Crip1

Well...one thing is clear. Someone at Torstar does not like Gary Bettman as evidenced by the decision to display about as unflattering a photo of Mr. Bettman as exists in the world. -Crip

I agree with many on this string, particularly Al, with regards to the 20 year time frame. Indeed, in 2029, life and business will look entirely different than it does now such that trying to predict which firms will benefit the most is next to impossible. Example, many folks feel that Wells Fargo is a well run financial whose services will still be needed well into the future. But, in 20 years, is it possible that some knucklehead will be running the show? Of course it is. As well, could Wells be bought out thereby changing the "DNA" of the company? Absolutely. I am a fan of JNJ and have held for years but 20 years forward, who can say that the principles which guide the firm now will be adhered to then? My impression is that the gist of the question really asks for the board's picks for a "set it and forget it" company as opposed to ones where it is manditory that the stock be held for 20 years. In that case, my response simply would read my top 5 holdings...BRK, FFH, JNJ, MKL and WFC. As investors, we do need to be vigalent in making sure that the reasons for holding each of these are still valid. If there is a "change to the story", then we need to make the appropriate changes (i.e. sell) to our portfolios. Misterstockwell is spot on with his assessment of Asia (IMHO, China) as being a vital componant of the world economy in the coming decades, and, as such, it should be a componant to an investor's portfolio. The problem for me is that I have not been able to make a decision on how best to bring Asia into my portfolio. I have been (admitedly, somewhat half-heartedly) been looking for the "best" choice which has resulted in more "thumb sucking" than actual action. Unless I can take a more definitive action, it may be better to simply invest in a fund or two and buy on dips. -Crip -Crip

Would hate to see venting more than "a bit". -Crip

Al, I see you sold, so this point is moot, but I was going to recommend that you sell, not necessarily because the price would not increase, but because it was a total crap shoot and was well beyond your control. It seemed to me (and still does seem to me) that you would be better off using your analytical skills on looking for the next investment. FWIW. And, to add, I sucked my thumb throughout this, did not sell my ORH preferreds to re-purchase the ORH common and lost out on a tasty return. C'est la vie ineed! -Crip

I'd like to be able to short the newbie options-traders' net worths. Regrettably, I do not think that we can do that. What this means is that, potentially, we will have higher levels of volitility which will lead to, hopefully, more mis-pricings. Besides that, I've got nuthin'. -Crip

SHHH...don't tell anyone.

Gosh darn it...I TOLD my broker to make my purchase DURING market hours, not AFTER...this is precisely the kind of commotion I wanted to avoid. ;) -Crip

Arrow, I was thinking the exact same thing. One significant benefit which FFH brings to the table is their investing acumen. Allowing Hamblin-Watsa to invest the float of these partial positions, particularly in India where there is a limit on foreign ownership, would look to be a win-win for all.

Yeah, the stories go on and on. A buddy of mine was at a game where Bo hit a popup...the shortstop faded back, then started running back, then stopped and looked out towards left field. The ball landed in the seats a couple rows back. He hit the ball so hard that it just carried out to the seats. And, yes, this was when he had a prosthetic hip and was past his prime. As well, he was universally well liked by his teammates. If anyone had the right to be cocky and arrogant, he did. But there are few, if any accounts, of Bo being arrogant or cocky. Humility, more than anything else, likely accounts for his success in business after sports. Now, it is true that if someone with the status of Bo Jackson were to go out selling industrial cleaners for example, he would make some good coin because what sports-loving purchasing agent would not like to buy from Bo? He could still be a commercial endorser for candy bars, laundry detergent, what have you. That would be easy. But, part owner of a bank? I would argue that the two biggest factors in his success as an athlete and as a businessman are his work ethic and his humility. These happen to be two very common traits amongst great value investors. While aptitude and education are contributing factors, those factors are additive, where work ethic and humility are multipliers. Few of us will ever replicate his feats on the athletic field, but it is worth striving for a better work ethic and a sense of humility at every chance. -Crip

Much had been made of his athletic prowess, but it looks like Bo Jackson had done quite well for himself in his life after athletics. http://rivals.yahoo.com/ncaa/football/news?slug=ap-hall-bojackson&prov=ap&type=lgns This quote could have been uttered by a young Warren Buffett: “I’m learning something new every day. I’m eager to learn,” he said. “I’m also learning that if you don’t watch yourself you can be taken advantage of quickly in the business world. The thing I try to do is surround myself with smart, astute business people and that seems to help out a great deal.” He played in Chicago for the White Sox after his hip replacement and, though he was certainly not in his prime, he was still amazing. I'll never forget his catching a ball flat footed in medium-deep right field, taking one stride and throwing a ball that got MAYBE 10 feet off of ground that made it to third base on a dead fly nailing a baserunning making an ill-advanced attempt to advance on a fly out by 2 steps. The announcers were speechless, literally. And, again he had a prosthetic hip! The dude was amazing and always seemed classy...am very glad he is seeing success after sports....seems to be the antithisis of Len Dykstra. -Crip

