Fairfax 2023

[MMM20]

21 hours ago, UK said:

Thanks. You are right, angst is not necessary and I need to be more patient, because, on the other hand, how could one even complain, with FFH up like 50+ per cent YTD, after a few up years before:)

 

Ring true for you too @Viking? “The best ideas are usually the ones most people find unappealing, even if the investment thesis is articulated well. This is why you may have found it frustrating to share your best ideas, even if - or maybe *especially* if - those ideas went on to be big winners.” -John Mihaljevic

 

Edited November 27, 2023 by MMM20

[MMM20]

Does anyone here have a view on whether this should matter much to Fairfax investors?

 

https://lindynewsletter.beehiiv.com/p/borders-lindy

The Canada Experiment

In a bold and unprecedented move, Canada is embarking on an audacious experiment, opening its doors to millions of high-skilled immigrants in a bid to outpace the economic might of its southern neighbor, America. This strategy is anchored in the belief that an infusion of skilled talent can catalyze innovation, boost productivity, and propel Canada to new economic heights, potentially surpassing the United States in wealth and technological advancement.

In 2023, Canada is on track to welcome nearly 500,000 new permanent residents, marking a significant increase from previous years and surpassing its annual target. The plan is to keep this going, adding millions every 2 years and turning Canada into a 20-40 percent high-skilled immigrant country.

However, this gamble carries with it the risk of significant societal upheaval. If the policy fails to integrate these new immigrants smoothly, or if it inadvertently exacerbates economic disparities and cultural tensions, Canada could find itself grappling with deep internal divisions. In the worst-case scenario, such tensions could escalate into widespread civil unrest or states seceding from the union like Quebec or Alberta.

What if it’s successful?

In a successful scenario of Canada's immigration strategy, the country actively transforms into an economic superpower, surpassing even the United States. By welcoming millions of high-skilled immigrants, Canada ignites an innovation and productivity renaissance. Cities like Toronto, Vancouver, and Montreal rapidly develop into global tech hubs, challenging Silicon Valley's dominance. Canadian companies, driven by a diverse and talented workforce, lead groundbreaking advancements in fields like AI, renewable energy, and biotechnology, attracting worldwide investments.

This is a high stakes gamble. If Canada’s plan works. If you can just import high-skilled immigrants and create an economic superpower, than America may copy it. A lot of people want to move to America. Billions. We are all waiting and watching the Canadian experiment.

[UK]

1 hour ago, MMM20 said:

Does anyone here have a view on whether this should matter much to Fairfax investors?

 

https://lindynewsletter.beehiiv.com/p/borders-lindy

The Canada Experiment

In a bold and unprecedented move, Canada is embarking on an audacious experiment, opening its doors to millions of high-skilled immigrants in a bid to outpace the economic might of its southern neighbor, America. This strategy is anchored in the belief that an infusion of skilled talent can catalyze innovation, boost productivity, and propel Canada to new economic heights, potentially surpassing the United States in wealth and technological advancement.

In 2023, Canada is on track to welcome nearly 500,000 new permanent residents, marking a significant increase from previous years and surpassing its annual target. The plan is to keep this going, adding millions every 2 years and turning Canada into a 20-40 percent high-skilled immigrant country.

However, this gamble carries with it the risk of significant societal upheaval. If the policy fails to integrate these new immigrants smoothly, or if it inadvertently exacerbates economic disparities and cultural tensions, Canada could find itself grappling with deep internal divisions. In the worst-case scenario, such tensions could escalate into widespread civil unrest or states seceding from the union like Quebec or Alberta.

What if it’s successful?

In a successful scenario of Canada's immigration strategy, the country actively transforms into an economic superpower, surpassing even the United States. By welcoming millions of high-skilled immigrants, Canada ignites an innovation and productivity renaissance. Cities like Toronto, Vancouver, and Montreal rapidly develop into global tech hubs, challenging Silicon Valley's dominance. Canadian companies, driven by a diverse and talented workforce, lead groundbreaking advancements in fields like AI, renewable energy, and biotechnology, attracting worldwide investments.

