wisdom

http://video.cnbc.com/gallery/?video=3000419287 David Tepper had interesting stuff to say - there are about 6 or 7 videos.

http://www.bloomberg.com/news/articles/2015-09-08/buffett-says-he-sold-exxon-bought-refiner-phillips-on-oil-fears?cmpid=yhoo Buffett on oil.

One way of thinking about it may be: http://www.bloomberg.com/news/articles/2015-09-01/morgan-stanley-central-banks-are-playing-a-game-of-chess-that-results-in-an-endless-cycle-of-easing

I don't think I have said that. Yor are mistaking what I have said with other posters.

I am just saying that I do not have as much confidence in authorities as you guys. I do not mind having insurance in place especially when 7 years of money printing and low rates still have not increased inflation. I am fairly sure if we get a recession or slow down those hedges will be in the money pretty quick. We would not require actual deflation to take place. YOu are saying you are sure we will not have deflation. I am saying I am sure that we will have a dlow down at some point and FFH is likely to do well.

That does not stop them from selling them - just like any other derivative. People buy and sell them based on their expectations of the future.

rb - FFH can do the same with deflation hedges. They do not need outright deflation, just the perception in the market.

RB do you believe that US has decoupled from the rest of the world? If not, with inflation where it is, do you think it is possible that inflation could drop a bit lower? What if we have a recession at the same time? I do not know the answers to these and thus, cannot make a case. Things can change quickly as it has been a while since the last slow down. I do not see what I lose by being cautious and prepared.

Yes, but is household debt still above long term averages. What if it goes back to the long term averages?

What behaviour changed? People stopped taking on debt? What was the impact of QE? Would we have had deflation without QE?

I see things the way two cities is describing it. He has put it better than I can. I do not see anything that says FFH has been wrong. My read is that the majority has yet to come to the same conclusion because we are so used to inflation. It takes time for societies to notice things have changed. But, when everyone finally notices and changes behaviour is when things can get interesting.

RB - I do not believe that deflation has to happen. I said more likely than before. I don't mean more than 50%. I hope this makes sense. Because inflation is so low, i believe any slow down could push us under. As slow as things have been to play out, so far I am not confident that FFH is wrong. I do have most of my money in USD because I do expect US to be relatively better, but, I cannot imagine US continuing to do well if the rest of the world struggles. I cannot come up with a story that I will have confidence in as to why we will have deflation, but, I can see how it could happen if anything does not go to plan or as we would like it go.

I am not saying it will again be so - but could you have made the same argument in 2006 about their CDS's? Edit: I will agree with you once this busines cycle is complete and they are still falling behind.

I wasn't referring to the US as much as the globe. If USD rises due to a panic what would the impact be. I would also refer you to slide 27 onwards http://www.fairfax.ca/files/doc_news/2015/2015-AGM-Final-Slides-for-Website.pdf

I do not believe it is conviction as much as the likelihood is higher because of high debt levels and where interest rates are across the world. Last time around virtually the whole world eased. Rates are already so low that this is going to be tougher to repeat if we have a shock or recession. A shock could be higher interest rates or it could be deflation. History shows that initially private debt is taken on by the public and during the subsequent shock authorities struggle. In this case a longer horizon may be better rather than just looking at how 2008 worked out - Ray Dalio's 'How the economic machine works' could be used. It is cheap insurance if the authorities make a mistake or lose control - which does happen.

Read his 2013 report. That shows how good he is.

no letter so far?

cash

Does it really matter how we get there? What matters is that no one knows what to expect. This will lead to volatility as adjustments happen = opportunity. Was reading a article on real estate being 15% of Chinese GDP. Used to be 4% before the boom began. US was around 5 or 6% before it crashed in 2008. Canada peaks at 7%. Canada is there. According to Barclays, 50% of Chinese debt is backed by real estate - i recall, Chinese bank assets are at $25 T. The margin of error is getting smaller for governments.

BTW from what I hear fake income tax documents are sold for less than CAD$200 with any income that you need. We don't need subprime because we beat the system. This is how you raise median house prices to 11x median income. When the dust settles, the next shock will be that people had less equity than the government stats show and there were more rentals than reported.

http://www.theglobeandmail.com/report-on-business/economy/housing/home-capital-cut-ties-with-dozens-of-mortgage-brokers-over-falsified-documents/article25762694/ They finally figured this out after 10 years of people lying to beat the system. I wonder when will the banks and government.

Isn't that the same as Florida, etc. where real estate prices had the biggest drops. Is there any proven corelation between non-recourse mortgages and what happens or is it more dependent on human behaviour and the debt/income/supply/demand.

http://wealthtrack.com/recent-programs/kessler-treasury-bond-contrarian/ good interview

Float!

I believe 50% of the mortgages are held by CMHC, Genworth and Canada guaranty. I could be wrong (relying on memory here) but i think these are 90-80% backed by the government. The majority of the remaining mortgages are likely to be held by regulated FI's the banks, credit unions, etc. But, it is easy to beat the system if you know how to play the game which brokers/lenders do. 1) banks do not report mortgages on credit bureau's - thus, borrowers lie about primary residence v RE for investment. As far as the new FI is concerned this would be the only mortgage this individual would have. 2) by under holdco and the mortgage/HELOC is not reported on credit bureau. Lie when you apply for your next mortgage under another holdco, whether you have a mortgage or not (similar to point 1) 3) often the down payment can be from an equity take out on the above properties as they increase in value. 4) Brokers/lenders advice individuals to apply for as many lines of credits as possible once a mortgage is approved to come up with the 5% down payment. 5) of course - private lenders - it is common to have small pools of upto $10 mil or so lending to purchasers who do not have down payments or to builders. Often the source of the funds in first place are HELOCs on properties. Back in 2007 individuals took out HELOC's at P minus 1% or so and lent to borrowers before getting burnt. This time around the money chasing this market seems to be more organized though often linked to brokers or pooled funds with no previous experience in downturns. Often the term on these are for 1 year at 12-14%. The down payments can come from private mortgages. If true, the official stats on %age of houses that have less than 20% down or the number of investment properties are, in my opinion, under reported. The article about flipping also shows that a lot of the demand being reported may be artificial because the properties are being bought by either speculators or builders who plan to tear down and build more expensive homes. We will know at some point whether it is the end user buying or just flippers creating this demand.