SharperDingaan

Sadly - good leadership, and a good investment, don't have a high degree of correlation. Mostly because leadership is long-term orientated whereas investment is short term orientated. A great business requires reputation, growth & predictability, whereas a great investment - just requires volatility. An Enron a Worldcom, a Nortel were all great investments; both on the way up (long), and on the way down (short). Had you 'invested' wisely, you would have made stupid amounts of money. The leadership in those companies? not so hot. There are all kinds of other examples - and we see them every day. Might not be most peoples preference, but it is just another way of turning a profit. The equation changes when you have partners. Shareholders are NOT partners. no matter how much they might think they are. Partners have unlimited liability exposure to each other, shareholders don't. Different dynamics. SD

Like it or not, FFH is a family business transitioning succession. An inherently higher risk activity. Mistakes are inevitable. There is a reason why merit is a criteria, and not nepotism - and the higher the appointment, the more critical that separation is. It is preferable that the screw-ups happen in a row-boat, not the ship carrying the row-boats; there are lots of potential solutions, but it will be a family decision, not the shareholders. Higher risk, gets settled via a higher price discount. Lower multiples, haircuts for opportunity loss, waning 'popularity', etc. There are plenty of fish in the sea. An investor can toss back an ugly one, and get a replacement, at any time. We wish them luck, but most investors would be better off elsewhere. SD

The purpose of the Covid spend is to get the economy back on its feet. Most people cannot continue to live where they are if their property taxes go up 50% in one year, and more the year after. They have to move - and their forced mass selling into into a buyers market, will drops MV's, which will drop LOC maximums, contracting credit and strangling recovery. Recovery isn't going to happen, if the municipalities or states are bankrupt. Ultimately - the issue is the size of the cumulative debt (muni, state, fed) across all 52 states, and how it gets serviced. If the economic pie is shrinking (or no longer growing), there are hard choices. SD

Covid-19 has been with us for a while now, and we have a better picture of the spend to date on the various stimulus programs. As well as a murky insight into a number of grey elephants that hadn't initially been considered. The economic 'story' is "Yes, it is serious - but it is a temporary blip; that we will recover from once the economy is back up". All canadian municipalities are required to balance their budget every year, with any shortfall charged to the taxbase the following year. Toronto, recently forecast a current year Covid-19 related shortfall of 1.65B, and a property tax-hike of 35% if it weren't addressed - late last week, the Federal Government agreed to fund part of it. Every single municipality in Canada has the same issue, and will seek similar relief. The same Grey Rhino is present in the US. Most project annual Covid-19 spend to exceed the annual spend levels of WWII. During WWII, both the Allies/Axis financed their war efforts via patriotic domestic war-bonds - long/no maturities, and very low rates. The US financed Vietnam by removal of gold backed notes, and the USD as the worlds reserve currency. For a Canada, it is hard to imagine an eventual total Covid-19 recovery bill, of much under 2-3T - net of multiple years of wage subsidies, industry bailouts, mega-project stimulus, and social spend on skills retooling. Canada will come out modernized, and a lot stronger for it - but it's a nation building multi-year project - NOT a 1-2 year project. At 10x Canada's size - the total US bill is roughly 20-30T+. The EU will have something similar. I would like to hear how US based COBF members, would expect a financing of this size to play out - as it has never been done before. My own view is that ultimately, this it is going to require new arrangements, similar to what occurred in the years immediately following the end of WWII. And NONE OF THIS is priced into the market yet. SD

Think of your career. For most people - the industry you work in - is the industry in which you got your first full-time job. For the CPA, CFA, lawyer, etc. - it is the industry you went to as soon as you got your designation. Anytime you change jobs, that will be the industry where you are the 'best fit', and where you will get paid most. PROCESS keeps you in the industry swim-lane, and luck chose the industry - it was just where the jobs were at the time. It is the same in investing. To change careers requires ongoing flexibility, significant effort, and ability to absorb loss for an extended period (ask anyone in o/g). An individual might use a MBA/PhD as the change vehicle, an IT manager might use Agile Project Management. A PM has to rely on how often the 'phone rings - today's star value investor being tomorrow's bum. Successful investing requires ongoing mental flexibility, and continuous expansion of circle of competence. A great antidote is to learn how to simultaneously play chess against 4-5 other players, under distraction. It forces one to filter, think flexibly and at speed, in terms of flow versus static positions, and always outside the box (as everyone knows the standard thrusts/parries). Sadly, the former east block players that I used to play with have all passed on now, and their games were always an 'event' - 18 minutes, to win 2 or more games, to the music of Tchaikovsky's 1812 Overture ;D The 'master's' at this used to insist on fireworks for the cannon, played pissed out of their skulls, and were the most cunning evil bastards you'd ever want to play. SD

