A_Hamilton

True, but I believe these remaining long duration bonds are, more so, held to a maturity type of position unlike the much larger position of a few years back that were sold at a very large profit. It would appear, to me anyway, that the portfolio is in a somewhat win-win situation now. For example, if spreads widen like they are doing now then the economy is doing better and WFC, JNJ, BIR all do better and probably have alpha against the hedges. If the economy sours, then spreads flatten back out and the losses on the hedges and bond portfolio are mitigated somewhat. Call me naive, but what is the downside with FFH today? Cheers JEast I'm as big a fan of what is going on at FFH as anyone out there, I'm just saying if we are going to talk about short term mark to market moves then people have to be looking at the long duration bond portfolio and assuming there will be a large loss in the q. Whether the loss is realized or not, and whether realization of the loss or not is meaningful to FFH is a totally different question.

Yeah, and FFH's long duration bond portfolio that losses $500 million on a 100 bps rate rise.

Yes, they have been increasing writings but look at NPW/Shareholders' Equity....these guys were/are not writing that much business relative to their capital.

I am not entirely sure what you mean, but banks hold a lot of AFS securities which are mainly agencies. They use deposits as their main funding source rather than repos which make them much more attractive imo. Question: when should mREITs not trade at BV? I see some of these trading at premiums and am hearing about PE and hedge funds trying to launch some these. That is my view. Only mREIT I have ever owned was NYMT when it was trading at 0.25x BV in the crisis.

A bank wouldn't ever do this exclusively because their after tax ROE's would be very low. Also, the FDIC/OCC has seen duration mismatches before (savings and loan crisis) and won't let a bank take on that much duration risk. The closest thing you will find is a thrift (CFFN, HCBK before MTB bought them...and many many others). However, few of them have the scale HCBK had and most institutions' expense line is very high given costs to operate branches, etc. I could see a bank with a huge DTA trying to run at the highest levels they could get away with to use up the DTA. The ibanks regularly use these strategies. What do you think all of those Repos on the b/s are?

Bargain Value Hunter, I see your links and post, was there something you were looking for in terms of response?

As Prem might say, it appears to still be "early days" with this trade. Sure the U.S. has picked up, but look at any industrial company in Europe and sales and order backlogs are doing a cliff dive. Plus who knows what Asia looks like as China cools. I think it is Time to review some photos of Ordos, China. http://www.time.com/time/photogallery/0,29307,1975397_2094502,00.html

I wonder how Gary Shilling feels about Paulson now. Did he ever get his money out? His most recent book says he had an 11x return in Paulson's fund. Hope he moved on...

I'm on my 3rd and I'm confident that I'll finish this one since it has my attention and I find it really interesting (Dan Ariely's A Beginner's Guide to Irrational Behavior). It has real life, relatable examples and he's engaging. I've given up twice on Model Thinking since it just doesn't live up to what I had thought it was. I just see a bunch of useless data that neatly fits into a model that they create around it. The problem is more my own since I relate models to Munger rather than University math course. Augustabound, I assume you have a traditional college education? Just curious because these MOOC's are being touted as the salvation of America's crappy education system, and from everything I've read our undereducated don't have the motivation or discipline to complete these courses without some kind of institutional support. Shows great personal dedication to want to improve ones' self.

Nah...the problem is not your 8-10% loss ratio. The problem is the high fixed cost of having a title plant and having the necessary personnel in place when transactions pick up.

It is not 1 out of 10 policies that have losses. It's substantially lower. However, when you have a claim you typically get a real gem in terms of severity. Here's one we covered in my law school class: A railroad with a 200 year easement to run tracks on another's property hasn't used the property in 50 years and you decide to give title coverage to a company building a factory over the easement (you don't think the railroad will ever use its easement) without getting the easement waived by the railroad. 20 years later railroad comes back and says WTF I'm now wanting to put in my rail line. Title company has absurd payout for the $1,000 premium they received 20 years ago to fix the problem satisfactorily to both parties. The industry is low price per premium, low frequency in claims, extremely high severity when claims hit.

