Fairfax 2024

[thepupil]

6 minutes ago, MMM20 said:

 

Just not a fan of the smash and grab... and seems clear that this is probably one of those, no?

 

Need regulation around minimum holding periods for short sellers who choose to go public.

 

 

there are already regulations against using false or misleading information to manipulate the price of a stock. activist do the same thing on long side w/ calls in monetizing bumps. risk of selling / buying something because of what someone else said is borne by those acting on that information. 

 

there is nothing wrong with short (or long) reports if they use true information. if people want to sell or buy the stock as a result of their assessment of the information, that is the market functioning. 

 

everyone's accountable under the current system. 

 

if you bring to light interesting enough info that causes longs to sell, you get rewarded

 

 if you lie, you (should) get prosecuted/punished.

 

if your schtick has no impact or even further heartens bulls / the company is well capitalized, you get run over. 

 

seems pretty fair / well functioning to me. 

 

 

 

 

 

 

 

[LC]

Agree with pupil on the overall market structure.

 

Do not agree with Brett Horn who couldn't hit a tee ball, rather insisting that the ball is actually 2 ft lower.

[KFS]

Another video interview of Carson Block discussing the MW short..... 

 

Fairfax Financial: The Oracle of Nothing - Zer0esTV: Video channel for short sellers

[Mick92]

44 minutes ago, MMM20 said:

Here's the hard hitting analysis from everyone's favorite FFH analyst...

 

"Short-seller Muddy Waters released a report outlining a bear case on no-moat Fairfax. At a high level, we don’t disagree with its take, and we do think the stock is materially overvalued right now. In our opinion, Fairfax is a hit-and-miss investor, a relatively poor underwriter, and has an overly complicated structure. We would agree that the company’s book value growth target of 15% is unrealistic, and it has generally fallen well short of this level since the financial crisis. As to Muddy Waters' claims that Fairfax is mismarking investments, we don’t think it is necessary to believe that to think the stock is overvalued. We will maintain our CAD 970 fair value estimate."

 

 

I'm going to get a t-shirt printed with "No-moat Fairfax" on it.

[SharperDingaan]

Folks, the reality is that FFH is going to go a good bit lower before this is all over. Simply do a swing trade, buy your stock back later at the lower price, and take your cash difference off the table. MW drives the share price down; FFH does a share buyback at below book, and books both a gain on cancellation, and a higher EPS. 

 

SD

[Parsad]

Hmmm, I wonder who the TRS counterparty is?  I wonder if Muddy Waters does work for them?  Cheers!

[KFS]

31 minutes ago, KFS said:

Another video interview of Carson Block discussing the MW short..... 

 

Fairfax Financial: The Oracle of Nothing - Zer0esTV: Video channel for short sellers

 

Block compares Go Digit to Lemonade to illustrate his assumption that Digit's market value has obviously plummeted "into the toilet" over the last few years.  Lol.  

 

 

[treasurehunt]

5 hours ago, TwoCitiesCapital said:

Cash would flow out of Fairfax to the counterparty. But this dip so far only takes us back to where we were in January, so nothing to be concerned with on Q1 at this point as it's just reversing cash that would have been due to Fairfax. 

 

Plus, we've got blowout earnings coming in a week that may take us right back up. 

 

TRS is only concerning when the economy actually tips IMO. Then you'll likely have falling asset values AND falling liquidity as it drains cash from Fairfax's coffers.

 

This is why I am not a fan of Fairfax holding on to the TRS over the long term. Sooner or later a situation might arise where the company has to come up with a lot of cash at a very inconvenient time. Why take this risk? Fairfax will do just fine without it.

 

I'm also very curious to see Viking's take on the Muddy Waters report, but based on my read it seems to be much ado about nothing much.

[MMM20]

1 hour ago, thepupil said:

everyone's accountable under the current system. 

 

Pretty naive about who's getting paid by whom and the twisted incentives involved.

[thepupil]

9 minutes ago, MMM20 said:

 

Pretty naive about who's getting paid by whom and the twisted incentives involved.

 

how so?

 

who's getting paid by whom? 

from my understanding activist short sellers have several models. they either take LP's in an SPV or fund structure and use that capital to put on positions. they can do the research themselves, or can collaborate with other hedge funds/freelancers who wish to stay off the radar from a regulatory/LP/company/general reputation standpoint. so from my understanding activist short sellers are paid fees by other HF (either success or cash based) and get paid on their performance from trading their ideas. 

 

the prime brokers get paid through trading flow, through the arranging of securities lending which results from demand from HF's and from fully paid stock from retail / LO's. 

