Fairfax 2024

[cwericb]

Putting things in perspective, isn't share price presently back to where FFH was about three weeks ago?

[value_hunter]

Are shorts covering now? Looks like no chance to buy it cheap any more.

[Santayana]

3 minutes ago, value_hunter said:

Looks like no chance to buy it cheap any more.

Oh, it's still cheap.

[LC]

The only outstanding question I have is on the Level 2 classification for FFH's bond portfolio. My guess is there are covenants/options linked to these bonds which cause the L2 classification. Even with that question mark outstanding, the interest income generated from these bonds is observable so it is really more of a curiosity vs. a concern.

 

 

[nwoodman]

2 hours ago, MMM20 said:

I guess simple errors of omission don't matter when you can move the market and cover the next day.

 

Source: National Bank of Canada

 

This is partly why the board was scratching it's collective head yesterday.  My gut feeling is that MW has been “researching” for a while and knew their thesis was about to get run over by two freight trains - Fairfax equity positions and earnings.  They dropped the report to get at least some return on their efforts. 

[Hoodlum]

3 minutes ago, nwoodman said:

This is partly why the board was scratching its collective head yesterday.  My gut feeling is that MW has been “researching” for a while and knew their thesis was about to get run over by two freight trains - Fairfax equity positions and earnings.  They dropped the report to get at least some return on their efforts. 

i agree.  They knew this would be their last opportunity to get out at close to where they started their short. 

[Viking]

4 hours ago, sleepydragon said:

I have access to short interest data. It seems someone put on big short position after 20231127, and then covered on 20231227. Then resumed shorting (at much smaller size) around 1/17. There’s actually not much shorting now. I suspect MW has a small short position , or if they had a client who co-shorted, that client covered last year.

 

i called RBC this morning to see if my shares could be lent out by RBC (they are in self directed accounts). No, they cannot be lent out.

 

They told me to go to the monthly account summary in my account. In the asset review section there is a Quantity/Segregation column. As long as there is the same quantity listed for both Quantity and Segregation then the shares are not being lent out by RBC.

[gfp]

22 minutes ago, LC said:

The only outstanding question I have is on the Level 2 classification for FFH's bond portfolio. My guess is there are covenants/options linked to these bonds which cause the L2 classification. Even with that question mark outstanding, the interest income generated from these bonds is observable so it is really more of a curiosity vs. a concern.

 

 

 

I already posted about this, but all off-the-run treasury securities are classified as Level 2.  Also any bond that requires a dealer quote to mark to market is also a Level 2 security.  So that leaves basically on-the-run treasuries, bills, cash equivalents, as the only level 1 bonds.

[Munger_Disciple]

3 minutes ago, gfp said:

 

I already posted about this, but all off-the-run treasury securities are classified as Level 2.  Also any bond that requires a dealer quote to mark to market is also a Level 2 security.  So that leaves basically on-the-run treasuries, bills, cash equivalents, as the only level 1 bonds.

 

[Crip1]

3 hours ago, RedLion said:

I’ve done well over the years buying after some of block’s reports. Buford was the best. I’m fully invested right now, already have a big chunk of ffh, and watching to see if I get a great chance to backup the truck. Looks like probably not. 

Well, I backed up the car and added a few into the trunk this morning.

 

-Crip

[LC]

15 minutes ago, gfp said:

I already posted about this, but all off-the-run treasury securities are classified as Level 2.  Also any bond that requires a dealer quote to mark to market is also a Level 2 security.  So that leaves basically on-the-run treasuries, bills, cash equivalents, as the only level 1 bonds.

Thank you, I must have missed your post - so I'm guessing mostly the off-the-run treasuries, so no big deal at all.

 

Some accounting reading for anyone interested: https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_4_concepts_u_US/45_inputs_to_fair_va_US.html#pwc-topic.dita_1533084709184712

 

Carson Block in shambles.

 

Edited February 9 by LC

[gfp]

10 minutes ago, LC said:

Thank you, I must have missed your post - so I'm guessing mostly the off-the-run treasuries, so no big deal at all.