The 8-10% combined loss rate is a loss on the premium dollars received in a given year, the notional exposures are significantly higher than premiums received.

Figure out who has a consensus opinion and who doesn't. I'm going to say Prem is the contrarian here.

Ick. Having covered french regional banks in a past life...seemingly no price is low enough for these institutions. Maybe Ile De France in Paris...but most of the management teams at these insitutions make US community bankers look like brilliant capital allocators. Also, while they are kind of like MHC's here, there is no real way to demutualize these things. And spot on with CA...what happens to the regionals when CA has a trading blow up on their trading desk? The regionals get diluted in the cap raise.

Sorry for asking, but did you mean STRA as in Strayer Education, i.e. this: http://www.shareholder.com/visitors/DynamicDoc/document.cfm?DocumentID=3006&CompanyID=STRA&zid=e1f0bfae APOL looks cheap, but something Charlie Munger said about being on the wrong side of a trend (or something similar) has kept me from looking in more detail at the for-profit education companies. I try to read letters and reports from LUK, Y, MKL, BRK, SHLD, DJCO and BAM. Yes, meant Strayer. Different companies in the for-profit segment are positioned very differently.

When was the last time they provided any value?

Brk/a, FFH, MTB, JPM, STRA, WRB, MKL, Y.

I think you should download the 2012 AGM presentation from Fairfax website. Then, read all Mr. Watsa’s letters to shareholders: they are great, full of a lot of information both on Fairfax and on the insurance industry and the investment world in general. :) giofranchi Yes, the slide presentation @ the AGM from 2012 is as good a primer on FFH as any. If I had to tell the FFH story in a few words, the following "scream" from the presentation: Long term focus, Totally risk averse, Against-the-herd, International (emerging markets ie non-USA) insurance growth focus and investor friendliness(Like few others!). One fact included in the presentation that blows me away is their bond portfolio performance (5 year- 13.3%; 10 year - 12.5%; 15 Years - 10.4%)! Shareholders need to appreciate the bond team lead by Brian Bradstreet for this, given the challenges faced by FFH especially during the last 10- and 15- year periods! IMO, this is unprecedented. Remember that >80% of the investment portfolio was invested in Fixed Income over this period, Equities have increased only since 2008. This defines the investment mindset @ FFH better than anything else. See if you can't find a copy of the First 25 years of Fairfax.

Al Friedberg. http://friedberg.ca/content/resources/quarterly/filelist.html

[amazonsearch]Change.edu[/amazonsearch] Andrew Rosen's (CEO of Kaplan) book on higher education. The book provided a number of insights into the higher level education system that had not occurred to me before. In particular, I appreciated the depth of statistics around community college graduation rates and how they compared to online education, as statistics indicating how difficult it is to go to a community college and be able to obtain a full course load in order to graduate “on time.” I also appreciated the insights that the book gave on Strayer University, which shed some light on Washington Post's recent purchase of shares in that company.

The theory is simple. Buyback at 1.2xBV on a stock that has a daily volume of about 300 Millions $/day. The company has about 20 Billions of extra money in the bank and generates about 10B a year. If it ever goes under 1.2xBV BRK can therefore buy substantial amount of it's own stock and sustain it's price. BeerBaron I understand that....but why is that a "put"? Because you can always sell your shares (put them) back to Berkshire at ~1.2x BV.

Wood-Panel Rally Seen Fizzling Amid Increasing Supply http://www.bloomberg.com/news/2012-12-27/wood-panel-rally-seen-fizzling-amid-increasing-supply.html

Did he say this on CNBC this morning? Would love to get footage of this.

Yeah, but I'd prefer you have to go to the black market to get your cocaine. In the same way, I'd prefer that a guy who failed to take his psych meds couldn't walk into the local Walmart/Dick's/Bass Pro and pick up an AR15 and would have to go through some more difficult channels.

Agreed. Gun control, kicking out Reagan's religious right (and I'm a republican), coming up with a tax system that is progressive rather than the absurdly regressive one that has lead to no growth in median incomes in a decade, coming up with some kind of limits on how much the government will spend on your medical care through our new universal healthcare system...the U.S. has its work cut out for itself.