ERICOPOLY

What are you referring to when you mentioned the '40% down news and the delisting news....' ? In my first mention of the loan I was trying to get, I mentioned that they required me to put 40% down (I don't want to put more than 20%, which is the standard if I had income). Within a few seconds I saw the news that FFH was being delisted (which set off a round of questions in my head), and then a few seconds later saw that I had to double my down payment if I want that house (There is nothing like being mentally anchored at 20%!).

I appreciate the home loan ideas -- I agree though that it is off topic. I walked in the door and checked my messages and was hit with the 40% down news and the delisting news at the same time (that's the only relation).

Get an account with Interactive Brokers. They give 30% initial and maintenance margin on Toronto FFH. http://www.interactivebrokers.com/en/p.php?f=margin That looks like it's a viable alternative, thanks for the help.

Tax deduction. You can only deduct mortgage interest up to $100k of principle amount for loans, if those loans weren't used to finance the initial purchase of the home. But you gave me an idea -- maybe I can get a HELOC, and when I draw on it if I use the funds to buy stocks I could then probably deduct it as investment expense (much the same as margin interest). I also wanted a 30 yr fixed loan, but I don't think I can get that with a HELOC (I could be wrong).

It sounds like you have a job then, if you are talking about W2 forms. I said I am retired. There is no W2. Bank account has less than $30k. The money is in the brokerage a/c. You need to have a job to qualify for a conforming loan -- I don't qualify because I don't have a job, so my only option is a "portfolio lender" who will keep the loan on the books. Fannie/Freddie won't touch a loan issued to me (income is required), so that's why I get the door shut in my face. Imagine, you could have $50m in Berkshire stock but... no income!

Eric as a US resident no Canadian broker will open an account for you, thank the SEC for this. I am sure you can find a US domiciled broker who will extend margin on Cdn listed securities. That's so lame. But there's too much lame going around this week. For instance, I've been trying to get a home loan the past couple of days, and I've been experiencing lame on a whole new scale that I never thought existed. I quit my job in early 2008 so the only person who will give me a loan (after much hunting around) wants 40% down and 6.5% on a 30 yr fixed. But if I had a job, it would be less than 5.5% and only 20% down for that 30yr fixed. I asked them how much income I would need from that job to qualify for the 20% down loan, and they said "X". Well, I told them that I already have 40 yrs worth of "X" in hand... 40 birds in hand has got to be worth more than one in the bush right? I asked them what if the person with the income gets laid off? Well, they said he could just go get another job. So I said, well so couldn't I get another job if I had to? I mean, this is absurd. Personally, if it were my money, I'd rather lend it to the guy who had 40 yrs income, and who could pay cash for the full price of the home 4 times over right now (rather than just once over 30 yrs). Is this why the financial system is such a mess, because lenders won't lend money to people of low risk and instead want the person that's one pinkslip away from foreclosure? Why in the world do they act like this?

I take it the new TSX USD denominated version of FFH can be used for this, so no currency conversions needed.

I'm not going to be able to use my FFH as margin equity if I take delivery on the 2011 calls, now that it is going to be a "foreign" listed stock. In order to preserve my margin borrowing capacity I'll need to take delivery of FFH and then move the shares to an account in Canada I assume? Any tips on best/reasonable Canadian brokerage?

I have some good news for you there: I held my NBFCF (Northbridge) shares in my IRA -- traded over the counter. I currently hold SFKUF (SFK.UN) in my IRA -- again, over the counter.

That's what happened with NB. I owned it via the ticker NBFCF.

Don't worry, they had children. http://en.wikipedia.org/wiki/Echo_Boomers In the United States the actual "Echo Boom" was a thirteen year span between 1980 and 1995[40] when for the first time since 1964, the number of live births reached over four million. It wouldn’t be until 1985 that the live birth number would even match that of 1965 at 3.760 million. Also it should be noted that the birthrate of 1971’s 17.2% has yet to be reached according to the 2000 census. [41] One analysis of American demographics locates the increase in births between 1979 and 1992. By this calculation there are 60 million members of the generation, more than three times the size of Generation X, and just shy of the 78.2 million baby boomers

Per the "Monetary History of the United States" by Milton Friedman and Anna Schwartz, from 1875-1900 (i.e. 25 years) consumer prices fell by more than 1% a year. Cheers JEast I'll bet one can't find "quantitative easing" in that book.

The supposed equities bubble is confounding me because a rising tide should lift all boats. YTD performance: Berkshire +6.6% JNJ +3.9% WFC -4%

Where is the fault in that? Is it unethical to sell FFH above fair value? What if he unloads his WFC stake above fair value, is there a duty to tell the buyer that he is getting ripped off? Has Warren ever sold anything above fair value, taking advantage of some rube?

