Partner24

I read a decent book about buying homes. It was written in 1999. The guy predicted that home prices would probably decline over the 2000-2010 period, especially for the average home because a lot of baby boomers would want to sell them and it would create some pressure on prices. Let's say that I would have listened to this prediction and buy puts or short of a given American home prices index it it was possible to do so (that's not the kind of thing that I would do, but let's suppose that for the case in point). Boy, what history can teach us! Past is past. So, what's next for us? How much households that will will want to buy their first house will we have over the next decade? On the opposite side of the transaction table, how much households that will want to sell their house to move to another kind of residence will we have over the next decade? What will happen to interest rates? Will the borrowing cost for buying homes will stay the same? Go higher? Lower? What impact would it have on prices? What will happen with average household income? Will people will have the same, more or less ressources to buy homes? To me, these are important questions and I have my own opinion on that. That being said, I do not think that I know much better than the average Joe on this subject, so my opinion is not very valuable so that's in my "outside of my circle of competence" bin.

Brian Joffe, CEO of diversified conglomerate Bidvest Group, said yesterday that there is a "rosy horizon" for acquisitions. http://www.bloomberg.com/apps/news?pid=20601116&sid=aM5lt3encbDY Going forward, Joffe said that it will keep it's business model very decentralized on the operations, but very centralized on the return on investments expectations. ALEC HOGG: Looking ahead, the decentralised nature of your model - is that going to be helpful, going forward? BRIAN JOFFE: Ja, for me it's fundamental to the way we manage our business, because it is diversified. And I think it's not a model which is unique to us. I think if you take, for example, the supermarket model, they have specialist people doing specialist parts of their business, and so have we. We will continue to look at our business on a very decentralised basis, and to manage in a very focused way the type of return we should get out of every component piece of every business. ALEC HOGG: And another theme that goes through these results is that you have cleaned up balance sheets, you have generated more cash to position yourself well for acquisitions. BRIAN JOFFE: Ja, I think this is an opportunity time, and I'm not saying we would be reckless in running out to buy lots of businesses, but we are hopeful that one or two will come our way and we can close on them. And so on that basis we can get back to our acquisitive growth as well as our organic growth. http://www.moneyweb.co.za/mw/view/mw/en/page295799?oid=314503&sn=2009%20Detail&pid=287226 Cheers!

I really like what Fairfax is doing. They are building slowly, but surely an international platform to develop the business...solid brick after solid brick. Make sense a lot to me! Also, I think that Fairfax is building a reputation of a first class owner. Cheers!

Congragulations to John! Are his children trusts open to investors? ahaha ;) Cheers!

I'm not a follow the crowd, neither a contrarian investor. I do my best to ignore the crowd. Is ABC is a good, solid enough business? Does it has good prospects over the long term? It is run by talented, honest and shareholders oriented managers? What about the price? Is it cheap enough? Wheter people around me are manic or depressive, it doesn't change these fundamental basic questions to me. If the business pass the test, I click on "Buy". If I don't find anything interesting enough, I'll just keep cash waiting patienly for a good offer. I'm happy to say that I still can find some interesting enough opportunities to not having to keep cash to wait. Then, if people offer me a price that is high enough relatively to it's estimated intrinsic value, I'll consider clicking on "Sell". Cheers!

Ahaha, Google AdWords is so terrific sometimes. With this thread, I've seen few ads regarding derivative trading and counterparty services! One say that Lehman and others are gone for counterparty services and they offer their own. :D Cheers!

I like the read. Thanks for posting it. I don't understand most of the "swaps" things out there. I don't know if this Charlie Munger comment would apply on these swaps, but here is what Charlie Munger had to say in a recent interview about some derivative stuff : You and your partner, Warren Buffett, have for years warned about the dangers of the modern derivatives markets, particularly credit derivatives, and about interest rate swaps, currency swaps, and equity swaps. Interest rate swaps have enormous dangers given their size and the accounting that has been allowed. But credit default derivatives took that danger to new levels of excess—from something that was already gross and wrong. In the '20s we had the "bucket shop." The term bucket shop was a term of derision, because it described a gambling parlor. The bucket shop didn't buy any securities. It just enabled people to make bets against the house and the house furnished little statements of how the bets came out. It was like the off-track betting system. Comments and information would be appreciated and welcome. Lastly, one can never say never, but I would be surprised to invest directly in these kind of things one day because actually, I may be really wrong on that, what does it sound to me is some synthetic tools of speculation that have significant counterparty risk. Cheers!

Fairfax and Markel are still sufficiently cheap to me. Some megacaps high quality businesses are still cheap also. It depends on the margin of safety that you ask and the kind of business that you search for. If I can find a business that can grow by 12% per annum (more is the bonus) over the next 5 years and that is trading at 70% (less is the bonus) of my estimated reasonable fair value, the potential CAGR over 5 years is interesting. Classical Shelby C. Davis criteria. Can Fairfax and Markel grow their book value per share at 12% or more per annum over the next 5 years? Are they trading at 70% or lower of their intrinsic value? To me, both answers are yes.

They do that on a usual basis. Take a look at their press releases archive. http://www.fairfax.ca/Assets/Downloads/Press/fpr2008-04-18.pdf http://www.fairfax.ca/Assets/Downloads/Press/fpr2007-04-02.pdf etc.

Interesting. Thanks for the information.

Ok :) So that's Brian Joffe of Bidvest Group: www.bidvest.co.za His track record of shareholder's wealth creation over the past 17 years: http://www.financialresults.co.za/bidvest_ar2008/performance_glance_02.htm And, finally, Bidvest global footprint: http://financialresults.co.za/bidvest_ar2008/global_footprint.htm By the way, I'm very interested to hear some suggestions from the members of this board.

