A_Hamilton

15% Cash (ex-short collateral). Longs are 100% hedged by Russell 2K shorts.

In what sense does he offer no insight? His long term focus on data has lead him to be particularly prescient at spotting anomalies in different asset classes. His datasets are a wonderful toolkit for value investors to say nothing of the innumerable regulators and politicians who would be aided in their policy making activities by quickly reviewing his data. Also, what is wrong with trying to think of a new insurance market that homeowners could utilize to limit their exposure to the price of their home, or, limit their exposure to being unable to come up with the money to pay their mortgage? I don't think you are going to do much better than disability insurance and life insurance but what is the harm in trying to explore that route?

Why don't you just short the index (IWM, SPY, QQQQ)? Why do you need to be going short 2x and 3x? Decay on these things could kill any return you are looking for from your "hedge."

You are correct. 10 warrants=1 share

Yes, multiply by 10.

I'd suggest calling FFH and leaving word with investor relations that you would like a copy mailed to you. They probably have some leftovers. It is worth every page.

I wonder if FFH still owns its $300 million plus in face value of Greek debt...

He can't just Buy the Gap...it is controlled by the Fisher family...and they have a pile of money outside of GPS that they can throw at this thing if it gets hostile...

Obviously the major risk with these guys is pricing regulation from governments. What is interesting to think about, however, is that for developing countries, the governments actually like increased penetration of electronic processing as it increases tax reporting substantially (or at least increases recoveries on audits from merchants). I don't know what this does for valuation, but interesting to think about the different incentives that governments have in the way that they treat these things over the next 5-10 years.

Francis Chou owns some of the bank warrants and wrote about them here (http://www.choufunds.com/pdf/SA10%20pdf.pdf). I picked up some WFC warrants a while ago...figure I'll look at the price again 5 years from now... Below, August 13, 2010 prices of some banks stock warrants. Warrant - JP Morgan Warrant Price - $12.51 Warrant Strike Price - $42.42 Stock Price - $37.50 Expiration Date - 10/28/2018 Strike Price Adjustment - Quarterly Dividend over $0.38 Warrant - Capital One Warrant Price - $14.50 Warrant Strike Price - $42.13 Stock Price - $38.82 Expiration Date - 11/14/2018 Strike Price Adjustment - Quarterly Dividend over $0.375 Warrant - Bank of America, class B Warrant Price - $2.59 Warrant Strike Price - $30.79 Stock Price - $13.23 Expiration Date - 10/28/2018 Strike Price Adjustment - Quarterly Dividend over $0.32 Warrant - Bank of America, class A Warrant Price - $7.12 Warrant Strike Price - $13.30 Stock Price - $13.23 Expiration Date - 1/16/2019 Strike Price Adjustment - Quarterly Dividend over $0.01 Warrant - PNC Warrant Price - $11.50 Warrant Strike Price - $67.33 Stock Price - $55.09 Expiration Date - 12/31/2018 Strike Price Adjustment - Quarterly Dividend over $0.66 Warrant - Wells Fargo Warrant Price - $7.77 Warrant Strike Price - $34.01 Stock Price - $25.84 Expiration Date - 10/28/2018 Strike Price Adjustment - Quarterly Dividend over $0.34 Warrant - Comerica Warrant Price - $12.20 Warrant Strike Price - $29.40 Stock Price - $35.87 Expiration Date - 11/14/2018 Strike Price Adjustment - Quarterly Dividend over $0.66 Warrant - Valley National Warrant Price - $2.24 Warrant Strike Price - $17.77 Stock Price - $13.48 Expiration Date - 11/14/2018 Strike Price Adjustment - Quarterly Dividend over $0.1814

SJ-They've owned USG for a time now. Seems to be a similar play to Abitibi...USG is the low cost producer... Vinod-The holding in Intel is a convertible bond. -A. Hamilton

Very few changes here. Boston Properties holding of $5 million is gone. Biggest change I see is the reduction in the JNJ stake by ~1.5 million shares.

Well they sure do have conviction in the CPI Floors. Notional value is up to 49.1 billion. Over 5% of book value (at cost) has been put into the trade! Hope I own enough FFH to survive what they see coming!

Anyone else not seeing the interim financials on their website?

Herk has generally checked out of investments at his namesake firm. He sits on the company's midcap committee which runs relatively little of the firm's capital (Though he does still do a good bit of marketing). If you want to get insights from him ask him about his best investments in the 1985-1993 period. He's better for case studies than current ideas.

