Fairfax 2020

[Parsad]

^ well said. The man keeps playing everyone. Its an ego fest at this point. Its not deliberately a fuck you like at Biglari, but the overall lack of concern for shareholders is very much the same. If Prem Watsa wasnt once regarded as the "Warren Buffett of Canada", no one would give a shit about this name. In fact, thats pretty much the investment case at this point...one day Prem will right the ship....good luck

 

You know Greg, that's the dumbest thing you've ever said! 

 

I know Prem really well, and he has never acted in a way that would be a "fuck you" to shareholders.  He could...but he never has.  He's actually one of the most humble people you will ever meet...a perfect CEO in terms of leadership, integrity and honesty.  And you can forget about my opinion...Ajit Jain would tell you that!  David Sokol would tell you that!  The numerous executives who have worked with Prem would tell you that.  The hordes of shareholders who know him well will tell you that.

 

By the way, the media came up with the "Warren Buffett of Canada" moniker.  Prem has never liked that.  Does he make mistakes?  Sure.  Is he as good as Buffett...he would be the first to tell you he isn't.  But he keeps trying...keeps aiming to live up to that standard.  That's all you can expect of anyone.

 

So please refrain from talking like an asshole about something you know absolutely nothing about!  Critique all you want, but keep the slander to a minimum.  Cheers!

[Gregmal]

I'm not slandering him but holy shit Sanjeev, how many times do we need to give people a break for making the same mistakes? I certainly dont mince words about guys like Einhorn who do it. I am sure he's a great guy. Why do you keep doing something that isn't working? Isn't it a travesty to have wasted what has literally been one of the most ridiculous periods of market prosperity in modern history!?! Where all you had to do was not be "that guy" FOR THE ENTIRE STRETCH!

 

I made a point of distinguishing this from Sardar, who is just all around an awful person. Thats not Prem. But I still think its inexcusable to not adapt as a manager. Thats ultimately their entire job! How many shareholders would have preferred to have taken a 50% drawdown in 08 and then just rode the wave rather than continuously being plagued by this need to be the smartest guy in the market by timing the next temporary drawdown? Which honestly, we've had a bunch of those over the last decade and when they've happened, FRFH still has somehow managed to avoid reaping the benefit of them. Its not about blasting a good man, its about being accountable as a manager and learning from your mistakes. 

 

I've tried so many times to get myself to like this stock/company and briefly owned it I think in either 2013 or 14. But every time I try, I come back to the same thing, and that is very simply, that whatever you are trying to accomplish here, you can do elsewhere without the management risk.

[Parsad]

I'm not slandering him but holy shit Sanjeev, how many times do we need to give people a break for making the same mistakes? I certainly dont mince words about guys like Einhorn who do it. I am sure he's a great guy. Why do you keep doing something that isn't working? Isn't it a travesty to have wasted what has literally been one of the most ridiculous periods of market prosperity in modern history!?! Where all you had to do was not be "that guy" FOR THE ENTIRE STRETCH!

 

I made a point of distinguishing this from Sardar, who is just all around an awful person. Thats not Prem. But I still think its inexcusable to not adapt as a manager. Thats ultimately their entire job! How many shareholders would have preferred to have taken a 50% drawdown in 08 and then just rode the wave rather than continuously being plagued by this need to be the smartest guy in the market by timing the next temporary drawdown? Which honestly, we've had a bunch of those over the last decade and when they've happened, FRFH still has somehow managed to avoid reaping the benefit of them. Its not about blasting a good man, its about being accountable as a manager and learning from your mistakes. 

 

I've tried so many times to get myself to like this stock/company and briefly owned it I think in either 2013 or 14. But every time I try, I come back to the same thing, and that is very simply, that whatever you are trying to accomplish here, you can do elsewhere without the management risk.

 

That's all you had to say.  I'm fine if you want to critique his performance...but critiquing his integrity just doesn't fly based on what he's done and how he treats everyone around him.  Cheers!

[Xerxes]

For the record, there is that billionaire in BC (Jim Pattison) that is also called Warren Buffet of Canada by BNN now and then. And then sometimes BNN also called Prem that as well when they are talking about FFH. Not sure how it started, but BNN is fanning it ... always ... non-stop.

