Crip1

I am considering subscribing to Seeking Alpha and would appreciate the thoughts from other board members on the relative merits of the service (or various subscription levels). There seems to be no limit to "stuff" on the site to be sure, but I can't gauge the usefulness of said "stuff". Thanks much. -Crip

I own all three, and each of them are in my top-5 holdings. FFH is selling at a much deeper discount to BV than the other two which makes it a more compelling buy, all things being equal. In reality, though, is that all things are not equal with the following being among the inequalities. • FFH has historically more big-bets compared to MKL/BRK such as MBS shorts in the aughts and equity hedges a decade later. Markets prefer consistency. • The communication from FFH, IMHO, is not on par with MKL/FFH. Prem tends to be a cheerleader for his company as opposed to Buffett who willingly acknowledges his mistakes and downplays his accomplishments. Markets like candor and generally don’t like cheerleading. • FFH’s longevity of disciplined and profitable underwriting is not on par with the other two. Markets like demonstratable performance. It comes down to this…if you believe that FFH’s future business performance (underwriting and capital allocation) is going to be close to the last 5 years as opposed to the preceding 15 or so (excluding the MBS bet) then FFH is the better investment, especially considering that BRK has gotten so enormous that market outperformance is very difficult. FWIW, I currently have a larger position in FFH than the other two. -Crip

1) This is a great time to reduce share count, but I'm not positive this is the best way to do it. 2) My understanding is the subs have sufficient capital to write their business and then some, so I don't think this is even necessary right now. 3) I like this as well, the return on this in terms of eliminating the interest payments is solid, additional earnings are then gravy. 4) Better now than 8 months ago, but I like other options more. 5) The general mood of the market, the past week notwithstanding, is still negative. They should be able to snap up some shares below UD$500. -Crip

Many others, myself included, have been saying this for a while. It was overdone when it fell from US14 and change down to $11-$12, and it's not stopped. I don't disagree with anything you've said but there are times when I do start to wonder if the market sees something that I don't. As far as what to do with the proceeds from selling IIFL Wealth, unless there is a screaming bargain out there, I'd love to see another Dutch Auction. -Crip

Ummm...up 10% today on seemingly normal volume with no news that I can see. What did I miss? -Crip

I'd be happy with cash put to work with 2-year treasuries...don't see the benefit of pushing durations out appreciably longer at this point. -Crip

This observation is less to do with the restaurant industry and more to do with virtually all industries. Technology is often sold as a way to cut costs or improve profitability. In reality, it's a matter of survival, really. Everyone eventually adopts new technologies (Word Perfect, Desktop Publishing, Robotics, etc). Those who don't fail, it's as simple as that. Accordingly, I'd not project this to have a major impact on profitability. What is forseeable is that if bringing this into the restaurant environment is not done correctly, it will have a deleterious impact on the company as a whole. -Crip

I am not professing to be an expert on this matter, but the inflationary environment has to be a big unknown. This would drive, presumably, more conservative reserving. -Crip

With FFI having traded around US$11/share for the past several months, and not having been above US$13 since November of 2021, one can see a Dutch Auction at, say, US$14-$15. Shareholders get a quick 27-36% pop at a cost of $150M to take out 10% of the shares outstanding. -Crip

This is not intended to start an argument, rather, it's intended to better understand. A few folks have indicated that the offer for ATCO was low and, accordingly, unfair to minority shareholders. The question then is "What should have Fairfax done had they wanted to purchase ATCO? Offer $15? $16? $20? Obviously, Fairfax owes it to their shareholders to acquire businesses at the most attractive price possible so if indeed the offer is a low-ball, that's what they really should be doing for their shareholder base, IMHO. Thoughts related to this are welcome. -Crip

I respectfully disagree...love the 2-Year bond purchase from a risk-reward perspective. -Crip

I didn't even attempt to put a number on the MTM losses on the equity portfolio, but we all knew it would be bad and it certainly was. Worth noting that half of Q2's loss S&P loss and 2/3rds of BB's Q2 loss have come back in the first month of Q3. This may have been my favorite part: Given the low duration of the bond portfolio if the investments are held to maturity a significant portion of the net unrealized losses recorded in the first six months of 2022 of $965 million will be reversed in the next 12 to 18 months. Interest and dividend income increased from a run rate of approximately $530 million annually at the end of 2021 to a current normalized rate of approximately $950 million annually.

Q2 - Haven't read yet. https://www.fairfax.ca/news/press-releases/press-release-details/2022/Fairfax-Financial-Holdings-Limited-Financial-Results-for-the-Second-Quarter/default.aspx -Crip

The difference is that this was an investment, not an acquisition. It is a fair question to ask if it makes sense to sell a holding at $35/share, why did it not make sense to sell a year ago at $50+/Share. FFH is my #2 holding but I have to admit one of the things I don’t like about it is, when questions like this are asked, the answers are more song-and-dance as opposed to “Yeah, we screwed up”. I respect the latter far more than the former. -Crip

Full disclosure that international currencies is not in my circle of competence. It’s understood how the INR’s devaluation has impacted FFHI, but how would the investor know whether that devaluation is temporary or more permanent? -Crip

And you're getting nearly a 5% yield to wait.

