Partner24

Very enlightening. Thank you very much onyx! The first thing that came in my mind is how poorly we compare to the rest of the group regarding underwriting. We're not on that chart because of our underwriting discipline and expertise advantages, but mostly because of our investing acumen. I'm not saying that I'm overall unsatisfied shareholder, but I must face the brutal facts of reality. That being said, there is a IF. The only thing that could change my mind is the reserves. If our reserves are conservatively stated and our competitors reserves are very understated, then that underwriting picture could change significantly. But that's just a IF, time will tell and you don't give medals to athletes before they get to the finish line. So far, we have not been the fast runner on that point. But I'm very confident that we deserve the gold medal on the investing front.

Leucadia top management overall track record is stellar, even when you consider the annus horribilis 2008. They have their own investment style. They historically bought so so businesses, turned them around and then sell them to more optimistic buyers. That model worked very well until 2008, when strong headwinds blasted weak businesses. Add to that the fact that they were optimistic about what emergent countries like China would do on the price of basic materials, and you had the recipe for blood on the street. But Leucadia survived and their top managers learned. Regarding their historical track return and poor 2008, that is were the puck has been. Where the puck will go? Leucadia has some size, but not as big as Berkshire. So they still have a decent universe of investment choices for long term capital appreciation. Then, they are now focused on building "fortress Leucadia", wich means that they are focused on long term quality assets to own instead of financial plays (cigar butts, from what I understand). And finally, regarding the succession issue, as far as I know, it is a subject that they talk about at each board meeting since quite a few years. I guess that they don't take that issue lightly. Suffice to say that I'm a happy shareholder and plan to hold my shares for the long term. This is my smallest position, but so far I've been satisfied.

I wish 100% of their assets, not 30%, would be in it. I know that I'm dreaming ::)

As far as I know, they are very conservative with their investing. I like someone who is conservative, but to add a word to it: opportunistic. When there is blood on the street, it's great to be opportunistic enough to be greedy without losing conservativeness because you get great assets with a great margin of safety. Again, as far as I know, that's what's missing with Lancashire to me. Conservative/opportunistic value investing as well as conservative/opportunistic insurance underwriting. I'm really open and willing to get proven wrong on that point. Cheers!

Very good letter as always. Their equity portfolio returned 17% CAGR over the long term and they have only half a dozen stocks in it. Unfortunately, Plymouth is not a publicly traded company. Cheers!

Cost of capital? Never used that number, don't need to neither and don't think that I will use it once in my life. “Obviously, consideration of costs is key, including opportunity costs. Of course capital isn’t free. It’s easy to figure out your cost of borrowing, but theorists went bonkers on the cost of equity capital. They say that if you’re generating a 100% return on capital, then you shouldn’t invest in something that generates an 80% return on capital. It’s crazy.” Charlie Munger http://www.25iq.com/charlie-munger-quotations/

Fairfax settle lawsuit for 3.5 billions! http://www.bbc.co.uk/herefordandworcester/content/images/2006/03/29/april_fool_420_420x420.jpg

Funny picture. Thank you!

Thanks for posting these notes.

Congratulations one and all, and please know that while we have plenty of ignorant numbskulls here in the US, there are a multitude of others like me who respect and admire the hockey team and the country of Canada. All the best. -Crip Stephen, that's a very elegant behavior. No problem for some of your fellows US citizens. More than 10 years ago, I've been to Vermont, Maine and New Hampshire a few times by hitchhiking (I used to be more frugal...). I've had a terrific time over there. Most of the people I've met were warm, friendly and generous. I'll always remember my short stay at Meredith and a person who've done one hour more of car driving just to help me to get where I wanted faster. Cheers!

You can also see that in their equity portfolio. They've been able to buy quality assets at a discounted price. Because of the price, we have the margin of safety. Because of the quality, we have time on our side. Quality see the time as it's friend. Mediocrity see the time as it's enemy. Cheers!

Cheers! http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzcxMDU4fENoaWxkSUQ9MzY3OTk1fFR5cGU9MQ==&t=1

Stock issues (twice in past several months) has led to some dilution of value. Agree, but that's not as much significant as some people seem to think. Shares languishing downwards on relatively low volume with no corporate capacity for buy-backs in fore-seeble future Voting machine stuff. Not significant unless you or Fairfax want to buy or sell some FFH stocks. Continued soft pricing in insurance market Yes, but that can't last forever. It's a cyclical industry that is difficult to predict. We're not in a good cycle indeed, but that will ultimately create some opportunities for patient and strong capital. Fading new opportunities for strong capital gains growth. Well, there is plenty of very decent quality insurers and reinsurers that are cheap out there. Opportunities arise for those who search. You don't find gold by saying that there is no gold out there. You find gold by digging.