 

I think that is just marketing for an American audience. At the 2018 AGM in Toronto, there was this person in the audience in the FAH portion of the AGM that said something along the line "you are warren buffet of Canada" as a complementary gesture. It was clear from Prem's face that he didn't like that ... and frankly i would find that moniker offensive if I were Prem. Everyone follows a different a path and have a unique story to tell.

 

PS: for the record, i find it ridiculous, Alibaba is called Amazon of China. Not it isn't. Or how iQiyi is Netflix of China or etc... each company is unique.

 

Now to more interesting stuff (moving away from FFH's shorts that sets me off):

 

John Chen's interview on Bloomberg.

I believe this is his first interview in a while, and i believe he skipped BNN. Good riddance.

 

[omagh]

For the record, there is that billionaire in BC (Jim Pattison) that is also called Warren Buffet of Canada by BNN now and then. And then sometimes BNN also called Prem that as well when they are talking about FFH. Not sure how it started, but BNN is fanning it ... always ... non-stop.

 

I think that is just marketing for an American audience. At the 2018 AGM in Toronto, there was this person in the audience in the FAH portion of the AGM that said something along the line "you are warren buffet of Canada" as a complementary gesture. It was clear from Prem's face that he didn't like that ... and frankly i would find that moniker offensive if I were Prem. Everyone follows a different a path and have a unique story to tell.

 

PS: for the record, i find it ridiculous, Alibaba is called Amazon of China. Not it isn't. Or how iQiyi is Netflix of China or etc... each company is unique.

 

Now to more interesting stuff (moving away from FFH's shorts that sets me off):

 

John Chen's interview on Bloomberg.

I believe this is his first interview in a while, and i believe he skipped BNN. Good riddance.

 

 

I haven't watched BNN in years.  Didn't know it was still a thing.  Cutting out crap is satisfying.

[Cardboard]

What has hit that dog today?

 

Cardboard

[StubbleJumper]

What has hit that dog today?

 

Cardboard

 

I have been expecting to see a bit of tax-loss selling at some point in December because pretty much anybody who bought FFH in the five years leading up to last March is pretty deeply under water.  I must confess that I hadn't expected to see it on December 10 as usually people wait until the final few trading days of the year.  But, if somebody had the intention to sell, crystallize the capital loss and then re-purchase after waiting the obligatory one month to avoid the superficial loss rule, they might wish to do it sooner rather than later.  In 2020, FFH traded X-D on about January 17 or 18, so if somebody wanted to crystallize the loss and still get the US$10/sh dividend, they'd need to dump their shares in the next few trading days, recognizing the T+2 lag.

 

 

SJ

[petec]

What a quarter. After the 2/3q statements about how FFH’s equity holdings have always bounced back after bad periods, the crowing in 4q is going to be deafening!

[KFS]

Dear lord,

Who let the hope-FFH-is-shorting-Tesla crowd get in. Tesla has slayed many short-sellers, some of which are actually in the business of shorting things and have proper track record. With a track record like this, shown below, very much prefer that FFH actually looses money in Q4 in its short so that they can finally "move away" from the casino. Any win, would just encourage them to keep shorting. We already had a lost decade, whose seeds were planted by the wins of 2008-09's big short. The cost of those 2008-09 wins have been enormous. 

 

For the record, $1 billion has already been lost since the pivot-away from shorts in 2016, which was more like 360-degree spin, and in the most recent conference call management still talks about ".... these are remaining position that we are wounding". Thank god we have mark-to-market accounting that allows you to see the un-realized gain/loss progression quarter-by-quarter, so we know what they said on conference call for Q3/2020, was misleading.

 

Any wins in Q4, needs to be more than that  realized losses of $1 billion to offset. Better for FFH to lose, lick it wounds and move away.

 

2011:  zero

2012:  $6.3 million

2013:  ($1.350) billion

2014:  $13 million

2015:  $126 million

2016:  ($2.634) billion

2017:  ($553) million  (almost all of it in Q4 2017!)

