Fairfax 2026

[longlake95]

3 hours ago, Hoodlum said:

thanks @Viking  do we know what the duration was at year end.  I don’t remember seeing that in the annual report. 

I thought they said 2.5 on the call... 

[Hoodlum]

18 minutes ago, longlake95 said:

I thought they said 2.5 on the call... 

 

I couldn't find that in the transcript.

 

Quote

The $50 billion in fixed income is earning a very nice yield of 5%, despite being very short duration and mostly invested in government bonds. We’re playing it safe with spreads at lows and uncertainty around inflation numbers, yet earning good money while we do that. We’re keeping a close eye on inflation, treasury actions, fed funds rate, GDP growth, and corporate profitability, both in the U.S. and globally. If there’s one thing our fixed income group has proven, it’s that it has the ability to act quickly when the time is right. It’s really a core competitive advantage throughout our investment group.

 

[Hoodlum]

Large 280k shares traded today with what looks like 128k shares traded at the close. 

[Maverick47]

In an uncertain world, one would expect that a company such as Fairfax, with shorter term fixed instruments, cash (dry powder), positive income and a variety of attractive uses for income (stock buybacks, minority partner buyouts, etc) will navigate the volatility ahead well.

 

Unlike @Parsad, my own ability or willingness to maintain a reserve of cash (dry powder) for myself has been extremely limited.  So I’m trying to console myself with the fact that over 90% of my invested assets are split between Fairfax and Berkshire, both of which have dry powder of their own to put to work…

[MMM20]

23 minutes ago, Maverick47 said:

In an uncertain world, one would expect that a company such as Fairfax, with shorter term fixed instruments, cash (dry powder), positive income and a variety of attractive uses for income (stock buybacks, minority partner buyouts, etc) will navigate the volatility ahead well.

 

Unlike @Parsad, my own ability or willingness to maintain a reserve of cash (dry powder) for myself has been extremely limited.  So I’m trying to console myself with the fact that over 90% of my invested assets are split between Fairfax and Berkshire, both of which have dry powder of their own to put to work…

 

Becky Quick: “When people start to think, well this could be the beginning of something really bad, it could be even a World War 3 situation, it could be a return to the Cold War, does any of that go through your mind?”

 

Buffett: “Well, if you tell me all of that’s going to happen, I will still be buying the stock. You’re going to invest your money in something over time. The one thing you can be quite sure of is that if we went into some very major war, the value of money would go down. That’s happened in virtually every war that I’m aware of. The last thing you’d want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War 2, the stock market advanced. The stock market is going to advance over time. American businesses are going to be worth more money. Dollars are going to be worth less, so that money won’t buy you quite as much, but you’re going to be a lot better off owning productive assets over the next fifty years than you will be owning pieces of paper, or I might throw in bitcoins.”

 

Could’ve been yesterday, but that’s from 2014…

 

Edited March 21 by MMM20

[Maverick47]

6 minutes ago, MMM20 said:

Becky Quick: “When people start to think, well this could be the beginning of something really bad, it could be even a World War 3 situation, it could be a return to the Cold War, does any of that go through your mind?”

 

Buffett: “Well, if you tell me all of that’s going to happen, I will still be buying the stock. You’re going to invest your money in something over time. The one thing you can be quite sure of is that if we went into some very major war, the value of money would go down. That’s happened in virtually every war that I’m aware of. The last thing you’d want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War 2, the stock market advanced. The stock market is going to advance over time. American businesses are going to be worth more money. Dollars are going to be worth less, so that money won’t buy you quite as much, but you’re going to be a lot better off owning productive assets over the next fifty years than you will be owning pieces of paper, or I might throw in bitcoins.”

 

Could’ve been yesterday, but that’s from 2014…

I love it!  Thanks for sharing, @MMM20!

 

A good reminder that wisdom never goes out of style.

[TwoCitiesCapital]

18 hours ago, MMM20 said:

 

Becky Quick: “When people start to think, well this could be the beginning of something really bad, it could be even a World War 3 situation, it could be a return to the Cold War, does any of that go through your mind?”

