Crip1

"Bharara said the conviction 'likely will result in the forfeiture of his illegal windfall.'” My guess the windfall refers to his $9.3M bonus as I don't know how they could forfeit the $275M benefit. Assuming that's true, it effectively means that SAC, who paid the bonus, would be allowed to recoup? -Crip

yeah, that's coming, when is that ex date? TORONTO, ONTARIO--(Marketwire - Jan. 4, 2013) - Fairfax Financial Holdings Limited (TSX:FFH)(TSX:FFH.U) announces that it has declared a dividend of US$10.00 per share on its outstanding multiple voting and subordinate voting shares, payable on January 29, 2013 to shareholders of record on January 22, 2013. Applicable Canadian withholding tax will be applied to dividends payable to non-residents of Canada.

...why Fairfax dropped 3% in the past hour? Granted that this is not an obscene move, but it is out of the ordinary given the past few years, especially considering that the market is down and FFH has tended to show inverse correlation to the market. -Crip

Krazee, A few questions and a comment: 1) Residential Real Estate in the US (Houses/Townhomes/Condos) to be rented out? I work for a mortgage company and can run your thoughts past our underwriters to see what issues you may encounter. 2) Making you a trustee for your kids? 3) In what states are you looking to do this (based on your moniker, I am thinking NY, CT or NJ but please clarify) 4) Pulling for your guys, and think you've got a good shot at it. The Seahawks have not been much offensively besides Marshawn Lynch recently and with Crabtree, your offense looks quite difficult to defend. Plus, I do not think highly of Pete Carroll so I hope you spank his team but good. -Crip

Currently I oversee the operations of a small US Mortgage Company. Before that, I was involved in a few different aspects of corporate personnel relocation. The overlap from investing into these businesses is minimal, but it does exist. Quoting Warren Buffett to our Tea Party President gets his dander up, especially when the quote is applicable, and correct. The biggest overlap comes in the form of management. Buffett is notoriously hands off in his approach to his operating businesses, but still commands a high level of expectation. As it relates to the folks we have working for us, I look at it the same way. Not that it matters on iota in regards to investing, but long ago I manned the grill at a McDonald’s. Could do a “double run” of 24 patties every two minutes (meaning that I would start with 24, 60 seconds later start another 24, then start a third 24 when the first 24 came off, repeating every minute) effectively cooking 24 meat patties every 60 seconds. The act itself was not fun, but the feeling of accomplishment was actually quite cool. -Crip

I also disagree with this assertion. While I’ve only smoked once since Sophomore Year if High School (more than 30 years ago), I know of a few folks who do. The profile of these folks is not focused…older, younger, professional, manual laborers, artsy or more concrete thinkers…it runs the gamut. As with alcohol, there are those who do it to excess and others who do not and any mind-altering chemical put into one’s body carries with it a unique set of problems/issues. While I do not partake in the smoking of pot, I’ve found it difficult to maintain my position that it should not be legalized. The parenting aspect of this is interesting. I candidly do not want my kids (15 and 13) smoking pot OR drinking and, to the best of my knowledge, neither do. It was always easy to say “Don’t smoke pot, it’s illegal” but that parenting tool is being lost. Now it’s a matter of trying to dissuade them based on thinks like random drug testing, the cost, etc. Parenting is hard. -Crip

This has been interesting to read, thanks to all who have commented to date. The story itself, of an individual who seemingly lived a VERY modest lifestyle when compared to his substantial net worth, is intriguing to say the least. In a capitalist society, it is much more normal to spend accumulated wealth on material things (homes, cars, clothes, travel, etc.) than to live a more “simple” life. The abnormality of this gentleman’s existence is what gets everyone going as human-kind does show interest to abnormalities (Think PT Barnum’s Freak Shows). It would be interesting to be able to ask him why he did this as opposed to speculation but, speculation is all we have left. While the story itself is interesting, something else is equally interesting to me. Here is a guy who gave, by any measurement, a boat-load of money to charity…and several board members choose to question his actions. Perhaps he should have been donating monies throughout his life? Perhaps he should have “enjoyed” his money more? After reading the messages to date I can conclude one thing. Specifically…he may have kept his fortune a secret in order to avoid receipt of unsolicited advice from others who were NOT as successful in capital allocation or who were less inclined to donate monies to charity. Lived 98 years, was thoroughly successful (at least financially) and seemingly happy with his more modest existence (as, if he was not, he could certainly have lived a far less modest existence) and left a substantial legacy for the fruits of his labors to do well after he leaves this earth. Maybe he did have it all figured out. -Crip