It will be a year-end 'discussion' item with their auditor. One side will argue that it was isolated, and correctly accounted for via the loss recorded on date on sale. As a result of the sale, the valuation premise of the remaining stake was further strengthened - hence an impairment write-down is not required (opinion). The other side will most likely concur - subject to a disclosure note that outlines the material facts of the transaction. Reader makes his/her own decision. Comes back to the trust, vision, and informational reporting thing. One is either OK with this kind of thing, or not. SD

Assume FFH does NOT record the impairment - subject to an annual future MM impairment charge. It is not unusual for different owners of the Toronto DT towers to have different valuations on their ownership portions of the same tower (precedent)- and just reflects their differing future opinions. IFRS accounting is accepting as long as the opinion and valuation is documented - and there is annual impairment testing (valuation model re-run with current data), if the opinion difference is material. SD

Treat it as a learning experience in investment strategy. Master it, if you intend to invest in the 2nd/3rd world. Three main takeaways. 1. A minority shareholder has no place investing in a FAH. He/she has to trust the majority shareholder, believe in their 'vision', and accept that the entire information structure of the new arrangement - puts them at a severe disadvantage. Lot more 'real' to just write a cheque to Oxfam, or invest in an african gold/platinum miner. 2. FFH sucks at this. Sure, they should do better under the new management going forward - but they are still neophytes. Given how hard it is to outrun devaluation/corruption, and how easy it is to screw up; most would expect more fails than successes. Implies that FAH is worth more as a short, and that there is a bias towards taking the minority out altogether - at a discount. 3. If you want to invest in Africa, use an index fund - & bet against the MCSI Index. Diversifies the risk, buy at a deep liquidity discount when there is a rush for the exits (today), sell at inflated prices when there is a rush back in .... Helios reporting outsized profits, triggering a gold rush ;) We live in interesting times. SD

The reality is that the reputational damage to the Watsa family, is far more damaging than the $ lost. Good intentions are great, but they are well out of their depth in these 2nd/3rd world ventures. If this is truly going to be a long-term thing - at least one family member needs to apprentice on site, under skilled expertise, for an extended period of time. A great opportunity! We wish them luck. SD

It is useful to think in stages. During Covid, Covid Recovery, Post Recovery. Africa doesn't have the medical infrastructure that a NA or Europe has. Hence, most would estimate how long until there is a working vaccine in wide distribution within a NA/Europe, and triple it for Africa (3rd world will be last in line). The reality is that Africa will be achieving herd immunity primarily by contracting Covid, and surviving it - a very difficult business environment for quite some time. If the average devaluation over the next 5 years, is 8%/yr (conservative), a $ invested today is worth 68c. CB's in NA/Europe are dong 'whatever it takes', with current/forecast spending at war time levels in many places. The traditional hedge against unavoidable currency devaluation is precious metals; either bullion itself, or the miners producing it. Africa is home to some of the most productive gold/platinum mines in the world - and the shares of all the bigger miners trade on unrestricted global exchanges, outside of Africa (liquid, enforceable rights, no capital controls). Pretty clear where a foreign investor, wishing to invest in Africa, needs to be. The equation changes if the investor intends to consume the production, as either a tourist, or to make/distribute some other product. Buy that second property in Cape Town ;) not Florida, and visit for 3-4 weeks every year. Use the minerals (China), or resell to others (Glencore, etc.). Point is - there has to be a flexible and intelligent LONG TERM plan If you had a $ today, to put into either a FAH or an ABX, where would you put it? Then, do you really see that changing? while Covid does its thing, around the world? Hence, maybe it's time to rethink the execution. WEB did it with the airline stocks. Africa is a tough place to invest, and we wish them the best of luck. SD

Just to give an indication of the FX headwind. 07/09/2019 the ZAR/CAD FX rate was 10.791:1. One year later, 07/09/2020 the ZAR/CAD FX rate was 12.4363:1. ZAR had devalued by 15.25% ((12.4363-10.7910)/10.7910) x 100. The Atlas Mara and CIG investments were made when the ZAR/CAD was stronger. Their cumulative FX devaluation is a lot worse. The FAH books are denominated in USD. Balance Sheet revalues every quarter-end, reducing equity. To maintain the BS ratio's requires fresh capital every year, in addition to the maintenance capex. Not a problem while they are rolling in the investments, but after it's done? Not to say that it cannot work, but it's a lot of work - just to break even. Hopefully, it works out for them. SD https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates-lookup/?series%5B%5D=FXZARCAD&lookupPage=lookup_daily_exchange_rates_2017.php&startRange=2010-07-09&rangeType=range&rangeValue=1.y&dFrom=&dTo=&submit_button=Submit

