AZ_Value

When someone shows you who they are, believe them. IMO the right time to move on from FFH was many years ago and many instances of them talking from both sides of their mouths ago. AZ

Like Nate said, make sure you're comparing to shares authorized not outstanding. They can't issue more than the shares that were authorized. If they are without going to shareholders to increase the number of shares authorized they most likely are breaking the law or the corporation's charter

I'm really confused. Not even kidding. Not sure if what's going on is selective memory like is so often the case given that this is the corner of B. and Fairfax but they did one about 1 year and a couple of months ago. http://www.fairfax.ca/news/press-releases/press-release-details/2013/Fairfax-Completes-C431000000-Bought-Deal-Financing/default.aspx And that one was to raise money because they had to put a bunch of it into Blackberry as well as supplement the capital needed because their hedges forced them to fork over $2 billion in cash in 2013. So I don't understand the shock, the out of character, and never thought they'd do a bought deal comments. At least for this one, looks like you guys have a consensus that it is to buy a quality insurer. Disclaimer: I haven't reviewed the deal myself or anything about Fairfax since the last quarter, so I have zero opinion on the deal. My review process is a consistent one for all companies I follow/care about. I wait for the annual report to come out as well as the letter. And I first read the whole annual report and decide for myself how they did and then read the Chairman's letter to see what he has to say about how they did to see if I agree. I haven't even reviewed the transcripts from the recent conference calls. So I have no comment other than pointing out the other bought deal in the not too distant past.

#TeamKraven!! Unless... wait.... Is he the werewolf or the vampire again? That matters a bit.

https://www.youtube.com/watch?v=lUMQylUxbsg Wonderful business mind and humble person. Not recognized enough I think. Edit: Forgot to specify. I think the transcript shared above is of this interview I just posted. For those more inclined to listening to him vs reading the transcript. Cheers.

And buy some expensive abstract art for the lobby! I've also installed 24 monitors in my office for trading! ;D Actually, I took one of the smallest offices...24 monitors wouldn't fit. The nicest offices are going to be subleased to cut overhead. Cheers! Personally, I'll know that you made it big when your private pictures start being leaked on the internet :-) Congrats Sanjeev, know that you have a bunch of people pulling for you that you can reach out to whenever and for whatever, and trust me, in life as in business, this intangible is priceless. For everything else use your corporate AMEX card now that you're the boss :-) Congrats again buddy.

http://i.imgur.com/qPV0WcU.gif Extremely sad news. Depression is a very real and quite terrible thing that eats away at many lives and often times without friends and family even knowing. Always lend an ear to those you think are suffering quietly and encourage them to reach out and talk to someone. Many times a phone call is all it takes. These guys have saved many lives - National Suicide Prevention Helpline 1-800-273-8255 (1-800-273-TALK)

This is why I regret so much that I didn't make it to Toronto, so I have to rely on you guys to tell me what they said. Now is this something that they said you're quoting? Or did you see that somewhere (If so could you point us to where you saw that) Because here's what I can personally see, this is straight from their annual report: https://dl.dropboxusercontent.com/u/72385227/Fairfax%20Derivatives%20Table.JPG Where is the switch into long swaps happening since from what I can tell the long swaps positions actually almost went away entirely from $1 billion in notional value in 2012 to $260 million in 2013. I'd be interested to know where you got that from. If you heard it from a member of the Fairfax team directly or somewhere else. Thanks. As for the CPI derivatives, that is correct, the maximum amount they can lose is the premium they paid to initiate the contract

Good points Paul. But unfortunately life doesn't work like that. I don't have to stop at 2009 and then disregard the following 5 years just because I'm being asked to. It's my right and prerogative to look at everything. Which is why I made it a point to make sure I detailed the various factors I don't like and it wasn't necessarily that they lagged the market. I wanted to point out exactly what I didn't like that they were doing. Like I said it really doesn't matter to me how you want to explain it, talking about the Fed or other factors, or what the track record is, I just don't believe it is given to man to be able to predict stuff like inflation and deflation (especially the type of deflation Prem is talking about). Actually if you put a gun to my head and asked me to choose I'd rather go with the guy predicting inflation because the odds are in his favor since deflation is so rare.

