I would suggest that there are a number of members of this board that could get an analysts job at Dundee. I used to believe some of those guys until I learned the hard way how expensive that could be. Really, do they actually get paid for their opinions? My rant of the day.

.. and on the subject of Dundee's fearless predictions Google alerts just put this out ... "FEBRUARY 23, 2010, 7:58 A.M. ET. SFK Pulp Target Raised To C$1 From C$0.50 By Dundee"

SFK will release its 2009 fourth quarter and year-end results after market hours on Wednesday, February 24th, 2010

nodnub Not as yet, but I am concerned about that. It may be more psychological than reality on my part but if the share price is moving rapidly - as it does at times - a delay in buying or selling a small lot could prove expensive.

"199 out of every 200 investors should not be picking their own stocks" You are perhaps right, and this may be a little convoluted, but isn't that a good reason to own FFH?

"who cares about a temporary 5-10% pop from splitting the shares" I tend to disagree that the 5-10% increase would be temporary. That hasn't been my experience with other shares that have split. In fact I believe that the long term effect would tend to keep share price a little more in line with book value. On the other hand I definitely agree that there is money to be made with the volatility of FFH. I have been so tempted to sell every time FFH takes a big jump, but always resist in the fear that I may get left behind if it doesn't drop back. Guess I'm going to have to suck it up and start playing that game. But again as a small investor it's not so easy with the share price where it is. Condolences over your capital gains problems... ;D

So Sanjeev, what you are suggesting is that you would prefer a lower share price to ensure a better quality of shareholders. But isn’t that rather counterproductive? I mean the value of the company is generally the product of management - not the group intelligence of shareholders. Further, in watching the share price of Fairfax bounce around over the past few years doesn’t give one lot of confidence in the ability of the present shareholders to put a proper or consistent value on this company. While the value has been consistently increasing, the share price charts looks like my dog’s teeth. Let’s say splitting shares eventually leads to an average 5-10% increase in share value, don’t you think that would outweigh the fact that you would have a lesser quality of shareholders? And as far as volatility is concerned, this company can move 10% in a couple of days and all too frequently does. Hypothetically, lets say ownership of FFH was limited to a few dozen very knowledgeable shareholders, are you sure that the share price would rise quicker over time than if they were more widely held? What if if liquidity was lowered to the point where there was such a limited market there was no one to sell the shares to? The expertise of many members of this board is most impressive, but there is one rule of business that rarely fails. Any commodity, no matter what it’s value is only worth what someone will pay for it. When you limit your market, you limit the competition and thereby what people are willing to pay. Long term or short term, isn’t the reason any of us buy shares in any company is to make money? (Forgive me if I sound like Kevin O’Leary)

I hate to disagree with some members of this board because i have the utmost respect for their opinions, but the "split shares and I'm gone" concept seems to be a bit of an elitist position. Not everyone is a fund manager or can afford to own thousands of shares. There would seem to be very little downside in splitting shares from what I can see. From past experience it seems a given that when a stock splits, liquidity on the market improves, the shares become more available to the smaller investor and the price increases. There might also be some other spin off from having a wider base of shareholders. Now when I shop around for personal or company insurance I make it a point to consider FFH as an insurer. Why would any company who deals with the public want to keep a low profile? When investors complain about FFH shares selling for a lower ratio to book than some competitors, might that not that have something to do with its low profile? The more shareholders there are, the more people who will do their research and recognize the integrity of this company and the farsighted investments they make. That in itself will tend to snowball and help keep prices in the range where they should be. And if a stock split improves prices - what's wrong with that, isn't that why we invested in the first place? I often read where FFH shareholders say they don't really care about the short term pricing, but in my opinion, the higher the average price, the better because who knows when one might want to sell for any number of good reasons? As a small investor, I know that I for one would own more of FFH if it was selling for a lower price.

Seems that the FBI agent who cleared Fairfax is now pursuing SAC and Cohen. This is a very interesting article. http://www.iii.co.uk/news/?type=afxnews&articleid=7657202&subject=companies&action=article Lest anyone think Prem's claims against Cohen and friends are a little far fetched (letters to his church, crank calls, etc), those incidents seem to pale in comparison to some of the other things that were alleged to have happened at SAC. "In a lawsuit earlier that year Tong had charged that his male supervisor, Ping Jiang, then a top SAC trader, forced him to perform oral sex on him before completing a trade, according to people familiar with the investigation and court papers. Tong also alleged Jiang ordered him to take female hormones to turn him into "the ideal analyst/trader," combining both male and female characteristics, the court documents note." Sounds like Fairfax probably wasn't the only party getting screwed. Sorry, I couldn't resist that.