 

longs get paid by being right, have heard several longs with very successful stock purcahses whcih resulted from dislocations from an ultimately inaccurate activist short report

 

the twisted incentives

to do work, share information and make money in the markets thereon for the benefit of LP's or personal capital. 

 

what would you correct / add? 

Edited February 8 by thepupil

[value_hunter]

23 minutes ago, Parsad said:

Hmmm, I wonder who the TRS counterparty is?  I wonder if Muddy Waters does work for them?  Cheers!

Do you think the TRS counterparty will benefit from the price drop? Shouldn't they already hedged on this?

[ASTA]

One of the biggest concerns of the report is that FFH is not hitting its target of 15% per year and Carson speaks about this with passion and seriousness makes me just die inside of laughter. Who cares about that? I can not comprehend why that is number 3 or the number one reason not to like the company.   

[juniorr]

58 minutes ago, KFS said:

Another video interview of Carson Block discussing the MW short..... 

 

Fairfax Financial: The Oracle of Nothing - Zer0esTV: Video channel for short sellers

 

 

The TRS is the only risk here.. They need to eventually offload the TRS at least above $1200 and it should be smooth sailing 

[Gregmal]

Not gonna lie, this is a much better thesis than “St Joe trades at an unwarranted premium to book value”….

[Parsad]

27 minutes ago, value_hunter said:

Do you think the TRS counterparty will benefit from the price drop? Shouldn't they already hedged on this?

 

We've seen brokers recently willing to borrow FFH shares...Fairfax has laid out interest income for the next 3 years...recent spikes in price that seem to be far more than just FFH buying back shares or investor interest...

 

...could it be that the TRS counterparty has more outstanding shorts against Fairfax?  Cheers!

[MMM20]

53 minutes ago, thepupil said:

 

how so?

 

who's getting paid by whom? 

from my understanding activist short sellers have several models. they either take LP's in an SPV or fund structure and use that capital to put on positions. they can do the research themselves, or can collaborate with other hedge funds/freelancers who wish to stay off the radar from a regulatory/LP/company/general reputation standpoint. so from my understanding activist short sellers are paid fees by other HF (either success or cash based) and get paid on their performance from trading their ideas. 

 

the prime brokers get paid through trading flow, through the arranging of securities lending which results from demand from HF's and from fully paid stock from retail / LO's. 

 

longs get paid by being right, have heard several longs with very successful stock purcahses whcih resulted from dislocations from an ultimately inaccurate activist short report

 

the twisted incentives

to do work, share information and make money in the markets thereon for the benefit of LP's or personal capital. 

 

what would you correct / add? 

I’ll get back you but read eg

this

https://www.institutionalinvestor.com/article/2bsxbe3qsygknlfaolibk/portfolio/the-dark-money-secretly-bankrolling-activist-short-sellers-and-the-insiders-trying-to-expose-it

and this 

 https://www.afr.com/wealth/investing/short-seller-carson-block-the-stock-s-rocketing-i-want-to-vomit-20220718-p5b2f6

 

“There’s a multibillion-dollar fund out there going around with a short report trying to pay people to publish it on their behalf,” Fichthorn recalls the man saying.

 

——————————————-

 

Marc Cohodes, a former hedge fund boss who now manages his own money from a chicken ranch in California, calls it “smash and grab”. It works like this: a prominent short seller stands on a stage and unveils research on a target company. The stock plunges 10 per cent, 20 per cent or 30 per cent before anyone has time to digest the report. By the time the public can debate the merits, the short seller has already closed out positions and is tallying gains.

 

Cohodes has become outspoken in the short-selling community about his disdain of such practices. He and Block have seen their once-cordial relationship sour into a deeply personal Twitter feud.

 

“There’s no place in the investment landscape for people who encourage others to trade one way and then take the other side of that position,” Cohodes says by phone. “When the government is done looking at this, people will know the proper rules on what you can and can’t do.”

 

Block doesn’t hide that he takes money off the table quickly. “What he calls ‘smash and grab,’ we call risk management,” he says of Cohodes.

 

 

 

Edited February 8 by MMM20

[Hektor]

2 hours ago, Ghost said:

I am a bit disappointed that the stock didn't fall some more.

I am too

[nwoodman]

1 hour ago, KFS said:

Another video interview of Carson Block discussing the MW short..... 

 

Fairfax Financial: The Oracle of Nothing - Zer0esTV: Video channel for short sellers

Thanks @KFS 
 

So after all the hyperbole the upshot is book value needs a 20% haircut, CAGR has only been 9% and Prem isn’t Buffet.  That is a pretty weak short thesis.  It's fascinating to see this guy floundering around.

 

The only piece of the puzzle that he kind of gets right is the Omers debt dressed as equity.  That has been done to death on this board.  This financing cost is more than worth it to buyback shares at $US500 when they should do $150+ in earnings for a few years running.

