Fairfax 2022

[bluedevil]

Great points, Petec.

 

The fact that this boom in shipping has gone on for so long seems to me to have two big consequences for Atlas (other than its shareholders like me being sad that they missed the boom!): (1) It has greatly lessened the counterparty risk that Atlas faces with the liners, which is a big plus.  (2) It has taken a field of competitors that were weak, and made them flush with cash and 3-5 ship lease contracts at very high prices.  The vision of Atlas rolling up these weak lessors and consolidating the industry is probably gone, at least in the medium term, and the company is more likely to look to invest in other fields.

 

In terms of the relative attractiveness of the stock, i'm curious in terms of what you see as more attractive.  The company will earn about 55% of its market cap by the end of 2024, has an excellent management team, and in 2025 will still have something like 13B of contracted revenue on the books, even if it doesn't book a single new contract until then.  In terms of risk/reward, it is hard for me to identify other stocks that are largely indifferent from a revenue/earnings perspective to what happens in the broader economy over the next couple of years and yet still have this kind of earnings yield. 

[Candyman1]

1 hour ago, bluedevil said:

Great points, Petec.

 

The fact that this boom in shipping has gone on for so long seems to me to have two big consequences for Atlas (other than its shareholders like me being sad that they missed the boom!): (1) It has greatly lessened the counterparty risk that Atlas faces with the liners, which is a big plus.  (2) It has taken a field of competitors that were weak, and made them flush with cash and 3-5 ship lease contracts at very high prices.  The vision of Atlas rolling up these weak lessors and consolidating the industry is probably gone, at least in the medium term, and the company is more likely to look to invest in other fields.

 

In terms of the relative attractiveness of the stock, i'm curious in terms of what you see as more attractive.  The company will earn about 55% of its market cap by the end of 2024, has an excellent management team, and in 2025 will still have something like 13B of contracted revenue on the books, even if it doesn't book a single new contract until then.  In terms of risk/reward, it is hard for me to identify other stocks that are largely indifferent from a revenue/earnings perspective to what happens in the broader economy over the next couple of years and yet still have this kind of earnings yield. 

 

I think with Atco, the main issue to think about is what happens to container shipping prices (and thus ship leasing prices) over the next few years. What I am afraid of is that a. demand for container shipping declines for some reason and b. how many ships are on order. If container shipping goes into a large downturn, I think it will reflect on ATCO's stock price.

- What will happen to demand for container shipping long-term (i.e. will it continue to grow the way it has over the last few decades? Or not?) I know there is a lot of talk about de-globalization and on shoring. I think that will be way harder to achieve than politicians think. 

- I looked at the 2022 investor day presentation on page 27 it lists a global container fleet of 25.4 million TEU (which was a 4.9% increase over last year) and a backlog of newbuilt orders of 6.1 million TEU, that is about 25% of the current fleet, and very few demolitions (which is to be expected and demolitions will increase if container shipping prices come down.) Still that seems that ballpark the container fleet capacity is increasing for the next few years at between 4% and 6%. How will that impact the value of ships and the value of ATCO if we go from a shortage of ships to a surplus? Despite that amazing contracted cash flow, will people even consider that? 

- One issue that worries me a lot is what happens if for some reason it turns out we built too many ships and the industry goes into one of those long down shipping cycles, as they tend to do? Could it be that some of the lessors just break the contracts? I remember dealing with coal companies and in pr releases they kept talking about that new contract of X millions of tons for the next five years, until I found out that in a down period, these coal burning utilities just would not allow the trains on their terrain to unload and said f... off to the coal miners. Could the same happen to ATCO? Not saying it will. Lets say Maersk has leased a number of ships at higher prices, will they be willing to blow up their reputation for a short-term gain? Also, how will ATCO have to deal with Maersk? Do they look for a compromise and lower the price? Not sure how the dynamics will work. I think ATCO's position will be pretty good, still it worries me.

 

On the other hand, lets not forget that the people running ATCO are great. I believe that APR business has a decent chance of doing much better over the next few years. Given the transition to more renewables, it looks like there might be a fair amount of demand for leased generating capacity as there will be bumps in the road. Just read a WSJ article about many grid operators worry that too many cabon based utilities have been shut down and renewable project have not booted up yet. Also wind and solar are intermittent, so more backup capacity will be needed anyway.

Also, I would not be surprised if Sokol is thinking way beyond the current APR business. The guy has built a number of businesses and will likely continue to push growth.

