JEast

Based on the recent short form notice, they have bought 65k since June 30. Not anything like that have indicated that they would buy though, but with the caveat being that they needed the capital to buy more Brit/Allied.

Sold the last remaining 4.91% stake of ICICI Lombard for a slightly better price than the previous block. https://www.business-standard.com/article/companies/fairfax-offloads-4-9-stake-in-icici-lombard-for-rs-2-627-crore-119101700048_1.html

In non-legal speak, the defendant usually pays for the privilege to not have to admit guilt.

January, 20th 2003 — Morgan Keegan & Company put out a fake report that FFH was bankrupt and the stock price tanked in the morning to around CAD$50 briefly. Others joined in for the next few years until around 2006 when a lawsuit was brought forward against all. Morgan Keegan & Company finally admit their guilt over fifteen years later. https://www.fairfax.ca/news/press-releases/press-release-details/2018/Fairfax-Settles-Lawsuit-With-Morgan-Keegan/default.aspx Many of us knew this was a hit job and especially when about three days later after the report release the analyst revised his story and said he had a typo of just a few billion (if memory serves).

Maybe my comments were too subtle and the above quote is more to the point. As all banks have pulled their horns in and have become basically domestic franchises, then what is a UK bank worth that has captured 9% of the domestic market with annuity type returns? TBV is maybe an archaic measurement these days, but TBV plus intangible franchise value makes some look very inexpensive with only recessionary risk. In a few select European countries, there are some domestic banks that have 25-40% market shares presently with negligible to zero intangibles on the balance sheet.

From about 1986 thru to 1992, US banks in general had a tough time with the S&L crisis where over 1,000 banks were closed and that also included a nice recession in ’90-‘91. Near the end of this terrible period, you could buy banks for 60-80% of TBV and all paying a healthy dividend. Then, coming out of that period the banks had a long runway for 10-15 years only culminating in the beginning of the ’07 crisis. It took nearly six years to clean up the mess the first time and appears that it has taken about 8 years to clean up the mess second time. What’s different now versus the ’86-’92 period? A lot. There were roughly 12,000 banks in the US in 1992 and today their are less than 4,900 due to consolidation and Dodd/Frank pushing smaller banks out, and Now, the top 10 banks capture the vast majority of all US deposits. The regulatory capture has also made the largest banks even in a more advantageous position with the ‘stickiness’ of IT, such as, Winner takes all effects with digital and ongoing with Fintech R&D (e.g. what small bank can afford an annual $500m spend on cybersecurity). Also, Buffett gave a big thumb up to banking last year with his BAC conversion and Dimon says it is just the sixth inning. That is the US from a very cursory look, but what about Europe, the UK, and maybe Africa? In essence, the UK is about two years behind the US and selective opportunities in Europe are a year or two behind the UK. Also, the European regulators are forcing banks to up their IT game and only the bigger banks can afford this ongoing expense. Again, the biggest banks appear to be locking in customers in a somewhat annuity type outcome, as the stickiness of IT will keep customers for a long time. In addition, some big banks in the UK may even have better IT presently then in the US and are selling at only 70-90% of TBV. In addition, with the ‘ring fencing’ in the UK is the financial risk reduced more due to a more centric domestic market? Outside of the UK, there are some European banks with similar attributes and are selling for significantly less but maybe a little more political risk. What makes some of these non-US banks seem interesting, along with the current low valuation with potentially annuity type returns going forward, is that they are actually cheaper than they appear due to the recently adopted IFSR9 (booking loan losses up front). From a value perspective — this up front loss acts like additional margin of safety — does it not (e.g. many banks took 10-15% equity adjustments for anticipated loans losses)? One could make an educated guess that loan-to-value-plus-collateral is better today than 10 years ago and this pro-cyclical accounting adoption should make the banks even more overcapitalized over the next few years, maybe longer. As for the UK challenger banks, they have made good progress but its been easy pickings and their IT spend going forward will catch up to them eventually. So and if we are in the sixth inning in the US as some have suggested, then Europe, the UK, and maybe Africa are only in the second or third inning. What say our UK and European friends?

Here is hoping our friend BB and team have put another $3-4B to work in the 12-24 month space this month.

A more recent hypothesis is that it was not societal collapse but foreign rats that changed the ecological system (see The Statues That Walked by Hunt & Lipo or National Geographic video ). Diamond debates this full throated though.

As this is a very global bunch of folks. Any comments/recommendations for a dual sim global phone with all bands that works in all SE Asia (including Japan). The Huawei P10 and OnePlus 5T have good reviews but actual use is lacking for on the ground feedback.

First investment book I have ever read that spoke about Socrates, Popper, and Graham in a cohesive investing narrative which is the first third of the book. Maybe a little highbrow for the beginning investor, but I enjoyed the narrative. For the majority on this board, the remainder of the book may be considered review, still, another nice installment from Columbia Publications and a worthy addition to an investor’s shelf. Cheers James

IPO early next week (Sept 15-19). https://www.bloomberg.com/gadfly/articles/2017-09-08/india-s-insurance-party-gets-started http://www.moneycontrol.com/news/business/ipo-business/icici-lombard-general-insurance-ipo-to-open-on-september-15-icici-bank-shares-gain-2381159.html

A placeholder for future discussion from our South Asia board members. https://www.infibeam.com/about-us

An interesting book on decision making from real action of both failures and successes, not to mention the historical perspective. https://www.barnesandnoble.com/w/washingtons-crossing-david-hackett-fischer/1100617342?ean=9780195181593

In North America, we live in the land of the free and home to more contradictions than anyone can imagine. Maybe the lexicon of ‘false’ or ‘wrong’ is too pejorative and a more appropriate description is just inaccurate. Because even the most seemingly bulletproof scientific theories of times past eventually proved to be inaccurate, we must assume that today’s theories will someday prove inaccurate as well – Pessimistic Meta-Induction from the History of Science.

There has been some unique programs over the last 6-9 months that have found considerable interest from the public - namely the 2 or 3 year policies for two-wheelers and bodily injury policies for train rides. As the rules/regulations continue to change in India, found this update a little interesting, in a good way, for the Indian capital markets. http://www.reuters.com/article/india-debt-bonds-idUSL4N1E71CZ