Behavioural conditioning requires both rewards and penalties. It can't be one side of the coin only. It is also a simple task to add 'circuit breakers' into the conditioning process, as already occurs on the major exchanges. Sure, it is not libertarian - but neither is the 'real world. It's just an alternative approach, that also solves some practical problems. An echo-chamber is of no value - to anybody. Game in/out friends/undesirables, and you just destroy the value of your time and reputation invested. Self correction. Different strokes. SD

Just to add to this ... Consider upvoting/downvoting + an algorithm as the self-regulating mechanism - by which to move people between tiers. 3 tiers at a different annual subscription rate/year - Tier 1 at zero cost, Tier 2 at $$, Tier 3 at $$$$. You can buy access to a tier, but if behave like an asshole the algorithm bounces you down to a lower tier. Do quality posts, and the algorithm bounces you up a tier (& free of charge for however long you remain in that elevated tier). Incentive driven behaviour, and costs covered. Consider a similar override algorithm for the controversial. A NYC is what it is, because their ain't no shrinking violets, it is very 'grounded', and they ain't above telling anybody off - directly, and with panache :) It is the antidote to echo-chambers. SD

Nice to see. Congratulations! SD

Most long-timers have just evolved over time. At one time they were utter sh1te, and the board was a valuable asset. Over time, the value-add of the board declined as they got better. Eventually, ongoing participation just wasn't worth the upkeep. No dispute that the tone has declined quite a bit over time. I flatly will not post on our positions any more, other than for disclosure or time-capsule purposes. Lots of time for informed enquiry/criticism - but peanut gallery comment? PFO. My own view is that the tone reflects ongoing deterioration in US business leadership/civility. When tolerance of Trump antics are the 'new norm', a decline in tone is pretty much inevitable. SD

He's not wrong - but the timing of all this is the mystery. Reserve status loss is also a LOT more routine than most recognize; everytime a nation's economy reverts to 'dollarization' - versus its own currency. Zimbabwe, South America (multiple times/places), EU member switches to the EU, etc. Most often not 'planned', more a gradual build-up to a tipping-point - and sudden change, expressed as a 'market discontinuity'. Folks don't want to hear it, but the recent technological ability to use CBDC, as a global reserve currency replacement - fundamentally alters everything. The limitation is not the technology, but the thinking/mind-set. Reserve status confers power, but it's a limited term (long-term) engagement, and inherently disruptive (unstable). CBDC offers shared power, no time horizon, and is inherently stabilizing (high volume trade/capital flows settle via the CBDC, low volume trade/tourism flow settle via local currency exchange) Game theory suggests a once-only advantage to the first nation, that converts its reserve currency status to the CBDC A China never gets reserve currency status, and each of the USD, EU, Yuan, etc lose their regional currency status. Unlikely to occur under a Trump - more likely under someone else. The more global disruption/bad community behaviour, the closer the tipping point. SD .

There's is little doubt that over time, FAH could build a solid business in Africa. But it is wealth in an isolated gilded cage, and only local - try to convert that wealth into hard currency, and most often - investors will be disappointed. Always a devaluation + liquidity discount, the size of which will vary according to money flow in/out of the MCSI index. Colonialism has been much maligned across Africa, but the reality is that the business model was very successful. Colonialism 2.0, is even more effective - let the natives control the domestic assets (saving on upkeep), and control distribution/sale of the output instead (minerals, food, exports, etc.). China's Belt & Road initiative, in various african nations, a more recent example. We may decry Colonialism 2.0 as a business model - but if you own a cottage/holiday property, you are practicing exactly that. The municipality services the area as it sees fit, sets the taxes, you pay them. You take the benefits of the property/area, and sell/use them for as much you can get. If you don't believe - look at the seasonal towns, swamped by large numbers of long weekend 'outsiders' - some bearing covid-19. Who is doing the protesting? Point is, this might be an opportune time to rethink the approach. Hopefully, they do well, no matter the decision. SD

Depends on what's a "reasonable time frame". The time frame I see most often in the media is 12-18 months. It's hard not to be doubtful of that claim. From what I at this point we have the knowledge and capability to pretty much make any (most?) vaccine in 12-18 months. So I'm not so worried about the time frame. What I'm worried when it comes to the vaccine is: 1. Will it be any good? 2. Will the moron internet people actually get vaccinated? I am by no means an anti vaccination individual. Get your vaccines and trust science. That being said, I don’t get the flu vaccine every year, and a vaccine produced for a virus we don’t truly understand does give me a bit of pause. I’m pretty much extremely low risk for covid to begin with. I probably would get it anyways, but seeing a vaccine rushed to market without any significant length of testing/long term effect analysis does make me think twice. There are people on here saying that hydroxychloroquine hasn’t been tested enough and verified with long term effects. Wouldn’t it make logical sense to be just as hesitant regarding a vaccine? An accelerated covid-19 vaccine is not going to be rapidly accepted, until the public sees whether large numbers of the high-profile 'volunteers', get the virus or or not. Nice if they don't die (for social media clips), but no different to the tried and true poison testers of old. Show me, don't tell me :) SD