Thanks everybody for the kind words. Just the ramblings of one man to be taken with a grain of salt. Correct, I believe that graph is government debt to GDP. I thought that's what they were referencing also, so you're right, it would be higher. However, even the graph I showed was just an example of how someone might bring another fact to the table to contradict what Fairfax might be basing themselves on. Even if we're dealing with total debt to GDP a person could ask how about the fact that a huge portion of that is held by the Federal reserve, even the private sector debt since they've been buying billions of MBS with quantitative and qualitative easing. And the Federal Reserve happens to be the one entity that can afford to have a holding period that comes as close to eternity as humanly possible. What's the answer? I certainly don't know, that's my whole point and why I think making macro pronouncements is a fool's errand. As for the BV, I used the numbers Prem provides in his letter on page 7. The table he provides every year that shows a CAGR of 21% over the life of the company. Here's the thing though, in your scenario if everything goes up and they are hedged 100%, it's not like they're really realizing gains since there's a realized loss that then comes with it, this is something that they're also doing in that when they talk about this it seems like they are describing the selling of their holdings as realizing the gains or cashing in on the gains but on the hedge side it is described as adjusting them because they sold equities, I would want more emphasis put on the fact these are losses that are being realized, i.e some of that cash that they had to pay out over the course of the contract will not come back because the contract just got sold to someone else. Seeing the discussion here is exactly why my post was geared towards pointing out my own reading of details that make me uncomfortable and that I don't think neither Fairfax nor analysts are talking about. To repeat myself a bit, so they have a portfolio of equities and it is hedged 100%, and as the equities go up in value, the hedges go down. Fine. But that's not the whole story, which is a big part of my point. They constantly have to pay cash because of those swap contracts (even if in their mind, it will be recouped eventually if they keep the contract and the equities fall). If I now see them selling some of their equities, what am I to think? Given that their stated goal is that these are long term positions like WFC and JNJ that they don't want to sell hence the hedges to protect those very same positions. Well, does it have to do with the cash due to counterparties? It's not like the cash is sitting on their balance sheet, holding company cash is still at $1B. Like I said in my writeup, at the end of the day I have to come to my own conclusions as an investor and I don't think that Wells Fargo is so overvalued that it deserves to be dumped so if anyone else can offer me a rationale answering my questions then I'm more than willing to look into that. So I'm left with what I can observe myself, since they're not telling me, and it's that the positions were sold at a time when they had to pay out $2B because of those contracts AND on top of that they issued 1 million shares to raise $400 million in cash at the same time. Why? (like I said in my post we know that probably some of it went into Blackberry) Now THIS I agree with wholeheartedly. How hard would it be to just simply explain all of that. I really don't understand the need to be left feeling like the whole truth is not being told. Especially in a company like Fairfax, it's not like something can be forced onto them, Prem controls the majority of voting shares.

Now for the conversation about Scott. Definitely no need to overreact and use bad language. Seems like he's found a lifestyle that suits him and he thrives in it so I say you do you brother. However, while I also don't necessarily like how yadayada might have phrased his opinion or expressed himself I also always make it point to never pretend to be holier than thou in discussions like these. If we were to bring it to a personal level, I definitely can't sit here and pretend that if it was say my son or a friend that I found living in an apartment with only a sleeping bad and no friends other than internet friends and no girlfriend/boyfriend interests, my first reaction wouldn't be to inquire if everything is ok, and if I'm being very honest I would probably ask more than once. And I can guarantee that many here are exactly the same way, and I refuse to believe that there's anything wrong with that, just the instincts of the social animals we are that have served us so well forever. Now, you just need to also have the EQ (as in emotional intelligence) to realize that it's just someone being himself, that's all. So again, more power to Scott if he's figured out what works for him, I can tell you that I wouldn't last 1 week like that.