 

Btw. I remember when I had access to Bloomberg (about 12 years ago), that one could lookup in a fairly detailed way all ship orders on Bloomberg. If someone has access to Bloomberg, feel free to post that info here. I would appreciate that. ATCO did inform us about the total orders, but I would like to see if there is data of container shipping orders by size.

 

 

 

 

[Candyman1]

Viking, any chance you have that FFH investment spreadsheet available to post? Would like to see where we sit compared to Q1 2022.

[dutchman]

Why is fairfax holding up so well 

in the downdraft?  Thought it would get wrecked just based on market muscle memory lol

[TwoCitiesCapital]

1 hour ago, dutchman said:

Why is fairfax holding up so well 

in the downdraft?  Thought it would get wrecked just based on market muscle memory lol

 

I'm pleasantly surprised. One of the first times, in a long time, it's outperformed so dramatically. 

 

Recently sold some shares to buy other names I had trimmed on the way up now that Fairfax's relative performance is like +40%. 

[Parsad]

2 hours ago, dutchman said:

Why is fairfax holding up so well 

in the downdraft?  Thought it would get wrecked just based on market muscle memory lol

 

Name one company better positioned than Fairfax for this environment?  Maybe Google...a ton of cash, little debt and steady, recurring cash flow?  That's about it.  Not even Berkshire is positioned as well for a stagflationary environment and market downturn.  Cheers!

[nwoodman]

2 hours ago, Parsad said:

 

Name one company better positioned than Fairfax for this environment?  Maybe Google...a ton of cash, little debt and steady, recurring cash flow?  That's about it.  Not even Berkshire is positioned as well for a stagflationary environment and market downturn.  Cheers!

That’s a big call.  i think starting from a 20-25% discount to stated book value has a lot to do with the it.  I will take the outperformance but won’t be taking any victory laps too soon.

 

Personally i think the current situation actually favours Berkshire more than Fairfax.  At some point inflation, running at these levels, is going to kick the crap out of insurance companies even with a hard market.  Buffett has been preparing Berkshire for that moment, I hope Prem has too.  A couple of decent Cat 5’s or an earthquake or two would be just the way to round out 2022.  I hope not, just sayin’.

[Parsad]

1 hour ago, nwoodman said:

That’s a big call.  i think starting from a 20-25% discount to stated book value has a lot to do with the it.  I will take the outperformance but won’t be taking any victory laps too soon.

 

Personally i think the current situation actually favours Berkshire more than Fairfax.  At some point inflation, running at these levels, is going to kick the crap out of insurance companies even with a hard market.  Buffett has been preparing Berkshire for that moment, I hope Prem has too.  A couple of decent Cat 5’s or an earthquake or two would be just the way to round out 2022.  I hope not, just sayin’.

 

Fairfax has almost 90% of its portfolio in cash or bonds maturing in less than 3 years.  Berkshire has over 50% of its assets in equities.  If the market turns up from here, then Berkshire will do better.  If the market has further to fall, which is likely based on further expected rate increases, then Fairfax will be far better positioned.  So it's a coin toss, but the odds are in FFH's favor right now. 

 

Most insurers are going to get the crap kicked out of them from bond losses due to rate increases.  Fairfax is best positioned to deal with that, as well as put money to work as rates rise and markets fall.  We also already know that Fairfax does well when other insurers are getting beaten from catastrophe losses, as premium pricing only gets better after such events, and Fairfax reserves better than 90% of insurers.  Cheers!

[Viking]

3 hours ago, Parsad said:

 

Name one company better positioned than Fairfax for this environment?  Maybe Google...a ton of cash, little debt and steady, recurring cash flow?  That's about it.  Not even Berkshire is positioned as well for a stagflationary environment and market downturn.  Cheers!

i like Fairfax today. But with the S&P500 down 20% from its highs and Nasdaq down 30% from its highs (and lots of well run companies down much more) investors have lots of very good opportunities today. 
 

i don’t think Fairfax has a ton of UNNEEDED cash. Fairfax has a fair bit of debt (not a problem). If they can achieve a sub 95CR and with growing interest and dividend income - Fairfax will generate solid cash flow but this remains to be seen. Their equity portfolio has been coming down pretty hard (i’ll do an update of my spreadsheet the next couple of days). Bottom line, during past big equity sell offs - i would usually have exited Fairfax by now. But not this time. 

[Parsad]

23 hours ago, petec said:

 

 

I'm sceptical that the market doesn't understand that Atlas is a lessor. Atlas trades at a huge premium to other lessors. So it should: it is a better operator, it has longer contracts, it is not over-earning in the short term markets the way the others are, and it has Sokol. But Sokol has attracted a hell of a lot of attention and I think the market knows what this business is.