Hate to say it, but FFH really needs to rethink this entire thing. After FX devaluation, the investments will have to be stellar performers - just to break even. Until Covid-19 has run its course -simply put the cash into more robust entities (Barrick, Anglo-American, etc) doing acquisitions in the space. They will be the first to recover, and their shares are liquid - allowing easy exit at any time. Reassess later once the survivors are evident, and everyone is looking for recapitalization investment. Africa is not a place where the wealth is made by owning the capital stock. It is made by selling the annual production at a profit abroad, and returning only enough capital for maintenance capex & modest growth. Capital assets routinely get nationalized, and African countries routinely devalue. SD

Envy isn't unlearnt. The antidote, is all about subtly 're-setting' game decision matrices. Many a shepherd/women knows that's all that's required to break up a 'bromance', is to parade an attractive/available women in front of them. Competition will do the rest, cause both bro's to become available, and put both women first in line. Everybody wins. Of course - the trick is to recognize when YOU are being gamed! Talk to your significant other - you'll soon discover that you haven't a clue :) SD

Without envy, it would be very hard to motivate your sales force. If they aren't hungry, they aren't selling - and you're the evil bastard game-setting by putting the 'standards/expectations' in their heads. SD

I have used play accounts for much the same reason as LC. Primarily to train in the mechanics of the asset class, and the associated emotional highs/lows. The bad times typically more valuable than the good. I have also used them to side-car long-term positions that I did not wish to sell - to prevent them from influencing the main portfolio. Given your purpose, and location, the obvious choice is SPY puts. Simply because the changing election prospects are already part of the daily index. Make money, as long as the election result is likely to produce significant change, good or bad. Just be mindful that if you end up keeping the 'funny money', while those around you lost their shirts, you will be resented. Not a lot of fun, should the economy settle somewhere between the Great Recession, and the Great Depression, for a time. SD

On food production.. A very large % of existing production is extremely wasteful, and just goes to landfill, particularly in the US - the limitations are water availability, and production volumes at the expense of quality, and wastage. The 'solution' is increasingly being seen as integrated, drip-fed vertical greenhouses and fish/shrimp farms, in run-down urban centres - processing waste water. The poorest neighbourhoods eating the freshest, and highest quality, fish/veggies - because they are the cheapest food available, grown in the neighbourhood, and the largest local employer. The 'farm' now in the city itself - not hundreds of km away. And yes - fish/veggies are not the only tings that are grown in these. Gotta maintain a cash flow :) .... SD

How the words are strung, how they are expressed, and which words/phrases are used. Partially accent as well. Main point being that you will not 'sound' American (which is much harsher), which you will do if if you learn Spanish in the US. The Lima experience is to add harshness, and fluency in the local slang. Dilute your use of American slang as much as possible. To use a Canadian example, there is Quebecois, and there is Parisienne French - both are French, but each are instantly recognizable. There's no mistaking where the French guy muttering Tabarnac! comes from. Similar thing with Spanish. SD

Probably my biggest take-away from traveling was exactly this: I met several people with 1/100 of the assets/salaries of us here in the west, but they were 100x happier. Puts our first-world problems in perspective and frankly how unnecessarily we grind so hard and become so unhappy. Been to ~50 countries and agree with both of these big time. Once we get past the pandemic, I'm going to look heavily into digital nomading/slow travel. It's not that expansive in most places in the third world. You just need to find a place to rent monthly. In places like Mexico my cost has been between 500 to 1000 dollars per month. Yeah, was mainly saying that due to my US passport and the virus outbreak, I'm persona non grata for most places in the world currently. I think I'd target SE Asia starting out, Vietnam or Thailand. Really liked Da Nang when I was there in November. Though eventually would like to try Buenos Aires, Santiago, and Medellin. I'm absolutely not a warm weather person so would have to migrate in the summers (or get closer to the poles where it'd be cooler). With US citizenship, you might want to confine your traveling (until AFTER the elections) to just the major centres. In a great many places, a US citizen is a ATM machine. Each one worth a lifetime's earnings, if grabbed for K&R, and sold up the chain. Grab &/or early release, typically a function of how you/your government are perceived. South America is a great place, with great people - but it will help you tremendously if you can speak Spanish, and eat local. A few months in Quito (Ecuador) at Spanish School, then Lima (Peru) to polish it up. Why Quito? Dialect matters, and it will affect how you are perceived. Why Lima? It's cheap (by NA standards), and the jump-off point to the Galapagos, Manchu Picchu, and the Nazca Lines. Highly recommend a 3-4 month stay in Buenos Aires. It really is the Paris of South America. A 2-3 month stay in Rio de Janeiro, straddling Carnival, is also something that you will never forget! Enjoy! SD