They would hedge more than 25% of their stocks if they were building a deflation bet. I think they are making a "spread will tighten" bet, and getting paid well while they wait. The Julian Robertson "yields at 20%+" scenario they are not too worried about I suppose, unless they have some new hedges in place. Or do they still have some CDS that would protect them?

I read an interview yesterday showing that Peter Schiff (running for Congress) wants to put the United States back on the gold standard. Even if the United States held all the gold in the world, it would only amount to about $20,000 per person. So there simply isn't enough to go around Peter. Ah, but somebody would say that they coins distributed would be silver or copper (or both). So why not a silver or copper standard? Why beat around the bush?

Based on the first 9 months of 2009, annualized interest and dividend income (less interest expenses) comes to 8% (pre-tax) of book value. At a 30% tax rate it comes to 5.6%. So, capital gains (relative to book value) need to be roughly 9.5% in order to drive BV by 15%. Are you guys saying that they can't do 9.5% from capital gains? Too big? I strongly disagree. Have you ever heard of a $7b fund that can't return 9.5% based on an argument that it is "TOO BIG"? I can't quite grasp how you can really believe that.

Has it been a "pure insurance play" the past two years? What exactly is a "pure" insurance play anyhow? I would consider a pure insurance play to be a company that 1) relies on underwriting profit to drive earnings 2) and invests the float in short term govt bonds. Fairfax is neither. Fairfax is an investment vehicle. The investments drive the growth in book value per share. JNJ is not an insurance company. WFC is not an insurance company. GE isn't either. Munis neither. Fairfax's results will be driven by the outcome of these non-insurance investments. Same as ever. Think ORH's 20% growth the past 8 years or so were driven by underwriting profits alone? It was mostly the investment returns.

You're right, that's it. Gates says the operating companies are now worth more than the "investment portfolio". IV > 2x investments (according to Gates). I guess that puts IV > 184,000 per share (according to Gates).

Somebody on this board recently (last 2 weeks) told us that Bill Gates thinks the operating subsidiaries are worth more than the equities portfolio at Berkshire. Who was that boardmember? I remember the comment, but I can't find it.

I think you're right. Too much Disneyland for me. I took something you said earlier for sarcasm, but maybe I was tired. You remind me of the good things Fairfax will bring, basically the points you are making are the reason why I hold 50% Fairfax and 0% Berkshire. I only scratch my head at whether or not the market should price liquidity at a premium... I think it is valuable to have liquidity yet I couldn't see 100% cash (an extreme example) being worth a premium to book. But whatever, I agree they are in pole position.

There are still some big public companies out there that Buffett is passing up to buy the rest of BNI. He is passing up GE, JNJ for example (both Fairfax favorites). Owns a little of JNJ already, but could certainly own a lot more. Doesn't own much of GE at all. He could have bought enormous amounts of both on a fractional basis, but prefers to own the whole of BNI. I haven't really seen Fairfax do much trading in this past year. They've been buyers the past year, but not much selling. Much of their flexibility comes from the S&P500 hedge, and that's something that Buffett could have done if he had wanted to.

I'm actually not at all upset, but I can see you are pissed off so I'll stop inverting your idea. Maybe you are having a bad day, maybe you don't like to be questioned, maybe you don't like me, maybe you think I am going after you, I have no idea. I actually thought it was a constructive conversation because you are the first person I've heard argue that companies should trade at a premium if they are invested in common stocks and other liquid assets. I had just never before heard that anywhere and was following up with questions to see if you had a special insight, but you are responding as if I stepped on your foot.

Dazel, No bait -- I am not baiting you. You say you "will bite" but just don't start taking this the wrong way. Your comment about a "liquidity premium" of sorts for fractional ownership goes against my thinking, which has been influence by watching Buffett buy companies whole when he could instead continue to buy fractional shares to retain an "advantage". My point for mentioning a couple of Fairfax's businesses on a per share basis was to demonstrate that they don't have control over the underlying cash flows the way Berkshire does with it's wholly owned businesses, nothing more. Retaining the right to have a say in the operations is an advantage in my opinion, and I don't think it should be worth a discount. I picked bad examples, they didn't demonstrate the point. Let's ask another question... if per-share ownership is such a dramatic advantage that it's worth a premium vs full ownership, then why does Buffett prefer full ownership positions? I think Fairfax even mentioned something about increased flexibility when they took the rest of NB and ORH.

I'm not sure if the liquidity argument helps the premium. Aren't these assets priced in a market that knows they are liquid? In other words, isn't this already accounted for in the price of the assets themselves? I was thinking that Berkshire actually has the advantage in the assets not being liquid -- Berkshire has the access to the underlying cash flows. When Fairfax tries to tap the value of JNJ or OSTK, it is held hostage by the bid. The only dividend it can tap from OSTK is... what??? LVLT? There are limits to the value of the liquid assets... the limit is the bid! Liquid markets can be illiquid at times.