This is a high stakes gamble. If Canada’s plan works. If you can just import high-skilled immigrants and create an economic superpower, than America may copy it. A lot of people want to move to America. Billions. We are all waiting and watching the Canadian experiment.

 

I think that, despite of some problems and imperfections, this immigration system and it's ability to atract and melt people quite successfully (contrary to some other situations e.g. in Europe) from all over the world is basically a secret source of US, Canada and maybe a few other, mostly English speaking, countries. And it bodes very well, especially for the future, when most of the world, including China, is starting to deal with huge demographic problems. Couple this with a deteriorating geopolitical situation elsewhere in the world and North America really stands out as a region which can defend itself and be reasonably safe, has abundant energy, water, agricultural resources etc, positive demographic, rule of law etc, and so not only people and ideas, but I think also capital will flock in a major way into this region long into the future. If you where a martian, looking at the earth from the distance, where else would you put majority of your capital:)? So of course it is not a minus for an insurer or a conglomerate with a major focus and exposure to North America:)

 

I was just listening to the somewhat relevant discussion about this topic: https://www.youtube.com/watch?v=u4KR5dBh5OM

 

If not for martians, this whole idea and attractiveness of Canada or US is sure much more understandable and obvious for some Eastern European investor:)

 

Edited November 27, 2023 by UK

[Viking]

2 hours ago, MMM20 said:

Does anyone here have a view on whether this should matter much to Fairfax investors?

 

https://lindynewsletter.beehiiv.com/p/borders-lindy

The Canada Experiment

In a bold and unprecedented move, Canada is embarking on an audacious experiment, opening its doors to millions of high-skilled immigrants in a bid to outpace the economic might of its southern neighbor, America. This strategy is anchored in the belief that an infusion of skilled talent can catalyze innovation, boost productivity, and propel Canada to new economic heights, potentially surpassing the United States in wealth and technological advancement.

In 2023, Canada is on track to welcome nearly 500,000 new permanent residents, marking a significant increase from previous years and surpassing its annual target. The plan is to keep this going, adding millions every 2 years and turning Canada into a 20-40 percent high-skilled immigrant country.

However, this gamble carries with it the risk of significant societal upheaval. If the policy fails to integrate these new immigrants smoothly, or if it inadvertently exacerbates economic disparities and cultural tensions, Canada could find itself grappling with deep internal divisions. In the worst-case scenario, such tensions could escalate into widespread civil unrest or states seceding from the union like Quebec or Alberta.

What if it’s successful?

In a successful scenario of Canada's immigration strategy, the country actively transforms into an economic superpower, surpassing even the United States. By welcoming millions of high-skilled immigrants, Canada ignites an innovation and productivity renaissance. Cities like Toronto, Vancouver, and Montreal rapidly develop into global tech hubs, challenging Silicon Valley's dominance. Canadian companies, driven by a diverse and talented workforce, lead groundbreaking advancements in fields like AI, renewable energy, and biotechnology, attracting worldwide investments.

This is a high stakes gamble. If Canada’s plan works. If you can just import high-skilled immigrants and create an economic superpower, than America may copy it. A lot of people want to move to America. Billions. We are all waiting and watching the Canadian experiment.

Canada has been taking a hard turn left under the federal Liberals… entrepreneurs are exploiters… businesses exist to pay taxes. Government regulation of the economy is increasing. Not a model, IMHO, that will surpass the US.
 

The Liberal ‘experiment’ of ramping immigration/foreign workers/international students boosted Canada’s population by over 1 million last year. Total population of Canada is 40 million. The problem? We have a severe shortage of housing. And the economy here is slowing more than in the US (the Canadian mortgage market resembles that of the US in 2006 - and the low teaser rates are now expiring - so higher interest rates are slowing aggregate demand). 
 

The severe housing shortage looks like it is becoming THE political issue. It will take +5 years for the supply problem to be addressed. The crazy high number of newcomers is spiking demand. Many Canadians (who are pro immigration) are questioning if this is the right time to be bringing in record numbers of people into the country. We will see.

