Fairfax 2023

[SafetyinNumbers]

I chat with quite a few Fairfax holders and my impression is that many of them are looking for reasons to sell. I think it’s mostly to avoid drawdowns which might lead them to feel or worse look stupid. Especially to their bosses/clients if they are portfolio managers. Meanwhile, the index huggers just buy stock on VWAP so are price insensitive. 

 

Personally, I think it makes little sense to consider selling until Fairfax trades at least 1.5x book value because that seems likely over the next 5 years given how underowned Fairfax is by Canadian PMs benchmarked to the S&P/TSX and how active shareholders like ourselves see very strong book value growth over the same period.

 

In the past three years, Fairfax has gone from 47bps in the index to 89bps. The shares outperformed the index by 170% but that was offset by growth in capitalization of the index and Fairfax’s share buybacks.

 

It’s already very hard for active PMs not to own Fairfax given how it’s crushed the index recently but given the built in growth that I think we all agree is highly probable, if the stock just stays at 1x BV, it’s weighting will go well above 100bps and the urgency to own it will increase. 

 

It’s easy to think up narratives PM’s will use to justify paying up to 1.5x BV. They can point to comps like BRK, MKL that trade there. They can point to long term and recent ROE north of 15%. They can point to exposure to Greece and India in the equity portfolio and how cheap it is although that might be to justify paying 2x BV!

 

I really want to avoid selling too early because I think we could be in the first year of Fairfax’s 95-98 experience where ROE hit 20% four years in a row and the multiple went from 1.5x BV to > 3x BV. Fairfax also increased shares outstanding (Singleton like) by 33% which contributed to the growth in book value from $39 to $112.

 

These analogs are all pretty useless except they do show us what’s possible if not probable. It’s easy to hold or buy at 1x book value, it will be much harder north of 1.5x but I don’t have to worry about steeling myself until we get there. In 1995, the starting point was 1.5x BV. I don’t know if I would have been interested back then even if I had my knowledge now. That set of shareholders didn’t make it easy for the index huggers as the market cap grew from ~$800m to north of $7b. Maybe this set of shareholders is jaded enough given the last decade to hand over their shares easily but I’m trying to hold on to mine.

 

Of course, everyone should do whatever makes them comfortable. This is not investment advice. It’s just my thought process for which I welcome criticism.

[petec]

On 8/20/2023 at 9:55 AM, Viking said:

 you are a night owl! 

 

Early morning my side of the Atlantic!

 

Sorry it took me a while to come back to this.

 

On 8/20/2023 at 9:55 AM, Viking said:

My view is the true anomaly was the period 2010-2020 and zero interest rates.

 

That's entirely fair, and yes Prem & team positioned themselves for a reversion to normal beautifully. But (being pedantic) you said the increased earnings power is simply down to their decisions, and it absolutely isn't, IMHO.

On 8/20/2023 at 9:55 AM, Viking said:

The part of your comment i do not understand is: “And I think the stock looks fairly cheap on that basis.”

 

My estimate is the stock is trading at 5.2 x 2023 earnings. That is not ‘fairly cheap’… that is crazy cheap. Do you not think $4.3 billion is a reasonable estimate for operating earning for 2023? 
 

Or is it more a weighting issue… where Fairfax is getting too big and you want to lighten up to rebalance your overall portfolio? Regardless of fundamentals or what the stock might actually be actually worth?

 

It's definitely partly weighting. I went into covid owning a lot of this and had the great good fortune to add significantly at about $250 IIRC, so FFH has definitely grown as a % of my portfolio.

 

But it's also value. If we agree FFH's operating earnings are in large part rate-dependant, then we're straying into territory where I don't trust my opinions, and I don't assume that this level of earnings is sustainable. Instead I tend to value it at 1x or 1.2x 2-3y forward BV, including the excess of carrying over fair and a bump when the digit deal finally closes (and I don't penalise them for IFRS17, which arguably we should).

 

That still gets you a VERY nice return from here. But I can find other things with a similar outlook so why not diversify the risks?