thank you. perhaps I didn't do the best job of explaining myself at first or my choice of words may have been poor. Also, Buffett constantly downplays his skills...so his own quotes on the matter are not reliable. Though he is quoted as saying his Carnegie course diploma hangs in his office (and is the only diploma in his office) because "it changed my life." I think he is also quoted as saying How to Win Friends and Influence People was the 2nd most influential book in his life (next to Intelligent Investor). +1 and +1 This is a very interesting discussion. About Buffett, Kraven and Watsa are right, he was always sociable with great people skills as far as we've been told. He always had friends and partners and Graham and her network may have added to that but that was not new. I don't see how you can conclude differently if you read his biographies or listen to him. At 9 or 10 he and his friends organized to sell golf balls at a golf course, or recruited others to sell tip sheets at a race track, in high school he partnered with friends to invest in a gas station and whatever that pinball thing was, in a barber shop or something. He made lifelong friends while attending Ben Graham's class and we know the names of many of them. Heck, the guy was even in a fraternity while at U Penn. I think the Carnegie course was all about public speaking. I think a lot of this comes from the always self derogatory tone he uses when putting himself down and giving credit to others "Oh yeah... I was a mess, the class helped me out, or so and so helped me out etc..." I wonder why people never wonder whether he and Katherine Graham would have even become friends if he didn't have people skills or wasn't a very personable guy to begin with.

http://money.cnn.com/magazines/fortune/fortune_archive/2003/11/10/352872/ It was really a piece about the trade deficit more so than the debt itself if you read the whole thing, as he recognizes like he's said many times that a country that borrows money in the same currency it prints cannot really be faced with default or anything like that because inflation will always be the easier solution (This whole thing obviously only holds true if you don't factor in a childish Congress that might do the unthinkable for political posturing only)

Kill'em all and feed them to the poor. Solve overpopulation (read The Population Bomb, pretty scary stuff) and world hunger in one fell swoop. Interesting stuff. I like these topics. So what religion do people think is the best? Listen, as a true conservative I never fully agreed with us deciding as a people to move on from Zeus. Seriously. What was up with that?

Let me just go on record and say that I am a big fan of Kraven. No amount of scientific data will disprove that. Ever. That makes you a Kraven ideologue...a "Kradeologue". Let me guess, you DON'T have a portfolio concentrated in 3 stocks, right?! Oh, and I bet you don't think Sears eliminated all of their liabilities when they created the non-guarantor subs. Am I getting close? Friggin' well-poisoning Kradeologues. Damn right. You are spot on. And please don't even try looking into who's funding the Kradeologue movement. We don't want any controversy about the biased/unbiased nature of our ideology. Eventually the World will come around and join us, you just wait.

Let me just go on record and say that I am a big fan of Kraven. No amount of scientific data will disprove that. Ever.

wrong. the company is incinerating cash. it burned almost half a billion in the last 39 weeks and cash burn accelerated in the most recent quarter. your fcf number is astonishingly wrong. Chen's stated objective is to "arrest" cash burn. Thank you Wellmont. I was seating here since yesterday waiting for someone to point out that barely two months after the $1B cash infusion (after the failed go private attempt) Blackberry is going back to Fairfax for $250M more in cash. And no one is asking why, or even considering it to be worrisome. Remember the days when part of the RIM bull case was how they had all this cash on their balance sheet with no debt etc... but now two months can't go by without the need for an additional cash infusion. Come on guys... COME ON!!

I really don't ask for much All I want is for Eddie Lampert to finally come out and clearly spell out his plan regarding SHLD for his partners/sharelholders (like he should have already done at some point over the past decade) and finally put us all out of our misery with the SHLD thread. But since that's not going to happen, how about world peace and stuff like that?