 

I am also sceptical that a lessor should trade at 12x. I wouldn't capitalise long term contracted cash flows at 8% unless they were inflation-linked. BAM-style assets are infinitely more attractive than ATCO style assets, given they are largely inflation-linked cash flows that can be financed fixed. 

 

I do think the market is disappointed that they failed to grow earnings much in the best market in history. Short term rates are set by the marginal buyer, and can therefore spike to incredible levels in an unbalanced market; long term rates are set by the cost of new ships, so they stay much more stable. Normally, high short term rates don't last, so Atlas' strategy of locking in long term cash flows is normally smart, and they may yet look smart if the market normalises soon. But this spike in short rates has lasted 18 months now. Companies at the short end have earned vast percentages of their enterprise values in a few months. If that continues for another year or two, Atlas will look dumb, and worse, their competitors will be exceptionally well-capitalised.

 

I also think there is confusion about the diversification strategy is and whether it will succeed. The market won't assume that's a success before it is one. The only way I think this gets to 12x is if Atlas successfully develops 2-3 other earnings streams at good returns, and that'll take a decade.

 

Anyway, I agree it is cheap, and I would have been adding at $12 6 months ago. I just think the market might be offering better opportunities now.

 

There is an article in "Tradewinds" from the end of March that discusses how analysts are having a difficult time understanding Atlas...so you don't have to take my word for it.

 

https://www.tradewindsnews.com/tag/atlas_corp

 

Not only is Atlas a lessor, it is a finance company as well...one that owns the underlying assets being financed by leasing cash flows.  Such companies, when well managed, have easily been valued at 10-12 times earnings.  GE Finance in it's heyday was valued at 20-25 times earnings, and it wasn't particularly well managed, nor did it own the underlying assets except as collateral. 

 

McDonalds is considered a restaurant business, but it's as much a real estate business.  Most people never understood that about McDonalds.  Cash flows paid for real estate...long-term cash flows.  Atlas is doing the same.  Extending leasing contracts to an average duration of 11.5 years presently, and then paying for hard assets using those cash flows.  If that isn't inflation-linked, then I don't know what is!

 

Markets are bipolar.  They will vote based on quarterly results...value investors have the luxury of, one, not being bipolar, and two, investing in businesses at the right price for the long-term. 

 

Atlas will probably add a couple of businesses over time, but whether they do or not, will not take away from the quality business they have built so far in roughly four years since Sokol joined and FFH invested.  Four years!

 

I'm more than excited to see what they can do in another decade!  Cheers!    

[Parsad]

17 minutes ago, Viking said:

i like Fairfax today. But with the S&P500 down 20% from its highs and Nasdaq down 30% from its highs (and lots of well run companies down much more) investors have lots of very good opportunities today. 
 

i don’t think Fairfax has a ton of UNNEEDED cash. Fairfax has a fair bit of debt (not a problem). If they can achieve a sub 95CR and with growing interest and dividend income - Fairfax will generate solid cash flow but this remains to be seen. Their equity portfolio has been coming down pretty hard (i’ll do an update of my spreadsheet the next couple of days). Bottom line, during past big equity sell offs - i would usually have exited Fairfax by now. But not this time. 

 

$5B in equities plus investments in BB, ATCO, etc...compared to $45B in cash and short-term bonds.  They have significant potential for future investment gains, increased dividend income, alongside steady insurance income. 

 

While investors have plenty of choices, they don't get 3.5-1 leverage like they would through Fairfax.  Fairfax only needs a 5% return on their investment portfolio annually to get a 15-17% ROE, while the average investor has to get 15-17% return on their investment ideas annually.  Cheers!

[HeadOfLeverage]

14 hours ago, Parsad said:

 

Fairfax has almost 90% of its portfolio in cash or bonds maturing in less than 3 years.  Berkshire has over 50% of its assets in equities.  If the market turns up from here, then Berkshire will do better.  If the market has further to fall, which is likely based on further expected rate increases, then Fairfax will be far better positioned.  So it's a coin toss, but the odds are in FFH's favor right now. 

 

Most insurers are going to get the crap kicked out of them from bond losses due to rate increases.  Fairfax is best positioned to deal with that, as well as put money to work as rates rise and markets fall.  We also already know that Fairfax does well when other insurers are getting beaten from catastrophe losses, as premium pricing only gets better after such events, and Fairfax reserves better than 90% of insurers.  Cheers!