For the first time in years I am home sick today which affords me the rare opportunity to watch CNBC. It's been quite a while since I've tuned in so changes, which have been gradual to those watching every day, are more pronounced to me. That said, there are two things that pop out at me: * It's about 90% entertainment and 10% content...it used to be roughly the reverse of that. Sad. * Jim Cramer is a tool. He didn't even say anything to really bother me, but his smug attitude coupled with him "forced laughing" at any comment he makes where humor is attempted are all annoying. I can see how his shtick will appeal to some folks, but the amount of adults who follow him is truly bewildering to me. -Crip

Two separate thoughts: 1) Ross, thank you for taking this on. I really like the concept and will be very interested to see the results. There have been numerous suggestions from other board members on how to take this forward; I would only add that since this is your “baby”, feel free to do what you want. 2) I am a little surprised that FFH is leading MKL and, to a lesser extent, LRE. On a few FFH threads there is call for FFH to be more like MKL and/or observations that FFH is slowly morphing itself into a company more closely resembling MKL (higher focus on underwriting, less leveraged, more non-insurance businesses, etc). This suggests that MKL is the more evolved of the two companies. If so, then why would FFH garner nearly three times the votes of MKL? Valuation maybe? This is not a criticism of any voting nor is it campaigning for MKL. Candidly, if given X about of dollars and told that I have to invest all of it in either FFH or MKL, I would struggle with the decision. I just find it somewhat unusual. Looking forward to watching this for the months/years to come. Thanks again, Ross. -Crip

No matter how qualified the next generation is, I am quite critical of nepotism. Obtuse, I hear you, loud and clear. In my professional life I am forced to deal with that to a mind-boggling extreme. A couple points to consider: * Nepotism is really little more than an individual looking at a situation emotionally (I want my family member to do well) or doing so objectively. * Prem has shown in the past to be objective in thinking freely admitting his mistakes and tends, IMHO, to base decisions on facts as opposed to emotions. * Nepotism is wrong as is reverse-nepotism. Always, one is best judged by the content of their character, their work-ethic and their intelligence. A family member may or may not have these traits. I guess what I'm trying to say is that we should not automatically deduce that, should Prem's son somehow be brought into the mix, it's the product of nepotism. Considering these, I would keep an open mind. -Crip

I figure that if stocks crater, Fairfax will just cash in / take off their stock hedges. But, I don't think it's likely they will significantly increase their allocation to stocks as a percentage of their portfolio. What do others expect? Agreed, 100%. -Crip

I can't remember where I read this (someone on this board likely did and can advise), but the quote at the beginning of this thread reinforces the same notion, specifically, that entrepreneurs are not so much good at taking risk as they are good at assessing risk. For some reason, entrepreneurs have been portrayed as swash-buckling gamblers who, against all odds, prevail. This is very "romantic", I reckon, and is patently not true. If this group was given the opportunity to invest $X where one had a 50% chance of returning 4 times X and a 50% chance of losing it all, we would take that bet, every time. Life does afford those opportunities but does not advertise them. It requires an individual who can see this, assess it, and then have the wherewithal to make that bet. Mr. Pabrai states in his book that he likes the "heads I win, tails I don't lose much" proposition, and we all would. He is just better at identifying those opportunities than most of us (present company INCLUDED) are. -Crip