2018:  ($248) million

2019:  ($20.7) million

2020 (through Q3): ($327) million

 

Lastly, in my humble non-expert opinion, if one looks at Ackman' shorts in March, putting aside that it worked, you will see that his shorts were an actual hedge against his base-line thinking. His baseline thinking was long-USA, so he hedged that, by going short-USA.

 

In FFH's case it is not a hedge against his baseline thinking, in fact it is complementary and compounding to its baseline thinking. Long-resolute/Stelco/Recipe etc. short [tech name xx]. If FFH had take an actual derivative position that provide short-term relief against his main-deep-value investing style, then we can say it hedged.

 

 

I 100% completely understand the "all shorts are a bad idea" sentiment with regard to FFH's track record...  My only point is that shorting a 1000+ P/E euphoria stock is not the same thing as shorting the S&P500 in 2011..... When your bartender, barber, and Uber driver are all bragging endlessly about their TSLA gains -- now up 600% in 9 months --- and a market cap greater than BRK with hardly a crumb of real earnings, all built on absurd growth projections in a capital heavy business, now is not the time to cover the short prematurely.  I'd vote to let it play out.  (Assuming it's in fact Tsla -- still speculation at this point.)  That being said, long term, I am generally not a fan of shorting, and clearly with Prem's commitment to ending shorts, I'll not be very disappointed to see it come to an end.  It should be a healthy and sobering change for the next decade at FFH... we are in agreement on this!

 

 

[bizaro86]

Dear lord,

Who let the hope-FFH-is-shorting-Tesla crowd get in. Tesla has slayed many short-sellers, some of which are actually in the business of shorting things and have proper track record. With a track record like this, shown below, very much prefer that FFH actually looses money in Q4 in its short so that they can finally "move away" from the casino. Any win, would just encourage them to keep shorting. We already had a lost decade, whose seeds were planted by the wins of 2008-09's big short. The cost of those 2008-09 wins have been enormous. 

 

For the record, $1 billion has already been lost since the pivot-away from shorts in 2016, which was more like 360-degree spin, and in the most recent conference call management still talks about ".... these are remaining position that we are wounding". Thank god we have mark-to-market accounting that allows you to see the un-realized gain/loss progression quarter-by-quarter, so we know what they said on conference call for Q3/2020, was misleading.

 

Any wins in Q4, needs to be more than that  realized losses of $1 billion to offset. Better for FFH to lose, lick it wounds and move away.

 

2011:  zero

2012:  $6.3 million

2013:  ($1.350) billion

2014:  $13 million

2015:  $126 million

2016:  ($2.634) billion

2017:  ($553) million  (almost all of it in Q4 2017!)

2018:  ($248) million

2019:  ($20.7) million

2020 (through Q3): ($327) million

 

Lastly, in my humble non-expert opinion, if one looks at Ackman' shorts in March, putting aside that it worked, you will see that his shorts were an actual hedge against his base-line thinking. His baseline thinking was long-USA, so he hedged that, by going short-USA.

 

In FFH's case it is not a hedge against his baseline thinking, in fact it is complementary and compounding to its baseline thinking. Long-resolute/Stelco/Recipe etc. short [tech name xx]. If FFH had take an actual derivative position that provide short-term relief against his main-deep-value investing style, then we can say it hedged.

 

 

I 100% completely understand the "all shorts are a bad idea" sentiment with regard to FFH's track record...  My only point is that shorting a 1000+ P/E euphoria stock is not the same thing as shorting the S&P500 in 2011..... When your bartender, barber, and Uber driver are all bragging endlessly about their TSLA gains -- now up 600% in 9 months --- and a market cap greater than BRK with hardly a crumb of real earnings, all built on absurd growth projections in a capital heavy business, now is not the time to cover the short prematurely.  I'd vote to let it play out.  (Assuming it's in fact Tsla -- still speculation at this point.)  That being said, long term, I am generally not a fan of shorting, and clearly with Prem's commitment to ending shorts, I'll not be very disappointed to see it come to an end.  It should be a healthy and sobering change for the next decade at FFH... we are in agreement on this!

 

 

 

On the other hand, if it is  TSLA short that will probably wreck what should otherwise be a good quarterly report on the investment side. TSLA is up 42% this quarter. One of the tough things about shorting is that even if you're right eventually, you can lose a  great deal of money in the medium term.