 

I don’t think any of this affects Fairfax. If Fairfax grows insurance it will likely be outside of Canada. Given Canadas hard move left (and attitude towards businesses), I am not sure it is a great place to invest in today. There will be a Federal election in 2025 - if the Conservatives are elected we would see a shift to the right.

Edited November 27, 2023 by Viking

[Viking]

3 hours ago, MMM20 said:

 

Ring true for you too @Viking? “The best ideas are usually the ones most people find unappealing, even if the investment thesis is articulated well. This is why you may have found it frustrating to share your best ideas, even if - or maybe *especially* if - those ideas went on to be big winners.” -John Mihaljevic

Looking back at my 30 years of investing my biggest errors (if they can be called that) were selling my big winners too soon. But my returns have been pretty good so i am not sure if they could be called errors - i found other good investments.
 

Another way to look at it: it takes me a long time to find a big winner. For me, they only come along about every 5 years. It takes an enormous amount of work. So when you find one it makes sense to be patient. I am not in a hurry with Fairfax. 
 

Psychology is the most difficult part of investing. 

Edited November 27, 2023 by Viking

[LC]

18 minutes ago, Viking said:

The severe housing shortage looks like it is becoming THE political issue. It will take +5 years for the supply problem to be addressed. The crazy high number of newcomers is spiking demand. Many Canadians (who are pro immigration) are questioning if this is the right time to be bringing in record numbers of people into the country. We will see.

 

Assuming the issue is supply - should we be looking at Canadian homebuilders and the associated ecosystem?

[Hoodlum]

55 minutes ago, LC said:

Assuming the issue is supply - should we be looking at Canadian homebuilders and the associated ecosystem?

This will be a big challenge. Like homeowners, the builders have been conditioned to ever increasing new home prices over the past 30 years in Canada.  Any land purchased in the past 5 years would have been based on this continuing trend.  
 

New home builders are generally  slow in reducing their prices or starting new developments, which is not going to work during this high demand period. I am not sure how to work around this as there are many challenges.  Home builders have to pay more for borrowing and if they start building on their land for less than they anticipated, the banks may ask for more money down once the land value falls below the cost of the initial estimated value.  So basically home builders will try to wait this out hoping for lower interest rates and the return to “norm” for home buying. 
 

We also have the added complexity of working from home which is helping to drive both the upgrading of homes along with empty towers.  This added mismatch of markets makes a solution even more complex. 

Edited November 27, 2023 by Hoodlum

[TwoCitiesCapital]

On 11/26/2023 at 1:44 AM, This2ShallPass said:

I disagree we should choose a metric to pay fees that management can control, in fact that introduces a significant conflict of interest. At a very basic level, if I charge you for performance fees, you should be able to cash out at the said price levels where the performance fees were charged.

 

The fee is for performance. It makes sense to charge the fee on the performance the management controls - I e. Book value.this is precisely how mutual funds and ETFs charge fees too (on NAV). There is no outcry about that being a conflict of interest - it'd payment for the service. 

 

To charge it on anything else is asinine and defeats the purpose of the fee to begin with. 

 

On 11/26/2023 at 1:44 AM, This2ShallPass said:

Fairfax India will always be tied to Fairfax's reputation, in fact that's why they named the fund with their name on it. If the fund trades at a premium because of their brand or association with them, then I don't have a problem with paying more fees...again as long as I get the benefit of cashing out at said price levels.

 

The fund has ALWAYS been associated with them. The discount really started and persisted from ~2019 onward. That was long after Fairfax's reputation was in the toilet for the hedges/shorts that they were then closing. So it doesn't seem to be based on Fairfax's reputation, or even the performance, as it's NAV has outperformed most EM funds since AND has been located in the hot spot that is India. 

 

It's just the ebbs and flows in sentiment. Just like it has no business trading at a significant NAV premium at its IPO, it has no business trading at a significant discount now. Management is doing the correct thing by buying back shares which is accretive to shareholders. You could ask them to change their fair fee arrangement that was negotiated years prior to their own detriment - but I don't expect companies to act against their own interests to appease anonymous folks on the internet. 