 

Buffett: “Well, if you tell me all of that’s going to happen, I will still be buying the stock. You’re going to invest your money in something over time. The one thing you can be quite sure of is that if we went into some very major war, the value of money would go down. That’s happened in virtually every war that I’m aware of. The last thing you’d want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War 2, the stock market advanced. The stock market is going to advance over time. American businesses are going to be worth more money. Dollars are going to be worth less, so that money won’t buy you quite as much, but you’re going to be a lot better off owning productive assets over the next fifty years than you will be owning pieces of paper, or I might throw in bitcoins.”

 

Could’ve been yesterday, but that’s from 2014…

 

 

+1 Wars are highly inflationary. 

 

Productive resources are diverted from market demand to build military equipment that largely gets destroyed. 

 

Less supply of labor and material input la means higher prices for everything else. 

 

Destroying those outputs just means it was all "unproductive". 

 

As a side note, Bitcoin's price in 2014 ranges between $300s and $700s vs the $70,000 it's at now. 

[TwoCitiesCapital]

18 hours ago, MMM20 said:

 

Becky Quick: “When people start to think, well this could be the beginning of something really bad, it could be even a World War 3 situation, it could be a return to the Cold War, does any of that go through your mind?”

 

Buffett: “Well, if you tell me all of that’s going to happen, I will still be buying the stock. You’re going to invest your money in something over time. The one thing you can be quite sure of is that if we went into some very major war, the value of money would go down. That’s happened in virtually every war that I’m aware of. The last thing you’d want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War 2, the stock market advanced. The stock market is going to advance over time. American businesses are going to be worth more money. Dollars are going to be worth less, so that money won’t buy you quite as much, but you’re going to be a lot better off owning productive assets over the next fifty years than you will be owning pieces of paper, or I might throw in bitcoins.”

 

Could’ve been yesterday, but that’s from 2014…

 

 

+1 Wars are highly inflationary. 

 

Productive resources are diverted from market demand to build military equipment that largely gets destroyed. 

 

Less supply of labor and material input la means higher prices for everything else. 

 

Destroying those outputs just means it was all "unproductive". 

 

As a side note, Bitcoin's price in 2014 ranges between $300s and $700s vs the $70,000 it's at now. 

[Parsad]

18 hours ago, Maverick47 said:

In an uncertain world, one would expect that a company such as Fairfax, with shorter term fixed instruments, cash (dry powder), positive income and a variety of attractive uses for income (stock buybacks, minority partner buyouts, etc) will navigate the volatility ahead well.

 

Unlike @Parsad, my own ability or willingness to maintain a reserve of cash (dry powder) for myself has been extremely limited.  So I’m trying to console myself with the fact that over 90% of my invested assets are split between Fairfax and Berkshire, both of which have dry powder of their own to put to work…

 

18 hours ago, MMM20 said:

 

Becky Quick: “When people start to think, well this could be the beginning of something really bad, it could be even a World War 3 situation, it could be a return to the Cold War, does any of that go through your mind?”

 

Buffett: “Well, if you tell me all of that’s going to happen, I will still be buying the stock. You’re going to invest your money in something over time. The one thing you can be quite sure of is that if we went into some very major war, the value of money would go down. That’s happened in virtually every war that I’m aware of. The last thing you’d want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War 2, the stock market advanced. The stock market is going to advance over time. American businesses are going to be worth more money. Dollars are going to be worth less, so that money won’t buy you quite as much, but you’re going to be a lot better off owning productive assets over the next fifty years than you will be owning pieces of paper, or I might throw in bitcoins.”

 

Could’ve been yesterday, but that’s from 2014…

 

 

While I hold large amounts of cash in my trading accounts when I can't find anything, I'm generally heavily invested in any crisis.  For example, I had 60% cash in my trading account a month ago...it is 90% invested now.  My other non-trading/tax-sheltered accounts had maybe 30% cash...they have about 10% now.  And if prices fall further, I will sell more expensive assets to buy cheaper assets. 