[Xerxes]

I think my point is that, FFH has already enough to work with, and doesn't need the additional distraction of managing short positions (whatever they are).

 

It is not a question of Tesla being a good short target or not. In fact we do not know anything about FFH's short positions and it is all speculation (and we will probably never know), other than inference of Zoom on a conference call and the occasional list of Dirty Dozen high-flyers techs on the annual letters.

 

I am no expert in any of this, but my guess is if FFH is shorting anything it will be based purely on (1) high valuations, and not because (2) they see fraud or else. If it was the latter (i.e. (2)), one as a short seller can make their fraud case public, and often times the target company itself stumbles in its public communications and screws up. Assuming the thesis was correct.

 

But if it is the former (i.e. (1)), then it is not enough just to declare publicly that X company has this crazy Y multiples compared to its peers and it only makes this much Z. Because it is not illegal to have a high valuation, so time is not on your side. And keep referring to the 2000-01, is not going to make it come faster. Furthermore, shorting requires a second degree thinking that goes beyond valuations. is it a cult stock ? is it owned by an insider that can make things difficult for you. is it a trend-setter that has a tailwind ,,, thus unlikely to change soon.

 

At the end of the day, point is to make money the easiest way possible.

And not to go and try to short the hurricane.

 

Lastly, I personally feel, the more time is wasted in the trenches of being short seller, less mindshare is available to truly think about strategic long terms goals.

[StubbleJumper]

Apparently Prem gave a bit of a pep-talk about the virtues of value investing.  I wonder whether he spent a few minutes expounding on the effectiveness of shorting:

 

https://www.theglobeandmail.com/business/article-fairfax-ceo-prem-watsa-touts-traditional-value-investing-amid-frenzy/

[bearprowler6]

Apparently Prem gave a bit of a pep-talk about the virtues of value investing.  I wonder whether he spent a few minutes expounding on the effectiveness of shorting:

 

https://www.theglobeandmail.com/business/article-fairfax-ceo-prem-watsa-touts-traditional-value-investing-amid-frenzy/

 

In my view these are two of the most important statements made by Prem in that article:

 

“For value investors, this has been a tough decade,” Mr. Watsa said. “I tell people, value investing has worked over a 100 years, you just have to be patient.”

 

In the past, Fairfax has successfully positioned portfolios to take profit from market selloffs, using derivative-based investment strategies. However, Mr. Watsa said the company is not making bets against any stock or sector at this time. His focus is on finding underpriced, established companies that growth-focused investors overlook."

 

I am pleased to see him acknowledge in writing that Fairfax does not currently have any shorts. Is this how everyone else reads this or can we rely on Prem to somehow spin his way out of this once again when further losses on shorts are recorded?

 

Now for the comment about a tough decade for a value investor? How utterly ridiculous! How about he misread the impact of low interest rates and Fed policy intervention? How about he didn't understand the impact of technology on so many industry and sectors. Sitting around waiting for 10 years "patiently" waiting for value investing to be back in vogue means you were wrong with your stock selection. Its as simple as that. Even if his picks shine for the next 10 years on average over 20 years he will be lucky to breakeven on many of his selections. In my view, Prem did not adapt and is now unable/unwilling to admit he was wrong.

[Thrifty3000]

“How about he misread the impact of low interest rates and Fed policy intervention?”

 

- Maybe they just mistimed it by a decade or two. Time will tell. Debt markets are definitely a competency of theirs. They were concerned about unprecedented implications of total debt to GDP ratio, and the Fed being nearly out of ammo with rates at the zero bound. Debt has continued ballooning. The US is all but in a debt trap. There are plenty of reasons to believe markets will be more sensitive to interest rate fluctuations and increasingly volatile. I hope they continue hedging if they find bargain opportunities to do so.

 

“How about he didn't understand the impact of technology on so many industry and sectors.”

 

- He did understand. He was inundated by Blackberries at work, and ended up picking the wrong horse.