As Andrew Carnegie said, "Put all of your eggs into 1 basket, and watch that basket!"

4 Long Holdings FRFHF 23.6% SMBC 42% FSFG 14.2% JPM 15% Cash 5.2% __ Short IWM ~60% of portfolio.

In case anyone missed it: Moody's upgrades Fairfax Financial (senior to Baa3); outlook stable 2011-03-15 21:36:06.115 GMT New York New York Enrico Leo Robert Riegel Asst Vice President - Analyst MD - Insurance Financial Institutions Group Financial Institutions Group Moody's Investors Service Moody's Investors Service JOURNALISTS: 212-553-0376 JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 SUBSCRIBERS: 212-553-1653 Moody's upgrades Fairfax Financial (senior to Baa3); outlook stable Approximately $1.5 billion of rated debt impacted. New York, March 15, 2011 -- Moody's Investors Service has upgraded the senior unsecured debt rating of Fairfax Financial Holdings Limited (Fairfax; TSE: FFH) to Baa3 from Ba1. Moody's also upgraded the preferred stock rating of Fairfax to Ba2 (hyb) from Ba3 (hyb) and the trust preferred stock rating of Fairfax's affiliate, TIG Capital Trust, to Ba2 (hyb) from Ba3 (hyb). These actions conclude a review for possible upgrade that was initiated on December 13, 2010. The outlook for the ratings is stable. RATING RATIONALE "The upgrade of Fairfax's ratings reflects a continuation of favorable trends in terms of the group's financial flexibility including: significant dividend capacity from its insurance subsidiaries (approximately $750 million in 2011 without regulatory approval); abated risk at its run-off insurance operations; the ongoing commitment to maintain approximately $1 billion in cash at the holding company as well as the overall improved diversification across the Fairfax group of companies," explained Moody's Assistant Vice President, Enrico Leo. Moody's also expects that adjusted financial leverage will remain at or near current levels (31% as of 12/31/10), and that any future acquisitions will be managed to maintain the group's financial flexibility. Fairfax maintains a diversified revenue stream by product and geography, particularly as it now owns 100% of Odyssey Re (A3 IFS, positive), Northbridge (Canadian insurance operations, unrated), Crum & Forster (Baa1 IFS, stable), Zenith National (A3 IFS, stable) and First Mercury (Baa2 IFS, positive); and has about 20% of its operations outside of North America. Several challenges remain significant to Fairfax's credit profile including historically weak operating earnings (excluding realized gains) at its insurance operations, exposure to catastrophe risk, the high level of common stock investments (though a substantial portion of equities are currently hedged), and historically volatile loss reserves particularly at its run-off operations. In determining the Baa3 senior debt rating, Moody's considered the collective insurance financial strength ratings of the Fairfax group of companies and the debt outstanding at intermediate holding companies, which results in structural subordination at the ultimate holding company. The structural subordination at the ultimate holding company is mitigated by both the diversification of businesses and by the commitment to maintain significant levels of cash at the parent company. The outlook for the ratings is stable. The rating agency said the following could lead to an upgrade of Fairfax's rating: (1) stand-alone insurance financial strength ratings of the company's lead operating P&C and/or reinsurance companies are upgraded; (2) adjusted financial leverage consistently below 30% and operating earnings coverage (excluding realized gains/losses) consistently above 4x; and (3) aggregate combined ratios consistently less than 100%. 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Small Cap, What I'm saying is that if I buy say 25 bonds, am I going to get a horrible quote when I try to sell these, versus 100 bonds. How big of a lot do I need for a broker to give me something close to what an institution would get for these versus a retail holder.

Anyone have thoughts on how many bonds one needs to purchase so that they don't get their faced ripped off when they try to sell these?

Liberty (and others), I don't understand the frequent question on this board about FFH purchasing messy turnarounds. I recognize that this makes up some of their portfolio holdings, but what about the massive positions in RIMM, USB, WFC, GE, JNJ, KFT, DELL? Also, I've never seen a more conservative fixed income portfolio from a credit perspective... Additionally, Buffett and Berkshire are not against buying into difficult situations and have made a fortune on them over time: Johns Manville, Comdisco, USG, Level 3, not to mention Berkshire Hathaway itself. Buffett's also lost a ton by buying massive stakes in hugely distressed Irish banks. I think Buffett's refrain is quality businesses because he has a responsibility to the public and doesn't want some guy with $50,000 of his net worth to go out and put 100% into LVLT...much better for the guy to own 100% of KO. I'd highly recommend differentiating between what Buffett says and what he does in investing (writing swaps on indexes ring a bell?). Just my two cents, as I don't believe FFH is that into buying junk per se, it's just where the opportunities are sometimes...