 

So the behavior is not incongruous to what Buffett says...just the timing of when I find opportunity and put capital to work.  I don't just hold an asset regardless of valuation in the trading accounts.  This is the fallacy of people who hold cash...that they never put it to work.  That's the opposite of what I do.  Cheers!

[MungerWunger]

1 hour ago, Parsad said:

 

 

While I hold large amounts of cash in my trading accounts when I can't find anything, I'm generally heavily invested in any crisis.  For example, I had 60% cash in my trading account a month ago...it is 90% invested now.  My other non-trading/tax-sheltered accounts had maybe 30% cash...they have about 10% now.  And if prices fall further, I will sell more expensive assets to buy cheaper assets. 

 

So the behavior is not incongruous to what Buffett says...just the timing of when I find opportunity and put capital to work.  I don't just hold an asset regardless of valuation in the trading accounts.  This is the fallacy of people who hold cash...that they never put it to work.  That's the opposite of what I do.  Cheers!

What are some of your best ideas right now?

[Lotsofcoke]

1 hour ago, MungerWunger said:

What are some of your best ideas right now?

NU/NYSE

[dartmonkey]

7 hours ago, Parsad said:

when I can't find anything, I'm generally heavily invested in any crisis.  For example, I had 60% cash in my trading account a month ago...it is 90% invested now.  My other non-trading/tax-sheltered accounts had maybe 30% cash...they have about 10% now.  And if prices fall further, I will sell more expensive assets to buy cheaper assets. 

 

So the behavior is not incongruous to what Buffett says...just the timing of when I find opportunity and put capital to work. 

Yes, the behaviour is similar but the timing and the pricing are very different. Buffett keeps gobs of cash on the sidelines, like you, but he doesn't seem to ever deploy it, since the stockmarket drops we have experienced in the last 20 years don't seem to take us into what he considers bargain territory. Perhaps this is the curse of being 95 years old and having known times when stocks got really, really cheap compared to today's prices.

 

You on the other hand are prepared to go from 30% to 90% invested after the S&P 500 is down just 7% from its all-time high, or down 5% from the end of 2025, or up 15% from a year ago, however you want to think about it. This seems to me almost indistinguishable from fully invested. I am in a similar position, fully invested right now. I guess if the market drops by 40% this year, Buffett will have the last laugh, but he sure has been waiting a long, long time to be right.

[Parsad]

23 minutes ago, dartmonkey said:

Yes, the behaviour is similar but the timing and the pricing are very different. Buffett keeps gobs of cash on the sidelines, like you, but he doesn't seem to ever deploy it, since the stockmarket drops we have experienced in the last 20 years don't seem to take us into what he considers bargain territory. Perhaps this is the curse of being 95 years old and having known times when stocks got really, really cheap compared to today's prices.

 

You on the other hand are prepared to go from 30% to 90% invested after the S&P 500 is down just 7% from its all-time high, or down 5% from the end of 2025, or up 15% from a year ago, however you want to think about it. This seems to me almost indistinguishable from fully invested. I am in a similar position, fully invested right now. I guess if the market drops by 40% this year, Buffett will have the last laugh, but he sure has been waiting a long, long time to be right.

 

Our universe is much smaller than his.  When markets are down 7-10% like they are now...some stocks we can buy are down 30-40%...whereas they would be far too tiny for him to even buy 100% of.  Everything I've bought in the last month is down at least 20%...a couple are down 50%!  Cheers!

[Munger_Disciple]

1 hour ago, dartmonkey said:

Yes, the behaviour is similar but the timing and the pricing are very different. Buffett keeps gobs of cash on the sidelines, like you, but he doesn't seem to ever deploy it, since the stockmarket drops we have experienced in the last 20 years don't seem to take us into what he considers bargain territory. Perhaps this is the curse of being 95 years old and having known times when stocks got really, really cheap compared to today's prices.