[Parsad]

Now for the comment about a tough decade for a value investor? How utterly ridiculous! How about he misread the impact of low interest rates and Fed policy intervention? How about he didn't understand the impact of technology on so many industry and sectors. Sitting around waiting for 10 years "patiently" waiting for value investing to be back in vogue means you were wrong with your stock selection. Its as simple as that. Even if his picks shine for the next 10 years on average over 20 years he will be lucky to breakeven on many of his selections. In my view, Prem did not adapt and is now unable/unwilling to admit he was wrong.

 

Did anyone...anyone at all in the entire world...expect this much government intervention over 20 years?  From the original Nasdaq bubble popping, to the huge amount of asset buybacks during the Housing Crash, to finally the massive amount of stimulus being applied by almost every country during the Pandemic.

 

History, if it does truly rhyme, told us that the intervention in 2008 would have led to deflation.  Prem was more ready for that period than anyone else in the world...they had cash, shorted markets, collateral bonds betting against housing and then were ready for the eventual deflation that never arrived.  Theoretically it should have...Jeremy Grantham has laid waste to all the reasons why it should have happened...but it didn't. 

 

Now, during the Pandemic, we are witnessing the greatest debt explosion in history with the average consumer having no safety net, nor can they afford any reasonable spike in inflation.  How do you get this right?  How do you prepare for this? 

 

For me, after the housing crash, that was my last macroeconomic bet and I decided I will just buy cheap stocks and forget about macro...and we also pursued PDH at the time.  Macro is just too hard to get right!  Especially in unknown territory where history no longer rhymes. 

 

I'd like to know one guy who actually got it right and understood the disruption that would occur from technology, as well as expected a global pandemic to hit!  If you can find that one guy Bearprowler, let me know.  The only person that I can think of that may have gotten some of it right was Bill Gates.  Cheers!

[bearprowler6]

Now for the comment about a tough decade for a value investor? How utterly ridiculous! How about he misread the impact of low interest rates and Fed policy intervention? How about he didn't understand the impact of technology on so many industry and sectors. Sitting around waiting for 10 years "patiently" waiting for value investing to be back in vogue means you were wrong with your stock selection. Its as simple as that. Even if his picks shine for the next 10 years on average over 20 years he will be lucky to breakeven on many of his selections. In my view, Prem did not adapt and is now unable/unwilling to admit he was wrong.

 

Did anyone...anyone at all in the entire world...expect this much government intervention over 20 years?  From the original Nasdaq bubble popping, to the huge amount of asset buybacks during the Housing Crash, to finally the massive amount of stimulus being applied by almost every country during the Pandemic.

 

History, if it does truly rhyme, told us that the intervention in 2008 would have led to deflation.  Prem was more ready for that period than anyone else in the world...they had cash, shorted markets, collateral bonds betting against housing and then were ready for the eventual deflation that never arrived.  Theoretically it should have...Jeremy Grantham has laid waste to all the reasons why it should have happened...but it didn't. 

 

Now, during the Pandemic, we are witnessing the greatest debt explosion in history with the average consumer having no safety net, nor can they afford any reasonable spike in inflation.  How do you get this right?  How do you prepare for this? 

 

For me, after the housing crash, that was my last macroeconomic bet and I decided I will just buy cheap stocks and forget about macro...and we also pursued PDH at the time.  Macro is just too hard to get right!  Especially in unknown territory where history no longer rhymes. 

 

I'd like to know one guy who actually got it right and understood the disruption that would occur from technology, as well as expected a global pandemic to hit!  If you can find that one guy Bearprowler, let me know.  The only person that I can think of that may have gotten some of it right was Bill Gates.  Cheers!

 

Sanjeev....I was wondering how long it was going to take you to respond to my post. I now have my answer. You are loyal to Prem and I get that. I do however believe that you are not as objective as you could be when it comes to discussing his investing results. BTW...that's okay...this is your board and you can do with it what you want.

 

The job/role of any investment manager is to respond to the world they encounter. Holding onto positions thinking that you are right and the rest of the world is wrong year after year after year makes no sense. At least not to me. We must all adapt. This is a point Gregmal has made on numerous occasions and I happen to agree with him.

 

Yes the amount of government intervention in this magnitude has never happened before. So what. It did happen. It was happening before our eyes. We all had to respond to that. Prem does not get a pass on this simply because of his past successes. Or because he is a great guy and a wonderful friend.                                 