Sanj, On which days are the meetings to be held? I may have a trip up there and would love to get together before hte meeting. -Crip

I never compared until just now but is it normal for Chou's fund to be so totally dissimilar from the FFH holdings? Example, none of FFH's top 10 holdings appear on the Chou funds holdings. Conversely, only two of Chou's top 10, King Pharma and Berkshire appear on FFH's 13B. I would not expect the these to line up perfectly, but I would have expected some more corrolation. -Crip

Philipe, You're right...I looked at the story and not at the press release which clearly states that this is to "...restore the capacity which was available to Fairfax prior to its recent offering of Senior Notes which closed on August 18, 2009." Apologies for the false alarm...we will now return to your regular programming. -Crip

http://www.reuters.com/article/marketsNews/idUKBNG41791620090825?rpc=44 For a company which, by most any measure, looks to be well capitalized, this is rather interesting. As if the flames of ORH buyout or ICICI needed any fanning... -Crip

Several years ago, Big Pharma was a great way to make some money. This determination on both a macro and a micro perspective. Looking at it macro, the factors included an aging of the US population (my parents and in-laws almost need a separate "pill suitcase" when they travel), further standard of living increases in developing countries (such that these folks can afford more pills than they could previously) and that, in many instances, HMOs were driving their customers to pharma-based treatments rather than procedure-based treatments due to cost-effectiveness. From a micro perspective, the growth rates were significant and P/E's were reasonable....all were throwing of cash and all seemed good with the world. Once the growth rates declined, share prices declined...in some cases significantly. Looking at the situation now, the US population is continuing to age and the standard of living in developing countries is continuing to rise. Growth rates are low as are P/E's, but a lot of smart people have been adding to their Pharma Holdings: Bruce Berkowitz has 18+% of his portfolio in PFE Warren Buffett has almosst 5% of his portfolio in JNJ Prem Watsa has over 8% of his portfolio in JNJ Irving Kahn has close to 11% of his portfolio in SGP Irving Kahn has 9+% of his portfolio in BMY It would be interesting to note opinions on this sector... -Crip

"No! Hurricane season is NOT more than one-third over. If you look at the climatology link that I posted earlier in this thread, you will see that on average there are 10 named storms per year of which 2 typically appear by August 6th." Stubble, Acknowledged that hurricane frequency throughout the 6 month season resembles a bell curve rather than a strait line. However, if in early August there had been no named storms when, typically, we should see two during that timeframe, then we novices came to the same conclusion as did the folks at NOAA. My point is that predictions are worth little more than the paper on which they are printed. -Crip

I do admit to being tempted to sell some, if only because I have faith that Mr. Market in the will offer up FFH at a price 20% or so less than it is right now. That said, I do not think that I'll sell here, though. If it gets ignificantly higher (US$400+) then I may think about it more seriously, but since it really is not fairly valued yet IMHO, I'll hold on to it. -Crip

Another review from Texas. Yeah, it is a bit much for a burger but I do have to say that it is a pretty good burger. I concur with TariqAli that the burgers at RR are not too dissimiliarly priced from what one would get at Chili's, Friday's, Appleby's, etc. Their drinks (shakes, lemonades, etc) are really good as well. They cater to the Chili's, Friday's, Appleby's crowd of family fun casual but still offer a full bar for the adults out there. Honestly, I have completely given up trying to figure out the public's tastes as far as dining goes. I proudly declared a number of years ago that Starbucks was little more than a fad and figured that they had gotten to the saturation point...that was when they had about 80% fewer locations than they do now! (Depending on your gate at O-Hare airport in Chicago, you can walk past 4 Starbucks locations from the point you enter Terminal 3 until you get to your gate...seriously). Being rather frugal, Red Robin is not a weekly occurrence, but when we do go, I definitely enjoy the food. -Crip

What is the rate on the $180M noted expiring in 2012? -Crip

To the board members in Canada, what are your thoughts of The Brick from a retailing perspective? Do they have a competitive advantage? Personally, I do not like investing in retail as the consumer tends to be rather fickle and the competition is fierce. However, if The Brick has a competitive advantage, then perhaps it makes sense. If not, then I fear that this may be a case of good money chasing bad. Thanks in advance. -Crip