I find it amazing that a person can put their last penny into their 20% down payment, walk out with a 30 yr mortgage based on their income, and be 65 years old. Are they going to work until they are 95? I work in the mortgage business in the US and feel it best to clean up some misconceptions. Eric's scenario is not wholly correct. Yes, someone who is 65 can get a 30 year loan provided the income/credit profile is acceptable. The irony is that a lender cannot use common sense that the borrower will almost certainly NOT be earning the same income 15 years hence, let alone 30, as that would be age discrimination. The part I will take issue with is that they would be hard pressed to get this loan using their last penny as reserves (assets AFTER the loan closes) are required. Now, if this same person wanted to only put down 10% thereby holding the remaining 10% in reserves, and they were OK with paying for mortgage insurance, then they would be golden. The key term is "common sense" or the relative lack thereof employed by the mortgage industry. We have had loans which we've needed to decline for nonsensical reasons. Example, borrower A has a credit score of 660, is putting down 3.5% and will be paying in excess of 40% of his monthly income towards his housing payment. Borrower B has a credit score of 740, is putting down 25% and will be paying 20% of his monthly payment towards his housing payment. Borrower B also has liquid reserves such that he could make his housing payment from savings for 110 consecutive months. Borrower A is approved, Borrower B is not. Why? Borrower A has multiple credit lines (mortgage, credit cards, car payments, etc). Borrower B has only a mortgage and one other credit line. Fannie Mae states that the borrower needs 3 credit lines. So, the solid credit score, substantive down payment, high income, excellent asset (reserves) quality and the fact that he has not had a late loan payment in 10 years was not enough for Fannie Mae to approve this loan. It is nothing short of insanity. Common sense is discarded in favor of guidelines...it is maddening. Now, I will say that the vast majority of loans we've done...make that vast VAST majority of loans we've done in the past 4 years, are going to perform. And, the vast majority of lenders out there can say the same thing. Individuals getting loans now are ready, willing and able to repay...I have little doubt. But, the collateral damage is that there are well qualified folks out there who, for whatever reason, do not fit into the neat little box that has been designed by the industry, are either unable to get a loan or have to go through paperwork-hell to get one. -Crip

Well, Writser, you may not be at the top of the author's list, but, seeing as this group tends to be Long-Term, value investors, you are definitely at the top of our list! ;) -Crip

Richard, I'm going with JEast on this one. My father-in-law who is a very wise man (and worked for a company which is now part of Markel) said it best: "Experience and intellegence are additive...drive is a multiplier." My experience compels me to agree with this. Listen, we will all agree that an intellegent, experienced person with drive/energy is the holy grail when hiring. But, I've worked with really smart people who have mediocre energy, and high-energy folks whose IQ is no better than the average Joe, and I'd take the latter over the former in a heartbeat (assuming equal amounts of inegrity/character/attitude, etc). While not a hard and fast rule, those who are intellectually gifted tend to expect more from their employers, tend to be prima donnas and tend to be hired away. The nose-to-the-grindstone folks give more than they ask for and stick around. The work ethic they posess is infectious thereby making the whole team/department better. Those who are not afraid to "get dirty" get things done. Those who work hard figure out ways to do things better. Give me a group of well-managed ass-kickers, and I'll give you results... JMHO -Crip

I don’t disagree with the posts pointing out that there is an element of belly-aching among fund managers whose AUM, and subsequent fees, are such that said managers are not able to afford the 2013 Mercedes. It’s a sad fact of life that an excellent money manager who is mediocre at marketing is likely making less money than a mediocre money manager who is excellent at marketing. I’d add that it’s not difficult to look back at any time period and offer spot on advice on what one should have done. -Crip

Full Disclosure: I've not read The Halo Effect nor the thread related thereto. I did read Good to Great and, bucking the trend, liked it very much. Will look up The Halo Effect thread and review before posting more. -Crip

Years ago I worked nights and part-time during the day which allowed me to watch CNBC quite often. For years, however, working days I've not done so for a variety of reasons, most "lack-of-time" related. This morning I need to take my son to orientation at school so I am working from home in the morning before I depart for orientation. For the first time in years I've watched for about an hour and please allow me to tell you all of the useful information received over that hour: Seriously, it's remarkable how much time, effort and brain-power goes into producing a news-related televison which gives absolutely no useful information whatsoever. Again, Jim Cramer is on this morning so, really, how much can one expect? (BTW Jim, the incessant use of personal pronouns is really annoying) But, seriously, it's remarkable how much the talking heads seemingly like to hear themselves talk in a self-promoting and/or psuedo-entertaining way as opposed to actually imparting useful business information. Does anyone really care about the lock-up period of Facebook insiders besides Facebook insiders? Another tendency is the use of forced laughter in attempt to display to the viewers "Look how fun and entertaining we are". Perhaps it's a reflection on media or society in general where, at least in the US, we seemingly prefer sensationalism and/or entertainment as opposed to information. Irrespective, the last hour was an absolute waste of time to watch CNBC, it's disappointing. -Crip

That's pretty cool...