 

On 11/26/2023 at 1:44 AM, This2ShallPass said:

 

Most closed end funds trade at a discount to NAV not at a premium, which Fairfax knew.

 

And a few years back, plenty traded at premiums. This fund included. Again - ebbs and flows.

[Viking]

1 hour ago, TwoCitiesCapital said:

 

The fee is for performance. It makes sense to charge the fee on the performance the management controls - I e. Book value.this is precisely how mutual funds and ETFs charge fees too (on NAV). There is no outcry about that being a conflict of interest - it'd payment for the service. 

 

To charge it on anything else is asinine and defeats the purpose of the fee to begin with. 

 

 

The fund has ALWAYS been associated with them. The discount really started and persisted from ~2019 onward. That was long after Fairfax's reputation was in the toilet for the hedges/shorts that they were then closing. So it doesn't seem to be based on Fairfax's reputation, or even the performance, as it's NAV has outperformed most EM funds since AND has been located in the hot spot that is India. 

 

It's just the ebbs and flows in sentiment. Just like it has no business trading at a significant NAV premium at its IPO, it has no business trading at a significant discount now. Management is doing the correct thing by buying back shares which is accretive to shareholders. You could ask them to change their fair fee arrangement that was negotiated years prior to their own detriment - but I don't expect companies to act against their own interests to appease anonymous folks on the internet. 

 

 

And a few years back, plenty traded at premiums. This fund included. Again - ebbs and flows.

@TwoCitiesCapital , I agree with your comments. Fairfax India has been buying back shares for years at low prices. Are these not largely the shares that will be used to pay the performance fee to Fairfax? 

 

Fairfax India should keep buying shares when they are trading this much below BV. 
 

The good news for investors buying Fairfax India shares today is they are unambiguously cheap. They own quality companies. The prospects for Fairfax India - and India - are bright. 
 

Possible catalysts are out there. The big one is a possible Anchorage IPO. 
 

The biggest problem i see with Fairfax India is liquidity. I can’t buy shares without moving the price. There is no way an institutional shareholder can invest in Fairfax India. My guess is any remaining institutional holders would love to exit (and that is what we saw early last year).

 

As a result, absent some big catalyst, I think Fairfax India is destined to remain a frustrating stock to own. Not for those buying today. But for shareholders who bought when it traded above BV and still hold their shares. 
 

As it is configured today, I think the only ‘fix’ is for Fairfax to take it private. This makes more sense after Fairfax hits is ownership limit (about 50%)? Fairfax has been able to materially grow its stake in Fairfax India at exceptionally low prices.
 

Fairfax has always been a head scratcher for me (in terms of how the stock trades). Great company.

Edited November 27, 2023 by Viking

[Xerxes]

For what is worth and just as a datapoint, unlike FIH whose performance fee are based on BV (and neither market value nor the spread between the two), the Brookfield performance fee for BIP, BEP and the affiliates is based on their market value and not their NAV. 

[Hoodlum]

Foran mining has raised $200 through a private placement at $4.10/share.  I wonder if Fairfax is participating to increase their equity. 
 

https://www.theglobeandmail.com/business/article-canadian-critical-minerals-miner-foran-raising-200-million-a-rare/

[TwoCitiesCapital]

3 hours ago, Viking said:

@TwoCitiesCapital , I agree with your comments. Fairfax India has been buying back shares for years at low prices. Are these not largely the shares that will be used to pay the performance fee to Fairfax? 

 

Fairfax India should keep buying shares when they are trading this much below BV. 
 

The good news for investors buying Fairfax India shares today is they are unambiguously cheap. They own quality companies. The prospects for Fairfax India - and India - are bright. 
 

Possible catalysts are out there. The big one is a possible Anchorage IPO. 
 

The biggest problem i see with Fairfax India is liquidity. I can’t buy shares without moving the price. There is no way an institutional shareholder can invest in Fairfax India. My guess is any remaining institutional holders would love to exit (and that is what we saw early last year).