I think one factor is that if a recession would be deep and long, the generation of new cash at BRK will be very strong compared to most companies due to BHE and BNSF. You can't only take the current balance sheet split into consideration.

[petec]

On 5/19/2022 at 2:47 PM, bluedevil said:

The fact that this boom in shipping has gone on for so long seems to me to have two big consequences for Atlas (other than its shareholders like me being sad that they missed the boom!): (1) It has greatly lessened the counterparty risk that Atlas faces with the liners, which is a big plus.  (2) It has taken a field of competitors that were weak, and made them flush with cash and 3-5 ship lease contracts at very high prices.  The vision of Atlas rolling up these weak lessors and consolidating the industry is probably gone, at least in the medium term, and the company is more likely to look to invest in other fields.

 

I think you are right on both counts, but I disagree Atlas missed the boom. It has nearly doubled its fleet, including newbuilds, and its earnings power. It just captured the boom a different way.

 

On 5/19/2022 at 2:47 PM, bluedevil said:

In terms of the relative attractiveness of the stock, i'm curious in terms of what you see as more attractive. 

 

It's on 6x 2024 earnings. I think it should probably trade on 8-10x. That's a good return in 2-3 years. But amidst a generalised selloff with epic pain in certain areas and deep value in others, there are a lot of things that appear more interesting than they did a few months ago. I am still sifting through!

 

On 5/19/2022 at 5:16 PM, Candyman1 said:

- What will happen to demand for container shipping long-term (i.e. will it continue to grow the way it has over the last few decades? Or not?

 

No, it won't - it will grow, but is largely mature. Atlas's argument is/was that this would make it less cyclical. Clearly that hasn't been the case during covid but it makes sense long term - more predictable demand = less likely to overbuild. Also the industry is much more consolidated which should lead to rationality.

 

On 5/19/2022 at 5:16 PM, Candyman1 said:

newbuilt orders of 6.1 million TEU, that is about 25% of the current fleet, and very few demolitions (which is to be expected and demolitions will increase if container shipping prices come down.) Still that seems that ballpark the container fleet capacity is increasing for the next few years at between 4% and 6%

 

This probably isn't a huge issue. Demand would usually be 2-3% and scrappage 3-4%, so you usually need an order book of around 6% per year. In 2008/9 the orderbook hit 60% of fleet and clearly we are nowhere near that. I think demand would have to come in at 0% for the orderbook to be a big issue, and even then capacity can be regulated by steaming slower (which is likely to happen anyway given fuel costs and environmental regulations).

 

On 5/19/2022 at 5:16 PM, Candyman1 said:

One issue that worries me a lot is what happens if for some reason it turns out we built too many ships and the industry goes into one of those long down shipping cycles, as they tend to do? Could it be that some of the lessors just break the contracts?

 

No. Didn't happen in 2008-2018 and the industry is *far* better capitalised now.

 

On 5/20/2022 at 5:39 AM, Parsad said:

There is an article in "Tradewinds" from the end of March that discusses how analysts are having a difficult time understanding Atlas...so you don't have to take my word for it.

 

I have no intention of taking anyone's word for it 

 

On 5/20/2022 at 5:39 AM, Parsad said:

GE Finance in it's heyday was valued at 20-25 times earnings

 

It also blew up! But I take your point about 10-12x. I am not sure that stands in a more inflationary environment for the reasons I have given but, I doubt we will settle it here. Time will tell!

 

On 5/20/2022 at 5:39 AM, Parsad said:

Cash flows paid for real estate...long-term cash flows.  Atlas is doing the same.  Extending leasing contracts to an average duration of 11.5 years presently, and then paying for hard assets using those cash flows.  If that isn't inflation-linked, then I don't know what is!

 

That is a terrible analogy. Ships depreciate. Real estate appreciates.

 

Atlas buys ships at a fixed price and leases them at a fixed rate, earning a FIXED spread for as long as the initial contract lasts. There is no inflation link until the initial contract rolls. If the initial contract is 1 year then earnings are inflation linked. If it is 12 or 15 years then there is significant risk to the real value of the contracted cash flows in the later years of the contract. Yes, there will be a nice boost when the contract rolls, but in a high inflation environment that will be more than offset by the increase in the cost of replacement ships.

 

 

 

[Parsad]

On 5/23/2022 at 10:33 AM, petec said:

 

 

 

That is a terrible analogy. Ships depreciate. Real estate appreciates.