Wonderful. Me, I'm sitting on ATCO with an average cost of $13.27 (trading at $10.42) and FFI with an average cost of $12.12 (trading at $11.00). I have a full position in both but I may try to average down some on the ATCO. I still believe both investments are good, but just wish I'd have been able to get in at better levels. -Crip

As far as being a lost cause, you very well may be right. One has to acknowledge that. The question for holders (and I am a holder) is whether the market is right about the long-term prospects or if the holder is right. The increase in BV for FFHI over the past 7 years has not been great but it’s been reasonably acceptable, which compels me to think that market has it wrong. But, one has to acknowledge that the market may be right. If one does believe that the market is right, then there’s the exit strategy. If it was not sellable at US$12.50 then it really should not be sellable at US$10.97. This is akin to someone accepting an offer of $450K on their house that when they rejected an offer of over $500K a few months ago. Personally, I have a lot in this position so if/when it moves higher I will look to lighten my position and redeploy where things look better. And when I do, as one with the Sadim* touch for selling stocks, I’ll be sure to let this board know as my selling has more often than not been a good entry point. -Crip * Midas spelled backwards

The caveat to the commentary below is that geopolitical politics is not in my circle of competence, so take it for what it’s worth. I’m not stating that India should support Ukraine, but I think it’s important to not explicitly or implicitly condone invading a sovereign state if for no other reason that it’s trend-setting (and don’t underestimate that). Much of the citizenry in North America is bellyaching about energy pricing, some of which can be attributed to the invasion of Ukraine, and that definitely has a negative impact on all of us in terms of inflation. That, however, is not nearly as concerning as: The loss of life and liberties for thousands, if not tens of thousands, of innocent people. Everyone should be outraged over this. The impact on hundreds of millions of people who depend on food and fertilizer from Ukraine and from Russia. The crisis that may be caused by this is, honestly, unconscionable. The west can only do so much in terms of dissuading Russia from their actions. Sanctions may be putting pressure on the Kremlin, but the entities who are best able to dissuade Russia are China and India since both are chief trading partners for Russia. It’s more to do with humanitarian concerns and world economics than “supporting” Ukraine/Europe/The West. -Crip

My father, God rest his soul, gave more than a few pearls of wisdom over the years, one of which being "Wars are fought for economic reasons, yet wars screw up everyone's economy". -Crip

So, what do you do Mr, Watsa, assuming things once this deal closes as they are now, buyback Fairfax at C$650/US$500 or buy more ATCO at US$11.50 (and enjoy a 4.5% divvy yield)? -Crip

https://www.reinsurancene.ws/fairfax-backed-go-digit-seeks-approval-to-launch-indian-reinsurer-report/ -Crip

Digit IPO: The timing on this is interesting to say the least. If Fairfax owns a big chunk of a company whose value is increasing at a rapid rate and assuming Digit does not need capital that Fairfax would be able to inject, why would Fairfax want to dilute their ownership? Reinvesting monies in a more favorable investment (including a stock buyback)? The IPO would, due to some speculative frenzy, bring in more than Digit is actually worth? Fairfax needs the proceeds to supplement urgent needs of the parent company. Right now, I not seeing any of those scenarios playing out. The greedy side of me would love to see it since, assuming that it would IPO for anything close to what’s been speculated upon, that we’d see a nice bump in the stock price, but I am not sure that’s the best thing for FFH shareholders. -Crip

Invert, always invert. I’m trying to kill this company as an investment and am having a tough time doing so. So far, here’s what can kill it: • Substantively higher inflation in India compared to the US causing currency devaluation. • Political change. Modi will not be in charge forever and a less business-friendly regime can either limit the progress towards a more capitalistic society or reverse it. Capitalism was on the rise in Russia a couple of decades ago and, well, we know how that worked out. • Execution risk. So far the batting average looks solid, but the market has a way of humbling everyone. Those are my biggies. Any others? -Crip

I respectfully disagree. This looks/feels to me like risk-reward analysis. The yield spread between the 2 and 10 year treasuries is 27 bps. The spread between 2 and 30 year is 35 bps. The question is whether or not it is worth the risk of capital loss to extend past 2 years in bond duration. Looking through the prism of 2010 through 2021, the answer is "maybe". Looking at it through the prism of 1960 through 2022, IMHO the answer is a resounding "no". It's less of a "bet" that rates are going to rise and more of "it's quite possible, and I don't want to lose my a** if it happens". -Crip