 

As a result, absent some big catalyst, I think Fairfax India is destined to remain a frustrating stock to own. Not for those buying today. But for shareholders who bought when it traded above BV and still hold their shares. 
 

As it is configured today, I think the only ‘fix’ is for Fairfax to take it private. This makes more sense after Fairfax hits is ownership limit (about 50%)? Fairfax has been able to materially grow its stake in Fairfax India at exceptionally low prices.
 

Fairfax has always been a head scratcher for me (in terms of how the stock trades). Great company.

 

That may be. I don't know how to fix the liquidity issue until the fund trades back at NAV, or above, where more and more shares could be issued to fund other acquisitions. 

 

That being said, while I'm wary to be the minority in a Fairfax venture, I doubt they'll screw over their pension partners so I don't expect a take-under at a massive discount. 

Edited November 28, 2023 by TwoCitiesCapital

[SafetyinNumbers]

3 hours ago, Viking said:

@TwoCitiesCapital , I agree with your comments. Fairfax India has been buying back shares for years at low prices. Are these not largely the shares that will be used to pay the performance fee to Fairfax? 

 

Fairfax India should keep buying shares when they are trading this much below BV. 
 

The good news for investors buying Fairfax India shares today is they are unambiguously cheap. They own quality companies. The prospects for Fairfax India - and India - are bright. 
 

Possible catalysts are out there. The big one is a possible Anchorage IPO. 
 

The biggest problem i see with Fairfax India is liquidity. I can’t buy shares without moving the price. There is no way an institutional shareholder can invest in Fairfax India. My guess is any remaining institutional holders would love to exit (and that is what we saw early last year).

 

As a result, absent some big catalyst, I think Fairfax India is destined to remain a frustrating stock to own. Not for those buying today. But for shareholders who bought when it traded above BV and still hold their shares. 
 

As it is configured today, I think the only ‘fix’ is for Fairfax to take it private. This makes more sense after Fairfax hits is ownership limit (about 50%)? Fairfax has been able to materially grow its stake in Fairfax India at exceptionally low prices.
 

Fairfax has always been a head scratcher for me (in terms of how the stock trades). Great company.

I don’t think they will take FIH private. With OMERS stake, they can never own more 90% but they could buy every other share back over time. There is no ownership limit, it just doesn’t allow FFH to elect shares for payment of the performance fee if it means FFH would own more than 49% of FIH. They should hit that by the next performance fee period end in 2026 assuming continued buybacks or big enough performance fee given they are at ~43% now.
 

I don’t think institutions want to own it because it’s not in their benchmark more so than the liquidity. It seems pretty easy to buy most days and I know a small cap manager that recently bought some for his fund. I do think it’s interesting how no one wants to buy the shares that actually closes the discount which makes sense as it’s mostly active value investors that are looking. That sort of buying comes from quants and passive these days. FIH won’t ever have that kind of buying. Kind of like ELF in that way. 

 

One positive aspect of FIH, that doesn’t get mentioned a lot is the cheap leverage. $500m note that doesn’t mature until 2028 at 5% is a pretty cheap cost of capital. As you have pointed out often recently, Viking. FFH is pretty good at managing debt. Issuing 7 year 5% paper when the 10-yr was ~1.5% in 2021, was another stroke of genius.
 

Buying FIH at these prices is ~2 to 1 leverage which is a lot better than an India ETF and that’s probably the switch trade investors should be making but no one on this board likely buys India ETFs as a long term investment. I think it’s impossible to know when the discount will ever close enough to realize the return but I’m invested anyway. I appreciate that people have better alternatives in what I believe is a very inefficient market.

[Haryana]

Samer Hakoura Alphyn Capital 

https://www.alphyncap.com/uploads/1/4/1/2/14123551/acml_2023-q3.pdf 

"

The long game

 

“The daily blips of the market are, in fact, noise -- noise that is very difficult for most investors to tune out.” – Seth Klarman

 

Investing in the stock market can often test one’s patience. There are stretches of time when returns seem stagnant or even negative.