 

To be clear though, I've probably taken 5% of my peak position off the table - i.e. not much. It is still my biggest holding by some distance. I expect to own it permanently because I have great respect for management, but the size will vary with valuation.

[petec]

On 8/20/2023 at 12:40 PM, SafetyinNumbers said:

 

I think this take on Brit and Allied ignores that Fairfax issued stock at 1.3x book plus and issued preferred at tight spreads to partially fund these acquisitions. Singleton is a legend not only for the buybacks below book but for issuing stock early on well above book to grow the earnings power of the business. Call it towering ego if you like, I call it accretive capital allocation.

 

 

Agree, but nonetheless I think these will turn out to be good deals.

[petec]

On 8/20/2023 at 12:52 PM, StubbleJumper said:

 

 

I'm not Pete, but I'll take a run at this.

 

If you want to value a security using PE as a metric, you need to do so on the assumption that earnings are neither unusually high nor unusually low and that they are sustainable for a prolonged period.  A PE is essentially a mental short-cut for assessing the value of a perpetuity.  To make the argument that a 5.2 PE is cheap and that the company should have a PE of, say, 12, you need to assume that the current excellent operating conditions for an insurance company will persist for many years on end.

 

To do this, you need to argue that FFH has some sort of special sauce that enables it to write a 94 CR while buying US treasuries yielding 5%, but nobody else can/will do so.  So, in essence, the argument needs to be that $1 of capital in Crum or Odyssey can be used to write $2 of premium, the underwriting earnings will be 12 cents (94 CR) and riskless investment income will be 10 cents (a US Treasury yielding 5%), providing a slick return of 22% on that equity, BUT no other company can replicate that.  No other company will see this, obtain new capital, expand their book of business, and competition will not push the CR rate up and squeeze FFH's books of business.  If you can hammer out this argument in your own mind why FFH can do this and nobody else can/will, then your earnings are sustainable and you can simply slap some sort of market average PE onto current earnings to arrive at a valuation estimate.

 

Setting aside the argument about the sustainability of earnings, the comment saying, "And I think the stock looks fairly cheap on that basis" is in my view a reasonable and valid comment.  You have quite rightly pointed out that FFH has locked in some fairly attractive investment returns for the next few years.  You've done the arithmetic through to develop pro forma earnings estimates going forward 2.5 years and shown that there will be big earnings coming down the pipe, even if a guy gives a moderate haircut to underwriting profitability for 2024 and a  massive haircut to underwriting profitability for 2025 (but, hey if they actually continue to write a 94 CR, so much the better!).  If you do this, it is difficult to envisage a scenario where adjusted BV (after accounting for the excess of market over book for certain associates) doesn't hit $1,100 by Dec 31, 2025.  If operating conditions in the insurance market continue to be as wonderful as they currently are, with a CR of 94 and a treasury of 5% being SIMULTANEOUSLY available, that Dec 2025 BV could be higher, but it seems to be a no-brainer that they'll make the $1,100 BV given that the returns on the fixed income portfolio are largely locked in.  So, someone who doesn't buy the argument that FFH ought to currently trade at PE12x$180EPS=US$2,000+ can quite reasonably believe that it could trade at somewhere between 1x and 1.2x BV on Dec 31, 2025.  With the shares currently trading at ~US$830, a price on Dec 31, 2025 of $1,100 to $1,300 is quite plausible and is fully consistent with the observation, "And I think the stock looks fairly cheap on that basis."

 

It really amounts to a bit of a differing view of just how far into the future you are comfortable to predict outstanding insurance results.  I am assuming that we are at the peak of the insurance cycle and that conditions will deteriorate as capital enters the industry and companies competing to expand their books of business push the CRs higher (probably to slightly above 100 before it's all said and done).  If it actually does work out that FFH can routinely obtain a 22% return on an incremental dollar of capital, so much the better.  But, personally, I am unwilling to assume that today's wonderful insurance conditions will persist for a prolonged period.  I would be happy in 10 years if I am wrong today!

 

 

SJ

 

I should have read this before replying - nailed it I think!

