Crip1

Cardboard, not sure of the exact percentage, but assuming that you are right I would be a member of the 10% club as my firsts shares were purchased late in the 90's at C$ 375 on the TSX. Thankfully I averaged down...WAAAY down! I think that you are right in that US investors tend to purchase US stocks in a big way. The reasons are many including rampant US-centricity, the fact that the US is still the largest economy or that several US shares are, in effect, truly global firms (JNJ, KO, Etc.). And I will acknowledge that solely listing in Toronto may cause FFH to disappear from the radar screens of several US investors, but FFH will eventually trade at or close to IV down the road, irrespective of whether it is listed in the US. -Crip

Tax deduction. You can only deduct mortgage interest up to $100k of principle amount for loans, if those loans weren't used to finance the initial purchase of the home. But you gave me an idea -- maybe I can get a HELOC, and when I draw on it if I use the funds to buy stocks I could then probably deduct it as investment expense (much the same as margin interest). I also wanted a 30 yr fixed loan, but I don't think I can get that with a HELOC (I could be wrong). Eric, you can get a HELOC with your 15 year fixed...lenders are a little more restrictive then in years past as it relates to CLTVs, but if you have a good amount of equity in your home, then you will certainly be able to secure a HELOC. -Crip

Watsa is a Radian Hero, OK...while it's not a value investing topic per se, I would be curious to know what line of work has you traveling to Ghana. Oil? Gold? Do tell. -Crip

Ironically, I just made a purchase this evening on Overstock... There is a fine line between Chutzpah and Arrogance. IMHO, Patrick can tread closely to the line, but remains on the side of Chutzpah. Some like him and some don't. I like him. For whatever reason, I am not able to confidently value a retail organization, so I have no position, nor am I contemplating a position, in OSTK. But, based on everything I read about the guy, I hope OSTK makes a fortune. -Crip

Guys, this is becoming a Bobby Orr vs. Wayne Gretzky discussion. We can compare and contrast the relitive merits of Buffett and Watsa (or Orr and Gretzky for that matter) ad infinitum, but the key question is whether or not you want them on your "team". My answer for Buffett and Watsa is "Yes". -Crip

"I KNOW they are much smarter than me and I will be happy to have them manage some of my money at a nice discount to current BV." Viking, For what it's worth, I think your logic is spot on. Humility goes a long way. -Crip

