Fairfax 2025

[MMM20]

Maybe this is not the right place for this, but high yield has widened out ~272bps since year-end to ~10%+ spreads (with ~3-4 year weighted average duration) per Damodaran. I think that's starting to look attractive and I'm tempted to dip a toe in. That's got me wondering if Fairfax is getting more active on the credit side or staying patient for a fat pitch in high quality credit. I'm guessing the latter but curious about the board's take on it.

 

https://aswathdamodaran.substack.com/p/anatomy-of-a-crisis-tariffs-markets

 

Edited April 8, 2025 by MMM20

[Hektor]

On 3/23/2025 at 3:52 PM, Viking said:

3.) Share of profit of associates: Estimate = $950 million in 2025.

• Earnings at Eurobank and Poseidon/Atlas should continue to chug along.
• Tailwind: EXCO – should benefit from the rise in the price of natural gas.
• Headwinds: Shift of Peak Achievement to a consolidated holding ($57m). 
  • Sale of Stelco ($18m).

Any thoughts about the impact on Poseidon/Atlas from the ongoing trade war?

[gfp]

8 minutes ago, Hektor said:

Any thoughts about the impact on Poseidon/Atlas from the ongoing trade war?

 

First thought is they are going to wish they didn't order that car carrier

 

 

https://ir.atlascorporation.com/2023-12-05-Seaspan-Corporation-enters-new-market-segment-with-strategic-order-of-new-dual-fuel-LNG-Pure-Car-and-Truck-Carrier-vessels

Edited April 9, 2025 by gfp

[Hoodlum]

On 4/5/2025 at 2:58 PM, Viking said:

We will see where financial markets go from here. Bottom line, it is probably a good time to review/start to think a little more about Fairfax’s fixed income portfolio. My schedule is going to be busy for the next 10 days so a deep dive will have to wait until after then. Here are some quick thoughts:

What will be the impact of the big drop in treasury yields?

 

Fairfax will see two opposing impacts:

• Large investment gains (driven by the increase in value of bonds).
• Offsetting impact of IFRS 17. 

What will be the size of the investment gains? 

What will be the size of the offsetting impact of IFRS 17? 
 

More on this in a future post. (Short answer: as of today, YTD perhaps a net benefit of $250 million?)

 

Do we get a recession in the US? 
 

Probably not. But the risk is increasing. This means credit risk is becoming more important. 
 

How does this impact Fairfax? 
 

Fairfax’s bond portfolio is heavily skewed to government bonds - it is very conservatively positioned. Especially when compared to other P/C insurance companies (who are heavily weighted to corporate bonds). 
 

Do we see credit spreads blow out? 
 

If this happens, Fairfax will have the opportunity to

• Sell their government bonds - and realize a big investment gain.
• Buy corporate bonds at mouth watering yields.

Bottom line, the fixed income portfolio is getting a little more interesting. 

—————-

 

A review of some of the risks of investing in bonds

• Interest rate risk - rising interest rates cause bond prices to fall. Duration matters a lot with this risk. Spiking interest rates impact long duration bond portfolios much more than short duration portfolios.
• Credit risk - the risk the issuer may default on one or more payments. Market dislocations / recessions matter a lot with this risk - events that cause credit spreads to blow out.
• Inflation risk (purchasing power risk) - the risk that inflation is higher than the total return received on the bond. Unexpected inflation is what matters with this risk. Especially if the inflation is high and persists for years.
• Reinvestment risk - the risk that at maturity, the proceeds will be reinvested at a lower rate than the bond was earning previously.

 

It is interesting to see what can happen in just a few days.  10 year treasuries are up 0.50% since last Friday's close.   We may be entering new territory, with US treasuries loosing some lustre.  We could start to see more emphasis towards EU bonds, especially as Germany ramps up their bond sales.  While the emphasis at Fairfax is likely on Corporate bonds in the coming months/year, I do wonder if they will eventually start considering other government bonds as a higher percentage of their liquid holding.  

[TwoCitiesCapital]

43 minutes ago, Hoodlum said:

 

It is interesting to see what can happen in just a few days.  10 year treasuries are up 0.50% since last Friday's close.   We may be entering new territory, with US treasuries loosing some lustre.  We could start to see more emphasis towards EU bonds, especially as Germany ramps up their bond sales.  While the emphasis at Fairfax is likely on Corporate bonds in the coming months/year, I do wonder if they will eventually start considering other government bonds as a higher percentage of their liquid holding.  

 

Would increased issuance be BULLISH for European bonds? I'd think the opposite. 

 

Agreed treasuries are losing some luster. The writing is on the wall that the US will default. Probably implicitly via inflation, but not acting as the hedge they once were. Still outperforming stocks and still getting 4-5% YTMs in intermediate core bond funds though which I'm not upset with going into the current environment. 

 

Surprisingly, I'd say Bitcoin has held up well.  Has been the recipient of some still appreciable inflows through this volatile period even if it's not bleeding as much into upward price movement. Is probably why it has tanked as much as you'd expect from "leveraged NASDAQ exposure". 

 

[KFRCanuk]

2 hours ago, TwoCitiesCapital said:

Agreed treasuries are losing some luster. The writing is on the wall that the US will default.