 

The one query I have is how much CR and rates are related. It may be that 0% rates forces capital into the industry and CR's down, and 5% rates have the opposite effect. In other words I suspect the sources of operating earnings are highly correlated, and if you assume rates are now higher for longer, all insurance companies will earn more. But equally, the cost of capital is by definition higher in that scenario, and the net impact on stock price makes my head hurt.

[petec]

On 8/20/2023 at 1:27 PM, MMM20 said:

But I do think there is now a totally plausible upside case in which you could pay $4000 today and make ~10% returns long term from there.

 

I would put the probability of this at about 1%, but only because nothing really has a 0% probability.

 

But if you want my stock for $4000 you're welcome

[Viking]

8 hours ago, SafetyinNumbers said:

I chat with quite a few Fairfax holders and my impression is that many of them are looking for reasons to sell. I think it’s mostly to avoid drawdowns which might lead them to feel or worse look stupid. Especially to their bosses/clients if they are portfolio managers. Meanwhile, the index huggers just buy stock on VWAP so are price insensitive. 

 

Personally, I think it makes little sense to consider selling until Fairfax trades at least 1.5x book value because that seems likely over the next 5 years given how underowned Fairfax is by Canadian PMs benchmarked to the S&P/TSX and how active shareholders like ourselves see very strong book value growth over the same period.

 

In the past three years, Fairfax has gone from 47bps in the index to 89bps. The shares outperformed the index by 170% but that was offset by growth in capitalization of the index and Fairfax’s share buybacks.

 

It’s already very hard for active PMs not to own Fairfax given how it’s crushed the index recently but given the built in growth that I think we all agree is highly probable, if the stock just stays at 1x BV, it’s weighting will go well above 100bps and the urgency to own it will increase. 

 

It’s easy to think up narratives PM’s will use to justify paying up to 1.5x BV. They can point to comps like BRK, MKL that trade there. They can point to long term and recent ROE north of 15%. They can point to exposure to Greece and India in the equity portfolio and how cheap it is although that might be to justify paying 2x BV!

 

I really want to avoid selling too early because I think we could be in the first year of Fairfax’s 95-98 experience where ROE hit 20% four years in a row and the multiple went from 1.5x BV to > 3x BV. Fairfax also increased shares outstanding (Singleton like) by 33% which contributed to the growth in book value from $39 to $112.

 

These analogs are all pretty useless except they do show us what’s possible if not probable. It’s easy to hold or buy at 1x book value, it will be much harder north of 1.5x but I don’t have to worry about steeling myself until we get there. In 1995, the starting point was 1.5x BV. I don’t know if I would have been interested back then even if I had my knowledge now. That set of shareholders didn’t make it easy for the index huggers as the market cap grew from ~$800m to north of $7b. Maybe this set of shareholders is jaded enough given the last decade to hand over their shares easily but I’m trying to hold on to mine.

 

Of course, everyone should do whatever makes them comfortable. This is not investment advice. It’s just my thought process for which I welcome criticism.

@SafetyinNumbers Given the run that Fairfax has had the past 3 years, it does not surprise me that some investors are looking to lighten up, especially if Fairfax is now too big of a weighting in their portfolio. I call that a ‘first class’ kind of problem to have. 
 

Personally, i think Fairfax is still ‘dirt cheap.’ I love the push back from others on this board who feel that Fairfax is no longer ‘dirt cheap.’ Sorry, you haven’t convinced me (yet) with your pushback. My read is earnings are going to be much more resilient looking out 3 or 4 years than you think. We will see in another 12-24 months who is right. And that is what i love about investing (and this board). We share ideas and discuss/debate. We all do our own analysis. We place our bets. And we live with the results. Hopefully we earn enough along the way to be able to keep playing the game. Best of luck to everyone. 

[Viking]

33 minutes ago, petec said:

hIf we agree FFH's operating earnings are in large part rate-dependant, then we're straying into territory where I don't trust my opinions, and I don't assume that this level of earnings is sustainable.

@petec Why do you think FFH’s operating earnings are in large part rate-dependent? What do you see that is going to cause a big fall off in 2026 and later? Recession? 
 