 

Prem often quotes Ben Graham. Did Graham sit on losing "bets" or positions for 10 years? If I recall correctly Graham had a 2-3 year hold period and then he got out of the position if his original thesis did not play out the way he thought it would. Either you follow Graham or you don't.

 

I feel at times that value investors love to sit around with each other and tell each other how smart they are. How stupid everyone else is for not getting it. They seem to take comfort in holding onto their positions in the face of all evidence to the contrary. When Prem says that the last 10 years has been tough on value investors. What does he accomplish by saying this other than being part of the misery loves company bandwagon.

 

For what its worth...I thought Prem's deflation bet was brilliant. The amount invested (I believe something like $500-$600 million)  for the potential payoff made sense to me. The fact that it did not work out was okay. I do not however agree with him doubling down over and over again on losing positions in Blackberry, Eurobank and Resolute Forest Products to name just a few. Holding onto these positions year after year because value investing will prevail makes no sense.

 

Gates is a wonderful example. I am glad you brought him up. What about the old man himself... Warren Buffett? He seems to have done okay over the last 10 years. Bill Ackman is also someone who comes to mind. After a tough few years he pivoted and reacted to the way the world was and not how he wanted it to be.

 

I really do not want to go back and forth here. I know I will never convince you of my views and I can assure you that you won't convince me of yours. I still hold a smallish legacy position in Fairfax and hope it does well. I was just frustrated by some Prem's comments in the G&M article and decided to respond to them on this board. Thanks for providing a place for me to do so.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[drzola]

These our very well written WORDS  folks as these our very uncertain times eh! Haha and I mean the last 21 yrs NOW Eh!

[Parsad]

Now for the comment about a tough decade for a value investor? How utterly ridiculous! How about he misread the impact of low interest rates and Fed policy intervention? How about he didn't understand the impact of technology on so many industry and sectors. Sitting around waiting for 10 years "patiently" waiting for value investing to be back in vogue means you were wrong with your stock selection. Its as simple as that. Even if his picks shine for the next 10 years on average over 20 years he will be lucky to breakeven on many of his selections. In my view, Prem did not adapt and is now unable/unwilling to admit he was wrong.

 

Did anyone...anyone at all in the entire world...expect this much government intervention over 20 years?  From the original Nasdaq bubble popping, to the huge amount of asset buybacks during the Housing Crash, to finally the massive amount of stimulus being applied by almost every country during the Pandemic.

 

History, if it does truly rhyme, told us that the intervention in 2008 would have led to deflation.  Prem was more ready for that period than anyone else in the world...they had cash, shorted markets, collateral bonds betting against housing and then were ready for the eventual deflation that never arrived.  Theoretically it should have...Jeremy Grantham has laid waste to all the reasons why it should have happened...but it didn't. 

 

Now, during the Pandemic, we are witnessing the greatest debt explosion in history with the average consumer having no safety net, nor can they afford any reasonable spike in inflation.  How do you get this right?  How do you prepare for this? 

 

For me, after the housing crash, that was my last macroeconomic bet and I decided I will just buy cheap stocks and forget about macro...and we also pursued PDH at the time.  Macro is just too hard to get right!  Especially in unknown territory where history no longer rhymes. 

 

I'd like to know one guy who actually got it right and understood the disruption that would occur from technology, as well as expected a global pandemic to hit!  If you can find that one guy Bearprowler, let me know.  The only person that I can think of that may have gotten some of it right was Bill Gates.  Cheers!

 

Sanjeev....I was wondering how long it was going to take you to respond to my post. I now have my answer. You are loyal to Prem and I get that. I do however believe that you are not as objective as you could be when it comes to discussing his investing results. BTW...that's okay...this is your board and you can do with it what you want.

 

The job/role of any investment manager is to respond to the world they encounter. Holding onto positions thinking that you are right and the rest of the world is wrong year after year after year makes no sense. At least not to me. We must all adapt. This is a point Gregmal has made on numerous occasions and I happen to agree with him.