Oh my, when are we gonna see Peter Eavis write several articles about Greece liquidity crunch? ::)

Maybe there is an overreaction in the media, but does that media overreaction is deeply reflected in the stock price? I don't think so. It is very difficult to me to predict the long term effect of what's happening right now to Toyota brand, but it sure do not help. Maybe it will, maybe it won't, but I don't like the "maybes". And Toyota already has a significant market share in it's industry. Beside gaining few percentage points of market share and general industry growth tailwind, what will drive it's long term growth? Further cost reductions that will add to the margins? Not sure they can still do that a lot without putting Toyota brand at significant risk. That would sound to me "penny wise, dollar stupid" kind of cost reductions. And I don't see how they will not ultimately faces some new competition (like BYD or someone else), and maybe some will be significant over the long run. So add all of these, and I'm not tempted to buy. I prefer to stay with my actual very boring and quiet holdings. I saw the Peter Lynch interview posted here and it was interesting. He said something like a private investor can find 3 or 4 stocks per decade and that's quite enough. I couldn't agree more. Toyota is not an idea like that to me, but that's just my own opinion.

Well, 4 years later, maybe you could just put this on the PremWatsa.com website: http://www.gifs.net/Animation11/Science_and_Body/Hands_and_Feet/Clapping.gif Cheers! ;)

That's another stellar year for Fairfax. I'm delighted by these results. Some years ago, I told that we were making steps in the right direction. I must say now that we've made huge steps in the right direction! ;D Suffice to say that our balance sheet is far better now than in our lean years period. Furthermore, I'm impressed by the Fairfax shift toward quality-at-a-good-prices investments. While the equity portfolio hedge removing and strong investments in equities was a historical event for Fairfax recently, maybe we'll see Zenith acquisiton as an another historical shift few years from now. Cheers!

Reading some of the stuff on Deep Capture is like reading a book review of "How to destroy the capitalist system for fun and profit" Ahahah that's the quote of the day :) I have nothing to add.

Well, suffice to say that they are investing within their circle of competence ;)

Main US listed equities investments at 12/31/2009 market value: 1- Wells Fargo 2- Dell 3- Johnson and Johnson 4- GE 5- US Bancorp May have some mistakes. Take it with a pinch of salt.

"What a bunch of slime-bags!" Please don't insult slime-bags by comparing them to us. Mr. Slime, the CEO of The Slime-bags association.

Each time I see or hear the word "Fitch", the first thing that comes in my mind is "Who cares?". I never read their reports anymore. Maybe I sound a little bit rude, but I remember the feeling that I had a few years ago about them with their Fairfax reports and I think that memory will last for decades. Cheers!

Hi Dr Malone, It's nice to see you. I watch it too with a lot of interest. That being said, each answer provide you with more questions with this show, so I've concluded that it would be better off for me to just wait and see because a lot of reflexion and theories that I've heard find themselves unfunded few episodes later. So, in short, finding good predictive answers the the Lost show is outside of my circle of competence ;) Cheers!

Some may prefer that because it reduces the gap between intrinsic value and market price, but I'm of another group that believes you sacrifice the quality of your shareholder base...and not by a little bit, but by alot! Cheers! Well, I guess I'm between the two groups. I can buy a piece of a business for 0,10$ or 3000$, I doesn't matter that much. If I buy 2X 1/8 or 1 X 1/4 of a pizza, I still get 1/4 of the pizza anyway. Is the pizza taste good, made with good ingredients and sell for an appropriate price questions matter far much. That being said, having a higher price per share is per se a good filter because people who don't understand the "doesn't matter much how many slices a pizza has" concept don't buy them, but to me it becomes inappropriate when the price per share is too high so some young, but potential long term and business oriented shareholders can't afford them.

No, it is not ridiculous. You do not build statues of persons who are pessimistic on this society. To build a civilization, you need energic, ambitious, goal driven and optimistic people...not people who always think that sky will fall on their head. One of our more respected Prime Minister who funded the Caisse de Dépôt here in Quebec, when we was recently asked what when wrong with this institution, said that managers used to be driven by the "good father of a family" (I don't know how to full translate it in english) principle. Wall Street, over the last decades, forgotten this principle and we now unfortunately need to put some unperfect rules like that to kick some bu***s on Wall Street. Very respectfully submitted, Partner