1.) underwriting income

2.) interest and dividend income

3.) share of profit of associates

 

Interest rates especially further out on the curve have been moving higher over the past 2 months. That is very bullish for Fairfax. That means interest and dividend income is likely going even higher as a significant amount of bonds likely mature each quarter and are reinvested likely at much higher rates. Fairfax’s fixed income portfolio has an average duration of 2.4 years (very low compared to peers). What if they extend this in 2H 2023 to 2.75 or even 3 years? They likely couldn’t extend duration in Q2 partly because they had to come up with $1.8 billion to buy the PacWest loans. But Q3? We will see.

 

My point is it looks to me like you are assuming rates come down rapidly over the next year and Fairfax gets caught flat footed (operating income falls dramatically in 2025 and later). My view is for every risk there will be opportunity. If we get a recession, yes, treasury rates will likely fall. But credit spreads will also likely widen out. And that will allow Fairfax to flip into corporates and higher yields. My point is i think you are thinking about downside risk. And not giving any credit for the value of active management being able to take advantage of the mouth watering opportunities that will present themselves. 

 

[petec]

1 hour ago, Viking said:

@petec Why do you think FFH’s operating earnings are in large part rate-dependent? What do you see that is going to cause a big fall off in 2026 and later? Recession? 
 

1.) underwriting income

2.) interest and dividend income

3.) share of profit of associates

 

Interest rates especially further out on the curve have been moving higher over the past 2 months. That is very bullish for Fairfax. That means interest and dividend income is likely going even higher as a significant amount of bonds likely mature each quarter and are reinvested likely at much higher rates. Fairfax’s fixed income portfolio has an average duration of 2.4 years (very low compared to peers). What if they extend this in 2H 2023 to 2.75 or even 3 years? They likely couldn’t extend duration in Q2 partly because they had to come up with $1.8 billion to buy the PacWest loans. But Q3? We will see.

 

My point is it looks to me like you are assuming rates come down rapidly over the next year and Fairfax gets caught flat footed (operating income falls dramatically in 2025 and later). My view is for every risk there will be opportunity. If we get a recession, yes, treasury rates will likely fall. But credit spreads will also likely widen out. And that will allow Fairfax to flip into corporates and higher yields. My point is i think you are thinking about downside risk. And not giving any credit for the value of active management being able to take advantage of the mouth watering opportunities that will present themselves. 

 

 

I am not *assuming* anything - that's not how I invest. I just try to think through all the reasonably plausible scenarios to get a sense of the risks (in both directions).

 

I *very largely* agree with your analysis, which is why Fairfax is my largest position. I also agree that rising long bond yields are a potential boon.

 

But I can also envision a scenario in which inflation continues falling, rates settle back a bit lower, more capital enters the industry, Fairfax cedes and operating earnings fall. Or a recession, in which case all of those things might be combined with reduced demand and rising claims.

 

Much more importantly for me, if you're valuing it on PE, you're basically making an assumption about *terminal* earnings power, not just earnings power over the next 3 years. This is a critical point. I don't really disagree with your 3-year assessment as being the most probable pathway from here. But I am not so convinced that this level of earnings can be sustained from 2026 until eternity, which is what a PE valuation effectively calls for. That's why I value this on 2-3y forward BV.

 

 

 

 

 

 

 

 

[Xerxes]

4 hours ago, petec said:

 

I should have read this before replying - nailed it I think!

 

The one query I have is how much CR and rates are related. It may be that 0% rates forces capital into the industry and CR's down, and 5% rates have the opposite effect. In other words I suspect the sources of operating earnings are highly correlated, and if you assume rates are now higher for longer, all insurance companies will earn more. But equally, the cost of capital is by definition higher in that scenario, and the net impact on stock price makes my head hurt.

Hi Pete ,

did you mean the reverse ?

0% rates forces capital into the industry and CR's UP, and 5% rates have the opposite effect.
 

- - -

 

as far as the on-going conversation here is concerned, my concern would be if BV goes down on a sustainable basis !!
 