 

Yes the amount of government intervention in this magnitude has never happened before. So what. It did happen. It was happening before our eyes. We all had to respond to that. Prem does not get a pass on this simply because of his past successes. Or because he is a great guy and a wonderful friend.                                 

 

Prem often quotes Ben Graham. Did Graham sit on losing "bets" or positions for 10 years? If I recall correctly Graham had a 2-3 year hold period and then he got out of the position if his original thesis did not play out the way he thought it would. Either you follow Graham or you don't.

 

I feel at times that value investors love to sit around with each other and tell each other how smart they are. How stupid everyone else is for not getting it. They seem to take comfort in holding onto their positions in the face of all evidence to the contrary. When Prem says that the last 10 years has been tough on value investors. What does he accomplish by saying this other than being part of the misery loves company bandwagon.

 

For what its worth...I thought Prem's deflation bet was brilliant. The amount invested (I believe something like $500-$600 million)  for the potential payoff made sense to me. The fact that it did not work out was okay. I do not however agree with him doubling down over and over again on losing positions in Blackberry, Eurobank and Resolute Forest Products to name just a few. Holding onto these positions year after year because value investing will prevail makes no sense.

 

Gates is a wonderful example. I am glad you brought him up. What about the old man himself... Warren Buffett? He seems to have done okay over the last 10 years. Bill Ackman is also someone who comes to mind. After a tough few years he pivoted and reacted to the way the world was and not how he wanted it to be.

 

I really do not want to go back and forth here. I know I will never convince you of my views and I can assure you that you won't convince me of yours. I still hold a smallish legacy position in Fairfax and hope it does well. I was just frustrated by some Prem's comments in the G&M article and decided to respond to them on this board. Thanks for providing a place for me to do so.

 

First, my friendship with Prem, Mohnish, Francis, whoever else, doesn't make me blind to their faults.  So that's one supposition that is incorrect.  Other than accounts managed for my brother, mother and niece and nephew, and one personal taxable account, I've owned Fairfax for maybe 8 of 20 years.  I don't own any stocks for long periods of time other than PDH...and that's another discussion altogether.  Not even Berkshire Hathaway.  I buy below intrinsic value and sell above intrinsic value in my non-taxable accounts and my personal holding company.

 

Second, you're comparing two different things:  Money management is not what Prem and Buffett do.  Their hold period is not 2-3 years...it's forever, so making the comparison to money managers is like comparing apples to oranges.  You should be comparing Prem to other corporations...not money managers.  Markel would be an ideal comparison for better or worse.

 

Third, you use Greg's comments about adapting.  Unlike public corporations and public money managers, their records are exactly that...public.  Greg may be full of shit and hasn't outperformed anyone other than Dane Cook.  No offense Greg...just saying!  ;D

 

Lastly, again you compare to Ackman who uses his fund and SPAC's.  Ackman lost nearly 100% of his Target SPAC a few years ago...how do you account for that mistake?  Dare I say "FELP".  Again, no offense just that Ackman put nearly 100% of the capital into one stock.  That's effing crazy! 

 

So, let's keep comparisons on a level playing field.  Also, you haven't provided anyone who actually got it right.  Even Microsoft was in a deep 10-year funk a while ago until they got rid of Ballmer, and like I said, they had access to the one guy who studied both technology and pandemics!  Cheers! 

[Cardboard]

All I know is that it appears I made a mistake buying back into that dog after selling it following a nice trading gain.

 

Ever since I saw Prem in public and explaining his Swiss Re reinsurance deal of $1 billion, I had doubts about his integrity. Sounded and behaved like an old car salesman. Defending the indefensible.

 

There are some people that you can listen to and every word makes sense. Not him.

 

Cardboard

[drzola]

Cardboard has me thinking real hard today as maybe I'm the Ponzi @ the Poker table here maybe?

As I have invested in all three of Sanjeev's mention's ha!

[no_free_lunch]

Where did the pandemic talk come from?  Nobody holds that against prem. That's a strawman argument there.  The debate comes down to ffh book growth over past decade and even before covid there was underperformance.

 

I look at my own accounts and it's all outperformed prem. Even thus little RRSP I manage for family with 60/40 stock bond ETFs has completely whipped his record. I am pretty sure with lower beta too.