 

Atlas buys ships at a fixed price and leases them at a fixed rate, earning a FIXED spread for as long as the initial contract lasts. There is no inflation link until the initial contract rolls. If the initial contract is 1 year then earnings are inflation linked. If it is 12 or 15 years then there is significant risk to the real value of the contracted cash flows in the later years of the contract. Yes, there will be a nice boost when the contract rolls, but in a high inflation environment that will be more than offset by the increase in the cost of replacement ships.

 

 

 

 

Not as terrible as analogy as you might think:

 

https://www.tradewindsnews.com/opinion/-insane-market-as-prices-for-secondhand-container-ships-jump-by-a-third/2-1-1159454

 

Ships, planes, cars, trucks, etc depreciate in accounting terms and lifespan, but that doesn't mean their utility value decreases.  Thus the massive price increase in second-hand containerships during the hard market. 

 

So depreciation reduces the asset value in terms of GAAP/IFRS, but the cash flows being generated by those depreciated assets has not changed.  For example, again using McDonalds, who write down depreciation on PPE every year in their restaurants, but you can still make the same hamburgers on that equipment and charge customers the same for them.

 

Whether you like it or not, ships are assets.  Atlas is financing them through long-term leases, and they will do the same at APR.  It's what Sokol did at MAE, it's how Netjets works, as well as BNSF...Atlas is no different.  Cheers!

[petec]

On 5/26/2022 at 2:54 AM, Parsad said:

 

Not as terrible as analogy as you might think:

 

https://www.tradewindsnews.com/opinion/-insane-market-as-prices-for-secondhand-container-ships-jump-by-a-third/2-1-1159454

 

Ships, planes, cars, trucks, etc depreciate in accounting terms and lifespan, but that doesn't mean their utility value decreases.  Thus the massive price increase in second-hand containerships during the hard market. 

 

So depreciation reduces the asset value in terms of GAAP/IFRS, but the cash flows being generated by those depreciated assets has not changed.  For example, again using McDonalds, who write down depreciation on PPE every year in their restaurants, but you can still make the same hamburgers on that equipment and charge customers the same for them.

 

Whether you like it or not, ships are assets.  Atlas is financing them through long-term leases, and they will do the same at APR.  It's what Sokol did at MAE, it's how Netjets works, as well as BNSF...Atlas is no different.  Cheers!

I think we are talking about different timeframes. 
 

To the extent Atlas owns ships on short contracts it is fairly inflation-proof in the short term. If that’s what you’re saying then I agree. However:
 

1. Every single ship, always, ends up being worth scrap value. Ships depreciate. At that point, you’ve got to replace it with a new one, the cost of which will have inflated. That’s not an inflation hedge. In fact it’s exactly the kind of business with high ongoing capital costs that Buffett warned against owning in an inflationary environment. 

 

2. To the extent Atlas has *fixed* long term contracts it is not an inflation hedge. I can’t for the life of me see how that statement can be contested!

[Patient Investor]

On Thursday, Standard and Poor's raised Fairfax's credit ratings. The insurance operating company financial strength rating was changed  to "A" from "A-" . The holding company issuer credit rating was raised to "BBB" from "BBB-" with a stable outlook in both cases. This is continuing tangible evidence of the improved operations and outlook at Fairfax. A market price still substantively book value per share does not seem justified given these facts. 

[glider3834]

6 hours ago, Patient Investor said:

On Thursday, Standard and Poor's raised Fairfax's credit ratings. The insurance operating company financial strength rating was changed  to "A" from "A-" . The holding company issuer credit rating was raised to "BBB" from "BBB-" with a stable outlook in both cases. This is continuing tangible evidence of the improved operations and outlook at Fairfax. A market price still substantively book value per share does not seem justified given these facts. 

also saw this

https://news.ambest.com/presscontent.aspx?refnum=32073&altsrc=2

[glider3834]

On 5/28/2022 at 4:28 PM, petec said:

I think we are talking about different timeframes. 
 

To the extent Atlas owns ships on short contracts it is fairly inflation-proof in the short term. If that’s what you’re saying then I agree. However:
 

1. Every single ship, always, ends up being worth scrap value. Ships depreciate. At that point, you’ve got to replace it with a new one, the cost of which will have inflated. That’s not an inflation hedge. In fact it’s exactly the kind of business with high ongoing capital costs that Buffett warned against owning in an inflationary environment. 

 

2. To the extent Atlas has *fixed* long term contracts it is not an inflation hedge. I can’t for the life of me see how that statement can be contested!