Sanj, I was planning on starting a non-investing thread on this subject next January but will offer a sneak peak now. As a value investor, real-world stats and case studies resonate more than marketing gibberish ever can. With that in mind, I’ve got 6 months of data right now to share as shown below. Full disclosure, I’m in my late (really late) 40’s and average as it relates to athletic ability and overall health. I’ve been dieting for the past year or so but really tracked my exercise closely for the past 6 months, since January 1. If we assume that adding weight results when calorie intake is greater than calorie burn and, conversely, losing weight results when calorie burn is greater than calorie intake, there are two ways to lose weight…reduce calories or increase calorie burn (exercise). For years I’d gone the “reduce calorie” route as it was effective for me. However, as the years have advanced, simply reducing calories has had less and less effectiveness. Getting old sucks. In tracking the past 6 months, I’ve logged almost every workout on a spreadsheet, tracking and calculating the calories burned with almost every workout. There are many, many ways to calculate the calories burned but I’ll simply say that the method I’ve used has been on the conservative side. That said, here’s the math: Since January 1, I’ve lost 12 lbs. Since January 1, I’ve exercised (combination of running, other cardio and weights) for a total of 68 hours (2 hours, 37 minutes per week) which has burned between 35,796 and 59,660 calories depending on how it is calculated or, when subtracting the amount of calories I’d have burned by simply sitting (reading, watching TV, etc) results In 29,782 to 53,646 net calories burned. Assuming that one lb. of bodyfat is lost with every 3,500 calories of effort, the data suggests that my exercising has caused between 8.5 and 15.3 lbs of weight loss. Let’s take the low end to be conservative…of the 12 lbs I’ve lost, 8.5 lbs or 71% of my weight loss can be attributed to exercise. Wanna win this bet? Exercise and hit it hard! Good luck. -Crip

Always loved Munger’s "Bullshit" quote on EBITDA. As we know, Charlie’s obviously an intellectual but, rather than ascribe a long-winded, well thought-out intellectual explanation as to why he feels that EBITDA is not a valid metric, he simply dismisses it not as folly but as a matter of deception. If one is attempting to "bullshit" someone, the bullshitter is changing/obfuscating facts rather than just being misguided. Eliminating the interest and tax components of a company's expenses makes no sense. Think of two companies, moderately to highly levered, whose earnings, depreciation and amortization (and even maintenance CapEx) are identical. If company A has to pay a higher interest rate and/or is subject to higher taxation (due to geographic location, structure, etc) than company B, they will have the same EBITDA, but company A will have less, perhaps far less, cash with which to acquire businesses, develop new businesses, invest on "growth" CapEx and/or pay dividends. The fact that they have the same EBITDA but vastly different cash generating capabilities suggests a major difference in value, and suggests the lack of usefulness of EBITDA. The article has 30+ pages on why the author feels that the metric is invalid, where Munger says it in one sentence. That's one reason why Munger is who he is...the ability to quickly separate the world into useful information (and then focus on it) and bullshit (give it no other thought). -Crip

