Is FFH an "All Weather Fund"?

[Cageyone]

This video and the Bridgewater Associates website got me thinking as to whether Prem has also achieved an "All Weather Fund" - since while the market is down 3.5 percent since its high last week, FFH is up by about the same amount!

 

http://www.bwater.com/home/research--press/the-all-weather-strategy.aspx

[obtuse_investor]

Something I have been thinking about... And my opinion is that if FFH is all-weather/antifragile, it isn't by design. It is accidental and it may not continue to be true.

 

Berkshire is probably more antifragile.

 

[petec]

Something I have been thinking about... And my opinion is that if FFH is all-weather/antifragile, it isn't by design. It is accidental and it may not continue to be true.

 

Berkshire is probably more antifragile.

 

Hasn't almost everything they've done in the last decade been to make themselves antifragile?

[Cageyone]

So in the event of a global tsunami, which will weather the storm better - Berkshire or Fairfax?

[obtuse_investor]

So in the event of a global tsunami, which will weather the storm better - Berkshire or Fairfax?

 

That is an interesting question.

 

Are you asking: (1) "in a global tsunami, which will be more robust?"

Or are you asking (2) "which will be more antrifragile?" I.e. is it going to walk away from the tsunami, stronger than ever before?

 

(Not trying to be pedantic here-- I think both questions are worth exploring)

 

 

My current thinking says that my answers are: (1) FFH (2) BRK.A/B

[obtuse_investor]

Something I have been thinking about... And my opinion is that if FFH is all-weather/antifragile, it isn't by design. It is accidental and it may not continue to be true.

 

Berkshire is probably more antifragile.

 

Hasn't almost everything they've done in the last decade been to make themselves antifragile?

 

I think so too. I am not sure if that is by design or accidental.

 

Perhaps it is a good question to ask Prem this year at the AGM...

[Guest longinvestor]

So in the event of a global tsunami, which will weather the storm better - Berkshire or Fairfax?

 

Global Tsunami, the mother nature kind? Like a couple of earthquakes, hurricanes etc. striking major metros around the globe? Then it is 1. BRK.

 

Financial Tsunami? Then it is neither BRK nor FFH. It will be the value investors who have been actively "looking elsewhere to invest" (besides FFH/BRK). Many frequent this message board. Just open any discussion thread on CoBF to verify.

[Jurgis]

Financial Tsunami? Then it is neither BRK nor FFH. It will be the value investors who have been actively "looking elsewhere to invest" (besides FFH/BRK). Many frequent this message board. Just open any discussion thread on CoBF to verify.

 

I seriously doubt that more than ~20% of these investors will do better than BRK or FFH.

[petec]

In a natural disaster FFH will certainly lose money - but they are built to withstand that and would benefit from hard pricing after.  I regard that as antifragile (but I think they'd get hit harder than BRK because thy are more insurance-weighed).

 

In a financial tsunami they're rock solid (unless it's a hyperinflation - I haven't figured that out yet.  Probably more so than BRK given the hedges and swaps. 

 

And I agree, few investors will do better in a downturn.

 

 

[Guest longinvestor]

In a natural disaster FFH will certainly lose money - but they are built to withstand that and would benefit from hard pricing after.  I regard that as antifragile (but I think they'd get hit harder than BRK because thy are more insurance-weighed).

 

In a financial tsunami they're rock solid (unless it's a hyperinflation - I haven't figured that out yet.  Probably more so than BRK given the hedges and swaps. 

 

And I agree, few investors will do better in a downturn.

 

For this reason alone, Fairfax is no comparison to Berkshire. I don't believe Prem Watsa thinks differently either. Surely they would kill to build a fortress at FFH like Berkshire. He is doing all he can do to protect FFH the best he can, but there is none like Berkshire to withstand an epic period of insurance claims. If this does not form the central basis of comparing risk at BRK or FFH, wth is? Earning 9% versus 15% returns?

 

 

[petec]

In a natural disaster FFH will certainly lose money - but they are built to withstand that and would benefit from hard pricing after.  I regard that as antifragile (but I think they'd get hit harder than BRK because thy are more insurance-weighed).

 

In a financial tsunami they're rock solid (unless it's a hyperinflation - I haven't figured that out yet.  Probably more so than BRK given the hedges and swaps. 

 

And I agree, few investors will do better in a downturn.

 

For this reason alone, Fairfax is no comparison to Berkshire. I don't believe Prem Watsa thinks differently either. Surely they would kill to build a fortress at FFH like Berkshire. He is doing all he can do to protect FFH the best he can, but there is none like Berkshire to withstand an epic period of insurance claims. If this does not form the central basis of comparing risk at BRK or FFH, wth is? Earning 9% versus 15% returns?

 

I'm not sure we are disagreeing!  And I think they are building a fortress like BRK, slowly.  My point is simply that BRK would do better in a catastrophe because they have more operating businesses like MidAmerican; and FFH would do better coming out the other side because they have more businesses that would be exposed to higher rates.

[Cageyone]

Thanks for your thoughts! My dilemma is that I currently hold no Berkshire but FFH is now slightly more than 50 percent of my portfolio. So I'm wondering whether I should swap some of my Fairfax for Berkshire.

[TwoCitiesCapital]

I've thought this about Fairfax since I first invested back in 2011. It's what attracted me to the stock as I turned more bearish on the world economy. I'm not in any position to be able to ascertain their robustness in a severe disaster, but I certainly would welcome the large insurance driven profits that come afterward that I've been patiently waiting for.