So (absent some catastrophe) whether after-three years, and post hard market, their operating earning drop from today’ peak earning, is not really of concern for me because I didn’t pay 1.2 book for it. 
 

even buying today as BV, you are still catching the growing NAV, which will grow at a slow rate past peak earning. 
 

put it differently, end of the hard market does not mean BV dropping. Just that it will grow much slower, as one of FFH’ growth engine start to falters. At that point in time, value per share (rather than just value) will start to matter more as surplus capital get funnelled to share repurchase as organic business growth stalls.  

[MMM20]

5 hours ago, petec said:

 

I would put the probability of this at about 1%, but only because nothing really has a 0% probability.

 

But if you want my stock for $4000 you're welcome

I’ll model it out for you and maybe we’ll both get the chance to sell to compounder bros. 

[MMM20]

6 hours ago, petec said:

 

The one query I have is how much CR and rates are related. It may be that 0% rates forces capital into the industry and CR's down, and 5% rates have the opposite effect. In other words I suspect the sources of operating earnings are highly correlated, and if you assume rates are now higher for longer, all insurance companies will earn more. But equally, the cost of capital is by definition higher in that scenario, and the net impact on stock price makes my head hurt.

Maybe in theory better operating conditions immediately attract new entrants who drive profitability down, but we have just come from an unprecedented environment in which both 1) rates moved the quickest ever off the lower bound and 2) weather (climate?) losses are all time high and going higher. And so with the collective industry balance sheet so hobbled and required returns higher, this was already happening much more slowly and that dynamic might even be accelerating (decelerating?) now. It’s sort of a perfect storm for FFH and few others to continue taking share at much higher pricing. Maybe recent cycles are not really representative.

 

 

Time to stay patient and not unnecessarily interrupt the 8th wonder of the world… the hardest part of this.
 

Just my hypothesis at least. 

 

Edited August 22, 2023 by MMM20

[SafetyinNumbers]

Lots of discussion of what might happen to the downside without a lot of odds or timing included. A lot of positive things could also happen with the equity portfolio which seemingly almost no one is counting on for a contribution to ROE. I’m also curious what kind of valuation multiple the momentum and index hugging buying can take us. I’m guessing we find out post hurricane season as both buyers and sellers will be less afraid of a near term drawdown. 

[MMM20]

4 hours ago, petec said:

Much more importantly for me, if you're valuing it on PE, you're basically making an assumption about *terminal* earnings power, not just earnings power over the next 3 years. This is a critical point.

I am valuing it on a mix of a 2-3 year earnings assuming (i think conservatively) that they’re partially a windfall and then something normalized thereafter. What’s it worth if in ~3 years we are looking at ~$1400 BVPS and then capitalizing durable normalized earnings power off of ~5% spreads between investment returns and cost of float from there? IMHO that's the right way to think about it b/c the earnings power per share should nearly double over the next few years, whether driven by a "1x windfall" or not. That is durable in the sense there's no reason to think such a step up, it it does continue to play out that way, would evaporate in the next soft market... right? I'm fully prepared to look like an idiot on this one... clearly there's absolutely no guarantee it plays out that way. 

 

Edited August 22, 2023 by MMM20

[petec]

1 hour ago, Xerxes said:

0% rates forces capital into the industry and CR's UP, and 5% rates have the opposite effect.

 

Exactly. Sorry. My point is that when rates are low, capital goes hunting returns and some of it lands in insurance. When rates are higher, less capital goes into insurance, so both interest income AND combined ratios improve for FFH.

 

35 minutes ago, MMM20 said:

I’ll model it out for you and maybe we’ll both get the chance to sell to compounder bros. 

 

Amen! But at root you're saying this thing can earn $400/share in perpetuity (to hit a 10% return from $4000). I'll take the under!

 

10 minutes ago, SafetyinNumbers said:

Lots of discussion of what might happen to the downside without a lot of odds or timing included.

 

Agreed. I stopped trying to figure out odds or timing in any precise way years ago. I have a gut feeling that Viking will be roughly right on fwd 3y earnings. But the chances of the flywheel going the other way well above 0. That's all I am saying.