 

Some accounting reading for anyone interested: https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_4_concepts_u_US/45_inputs_to_fair_va_US.html#pwc-topic.dita_1533084709184712

 

Carson Block in shambles.

 

 

Yeah, from your link:

 

[Thrifty3000]

3 hours ago, MMM20 said:

 

I'd prefer that FFH not end up forced to sell another piece of a sub (even if it's at ~2x book). They're not running with some massive cushion at the holdco. Yes, they are generating a whole lot of cash right now - but if short sellers pile on, spread misinformation, and force them to post cash for the TRS going against them, then it's not just about meaningless volatility b/c anything can happen with stock prices in the short run - especially if short sellers smell blood in a relatively complex, volatile and illiquid one. I don't think it plays out this way, but that's why it's hard to just wave away as the bush league manipulative nonsense it seems to be. Maybe I'm off base?

 

I think many of us have big positions and just trying to make sure we're not missing something stupid.

 

 

I don't think there's a risk of getting burned by the TRS. According to the annual report there's over $2 billion of subsidiary dividend capacity. Also, there's more than enough undrawn capacity on the credit line.

 

[Phoenix01]

Part #2 

 

[SharperDingaan]

2 hours ago, lessthaniv said:

Hedge by liquidating to cash based on a weakly supported argument ahead of what will likely be an exceptional looking annual report in 7 days? No thx. The last thing I want to do is lower my exposure here.

 

I hear you; thing is, MW will still be there after the AR is released and now it'll just be a sale from a higher price. As did some others, we opened a very modest long position this morning after it became clear that round 1 of the MW attack was failing, ideally to resell after the AR release. Thereafter, hopefully MW isn't completely useless, and we get to buy those shares back again later at a lower price.

 

FFH is a solid company, but the reality is that its complexity also makes it vulnerable to this. It survives these attacks primarily because this board exists; and the great many very experienced people who contribute to it in live time, quickly call BS when they see it. Were this a more 'normal' internet board, round 1 of this attack would probably have been more successful.   

 

SD

 

 

[nwoodman]

4 hours ago, MMM20 said:

"not alleging fraudulent behavior" ... "cherry-picks" ... "standard short-seller playbook"

 

"If we had to guess, Muddy Waters likely covered the bulk of its short position yesterday"

 

These guys get it.

 

 

 

Good commentary, a little light on the Div though 

[gfp]

3 hours ago, SharperDingaan said:

 

Hopefully, a good $300+/share on the turn before any option/margin leverage!

 

We would also be very surprised if MW didn't intend to exercise on existing options, as the mechanism by which to raise the shares to repay the short loans; plus accumulate some additional - offered for a buyback. We also expect them to have used the drop to lay in a stack of out-of-the-money calls; FFH buys in the stock at a price well < 1401, MW walks away, the price quickly returns > 1401 & all those calls go deep in the  money.

 

.... Now of course, if an enterprising lad had learnt from ericopoly, and also knew how to work this trick!

Interesting times 

 

SD

 

Honestly I can never make any sense of your posts.

[Sparky627]

I have owned this stock for more than a decade. I’ve been wondering what the catalyst would be to finally ignite this stock.  I think it is Carson Block. If the earnings come in strong this should have a good run up.

[Parsad]

5 hours ago, Gmthebeau said:

 

Bitter little man cuz your stock crashed.  Ok, the analysis was 2 times accused of creative accounting just because you don't understand the analysis doesn't make it less useful. 

 

Not accused by the PCAOB, auditors, SEC, insurance regulators, or any regulatory body.  But by hedge funds shorting the stock.

 

If you don't know what you are talking about, best to maybe learn, rather than throw around ham-fisted anecdotes or comments that inflame other readers.  

 

Cheers!

[coc]

29 minutes ago, gfp said:

 

Honestly I can never make any sense of your posts.

 

It's a conspiratorial post about Muddy Waters supposedly manipulating FFH's stock so he can buy call options and make money on the bounce. Written by James Joyce.

[coc]

Just now, Parsad said:

 

Not accused by the PCAOB, auditors, SEC, insurance regulators, or any regulatory body.  But by hedge funds shorting the stock.

 

If you don't know what you are talking about, best to maybe learn, rather than throw around ham-fisted anecdotes or comments that inflame other readers.  