Haha. I think someone needs to defend thepupil here because his points are more than valid in my opinion. The fact is that not everybody is made equal, and like it or not, some managers out there prefer a smooth 12% performance to a lumpy 15% and if it helps them sleep at night and/or keep their job who am I to judge them? I personally don't subscribe to that but I also think us value investors way too often have a "holier than thou" attitude towards everybody else because we know our way is probably the most logical in the long term, even though we know from the start that the majority of investors don't have the discipline it takes to be a value investor. And when you look at it from that standpoint, the numbers in the document posted by Sanjeev speak for themselves. Out of the 19 full years provided, the S&P had 4 down years (down -11.6% on average), the short fund URSUS was up 42.9% on average. For the 15 up years for the S&P it was up an impressive 20.3% on average across those years and URSUS was only down -2.4% on average. This is quite valuable for managers who care about mitigating the pain of down years. very valuable. And over the whole period to have a short only fund have 2% CAGR while the index is roaring at 13% is quite impressive. All you have to do is look at how painful the Fairfax short book has been in the recent years of market advance and you'll know how difficult this is. Now I can't cast a judgement on Chanos as a man or his moral character which seems to be part of the issue here, but as always, numbers don't lie.

The puts in question were sold by BRK. i.e. He's not buying puts to hedge or protect his downside, he thinks that the markets will be much higher in 15 or 20 years or whenever they expire thus doesn't expect to pay anything on them while he gets to collect the float upfront to invest in the meantime.

I don't buy this at all. buffett invested $10s of billions in that period. He added so much value...He bought Burlington in late 2009. brk had no need to borrow. +1 I haven't read the interview and will try to do so tonight, but this is complete nonsense. How is it considered to be tepid when you spend $26 Billion to buy Burlington, put $5 billion in Goldman, $3 billion in GE, buy $300M of Harley Davidson bonds, and also participate as a financing partner in the Mars and Wrigley deal to the tune of $4.5 billion. And every quarter that went by it seemed like he was buying tens of millions (if not hundreds) of additional WFC and other stocks. Does Schroeder have any numbers or anything like that to tell us how she figures WEB became tepid? Actually WEB never let up throughout the entire time those puts have been on BRK's books, early 2011 he spent $9 billion to acquire Lubrizol, then put $5 billion into BAC, and let's not forget when we woke up to find out that he had put $11 billion into IBM. And all along the "derivatives" that the media (and Schroeder) were focusing on were swinging up and down each quarter. Alice Schroeder has been such a big disappointment (IMHO).

+1

Let's put aside the part about whether a man would consider her or not, like we say in French quoting Blaise Pascal "Le coeur a ses raisons que la raison ignore" - "The heart has its reasons of which reason knows nothing." She sounds like a reasonable lady and if some dude falls in love with her, the debt might not be a big factor when weighed against his feelings towards her. I'm more concerned about all these quotes below: DTEJD1997, Is this solely your reading of the situation or is this also her attitude towards her debt? If it is how she thinks about her predicament then IMO the most helpful thing a person can do for her is to teach her Charlie Munger's philosophy about complaining and whining. It never leads anywhere. So what if she's a journalism and law major and it's not working out. Adapt and keep plugging along until it works out, I don't see how whining about it is going to help. I was born and raised in a small African country torn apart by civil war, what do you figure the odds were for me making it to where I am today? She, and many people, should realize that by simply waking up everyday in America and the opportunities it has to offer, she is de facto ahead of most of the human population. So never ever feel sorry for yourself and keep plugging along as Charlie Munger would say. I'd have her watch this video starting at the 12 min mark.

Maybe it's me but I'm not sure it makes much sense. If in your view you should adjust for "the cash that you will not be able to tap into until later" before discounting your stream of cash flows then why stop at share buybacks why not the other allocation option called "nothing" (i.e. the Buffett way). If management retains everything and it all goes to retained earnings, you don't see a penny until: 1) They eventually give you some via dividends or 2) you sell your shares which will have presumably increased in value to reflect the higher book value. Why not then adjust for that every year since you're technically foregoing cash flows now with the idea that they will be higher in the future if the dollars retained grow into more dollars. Maybe this all goes back to the fact that you are combining in your DCF model a per share analysis now and in the future which I'm not sure how it can be done without some heavy guesswork

This is a great common sense check. If you were to find a company that has stayed under the radar for a long time and remained undervalued while generating good cash flows and management has consistently allocated 100% of that to buying back shares would your DCF model show us 0 then since your intention is to discount (FCF - Buybacks)