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The risk that you have when you want to privatize a company is that suddenly, the atmosphere become more charged, outside lawyers firm suddenly care so much about "fair prices" and some shareholders become very thirsty, while others new entrants want to speculate about how far they can stretch you on the price. That's not a situation that tend to help the potential buyer. Since the atmosphere is charged, he can fall into the trap of overpaying. So to avoid mistakes, it's a good idea to issue shares at their full intrinsic value first. But then, if you don't have sufficient cash on hands, what you should prefer? Buying big stuff by issuing debt or equity? If the debt might threatening the business life in the perfect storm scenario, you're better of having 3/4 X of something that has still some value than 4/4 X of something that is worth zero. That being said, like I said before, I prefer to be diluted at a fair price in the first place. Lastly, if you want to compare Berkshire and Fairfax solidity, let me ask you this very theorical and no numbers question: you want to buy a long term life insurance policy. You have only two insurers available, Berkshire and Fairfax, and the premiums are approximately the same. There is no reinsurance on any of them and no outside firm to garantee anything. Wich one would you actually choose? Frankly, I'm very confident that Prem and team made very significant steps in the right direction over the last few years. Their 2009 version is better than their 1998 version and it's where the puck is likely going to be that interest me most. In 2019, as a long term shareholder in the company, I'm looking forward to say that our balance sheet is stronger than ever, our intrinsic value per share over the last 10 years have compounded at a satisfying pace and our management team is also better than ever. Cheers!

The second important thing is to learn for your mistake and do your best to not repeat them in the future. That's the "rinse your cottage cheese" part. Discipline. What did I learned? First, to avoid very high gain potential, but at a significant fundamental risk "expense". So, since then, I did let pass some situations like that, and I effectively avoided some significant gains situations, but losses as well. I put more emphasis on the downside than before this experience. Now, back to Prem. Do you think guys he learned from his 7 lean years experience? From some value traps he recently falled into? I would guess that the answer is mostly yes. So far what I've seen with Fairfax is that they do care more than before on the solidity of our balance sheet. We're not a AAA company à la Berkshire, but we are in safer position than few years ago. Regarding FFH issuing shares since 1998, to me, it's a question of intrinsic value of what you give and what you get. If you issue shares at a discount to their intrinsic value for something that has less value in return, you're expanding your domain at shareholders expense. If what you issue has approximately the same value than what you buy, you're exchanging 4X25 cents for a dollar (fine with me, as long as it makes sense) If you buy something that has more intrinsic value than what you give, then your shareholders profit and it also makes sense.

Al, I think you have done some very good remarks here. The difference of Prem 1998 and 2009 versions are important enough I guess. Everybody do some mistakes and has his own house of horrors. The most important things is not betting the company on a given deal and to always keep a solid balance sheet, even if you think that there is plenty of fish to shoot in barrels around (by the way, some of them shoot back). Then, the first step is to try to clearly identify your mistakes. What went wrong with me? Let me give you an example of one of my two items in my house of horrors. Few years ago, I bought some First Marblehead shares. I tought that it would be a phenomenal gain (higher odds) or nearly lose it all (lower odds) situation. I was a little bit fearful of a credit freeze few months before it actually happened and I wrote to the investors relationship department. I've asked them if they tought that if a credit freeze was to happen, would investors flight more to safer products? Someone told me from FMD that he tought that, on the contrary, if that would happen, it would attract investors to FMD financial products. Oh boy, what history can teach us! Who made the mistake? The guy at FMD or me? ME! ...

The rest of the article show that Berkshire also has done some mistakes, but not at the expense of a solid balance sheet and Berkshire issued some shares at more than 2 times book in 1998 while Fairfax issued shares near book recently He did put some of Fairfax subsidiaries public to privatize them later. To him, it's what is called playing with the stock market. Even if it is critical and I don't agree with everything, I think it is an honest critic (unlike what we often saw over the past few years) and a must read for any Fairfax shareholder who is open to critics. Cheers!

- That being said, Prem the director is not subject to no critic. There is major differences between Fairfax and Berkshire. Fairfax is speculating with it's capital while Berkshire is particulary conservative. - It's the fourth time that Fairfax sell new shares since 1998 and the only one that has been profitable so far by the buyers is the december 2004 one. - In 2003, Fairfax nearly reached a disaster. - In a top of a good cycle for the insurance industry in 1998, Fairfax bought insurance businesses that were in bad shape and it's size tripled. Losses accumulated. - Since then, Fairfax is in a better shape, but Prem wanted to grow fast and he did put Fairfax in a dangerous situation. Warren would never do that. One of the consequences of that is the shares outstanding more than doubled since 1998.

For those who can read French (or translate it), Bernard Mooney from the Journal Les Affaires (Quebec) has written a critical, but honest, view of Fairfax that was released today. It's really far from being Peter Eavis like stuff (from those who remember it). Unfortunately, as far as I know,I think that there is no online version of it. In short: - He said that in a 1995 article, he compared Berkshire to Fairfax, saying that Fairfax was a canadian version of Berkshire Hathaway. He now regrets this past enthousiasm. - There is some points that the two companies share (insurance and reinsurance, two famous investors). - Prem the investor deserve congragulations for his investment acumen shown. His portfolio management returns are exceptional. (to be continued)

Yes, forget about the index, it's Sanjeev lunch. By far, he is the single most important factor of FFH return over the last few years. I mean, I don't know how it did cost, but his today's lunch is worth more than 250 millions $ US for the FFH shareholders. Can someone beat that return on investment? ;) For Few Hot chickens ;)

I've bought it a year or two ago. That's a good introduction to Warren Buffett to kids/teenagers. Cheers!