Hello All: I sent the note below out to many of my friends and family this past Friday. While it is not directly related to investing, I think that one can easily parallel the conclusions in their investing and professional lives. This is not intended to start a discussion of breast cancer or any other health malady, but it is intended to apply lesson learned in one part of one's life and apply it elsewhere. Today, and for the next two days, the love of my life is participating in the 60 mile breast cancer walk. To those who have never been involved with this event, or an event like it, the obvious physical difficulties of walking 60 miles are dwarfed by the emotional content of the weekend. It is completely draining for all the participants, and likely the organizers as well. Last year she was quite happy to have finished, to see her boys waiting for her, to sleep in her own bed, etc. But the happiness was muted out of sheer exhaustion, physical, mental, emotional and spiritual. So, why would one subject themselves to this? Every walker certainly has their own unique answer to this question such as walking for a loved one who has succumbed to or is fighting the disease or out of a sense of personal accomplishment. Similar to pretty much all husbands out there, I really do not know what is going through my wife’s mind at any time, much less as she leaves for the walk, so trying to figure it out is futile. But, it is likely that some of her thoughts are as follows: Between our sisters, our nieces, our cousins and their children, the odds are that two or more of them will get breast cancer in their lifetimes. And that does not include the wives of any nephews nor any grandchildren. We moved to Texas 4 years ago and have been lucky enough to move into a neighborhood with some really terrific neighbors. At a recent party there were about a dozen of our neighbors in attendance, all of them really good folks. It’s sobering to think that the odds are that one or two of them will be diagnosed with breast cancer in their lifetimes. One of the women we met down here was diagnosed. She has not only survived but thrived. We’re happy for her and her family. Shortly before Kim did the walk last year, one of our good friends from Chicago called and gave Kim the sobering news that she was diagnosed with breast cancer. She’s beating it. We’ve always admired her since the day we met and continue to do so from a thousand miles away. In the “friend vs. cancer” battle, I’d bet my house on this friend. Recently, I was able to re-connect with some friends I knew from high school. True to the odds, one of them had been diagnosed with breast cancer several years ago. She actually had two forms of the disease. In her own words, she “kicked its ass” and is now cancer free. I’m proud of her. There are several women in my office, at least a dozen of which are really smart, hard-working folks who are a pleasure to work with. Chances are one or two will get breast cancer in their lifetimes. It’s scary to ponder where the wheel of misfortune will land next. One of my former co-workers, an absolutely remarkable woman and a great friend was diagnosed with breast cancer 5 years ago, and has been continuously fighting various forms of cancer ever since…and I mean coniinuously fighting every single day with treatment after treatment that would bring the strongest of folks to their knees. She has beaten the odds to be alive right now, and is fighting as hard as ever. Biblical references to Job are very appropriate. Words cannot remotely describe… Both of my sons play American football. Between them, they have more than 30 teammates, each of whom obviously has a mom. Sitting at practice and games talking to other moms, we’ve really enjoyed getting to know them. The odds are that four of them will be diagnosed with breast cancer. It’s numbing. If you ever look up “inspire” in the dictionary, the definitions you’ll find, while technically correct, fall short of conveying the emotion associated with being inspired. But it seems to me that inspiration would be the key to the walk. It is inspiring to meet other walkers who are walking for their sisters, mothers, daughters, wives or friends. Some of the walkers are bald from chemotherapy. I’ll bet that just about every woman walking the walk never thought that they could finish the full 60 miles, yet tens of thousands all over the country do it every year. All of our friends noted above likely had serious doubts about their ability to survive, yet all are surviving. Pushing beyond what one thinks they can handle is inspiring, and contagious. Surround yourself with overacheivers and you will overachieve. Perhaps that is the answer to why Kim and others subject themselves to this walk. My former co-worker once quipped something to the effect of “I don’t know why they call it radiation therapy as there is nothing therapeutic about it”. But the walk, for as physically and emotionally draining as it is, does provide therapy for the mind and soul. Throughout this weekend, take a moment here and there to keep a good thought for all of the folks walking and volunteering down here in Dallas. Think of those who inspire you, and help inspire others and perhaps we’ll find it to be truly therapeutic. In further pondering the concept of inspiration/therapy over the past few days, I think that in a lot of ways, this board is therapudic. Intellegent, open-minded discussion sans the corporate bull**** that many of us are forced to deal with is really great, it's the way things should be. As such, we really do need to seek to associate with those who inspire us. If you think of it, you can quite easily compartmentalize co-workers, friends and neighbors into the categories of those who do inspire us and those who do not. Personally, I may need to look to change employers in consideration of this. One famous Buffett quote states that "Do what you love and work for whom you admire the most, and you've given yourself the best chance in life you can." I think that can be extended to spending personal time with similar individuals as well. Doing so will pay dividends well beyond financial ones. -Crip

http://finance.yahoo.com/news/Markel-Announces-Acquisition-prnews-365861396.html?x=0&.v=1 Markel has been making noise for a few years about buying non-insurance companies in totality in addition to or in lieu of buying equities, not unlike Berkshire. I seem to remember a purchase of a small bank not too long ago but nothing else besides this. It is clear that they seek to emulate Berkshire and this looks to be another step towards that. -Crip

Philippe, you said it much more colorfully than me! -Crip

Absolutely correct, although I mangled the second line it's "into your heart it will creep". I actually had been quoting another line in that song in listening to the partisian politics of the US: "Mostly say 'Hooray for our side.' " Regarding FFH pricing, there is more than a kernal of truth to JEast's response. Over the years, FFH's "price" and "value" have moved in the short and intermediate terms quite independently of each other. Over the long term, the two converge. The price quote means far less to me than the specifics of the Q3 report... -Crip

Well, I sold all of mine several months ago so he's likely taking a page from my book... Seriously, I don't know. -Crip

When Buffett referenced Fairfax, he did say something to the effect of Fairfax being a "small" insurance company. I guess if you are Berkshire's size, pretty much EVERYONE is small! Seriously, Buffett watches the insurance industry as closely as he watches any industry, and one cannot watch insurance and NOT know about Fairfax. And they did both participate in the USG deal... http://archives.chicagotribune.com/2008/nov/21/business/chi-biz-usg-warren-buffett-nov21 -Crip