 

Fairfax Financial serves as an apt illustration. Throughout our almost 5-year holding period, our investment in Fairfax has compounded at approximately 17% per annum, closely matching its impressive 25-year record of book value growth. However, it did not grow over a straight line. Fairfax’s share price largely stagnated for nearly five years of ownership, impacted by short-term issues, including macroeconomic uncertainties, underperforming investments, and challenges with operating companies arising from the pandemic. Yet, over the last year, the shares rallied as the market began to recognize its robust insurance business and the benefits of a favorable insurance market, and the company’s patient, long-term capital allocation began to bear fruit.

 

Had I lost patience and sold the shares at any point, we would have given up these returns and maybe shown a loss.

It is natural to wonder if I could time my position entry better and miss the long sideways or negative periods. Unfortunately, I’ve found no reliable method of doing this. Despite numerous discussions with fellow investors and researching various market timing techniques—like moving averages and oscillators, interpreting short-term news, or trying to outsmart the market on next earnings “beats or misses” I haven’t found a reliable, practical approach. Most attempts to time investments may offer smoother journeys, but often at the cost of overall performance. At best, it’s a trade-off; at worst, it hampers overall returns.

 

Of course, long-term holding is no guarantee of success, and our experience with Fairfax has not been replicated with all our holdings. Still, I believe that focusing on sound fundamental analysis, identifying undervalued companies, and maintaining a long-term perspective is more likely than not to lead to satisfactory outcomes.

"

 

[gary17]

3 minutes ago, Haryana said:

Samer Hakoura Alphyn Capital 

https://www.alphyncap.com/uploads/1/4/1/2/14123551/acml_2023-q3.pdf 

"

The long game

 

“The daily blips of the market are, in fact, noise -- noise that is very difficult for most investors to tune out.” – Seth Klarman

 

Investing in the stock market can often test one’s patience. There are stretches of time when returns seem stagnant or even negative.

 

Fairfax Financial serves as an apt illustration. Throughout our almost 5-year holding period, our investment in Fairfax has compounded at approximately 17% per annum, closely matching its impressive 25-year record of book value growth. However, it did not grow over a straight line. Fairfax’s share price largely stagnated for nearly five years of ownership, impacted by short-term issues, including macroeconomic uncertainties, underperforming investments, and challenges with operating companies arising from the pandemic. Yet, over the last year, the shares rallied as the market began to recognize its robust insurance business and the benefits of a favorable insurance market, and the company’s patient, long-term capital allocation began to bear fruit.

 

Had I lost patience and sold the shares at any point, we would have given up these returns and maybe shown a loss.

It is natural to wonder if I could time my position entry better and miss the long sideways or negative periods. Unfortunately, I’ve found no reliable method of doing this. Despite numerous discussions with fellow investors and researching various market timing techniques—like moving averages and oscillators, interpreting short-term news, or trying to outsmart the market on next earnings “beats or misses” I haven’t found a reliable, practical approach. Most attempts to time investments may offer smoother journeys, but often at the cost of overall performance. At best, it’s a trade-off; at worst, it hampers overall returns.

 

Of course, long-term holding is no guarantee of success, and our experience with Fairfax has not been replicated with all our holdings. Still, I believe that focusing on sound fundamental analysis, identifying undervalued companies, and maintaining a long-term perspective is more likely than not to lead to satisfactory outcomes.

"

 

 

It is hard to place significant value of this writing when he only done 3.2% since inception vs. 13.2% for the S&P500 !   

[Haryana]

 

More interesting commentary from Samer Hakoura of Alphyn Capital Management, LLC 

 

Letter to investors, Q4 2022

https://www.alphyncap.com/uploads/1/4/1/2/14123551/acml_2022-q4.pdf

 

"

Fairfax shares have remained flat over five years despite this quarter's solid share price performance. I had a conversation with someone in the company's investor relations department and asked what feedback they might be getting from investors regarding the medium-term share price performance. Were investors still upset with the company for the expensive and ill-timed macro hedges from years ago? His response was interesting: growth investors are attracted to different companies during boom times, and deep value investors look for badly beaten down companies that could rebound aggressively. Unfortunately, Fairfax doesn't easily fit into either of those categories and has largely been ignored for the last few years.