 

I have been specifically worried about this for months. I'm cherry picking the comment above. I'm clearly no expert. I'm probably taking your comment out of context.

 

Can Fairfax or even Berkshire move their subs away from US assets? Are there not regulations that force them to hold US assets? Even if they could, would it not cause a panic?

 

 

Edited April 9, 2025 by KFRCanuk

[Hoodlum]

2 hours ago, TwoCitiesCapital said:

 

Would increased issuance be BULLISH for European bonds? I'd think the opposite. 

 

Agreed treasuries are losing some luster. The writing is on the wall that the US will default. Probably implicitly via inflation, but not acting as the hedge they once were. Still outperforming stocks and still getting 4-5% YTMs in intermediate core bond funds though which I'm not upset with going into the current environment. 

 

Surprisingly, I'd say Bitcoin has held up well.  Has been the recipient of some still appreciable inflows through this volatile period even if it's not bleeding as much into upward price movement. Is probably why it has tanked as much as you'd expect from "leveraged NASDAQ exposure". 

 

 

It is not so much a bullish direction but rather the additional volume in EU debt would allow for current US treasury owners to spread their risk to other countries.   We will certainly see more volatility going forward with both bonds rates and currency exchange rates.

[TwoCitiesCapital]

12 minutes ago, KFRCanuk said:

I have been specifically worried about this for months. I'm cherry picking the comment above. I'm clearly no expert. I'm probably taking your comment out of context.

 

Can Fairfax or even Berkshire move their subs away from US assets? Are there not regulations that force them to hold US assets? Even if they could, would it not cause a panic

 

 

Where do you instead? Europe? Japan? China? All have worse finances and worse demographics. 

 

US treasuries may suck, but for anyone required to own bonds they're still the cleanest of the dirty shirts. 

 

You can manage the risk and massively  outperform the benchmark by being short duration, overweight credit, and time the fixed/floating weights, and etc. but you HAVE to own bonds. And if US bonds are in a crisis... everywhere else is likely worse. 

[SafetyinNumbers]

20 minutes ago, TwoCitiesCapital said:

 

Where do you instead? Europe? Japan? China? All have worse finances and worse demographics. 

 

US treasuries may suck, but for anyone required to own bonds they're still the cleanest of the dirty shirts. 

 

You can manage the risk and massively  outperform the benchmark by being short duration, overweight credit, and time the fixed/floating weights, and etc. but you HAVE to own bonds. And if US bonds are in a crisis... everywhere else is likely worse. 

I assume they match the currency exposure in their claims liabilities with the bonds in the investment portfolio to a certain extent. 

[value_hunter]

Bought back another 111k share in Mar.

https://ceo.ca/insiders-dashboard?symbol=ffh

[Xerxes]

Prem Watsa rocks !!

[giulio]

Please, someone cut this guy off. JFC

 

[SafetyinNumbers]

Raymond James just initiated coverage on Fairfax Financial with an Outperform 2 rating and C$2600 PT. 

[villainx]

16 minutes ago, giulio said:

Please, someone cut this guy off. JFC

 

 

There's no 1.5x speed for live presentations?

[jbwent63]

20 minutes ago, giulio said:

Please, someone cut this guy off. JFC

 

My thoughts exactly. Ruby was long-winded as well. Ask the question, don't tell a story. Make time for others to ask their questions.

[MMM20]

22 minutes ago, SafetyinNumbers said:

Raymond James just initiated coverage on Fairfax Financial with an Outperform 2 rating and C$2600 PT. 

 

Any chance you can share the first page? 

[MMM20]

 

I'm sure 9/10 investors wouldn't guess Fairfax is top 10. Still misunderstood, underrated and undervalued.

 

Edited April 10, 2025 by MMM20

[Xerxes]

Not much content compare to previous AGMs. Speaks to its full valuation. 

[Hsmpanl]

1 hour ago, Xerxes said:

Not much content compare to previous AGMs. Speaks to its full valuation. 

Not following, just saying FFH is fully valued compared to prior years? They're still buying back which seems bullish, maybe just less urgency to communicate the positives of the business since the market is giving them credit for most of it?

[gfp]

1 hour ago, MMM20 said:

I'm sure 9/10 investors wouldn't guess Fairfax is top 10. Still misunderstood, underrated and undervalued.

 

 

I guess Berkshire would be around 15% over that period?  Maybe a bit more.  Depends on which exact dates FFH was using.

[Xerxes]

38 minutes ago, Hsmpanl said:

Not following, just saying FFH is fully valued compared to prior years? They're still buying back which seems bullish, maybe just less urgency to communicate the positives of the business since the market is giving them credit for most of it?

yeap precious years needed lots of table pounding. 
 

They just used the even better let’s bring Sokol, let’s bring Sleepy guy, let’s bring Euro guy, formulae and meshed it with whatever questions came up that remotely matched the question. 
 

I would have like to hear from Strathcona CEO 

 

 

I wished I had listened to the FIH instead of this one. 

[KFRCanuk]

Did Prem answer many questions today? 

[SafetyinNumbers]

8 hours ago, MMM20 said:

 

Any chance you can share the first page? 

[Xerxes]

Based on the Q&A It is clear that Prem doesn’t waste too much time with Howard Marks’ memos

[Charlie03]

Will the AGM be uploaded?