"And again, I’d ask you to think – to remember that we’ve just spent $1 billion of that to complete the OdysseyRe privatization. And so we will – in Q4, we still have obviously well in excess of $1 billion in holding company liquidity." Remember when, a few years back, a half billion of hold co cash was an accomplishment? Again, while this has been a bone of contention amongst board members, I still admit to disappointment about the underwriting results, particularly at NB. Before I elaborate, I want to make clear that I fully acknowledge and appreciate the past 2-3 years have not been impressive, they have been nothing short of mind-boggling, and Fairfax is by far my largest holding (due in large part to the per-share increase in price). I am a huge fan! That said, the numbers for NB especially are a concern. NB was once referred to as "the crown jewel" of FFH companies for consistently good or better underwriting results. Well, there is certainly some tarnish to that jewel. We are going to have a underwriting loss for 2009 as we did in 2008. 2009 is a year where Cat losses were quite low. That would have been unheard of in the 2004-2006 timeframe. Yes, I understand the softening market and the increased expense ratio by not cutting staff, but I said before and and will repeat that if FFH could underwrite with the Chubbs of the world, this company would be absolutely best-in-class, without question. On the flip side, one other area not touched on by the board is the performance of Fairfax Asia. Though FF Asia net premiums earned was only 12% of the NPE of Northbridge, FF Asia's underwriting profit in Q3 more than offsets NB's underwriting loss. Considering that the FF Asia is increasing premiums written YOY while others are decreasing, FF Asia's contribution to the whole of FFH will become more and more significant. Certainly, we cannot expect combined ratios for FF Asia below 70 in perpetuity, but the trends there continue to look encouraging. All in all, the perforamance of FFH over the past 2-3 years, considering the economic malaise in which we currently find ourselves is nothing short of mind-boggling. Thanks to all at Fairfax. -Crip

I like what he has to say about damned near everything. Perhaps it is because we have seen countless Buffett interviews and far fewer Munger interviews but I really get a heckuva lot more out of 10 Munger minutes than 10 Buffett minutes. He flies effortlessly from topic to topic, coming off as an expert on each of them, complete with historical perspective. Thanks for posting. -Crip

BRK 7.4% BTU 2.0% FFH 26.5% JNJ 4.7% LUK 4.3% MHP 1.3% MKL 20.0% ORH 1.6% ORH-A 11.6% SU 2.1% WFC 6.3% XTO 2.6% Cash 9.5%

All, Thanks for the comments. Al, A couple of thoughts. Assuming that you are right (more on that in a moment), buying commodity-based assets and then moving into US assets during the step 2 to step 3 transition would presumably work out well. One would only need to be approximately right in terms of this transition to profit handsomly. Can you elaborate on how you got from #2 to #3? While there will be invariable fluctuations in commodity pricing, I don't forsee the drop of US buying power triggering a crash, especially considering that a much higher percentage of worldwide commodity usage will be in the developing countries. I am not necessarily disagreeing with you, but I would like to understand the circumstances which bring about the crash in commodity pricing a little better. -Crip

A lazy Saturday morning served as a opportune time to catch up on recent postings on this board. One advantage of cramming all of the reading into a single session is that it allows the reader to find parallel themes in what would look to be unrelated topics. The one which stood out to me this morning was the impending inflation in the US and the associated devaluation of the US Dollar. The jury is out on whether or not there will be an interim deflationary period, but there is a high level of agreement that, down the road, we will see significant inflation in the US. Under that assumption it is wise to consider Mr. Buffetts' quote...paraphrasing, “It’s one thing to think that it is going to rain. It’s another to build an ark”. Being a US resident, I need to build me an ark, but would be wise to first develop a blue print. The areas which do make sense to me are investing in non-USD equities where the currency is not expected to be in the same boat as the US Dollar. This eliminates most of Europe, IMHO, as inflation there is likely for the same reasons why it is likely in the US. China and India seem to be the more sexy picks, but without going into details, these areas make me nervous. The three locales which make sense to me are Australia, Brazil and Canada, and I would presume other Asian countries besides China/Japan. The three “ABC” countries are resource rich which will help insulate them from any inflationary pressures and, particularly in the cases of Australia and Canada, have well-developed financial markets. For an American, Canada is obviously a much easier market in which to invest…information is easily accessed, SEDAR, etc. Australia is a little more difficult and Brazil is significantly more difficult for several reasons, language among them. There is a temptation to buy an ETF for these countries but if one assumes that one’s analytical abilities are better than “average”, then one would prefer to buy individual equities versus a market weighted basket. I do have exposure to some of these markets with Suncor, and incrementally with FFH, LUK, JNJ and BRK, each of whom have a portion of their operations generating profits in non-US currencies. Overall, these positions are not hugely significant, though. I would appreciate any other thoughts regarding the blueprint of the US inflationary ark and, if Brazil and Australia make sense as well, any thoughts on how to research companies in those markets. -Crip