 

I read a report recently that described Fairfax as a "non-obvious growth stock," and I think the description is appropriate. From looking at the share price over the last five years, you would not know that Fairfax has been executing on several metrics. Consider that Fairfax's "gross premiums written" per share has compounded almost 18% from 2015-2021. It grew a further 19% in the first nine months of 2023). The insurance business is, of course, the engine of Fairfax's growth. With Fairfax's disciplined underwriting, insurance has averaged 2% profit for the last five years. Insurance also generates float, which the company reinvests. Float per share has grown 7% a year from 2017-2022, and Fairfax's investment portfolio has, in turn, increased from just under $28bn in 2015 to $51.5bn as of Q3 2021. As Fairfax generates a total return of approximately 5.7% on its investments, on a simplified calculation, we can see how this process has led to an additional $1.3bn in profits for the company. As a result, Fairfax's book value per share has grown by over 13% per year for the last six years. When one also considers the company's capital allocation, such as the sale of its pet insurance business which added $42/share gain on sale, buybacks, and the opportunity for increased profitability in the bond portfolio from higher interest rates, and growth from improving the operations of some of its privately held businesses, it has plenty of opportunity to continue compounding at faster rates. The share price should eventually catch up with the company's underlying economics. 

" 

 

[nwoodman]

11 hours ago, MMM20 said:

Does anyone here have a view on whether this should matter much to Fairfax investors?

 

https://lindynewsletter.beehiiv.com/p/borders-lindy

I guess more mouths to feed at Recipe restaurants is a good thing.  These mass immigration policies are typically hell bent on nominal GDP growth rather than the  thing that matters to the current population, GDP/capita growth.  If there is stagnant or even declining living standards then there inevitably will be push back.  These immigrants get old too, so is a bit of a Ponzi scheme in that respect.   This is not to say immigration per se is bad,  just that it needs to be measured and not a means of plastering over other poor economic choices.

[nwoodman]

3 hours ago, Hoodlum said:

Foran mining has raised $200 through a private placement at $4.10/share.  I wonder if Fairfax is participating to increase their equity. 
 

https://www.theglobeandmail.com/business/article-canadian-critical-minerals-miner-foran-raising-200-million-a-rare/

Me too, Fairfax look like they have kicked a real nugget here.  I note that Foran recently bought options on up to 100% of Denare West, an adjacent property from Purepoint.  The recent drilling program looks good too, with further evidence that Tesla and MB are linked.  

 

https://purepoint.ca/news/purepoint-uranium-enters-into-option-agreement-with-foran-mining-corporation-for-the-denare-west-project/

 

[This2ShallPass]

22 hours ago, TwoCitiesCapital said:

Book value.this is precisely how mutual funds and ETFs charge fees too (on NAV). There is no outcry about that being a conflict of interest - it'd payment for the service. 

There's no outcry because MF / ETF don't charge performance fees and rarely trade at a discount since most assets are mark to market. 

 

Here's my simple way of looking at it. Let's say I come to you with a plan of making you lot of money and in turn you give me 20% of profits. 3 years later, I come back and tell you I made you $1M (just take my word for it) and my fees are $200k. You pay me the $200k and turn around to sell your shares to get the $1M profit. But you find out no one is willing to buy at the price and the real profit you can get is $300k. But you have already paid me $200k and net is only $100k.

 

So, I used your money, 100% of risk is yours and made more money than you did! That's what is asinine to me. Let's not even get into the fact that I screw you even further by getting my $200k in heavily discounted shares.

 

To say there's no conflict of interest in using BV also makes no sense. Tomorrow if Fairfax increases BIAL valuation by 50%, with say fancy accounting, what's your recourse?