Brian Joffe of South Africa. Very interesting question, by the way.

And one the lessons I think they've learned in their 7 lean years is to maintain a high financial flexibility. So if they want to use that $ to extend their maturities and to increase furthermore their $ and liquid investments at the holding company level, then (to me) be it. I'll applause anyway. I'm not expecting any particular thing regarding that $. "Overcapitalized" might be one of the sweetest comment that I've heard regarding Fairfax. So I'm looking forward for FFH to keep being "overcapitalized" for a very long period of time ;)

I try to not comments on specifics decisions. I give a bat, watch the show and comment on the average. Cigar butts, value traps, however you call them...those are the kind of things that FFH has fallen into in their history. I'm far from being a fan for garbages that look like potential diamonds. One of the best way to describe value traps might be the midnight clock in the Cinderella story: She turned a pumpkin into a coach, mice into horses, a rat into a coachman, and lizards into footmen. She then turned Cinderella's rags into a beautiful gown, complete with a delicate pair of glass slippers. http://en.wikipedia.org/wiki/Cinderella Always remember that time is the friend of the great businesses and the enemy of the mediocre. When the clock ticks twelve times, the coach becomes a pumpkin, the horses become mice, the coachman become a rat and the footmen become lizards. Yes, there is some very rare exceptions to this, especially where there is a localized cancer and you have very skilled surgeons to remove it, but this is the exception and nearly 100% of people that fall into these traps might think that they have found the exception. Now, that being said, Fairfax, despite their usual potholes, have created overall some terrific wealth over time. Some of their stuff work, some of their stuff don't. What is important to them is to realize where they are very good at and where they are not good at. To rinse their cottage cheese, to learn from their mistakes and to focus on where their genius spot(s) is (are). That's one of the ingredients to become a greater company over time. Regarding that ORH buzz, like I said before, the FFH capital allocation decisions universe does not start and end with the remaining ownership of ORH.

Some highlights from these Prem's comments: - we have increased the cash and marketable securities in our holding company - These additional funds give us increased flexibility, including the ability to repay debt and other obligations from time to time. - we are committed to maintaining outstanding financial strength by always having a substantial cash and marketable securities position at the holding company level.

http://money.cnn.com/news/newsfeeds/articles/marketwire/0528995.htm "As a result of this offering, we have increased the cash and marketable securities in our holding company to in excess of US$1 billion. These additional funds give us increased flexibility, including the ability to repay debt and other obligations from time to time. This Canadian dollar bond offering is also a natural economic hedge for our Canadian dollar assets, in particular our 100% interest in Northbridge Financial. As we have said many times previously, we are committed to maintaining outstanding financial strength by always having a substantial cash and marketable securities position at the holding company level."

This late ORH privatization discussion is speculation at this point. Fairfax intends to use the net proceeds of the offering to augment its cash position, to increase short term investments and marketable securities held at the holding company level, to retire outstanding debt and other corporate obligations from time to time, and for general corporate purposes. As a FFH long term common stock owner, I have absolutely no expectation regarding that ORH privatization. What do I know is that FFH management team usually take very rational capital allocation decisions, so I give them a bat, watch them do their job and try to not shout "Hit it!" when a ball pass. So I keep all my FFH shares. What do I know is they'll do it if the deal makes sense for FFH owners. If they do not do the deal, I'll still be happy anyway. It's not like their capital allocation decisions universe begin and end with the remaining of ORH.

Thanks Sanjeev for the link! I'll always remember that period. We'll always have to remain vigilent on these issues. Cheers!

I'm not selling any single share. Fairfax is a long term holding and it's still far from being a fair price. They would have to increase the bid very significantly for me to consider any offer. Cheers!

Here is my 2 cents speculation about the 150 millions: it is for the 2012 debt. Extending the debt payment further. Increasing financial flexibility at opportunistic times. But who really knows? Not me. Time will tell.

To me, Markel is on the defensive mode. From what I read about them, they think that some competitors are underwriting business at very inapropriate rates. Consequently, they are shrinking their premiums significantly. Also, from what I see on their balance sheet and some comments I've heard, I came to the conclusion that they want to have a full loaded gun when the tide will come and some others will be naked. Cheers!

In my mind, you're right Sanjeev. From what I read, David Sokol seems to take more attention and place at Berkshire. I know, from what Warren said about him and the track record he shown, that Ajit Jain is a terrific underwriter, but I don't know much about him aside these comments. And for Warren son to take the Chairman role when he's gone, it's a terrific idea, especially if he's able to keep the culture intact after Warren is gone. Bill Gates is a visionary and a great capitalist. We're certainly in good hands also with him as a director and a significant stakeholder with his fundation. From what I red in the Warren CEO book, I felt at the time that even if the CEO role might be split, it might be David Sokol, Lou Simpson, Rich Stantulli and/or Ajit Jain. But, you know, Warren is far from having lost his marbles and new candidates might be added over time, so time will tell who will ultimately be the one(s). Cheers!

If I remember correctly from "The Warren Buffett CEO" book, Rich told openly that we would like to take the CEO job when Warren would leave. Again, if I remember correctly, he said something like "I would then call all the subsidiaries CEO, ask them what they were doing before I was at the helm...and them tell them to just keep doing it". Just my 2 cents, since it only comes from my memory and I haven't red the book since 4 years. Please correct this information if I'm wrong. Cheers!

Thanks for the link! It's nice to see some Prem interviews from time to time.

That was, by far, the shortest Fairfax conference call I've ever heard! Yes, me too! So here is the recipe for FFH to save on long-distance calls for the future FFH conference calls. 1- Make dust 2- Explain your dust comprehensively ;) Cheers!