 

Cheers!

Practically every fraud is first caught by short sellers. This argument holds no weight. The SEC and Deloitte are sure as hell not out there calling out the Wirecards, Enrons, Valeants, Sino-Forests of the world. 

[Parsad]

8 hours ago, StubbleJumper said:

 

No, Sanj, that's the one thing that Muddy Waters actually got right.  FFH hasn't had lumpy returns, it has rather had two-stage returns.  The first stage was from 1986 (FFH's inception) to roughly 1999 where BV grew extremely rapidly and far exceeded Prem's bogey of 15% annual growth.  The second stage is from roughly 2000 until now when the 15% bogey has only been achieved in 8-out-of-23 years.

 

 

 

Every year Prem publishes this table and it is extremely important.  If you believe that 15% will be routinely achieved, then FFH is easily worth 2x BV.  But then you need to get a notion very clear in your mind why FFH's performance would return to a level closer to it's initial growth phase rather than remain at levels similar to the past 20 years or so, and you need to have a solid hypothesis about why the industry economics that have juiced the returns for the past three years would carry forward for the long-term.  That, or you just understand that FFH likely won't ever be worth more more than 1.5x BV.

 

Of all the bullshit in that report yesterday, the comment about not achieving the BV growth rate was about the most fair and the most accurate.  But then again, last week, FFH was only priced at 1.1x BV so that's probably about right for the results of the past 20 or so years.

 

 

SJ

 

Yeah Stubble, I don't agree with this.  If you look at a single period in time, you will get one number.  If you look at a range, you will see there are marked periods where Fairfax did average the 15% ROE.  

 

We had a period where Fairfax struggled to hit the 15% ROE recently, which brought their average number down.  Now we are witnessing a period of enormous growth and you could see 3-5 years of far better than 15% ROE which brings the average up again. 

 

Time will tell if they hit the mark or continue to miss it.  Cheers! 

[Crip1]

3 hours ago, cwericb said:

Putting things in perspective, isn't share price presently back to where FFH was about three weeks ago?

Yeah, pretty much. And the company has not changed much in the past month, either.

 

-Crip

[Gregmal]

Except the “short sellers” of this ilk scream fraud 100 times and might get a small handful, and even out of the small handful the material nature of which? Even less. 
 

Chanos literally lived off 1 call(Enron) for two decades. Ironically Chanos and others went after GE at like $5-7 a share. IBM on “accounting”. DLR, same thing. Short sellers use “accounting” as a license to literally make up anything they want. It’s like giving credit to the people whom claim they “called” all the crashes….well, if you’re calling for a crash every day…of course you’re going to have predicted them. Doesn’t mean your track record is respectable. 
 

What’s even more hilarious now, especially lately, is they deliberately insinuate up to wazoo “fraud”, but refuse to actually say it, because they don’t want to have to answer for it factually in court. See the Burford short from MW. He made it so clear that even Hellen Keller would have walked away thinking “insolvent” and “fraud”….but then like a weasel covers his ass by claiming “never said fraud” or “it is just my opinion”. 
 

Zero accountability. Although I doubt it even matters because this is also somebody who openly admits he trades against his own noise, often the same day or days around his public campaigns.

Edited February 9 by Gregmal

[Parsad]

5 minutes ago, coc said:

Practically every fraud is first caught by short sellers. This argument holds no weight. The SEC and Deloitte are sure as hell not out there calling out the Wirecards, Enrons, Valeants, Sino-Forests of the world. 

 

Baloney!  Hundreds of ponzis, frauds, etc are caught by regulators and whistleblowers every year...SEC alone filed 760 enforcement actions in 2022.  Short sellers don't even account for a tiny fraction of such frauds that are caught.

 

On top of that, there is a widespread investigation of short sellers, including Muddy Waters by the SEC for improper, illegal trading practices:

 

https://www.bnnbloomberg.ca/vast-doj-probe-looks-at-almost-30-short-selling-firms-and-allies-1.1718553

 

Short sellers are as corrupt as many long-only hedge funds...the presumption that somehow they aren't is incredibly off mark!  Cheers!