Ok22 a few thoughts: 1.) Very simple on the the index swaps. They have $3.3 billion in notional against the Russell 2000. For every 1 percent increase in the Russell they lose $33 million. There is no limit to the amount that they can lose, except that they can close out the trade whenever they wish. Same deal with the S&P 500 swaps. 2.) On the CPI linked derivatives, the most that they can lose is their cost basis, or ~$300 million. 3.) See point 1. 4.) See 1. 5.) They don't know how their long portfolio of equities will perform, so there is no scenario analysis possible.

I would concur with this view. Anyone who thinks that MSFT is a value stock should open up their Microsoft Excel spreadsheet and run a number of hypothetical discounted cashflow models. They really only take about 5 minutes to build a 10 year earnings forecast, apply growth rates and discount rates, and then see what you get. When you do this, think very carefully about what sort of discount rate that you would need to apply to MSFT's earnings after about year 5 or so. IMHO, those earnings are so uncertain that I'd want a 10-15% discount rate on anything past about year 5. To be comfortable with MSFT at $27, you need to either be very confident about the distant cashflows (and thus use a relatively modest discount rate) or you need to assume some healthy earnings growth. I'm not saying that MSFT will implode any time soon, but I just can't get comfortable with the numbers and uncertainty. SJ Did you incorporate the $6 in cash per share on the B/S?

Read a little bit more detail. The series B “C WS B." are pretty far out of the money. "The United States Department of the Treasury, referred to in this prospectus supplement as the selling security holder or Treasury, is offering to sell 210,084,034 warrants, each of which represents the right to purchase one share of Citigroup common stock, par value $0.01 per share, referred to in this prospectus supplement as the Common Stock, at an initial exercise price of $17.85 per share. Both the exercise price and the number of shares that will be acquired upon the exercise of a warrant are subject to adjustment from time to time as described in this prospectus supplement. Citigroup will not receive any of the proceeds from the sale of the warrants offered by the selling security holder. The warrants expire on October 28, 2018." Quarterly dividends need to be in excess of $0.16 in order to get a reduction in the strike price. The other set (Class A) are also out of the money, but not nearly as far. The United States Department of the Treasury, referred to in this prospectus supplement as the selling security holder or Treasury, is offering to sell 255,033,142 warrants, each of which represents the right to purchase one share of Citigroup common stock, par value $0.01 per share, referred to in this prospectus supplement as the Common Stock, at an initial exercise price of $10.61 per share. Both the exercise price and the number of shares that will be acquired upon the exercise of a warrant are subject to adjustment from time to time as described in this prospectus supplement. Citigroup will not receive any of the proceeds from the sale of the warrants offered by the selling security holder. The warrants expire on January 4, 2019. Citigroup originally issued 188,501,414 warrants to Treasury in a private placement in connection with Citigroup’s participation in the Targeted Investment Program, or TIP, under the Emergency Economic Stabilization Act of 2008, or EESA, and issued 66,531,728 warrants to Treasury in a private placement in connection with a loss-sharing agreement among Citigroup, Treasury and the Federal Deposit Insurance Corporation, or FDIC. Prior to this offering, there has been no public market for the warrants. Citigroup has applied to list the warrants on the New York Stock Exchange under the symbol “C WS A.” The Common Stock is listed on the New York Stock Exchange under the symbol “C.” On January 21, 2011, the last reported sale price of the Common Stock on the New York Stock Exchange was $4.89 per share. Additionally, the exercise price of, and the number of shares underlying, the warrants will not be adjusted for any regular quarterly cash dividends that are in the aggregate less than or equal to $0.01 per share of Common Stock, which is the amount of the last dividend per share declared prior to the date on which the warrants were originally issued to Treasury

I don't know if they will be available to retail in the initial offering, but certainly in the secondary market. From the prospectus: Citigroup has applied to list the warrants on the New York Stock Exchange under the symbol “C WS B."