 

12 minutes ago, SafetyinNumbers said:

A lot of positive things could also happen with the equity portfolio which seemingly almost no one is counting on for a contribution to ROE.

 

Absolutely. I love the equity portfolio.

 

13 minutes ago, SafetyinNumbers said:

I’m also curious what kind of valuation multiple the momentum and index hugging buying can take us.

 

Yes - this is a really good point and I appreciated SiN's longer post on this topic above.

 

Separately, having been one of the stauncher (perhaps even dogmatic) defenders of FFH and its management during the dog years, it rather amuses me to be trying to inject some calm into the froth! How things change. It's amazing (to me) to think that I have held this stock continuously since 2008 and actually done ok in it despite the many years of darkness.

[SafetyinNumbers]

45 minutes ago, petec said:

 

Exactly. Sorry. My point is that when rates are low, capital goes hunting returns and some of it lands in insurance. When rates are higher, less capital goes into insurance, so both interest income AND combined ratios improve for FFH.

 

 

Amen! But at root you're saying this thing can earn $400/share in perpetuity (to hit a 10% return from $4000). I'll take the under!

 

 

Agreed. I stopped trying to figure out odds or timing in any precise way years ago. I have a gut feeling that Viking will be roughly right on fwd 3y earnings. But the chances of the flywheel going the other way well above 0. That's all I am saying.

 

 

Absolutely. I love the equity portfolio.

 

 

Yes - this is a really good point and I appreciated SiN's longer post on this topic above.

 

Separately, having been one of the stauncher (perhaps even dogmatic) defenders of FFH and its management during the dog years, it rather amuses me to be trying to inject some calm into the froth! How things change. It's amazing (to me) to think that I have held this stock continuously since 2008 and actually done ok in it despite the many years of darkness.

I object to 1x BV being froth!

[petec]

12 minutes ago, SafetyinNumbers said:

I object to 1x BV being froth!

 

Ha - I thought that might provoke a reaction. Of course it isn't. But the mood on the board has certainly shifted (and in a pro-cyclical way). A few years back I seem to remember lots of people questioning whether book value was accurate, even, let alone whether FFH should trade at 1x when it was run by a nepotistic ego who'd lost his edge. Today we are completely ignoring the fact that book value just got a meaningless boost from IFRS17 and think it's run by a genius. 

 

I am exaggerating, of course, but hopefully you see what I am getting at.

[MMM20]

@petec in the outside world, we are still generally looking at a mix of indifference, skepticism and disdain and that is still reflected in valuation... let’s see if the Vikings of the world see the light, not just our own @Viking...

 

Edited August 25, 2023 by MMM20

[petec]

3 hours ago, MMM20 said:

in the outside world, we are still generally looking at a mix of indifference, skepticism and disdain and that is still reflected in valuation

 

Agreed. 

[jfan]

Looking at their insurance subsidiary reserve triangles. A few things seem to stand out to me (caveat: not in the insurance business)

 

1) Insurance subs with large premium contribution and consistent favorable reserve developments 

- Northbridge and Odyssey Group

- roughly speaking, Northbridge/Odyssey Group pays out 50% of their policy payments within the 1st 5 years then it tapers off. 

- Eyeballing it, these 2 sub roughly write 2x the reserves for all their policy promises

2) Insurance subs with large premium contribution but turning around reserve developments

- Crum & Forester

- 1st year of favorable reserve development in 2022 but since 2016, their re-estimated reserves are consistently greater than the cumulative payments for each respectively calendar year

3) Insurance subs with large premium contribution but still struggling with reserve developments

- Allied World

4) Insurance subs with small premium contribution and consistent favorable reserve developments

- Zenith

* Didn't look at Brit's triangle

 

This suggests to me that the combined ratios that we see today is really a reflection of the underwriting that was done 5+ years ago . 80% of Northbridge's favorable reserve developments were written for calendar years 2012-2016. Similarly 75% of Odyssey's favorable reserve developments were written for calendar years 2012-2016. 