My professional business is mortgage lending, primarily to individuals on purchase transactions in 15 states. I state that in order to make clear the glasses through which I can see the Real Estate Market. That said, a couple of points: * Real Estate markets are, in large part, localized. I live in Dallas which has been quite stable for the past 6.5 years since we moved here. My old neighborhood in Chicago, however, has not fared so well. The same model home that we sold before moving here is LISTED for 20% less than we SOLD our home for...suggests a 25% decline, more or less. And, this home has been on the market for a few months suggesting that homes are not flying off the market. Apparently, the market in suburban Chicago is not enjoying a resurgence. My point is simply that individual marketplaces are often unique unto themselves. * Market data is, my nature, a rearview mirror. Most reports have been showing a nationwide leveling out of prices/activity for the past several months. The investor money which is apparently coming into some marketplaces (like So Cal, according to this string), will likely cause the numbers in coming months to improve. * Real Estate appraisal, in large part, is akin to market data as it is a rearview mirror. It's interesting to note that the real estate markets are, almost across the board, in better shape than 3 years ago. However, we are encountering more instances of homes not appraising out now than we did then...that's a sign of an appreciating market. * Now, looking into a crystal ball, where do we see things going from here. First, we'll assume the overall economy will be relitively unchanged for the next few years. Second, as stated here, the marketplaces indicated herein seem to be driven by investor activity. Investors have the benefit of low interest rates (low costs) and increased demand (people have to live somewhere, homeownership rates are down and it's STILL getting harder to get a mortgage loan for John Q Public). Furthermore, investors are not seeing other areas where they can put their money for attractive return as bonds are also yielding unacceptable returns. The question is...what happens if and when interest rates rise? First, investors have higher costs so, all things being equal, they will bid less on the existing inventory. Second, there will be fewer homeowner buyers since higher rates will force MORE buyers OUT of the marketplace. The double-whammy of fewer buyers will, I fear, tip the supply/demand law towards excess supply and, again, will stagnate or reduce pricing. The certainty of this, as is the timing, is totally unknown, but it suggests to me that "flipping" will soon be out of vogue but landlording will still work out for those who are good at it. Is anyone here from Georgia? I kid you not, half of the loans we do in Georgia have not appraised out this year in Georgia. Agents are telling us that appraisers are out of touch with the market. I can understand that, but also know that agents have a vested interest in seeing things through rose-colored glasses, so I take that with a grain of salt. Any other observations? -Crip

I'm in the same boat with you on this...not a lover or hater or Cuban, but love the way he made Skip Bayless look like a rank amateur. -Crip

Full disclosure: I'm in the mortgage industry. Reagrding the refi, I completed a refi in the fall. After looking at 30 year fixed (lower monthly payment but extended my loan another 6 years), a 7/1 ARM (too much uncertainty of my financial condition in 7 years, not to mention the crap shoot that is trying to predict interest rates 7 years from now), 10/1 ARM (Similar to above, but with 3 additional years to pay down principal), I went with a 15 year fixed. The payment is higher, but with all things besides Income Taxes factored in, courtesy of my "super-size" spreadsheet, it takes 15 months to break even, then I'm ahead of the game...21 months if you want to include taxes. The rate on a 15-fixed was very close to a 10/1 ARM and within reason of a 7/1 ARM. That 15 years coincides with my turning 63 which seems like a good retirement age since my kids, God willing, will be out of college by that time. Look at a 15 or a 20 fixed, and find a good mortgage banker to work with who can pull rates from multiple investors. I would offer up the services of my company, but this board is about exchanging information, not drumming up business. Quick note about "Big Bank" vs. "Small Lender" pricing. The way most Big Banks work (Chase, Wells, B of A, US Bank) is that they have a "war room" which spits out rates/pricing to their internal marketing channels. These channels then add their required profit margins and send out pricing which ends up a the desk of loan officers who then will quote rates to prospective borrowers. We are a correspondent lender, meaning that we close the loan in our name and then sell to Chase, Wells, Etc. If the Correspondent channel within a big bank is relatively busy, they will add a heftier profit margin so that they know that the volume they receive will be solidly profitable. If a particular channel is not busy, they will lower margin to bring business in the door so that the folks earning paychecks are being used. This changes daily. So, the blanket statement of "rates are bad a big banks" is not 100% true, but I know that we've beaten a locak Chase branch with a Chase product, multiple times. I also know that we've been beaten by Chase branches in the past as well. The change happens pretty often so getting a Loan Officer who is trustworthy, who will work for you and who is at least reasonably knowledgeable is your best choice. Finally, the industry is completely insane right now. We had to decline a loan of a guy who had very good credit, about 10 years of payments in savings (reserves), was putting down 30%, had debt ratio of less than half of what was required and had not made a late mortgage payment in a decade. The reason is that he had only two credit lines open, a mortgage and one other. The "rules" state that one needs 3 lines open. I took this forward for an exception and was declined. My response was "So, if this guy had a couple of late mortgage payments, gave away $100,000 and had a 40% cut in pay BUT had opened a credit card account 6 months ago, we could have approved him"...the response: "Yes". I kid you not. -Crip

Oh yea, for sure. I mean some of these goalies that are playing great came out of no where in the last few seasons or in the case of Holtby, he's only played 7 regular season games this year!!! Speaking of goalies playing great, my beloved Blackhawks got Smithed out of the playoffs. Give him props, he saved his best for last as he was unreal tonight. -Crip