Eric, I would caution you to infer too much from the most recent quarter. Review of the most recent three years tells a different, and I would argue, more comprehensive story: Combined Ratios FFH ORH MKL ’08 110% 104% 99% ’07 94% 96% 89% ’06 96% 97% 87% This does not necessarily mean that Markel is a better investment as I have more FFH than MKL. But the market rewards consistency and punishes “lumpy returns”. We can all agree that the quarterly returns for FFH and to a lesser extent ORH quarterly returns are quite lumpy which is the reason for their relatively lower valuation (as a % of BV) compared to MKL. It’s interesting to note that it is widely acknowledged that FFH/ORH has shown to be as adept at investing as any of the other insurers out there, but it appears that this is discounted by the market in favor of the better combined by the MKLs of the world. Considering that the investment leverage (investments divided by BV) for FFH is 4 while MKL is 3 suggests that investment prowess is MORE important for FFH than for MKL. So, why then is the market not rewarding FFH considering that for every dollar one is investing in FFH, one receives 4x investable funds in the hands of widely acknowledged savvy investors? Not sure, but I would attribute that to the “lumpy” returns and the comparatively less impressive underwriting performance. On another thread, I had said that if FFH can show consistently solid underwriting, that it would be come not a great holding, but an absolutely outstanding holding. Not sure whether there is any indication of industry-wide underwriting performance for 2009 available, but the closer that FFH comes to being average or better, the higher the valuation FFH will receive in the market. From the perspective of MKL, I believe that the Q2 underwriting performance is an aberration and that subsequent quarters will show a return to higher underwriting profitability. If not, then my MKL thesis will have changed and I’ll need to re-deploy my MKL. I have a bit of an emotional attachment to MKL as my father-in-law worked for them, but one needs to separate that when the analysis suggests alternative action. Time will tell. -Crip

OK, now I do not wish to impugn the integrity, knowledge, etc, of the good folks at NOAA, as I am sure that they have spent hours and hours carefully analyzing copious amounts of data using highly sophisticated models to arrive at the prediction that this will be a lighter hurricane year. But, really, since the Hurricane season is more than 1/3rd over and we have seen minimal activity, could we novices have not already come to the same conclusion? -Crip

Al, Thanks, you're right. Artifically soft. -Crip

Cardboard, You and I have similar thoughts with regards to underwriting. The ability to underwrite at or even close to the levels of Chubb, Markel, etc, would result in Fairfax becoming an absolutely outstanding investment as opposed to a good/very good investment. The results at ORH are certainly encouraging, but NB is especially concerning to me. NB had been the shining star in the portfolio for several years but that star has dimmed recently. Remember a few years back when NB was able to underwrite in the low 90’s consistently and our concerns were more centered on whether NB could grow their premium base? I get that we are in a soft market now, but even so, a best-in-class player should be able to eek out a small underwriting profit. As well, Crum was remarked a couple of years ago to have been “fixed” and while Crum is certainly performing much better than it did in the first half of this decade, it is not what one would refer to as the pinnacle of underwriting discipline. Prem always preaches “underwriting discipline”, and the reduced premium levels do demonstrate this, but my idea of discipline is more in line with the Chubbs of the world, not what we have seen from FFH. Counter-balancing this is, obviously, the investment performance. And considering that for every dollar of BV that we purchase, we are getting 82 cents worth of stock investments (give or take based on a few factors). Furthermore, this is arguably a better managed portfolio than the majority of the stock mutual funds out there. Interestingly enough, a few weeks back when FFH was in the US$250 area, we could have purchased MORE than $1 of stock investments for every $1 of market value. This is well understood so no need to belabor it (but it is nice to think about!). Assuming that the bond income can more than cover expenses, then the machine will be able to generate at least decent returns. I temper the concern of underwriting with a wildcard that I see as the market in general. As has been mentioned on this board recently, there are signs that the current hard market may be artificially hard due to a few issues. The AIG article posted by eggbriar and earlier allegations that AIG is lowering pricing based on the fact that they are backstopped by the US Government are artificially lowering pricing. Furthermore, the assertion from WR Berkley that “In addition, new entrants in the specialty lines are behaving in an undisciplined manner in an effort to establish a market presence” suggests that when the music stops, much of the P&C Landscape will be without a seat on which to sit. If Fairfax is accounting for reserves conservatively (which is likely) and some of the competition is being aggressive in their reserving (which seems to be somewhere between possible and likely), then time is on our side. Then we get a double-whammy of hardening market (when the music stops) and a crapload of capital with which to write new business. Granted that this scenario (aggressive accounting on part of competition resulting in a rapidly hardening market) is an “if” rather than a “when”, but our worst case scenario for owning FFH is enjoying the investments and underwriting at breakeven which will still work our for shareholders rather well. The best case would work out remarkably well. Better said, FFH is a heads I win and tails I really win…not bad.

"We'll come out great in the future, but the heart patient now has to go on the treadmill and lose some damn weight." Agreed in full...just concerned that the heart patient after years of cupcakes and curly-cheese-fries may not have the huevos to get on the treadmill and re-examine the diet. Not professing to have all of the answers, but am concerned that we are not dealing with the issues in the best way possible... -Crip