 

Would this not suggest that their combined ratio should remain sub 100% for more than a few years, especially since most of this reflects their underwriting from 5+ years ago during the soft market?

 

With their insurance writing into this recent hard market, we see the premium growth but with other players having such capital constraints, they have been able to take a big relative advantage of this and presumably have some better than recent historical 95-100% CR in the future.

 

Long and short of it. Even if the market softens, and assuming that the insurance subs avoid writing bad future policies, this suggests to me that they should be able to have better than average underwriting profit moving forward (even without IFRS 17 discounting) given the hard market tailwinds.

 

 

 

[Parsad]

6 hours ago, petec said:

 

Ha - I thought that might provoke a reaction. Of course it isn't. But the mood on the board has certainly shifted (and in a pro-cyclical way). A few years back I seem to remember lots of people questioning whether book value was accurate, even, let alone whether FFH should trade at 1x when it was run by a nepotistic ego who'd lost his edge. Today we are completely ignoring the fact that book value just got a meaningless boost from IFRS17 and think it's run by a genius. 

 

I am exaggerating, of course, but hopefully you see what I am getting at.

 

+1!  Mr. Market and investor psychology swings from extreme pessimism to extreme optimism and then back to extreme pessimism and so forth. 

 

Yesterday, Fairfax was a poor insurer with an ego-driven CEO...today, Fairfax is one of the best investments available run by the most proficient management in insurance! 

 

Until something goes wrong and everyone starts calling them bums again!  It happens in sports, it happens in politics and it happens with companies.  But every time someone calls them bums is when I make money, not when they call them heroes!

 

Cheers! 

[MMM20]

55 minutes ago, Parsad said:

 

+1!  Mr. Market and investor psychology swings from extreme pessimism to extreme optimism and then back to extreme pessimism and so forth. 

 

Yesterday, Fairfax was a poor insurer with an ego-driven CEO...today, Fairfax is one of the best investments available run by the most proficient management in insurance! 

 

Until something goes wrong and everyone starts calling them bums again!  It happens in sports, it happens in politics and it happens with companies.  But every time someone calls them bums is when I make money, not when they call them heroes!

 

Cheers! 

Respectfully, I disagree. If you talk to 100 investment professionals, 90 have no opinion, and they’re still called bums or dinosaurs by, like, 9 of the other 10.

 

A few of us weirdos here are just the 1%! Occupy Wellington Street!
 

Edited August 22, 2023 by MMM20

[Munger_Disciple]

7 hours ago, petec said:

Today we are completely ignoring the fact that book value just got a meaningless boost from IFRS17

 

+1.

If you use GAAP book instead, FFH is probably trading around 1.15x  GAAP Book right now. If one wants to compare FFH to BRK or MKL this is a fairer comparison IMO. 

[MMM20]

1 hour ago, Munger_Disciple said:

 

+1.

If you use GAAP book instead, FFH is probably trading around 1.15x  GAAP Book right now. If one wants to compare FFH to BRK or MKL this is a fairer comparison IMO. 

Where are BRK and MKL trading on owners earnings multiples? Also ~4x?

 

Edited August 22, 2023 by MMM20

[petec]

11 hours ago, Munger_Disciple said:

 

+1.

If you use GAAP book instead, FFH is probably trading around 1.15x  GAAP Book right now. If one wants to compare FFH to BRK or MKL this is a fairer comparison IMO. 

 

Does FFH publish under GAAP anywhere? I assume not...

[petec]

11 hours ago, MMM20 said:

Respectfully, I disagree. If you talk to 100 investment professionals, 90 have no opinion, and they’re still called bums or dinosaurs by, like, 9 of the other 10.

 

A few of us weirdos here are just the 1%! Occupy Wellington Street!
 

 

Sure - we are certainly not at the point of speculative excess yet. But the psychological pendulum has swung a long way from the pessimistic extremes. Maybe it's halfway through its swing. And it's closer to the point where you need things to go right to win, rather than things just not to go wrong.

 

All I think Parsad and I are saying is that this is not as easy a buy as it was at the lows, and a lot more is in the price, and as it continues to rise, we should all get more cautious not more excited.