Not like I am made of money or anything but this is only one case and is only $20M. Can anyone believe that there aren't many more cases out there with much, MUCH larger dollar amounts? Now if the individuals indicated are guilty and if they are found guilty, then I am certainly pleased with this. But it seems to be analogous to catching a baby muskie when there are scores of 25-pound muskies swimming in the same lake. Let's hope that this is just the start... -Crip

Tariq, This is a similar question to the one above, but I would like to hear how this bank analyst assesses the quality of a given bank's assets (or the lack of quality of the asset base). -Crip

We have too many lawyers in the US...waaaaaaaay too many. -Crip

Hilarious...

For a company the size of FFH, $5M is certainly not a game changer, but I would opine that we do not have sufficient facts to determine the ultimate worth of this investment... * We do not know the terms and conditions of this arrangement, which may incude some sort of conversion potential, etc. * There is always a time/value componant to these things. If this was a relitively quick and easy decision which required little human capital to put into place, then the cost benefit may make sense. * Is the the harbringer of things to come? FFH has cash, and in a recession cash is king. Again, if the time/value analysis makes sense, it would seem logical that this can be replicated for other smaller financing deals which, in aggregate, would presumably move the needle. I guess that I am going on faith here to a large extent, that Prem and co would not have had a week''s worth of 12 hour meetings before making this $5M investment which would earn FFH a modest premium to munis. -Crip

Al, Regarding growth Ops, I agree that WMT has exhausted most of their growth engines. The only exception that I have seen is trying to attract the mid-to-higher socio-economic markets. My example is that they opened a supercenter not far from my home here in suburban Dallas. The location is in a large retail area in an upper-middle class area (Walmart, as we all know, has traditionally appealed to the low to middle socioeconomic and rural markets). The store is actually quite nice and does a great business, easily topping a Target supercenter a half mile away (anecdotally, mind you). They have a large deli, fresh bakery and other prepared foods. In the parking lot, one will find multiple Mercedes, Lexus, BMWs, etc, at any given moment. This may be as much due to the recession as anything else, but it looks like they have figured out how to invest a little more in the store as opposed to the more traditional "stack 'em high and let em' fly" Walmarts of the past 30 years. The stigma of those who would "look down their nose" at Walmarts, at least in this instance, has been taken away. Granted in full that this is not a huge sector of the population and that it won't cause WMT to double in the next 5 years, but it is proof that they can take their expertice with buying and logistics and innovate, and this innovation is likely from where any growth above and beyond GDP growth will come. Now, is that enough to make a 14 P/E look good? Since it is not easily projected, I am not compelled, yet, to buy WMT when, as Eric mentioned, JNJ is selling at a lower multiple with a higher yield. But it is worth keeping an eye on. -Crip

I'm pretty sure that this is the shelf that they effectively renew every year. -Crip

As this string as devolved (or evolved depending on your perspective), I would offer up another worthy "money honey" candidate. For those of you who are not in Asia or who cannot can tune into CNBC World, I offer up Amanda Drury. http://www.cnbc.com/id/15839031 She's smart, beautiful and has a killer accent. Regarding the Buffett interview, it is astounding to me that someone can say that he was contacted about a $25B purchase and NOT sound cocky/arrogant. It is so "matter of fact" to Buffett that he sounds like he's talking about buying an Ipod. I suppose that over the years of accumulating great wealth and doing multi-billion dollar deals, that it becomes "old hat"...but he's tossing around $25 BILLION dollars like I discuss a $20 pizza. -Crip