 

I certainly didn't predict the government  intervention but I definitely predicted it could happen.  It's the only reason I have stayed invested. That's nonsense to say it's some crazy theory that nobody thought of. These world class investors have never heard of the fed?  They didn't watch what they did in the 08 crisis?  Buffet did, that's probably why he's on the fence with cash buffer and stock allocations.

 

I'm not buying it.  Prem FD up.

[Libs]

<Third, you use Greg's comments about adapting.  Unlike public corporations and public money managers, their records are exactly that...public.  Greg may be full of shit and hasn't outperformed anyone other than Dane Cook.  No offense Greg...just saying! >

 

Kind of a cheap shot, Sanjeev. Greg posts real-time buys and sells here, with good - to - great results. His thought process is well-documented. I have little doubt he's got a good track record.

[Viking]

To put it simply, Fairfax is a ‘hairy’ type of investment. The primary reason is ‘do you trust management?’ Too many times Prem has said one thing and something else has happened at the company. As result investors have to take everything Prem says with a grain of salt.

 

The most recent example? The recent Globe & Mail article: “In the past, Fairfax has successfully positioned portfolios to take profit from market selloffs, using derivative-based investment strategies. However, Mr. Watsa said the company is not making bets against any stock or sector at this time. His focus is on finding underpriced, established companies that growth-focused investors overlook.”

 

Does this mean the mystery short (that resulted in a couple hundred million in losses in Q3) is no longer is on Fairfax’s books? Or is Prem simply saying that no new positions have been entered into? The ‘at this time’ is also interesting... is this Prem’s attempt to flag this alternative is back on the table? Or is this simply the Globe saying a bunch of stuff out of context and Prem is the ‘victim’ here.

 

My Christmas wish is Prem gets off the quarterly conference calls and stops doing interviews. The less he says in public the better. The problem is what he says, what he thinks he says and what investors hear are three different things. And this is not helpful for Prem, Fairfax or investors.

 

Now does this flaw in Fairfax stop me from investing? No. That is because i think Fairfax

1.) is dirt cheap

2.) has lots of near term (next year) catalysts

3.) is slowly improving as a company

 

Will Fairfax be a buy and forget type stock for me? Not right now. Too ‘hairy’.

[Gregmal]

I appreciate the kind words. How great or terrible I am of course depends on who you ask!

 

Joking aside.

 

I think the point being missed is that when something isnt working, a market participant who is looking to make money needs to ask themselves why? Relentlessly. I hate group think and find great value in the other side of the story, even when its contrary to what I think. Its why many times(like TPL thread for instance) people may call it "trolling" or whatever. Who cares what they call it. But I find that knowing the other side of the investment is more useful to me than loving my own thesis. So with this said, the problem you run into with some of these guys, is they have weeks, months, years of data points conveying that something is not working. And outside of just being arrogant, I cant really see any other justification for being so cavalier about it. One of the biggest flaws I routinely find in the "value investor handbook" is that there are plenty of aphorisms and excerpts that repeatedly reinforce bad behaviors and habits. No one says Prem needed to buy Tesla. But if he was honing in on Blackberry, was something like Apple really too far out of his universe? I use Apple because its a direct comp to the observation made by another poster about Buffett, who has fully admitted he doesnt know shit about tech.

[Thrifty3000]

FFH average EPS:

 

- 2005 to 2009: $33

- 2010 to 2014: $17

- 2015 to 2019: $28

 

- 15 year average EPS: $26

 

Still under the same management.

 

Actually generates earnings over time and pays consistent dividends! (Not a money losing unicorn. Not a negative yielding bond.)

 

Was recently selling for less than 10x very long term historical average earnings.

 

Current price is slightly above where the CEO was willing to buy $150 million more.

 

Unfortunately, it feels like bitterness from those who bought into the hype of 2005 to 2009 - paying close to $400 per share - is clouding a lot of judgment about the opportunities/risks presented today. People seem to want to vent frustration, while it seems a perfectly prudent investment is right in front of us.

 

Maybe there should be a “Vent frustration with Prem” thread to provide therapy and isolate emotionally charged frustrations. Maybe a “Show love for Prem” thread too for balance. Haha.