 

Let's go back to how Fairfax can show they treat minority investors fairly. Very simple, they can say they didn't envision this scenario of 40% discount and they agree it's completely unfair for them to calculate performance in BV and get paid in discounted shares (double whammy). The least they can do to rectify is get payment in cash or go above and beyond and say they'll defer payment until the discount is closed. That would be setting a high standard, not that hard to do and the fees from this is peanuts for them. They could easily afford to defer payments.

Edited November 28, 2023 by This2ShallPass

[Munger_Disciple]

15 minutes ago, This2ShallPass said:

Let's go back to how Fairfax can show they treat minority investors fairly. Very simple, they can say they didn't envision this scenario of 40% discount and they agree it's completely unfair for them to calculate performance in BV and get paid in discounted shares (double whammy). The least they can do to rectify is get payment in cash or go above and beyond and say they'll defer payment until the discount is closed. That would be setting a high standard, not that hard to do and the fees from this is peanuts for them. They could easily afford to defer payments.

 

They should base the fees on the lower of book value and market value of FIH shares, which also gives them an incentive to close the gap between the two if the shares are trading at a discount to book as they have been for awhile. 

[hardcorevalue]

agreed on treating shareholders right would cost ffh peanuts at this stage.

 

at this stage, it’s just more of an embarrassment for the team, especially in light of how fairfax africa was total disaster. 

[Munger_Disciple]

Personally, I don't think Fairfax should manage retail funds like Fairfax India or Africa. At a minimum, it is a conflict of interest between the mother ship & the fund. Fairfax could have just partnered with a pension fund or other institutional investor to make India investments directly without running a fund with high expenses.

 

People like to compare Fairfax to Berkshire but I can't imagine Berkshire ever doing something like this.

Edited November 28, 2023 by Munger_Disciple

[Parsad]

1 hour ago, Munger_Disciple said:

Personally, I don't think Fairfax should manage retail funds like Fairfax India or Africa. At a minimum, it is a conflict of interest between the mother ship & the fund. Fairfax could have just partnered with a pension fund or other institutional investor to make India investments directly without running a fund with high expenses.

 

People like to compare Fairfax to Berkshire but I can't imagine Berkshire ever doing something like this.

 

No conflict.  The obvious answer is to own FFH, which benefits from Fairfax India or Africa.  That's what I did...sold any India I owned and switched it all to FFH.  I then have the Indian exposure and still benefit from the fees.  The funds are really meant for retail clients or FFH shareholders who want additional exposure to those regions.  Cheers!

[Munger_Disciple]

10 minutes ago, Parsad said:

 

No conflict.  The obvious answer is to own FFH, which benefits from Fairfax India or Africa.  That's what I did...sold any India I owned and switched it all to FFH.  I then have the Indian exposure and still benefit from the fees.  The funds are really meant for retail clients or FFH shareholders who want additional exposure to those regions.  Cheers!

 

I too only own FFH, no position in FIH. However I think there is a conflict between FIH and its manager FFH which also makes India investments on its own. If there is a new sexy idea, where would FFH invest? For its own account or FIH? Plus if I were an FIH investor I would hate to pay the excessive management fees based on NAV which is way higher than market price. 

[SafetyinNumbers]

5 minutes ago, Munger_Disciple said:

 

I too only own FFH, no position in FIH. However I think there is a conflict between FIH and its manager FFH which also makes India investments on its own. If there is a new sexy idea, where would FFH invest? For its own account or FIH? Plus if I were an FIH investor I would hate to pay the excessive management fees based on NAV which is way higher than market price. 

FFH does any insurance investments and FIH does everything else so there is no conflict there.
 

FFH has bought shares in the open market and FIH has bought back shares at a big discount. Almost no shares have been issued below NAV and they have bought back significantly more below NAV. We’ll see what they do this year. They might surprise and take it in cash and ideally tender for shares. The parties that really let down minority shareholders were those who negotiated on their behalf i.e. OMERS etc… The agreement incentivized minority shareholders to buy the shares into the measurement period at the end of a performance period but they haven’t shown up.