Edited February 8 by nwoodman

[Gregmal]

Yea Block is one of the bigger offenders with that. When you hear these losers saying things like “we put our research out there so that the market can see if they agree with us”….it’s a blatant lie and the truth is that they do it because they know the market will instantly move in the direction they want it to. Has nothing to do with “their research”….that’s just the cover. 

[gfp]

That zeroes - tv interview is better than the CNBC interview, that's for sure.  He still does a lot of assigning motive as being accounting write-ups without mentioning what they wanted/needed the money they borrow from OMERS for.

 

He seems to think that APR Energy has something to do with WTI oil prices because it has "energy" in the name.

 

He is right, of course, that the 10% of a subsidiary deals with the full intention to repurchase the interest is fixed rate preferred equity financing.  I don't think that has been hidden.  It's not structured as debt, it has a fixed, known cost, the partner fully expects to have the equity interest repurchased by Fairfax.  Fairfax fully expects to repurchase the equity interest.  It IS financing.  I don't think that's a bombshell.  But I guess it looks bad if you assume the motive was the accounting write up.  

https://www.zer0es.tv/big-announcements/fairfax-financial-the-oracle-of-nothing/

[thepupil]

11 minutes ago, MMM20 said:

I’ll get back you but read eg

this

https://www.institutionalinvestor.com/article/2bsxbe3qsygknlfaolibk/portfolio/the-dark-money-secretly-bankrolling-activist-short-sellers-and-the-insiders-trying-to-expose-it

and this 

 https://www.afr.com/wealth/investing/short-seller-carson-block-the-stock-s-rocketing-i-want-to-vomit-20220718-p5b2f6

 

“There’s a multibillion-dollar fund out there going around with a short report trying to pay people to publish it on their behalf,” Fichthorn recalls the man saying.

 

——————————————-

 

Marc Cohodes, a former hedge fund boss who now manages his own money from a chicken ranch in California, calls it “smash and grab”. It works like this: a prominent short seller stands on a stage and unveils research on a target company. The stock plunges 10 per cent, 20 per cent or 30 per cent before anyone has time to digest the report. By the time the public can debate the merits, the short seller has already closed out positions and is tallying gains.

 

Cohodes has become outspoken in the short-selling community about his disdain of such practices. He and Block have seen their once-cordial relationship sour into a deeply personal Twitter feud.

 

“There’s no place in the investment landscape for people who encourage others to trade one way and then take the other side of that position,” Cohodes says by phone. “When the government is done looking at this, people will know the proper rules on what you can and can’t do.”

 

Block doesn’t hide that he takes money off the table quickly. “What he calls ‘smash and grab,’ we call risk management,” he says of Cohodes.

 

 

 

 

I didn't see any new info in this article regarding my understanding of how the industry works / what the incentives are.

I believe we simply disagree on interpretation of the same facts. 

[MMM20]

3 minutes ago, Gregmal said:

Yea Block is one of the bigger offenders with that. When you hear these losers saying things like “we put our research out there so that the market can see if they agree with us”….it’s a blatant lie and the truth is that they do it because they know the market will instantly move in the direction they want it to. Has nothing to do with “their research”….that’s just the cover. 

+1 and that’s just the tip of the iceberg. 

[MMM20]

12 minutes ago, thepupil said:

 

I didn't see any new info in this article regarding my understanding of how the industry works / what the incentives are.

I believe we simply disagree on interpretation of the same facts. 

well, if he’s not long already, he probably will be shortly - and having added a bit today, I’m along for the ride. I guess reasonable minds can disagree on whether this should be legal and is part of well functioning capital markets, but I think it’s pretty clearly manipulation at that point. I’d personally advocate for at least massive capital gains taxes in such scenarios. 
 

Edited February 8 by MMM20

[Parsad]

2 minutes ago, MMM20 said:

+1 and that’s just the tip of the iceberg. 

 

+1!  Yup, seen it so many times.  I don't think the public would believe the stuff I've seen.

 

The first time Fairfax was attacked in 2003, because I was sticking my nose into the people who were involved, I was warned by a well-known money manager to be careful..."these guys are dangerous and connected!"

 

I remember when JoAnn was followed from the office and there were accusations being thrown around that Prem was ripping off his church.

 

These guys weren't just market participants assisting the efficiency of markets.  These were scum buckets manipulating stocks, reporting, analysis reports, journalists...working in coordination to drive the price down of many stocks.  

 

And when you had FTD's extending out almost a year, it was easy to use artificial shares to create a death spiral.

 

Cheers!

[thepupil]

I mean marginal tax rates on short term gains are like 50% with NII and state and federal