FFH is now large enough to attract big institutional investors. I wonder who are our new business partners. I've took a quick look at Sedar and Egdar filings, and didn't find anything related to that.

Makes sense. I have nothing to add. Cheers!

My still limited experience as an insurance investor tells me that it's not that easy to predict the timing of the beginning or the end of a given cycle, bet it hard or soft. I'll cross my fingers that we will get better priced reinsurance market, but I will not count on that on the short and mid terms. We have great investors at the helm to manage the portfolio and that will help to grow our book value per share. Regarding FFH stock repurchases, we are actually experiencing the contrary. They will issue some at a discount to their intrinsic value. They are sending the message that they will not grow at the expense of the balance sheet and do not want to repeat the 7 lean years experience. But to me, unless we buy some stuff at a very good price with the proceeds, our intrinsic value per share will be reduced after that FFH stock issue. I guess the day that you'll see massive stock buybacks will be when our stock will be really attractively priced and it will not be done at the expense of a very sound balance sheet. Cheers!

100% agree with these propositions.

At this point today, more than 2 millions ORH shares traded. That means that more than 120 millions of dollars of money have been used to speculate that FFH will boost it's offer above 60$. That's short term stuff, but those who speculate like that face the risk of a material paper loss (at least over the short term) if FFH say "Bye bye" and a little permanent capital loss if remaining shareholders say "Ok" to 60$. Little short term upside potential for a more significant short term downside potential. That being said, I'm not here to predict the odds of these two outcomes because it's not my kind of transaction table and these people are not at the same transaction table than me. I think I might apply for the "borest transaction table that you'll see around" contest. Most of the times, it has served me very well, but sometimes I lost an opportunity (like ORH recently). En effet, c'est la vie. Cheers!

Al, over the short term, the worst case in your scenario is that FFH says "Good bye folks, I'll leave the table now". The shares could then well go back to the 50$ range. That being said, I don't know the precise odds of that happening (but I would suggest that they are higher than 2%) Cheers!

Hi Al, I don't know the odds better than you, but suffice to say that as a value investor, I wouldn't think that Fairfax will stretch the price that much. If they back off because the special commitee and ORH remaining shareholders want to boost the price materially, I'll applause. FFH investment horizon doesn't start and end with the remaining of ORH. Leucadia "Rules of the road": 1. Don't overpay, no matter what the madding crowd is up to. (...) 5. Don't overpay! Cheers!

Frankly, I don't like the idea of diluting my ownership in FFH for less than the intrinsic value of the Fairfax shares, unless what we get in return is also attractive. Because of the intrinsic value per share dilution that we'll basicaly have as a basic consequence, I would be really surprised if FFH increase it's ORH offering price materialy. Cheers!

Keep in mind that: - we will issue some FFH shares (an undervaluated currency) to finance the deal; - ORH shareholders had more than 15% CAGR since 2001, wich is far from being bad, especially if you put that performance of the market context; - ORH short term shareholders had their small bonanza in a very short period of time. A return more than enough to be satisfied in my point of view. In the end, if ORH shareholders push their luck too much and if ORH asked price by it's shareholders does not give FFH a decent margin of safety, you know FFH have the right to say "No".

I'm not sure I'm a fan of Fairfax issuing shares at these prices...growing pains I guess. Perhaps more good would have been done if the company was allowed to continue buying back shares but we'll never know. Well, I guess that they have already someone in mind to issue their new shares. When you buy something for cash, the intrinsic value of what you give is obvious. When you have to issue your own stock, it's not that clear. I'll surely take a look at the price. I guess we will know it fairly soon. That being said, I'm happy that their not in a acquizition mood at the expense of our balance sheet. Cheers!

Welcome to Las Vegas!

I wish I could say that personnaly selling 3700 shares of Markel would mean nothing to me ;)

Ok Crip, I'll don't tell, but I think Sanjeev heard us and he is out to lunch ;)

Ahaha you had me on this one! ;D Cheers!

Thanks for the Rabbitisrich, that's an interesting quiz. The fact is the host increase my odds from 1/3 to 1/2 after the opening of the door with a goat. There is then no value added by switching my choice from one to another. Either way, I'll still have 50% odds.

Crip ahaha ;) So, you are on your way to own more than 50% of the common stocks of the company? :)

On the first round, obviously, my odds to get the car are 1/3. Then, unless he open the door of my first choice AND one of the two doors that has goats in it, on the second round, my odds to get the car are 1/2. If he opens the door of my first choice and another door that has goats, it would be stupid because my odds that I would find the car door would be 100% next round. Let's say that I've choosen the first door and, then the host open the second door (goat). Anyway, if I keep the first one or switch to the third one, the odds are 1/2 now anyway. Le'ts say that I've choosen the second door and then the host open it and I see that it has a goat in it. It would be foolish to keep my first choice because I would be 100% certain that it would have a goat in it.