Lets hope they manage their assets through shipping cycle effectively, take advantage of market conditions & don't fall into the position of having to scrap vessels - they are currently selling older 2nd hand vessels with charters attached - lets see how they go

Edited May 29, 2022 by glider3834

[Viking]

I like to follow Fairfax through three broad buckets:

1.) Underwriting

2.) Interest and dividend income

3.) Equity holdings

 

How is bucket 1 looking 5 months into 2022? Perhaps the most important thing we learned from P&C insurers when they reported Q1 results was the hard market is continuing. WRB forecast the hard market likely continuing into 2024.

 

What does this mean for Fairfax? Likely +20% top line growth in 2022. My current estimate is for Fairfax to grow net premiums earned by 25% in 2022 and another 10% in 2023. I think there is an outside chance Fairfax could hit US$20 billion in net premiums earned in 2022.  What does this mean for underwriting results?

 

                    Net Prem Earned     CR     Underwriting Profit

2023 Est       $21.3 billion            94          $1.28 billion  $57/share

2022 Est       $19.4 billion            94          $1.16 billion   $50

2021               $15.5                      95          $801 million  $31

2020              $13.86                    97.8        $308             $12

2019              $12.54                    96.9        $389             $15

2018              $11.91                      97.3        $322             $12

 

Fairfax could see close to 60% growth in net premiums earned over the last 4 years. At the same time we are seeing a lower CR. And this is resulting in a much higher underwriting profit (up 4X the past 4 years) to $50/share in 2022. As a reminder, Fairfax shares are trading at US$535 today.  

---------- 

One important input is hurricane activity. Sounds like the forecasts are for an above average hurricane season in 2022. Something to watch given we are just beginning hurricane season (June 1). The silver lining is a bad year for catastrophe losses will likely extend the hard market…

----------

My numbers above do NOT include runoff. My guess is the cost of runoff will come in at about $200 million per year (about the average from the past couple of years).  

Edited June 6, 2022 by Viking

[MMM20]

Thanks for the update. With the ongoing hard market, good-enough investment performance, and still conservative fixed income side, the stock seems cheaper now than at $360 1.5 years ago - I just wonder when we'll see them play more offense. Will they add a whole lot more capital to the mortgage side given that rates have essentially doubled? Also just hope they don't cut the flowers to water the weeds with respect to the potential digit ipo and other things.

[Crip1]

3 hours ago, MMM20 said:

Thanks for the update. With the ongoing hard market, good-enough investment performance, and still conservative fixed income side, the stock seems cheaper now than at $360 1.5 years ago - I just wonder when we'll see them play more offense. Will they add a whole lot more capital to the mortgage side given that rates have essentially doubled? Also just hope they don't cut the flowers to water the weeds with respect to the potential digit ipo and other things.

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
 

[glider3834]

thanks @ourkid8 for finding this - a small buyback under the NCIB

 

https://www.sedi.ca/sedi/SVTItdOneLineDetailDerivRemarkIss?locale=en_CA

 

 

 

Edited June 8, 2022 by glider3834

[allycat18]

Hi all 

 

Just thought  I would share Mr. Zechner's wisdom. I don't think he follows Federated or it's  holdings too closely.

Unfortunately I think he is view tends to be the same as Mr. Market. They just don't want to see the changes over the last couple of years.

https://www.bnnbloomberg.ca/investing/video/john-zechner-discusses-fairfax-financial-holdings-ltd~2462324

[Crip1]

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

 

-Crip

[petec]

On 4/30/2022 at 7:53 AM, petec said:

I’ve said this before, so at the risk of sounding like a broken record: why is the cash position a macro bet rather than a risk-reward bet? When curves are as flat as they’ve been, there simply isn’t enough interest rate reward to justify duration risk. The AGM deck is good on this - look how much higher the duration on a 30y treasury is compared to 30 years ago. Bond price risk is real. You guys are all focussed on the absolute level of rates, but how steep the curve is matters just as much. To invert, when the curve is flat, to go long you *must* believe rates are going to *fall*. 
 

*That’s* a macro bet. What Fairfax is currently doing is actually macro agnostic in my view. 

 

This month to date 20+ year treasuries (TLT) are down 5.3% and 1-3y treasuries (SHY) are down 1.4%. (Data from Koyfin.)

 

The loss differential in 14 days is nearly 10x the annual yield differential that was available at the start of the month. In other words there is absolutely no way people were being paid to take this duration risk.

 

Going long when the yield curve is flat is a macro bet. The only way it works is if yields fall. Staying short when the curve is flat is macro agnostic.