 

You on the other hand are prepared to go from 30% to 90% invested after the S&P 500 is down just 7% from its all-time high, or down 5% from the end of 2025, or up 15% from a year ago, however you want to think about it. This seems to me almost indistinguishable from fully invested. I am in a similar position, fully invested right now. I guess if the market drops by 40% this year, Buffett will have the last laugh, but he sure has been waiting a long, long time to be right.

 

I think most people are better off staying fully invested with a decent size cash buffer for unforeseen expenses that happen in life, and ride out the inevitable ups and downs of the market. Besides large scale changes to one's equity allocation is very expensive tax-wise, and selling & buying back involves two timing decisions which increases the probability of an overall erroneous decision. 

[thedanmancan]

Hi @John Hjorth, thanks for the welcome! No real reason behind my handle other than my name being Daniel

 

Just curious how people think about position sizing for FFH? If one uses the usual starting point of 1/2 of the Kelly Criterion = mean (excess return) /variance):

- assume excess return is 15% less 4% risk free rate

- variance - using historical volatility on IBKR of 32%

- optimal allocation = 53.7%

 

If one uses a more conservative fraction (eg CRRA of 3 or 4 per The Missing Billionaires - which despite the title is a surprisingly interesting book) that is still about 27% (for fraction of 4) - 35.8% (for fraction of 3).

 

If one expects the excess return to be even higher eg 20%+ per various analyses on this board and the volatility to be even lower given the Fairfax bid on the stock due to buybacks etc then this could be > 100% of one's portfolio implying that one should buy the stock on margin, and given these levels of excess return could potentially justify the cost of the margin loan

 

I'm familiar with the various principles of not using too much leverage, not relying too much on math models etc but just wanted to discuss the direction of travel of the math vs how one might be thinking about position.

 

Thanks in advance!

[John Hjorth]

4 hours ago, thedanmancan said:

Hi @John Hjorth, thanks for the welcome! No real reason behind my handle other than my name being Daniel

 

Daniel [ @thedanmancan ],

 

!, thanks! Occams Razor, and such stuff!

[sholland]

6 hours ago, thedanmancan said:

Just curious how people think about position sizing for FFH?

I am at 1/3.

I believe Prem is over 90%.

I am also curious how others think.

Depends upon what other opportunities you are weighing the opportunity cost against.

 

PS - Welcome to the board!

Edited March 23 by sholland

[Parsad]

1 hour ago, sholland said:

I am at 1/3.

I believe Prem is over 90%.

I am also curious how others think.

Depends upon what other opportunities you are weighing the opportunity cost against.

 

PS - Welcome to the board!

 

Prem lives an extremely modest life relative to his level of wealth.  If he lost 90%, it would have almost zero effect on him or his family's lifestyle.  

 

Ask yourself how your lifestyle would change if you lost 1/3?  If it is something that would be detrimental to you and your family, or you would have trouble sleeping, then you may want to adjust that allocation.

 

This doesn't just apply to FFH...but any investment relative to your net worth.  Similarly to you, FFH makes up about 25% of my portfolio...I sleep very well at night!  

 

Cheers!

[CapitalAlloc]

I'm new to Fairfax but I'm hearing a lot of people say that they are very conservative on reserving. Yet when I look at the gross claims, I see consistent adverse developments. You don't see that at Markel. So what am I missing here?

[A_Hamilton]

58 minutes ago, CapitalAlloc said:

I'm new to Fairfax but I'm hearing a lot of people say that they are very conservative on reserving. Yet when I look at the gross claims, I see consistent adverse developments. You don't see that at Markel. So what am I missing here?

In the main, what you are seeing is the adverse development FFH has had from its runoff asbestos and latent other exposures. You'll see in the annual supplements that all of the operating insurers are performing much better - in theory at some point this draw on earnings declines but claims counts haven't really trailed off yet. I won't post here, but you can do some work to look at BRK and FFH's exposures to this and each year they take a similar charge relative to their exposures. The problem for FFH is that runoff is larger here as a percentage of total then at BRK. Fortunately over the past 15 years the acquisitions of Zenith, Brit, and Allied have started to make this smaller as a % of total.

One other piece to note is that FFH sold off its Riverstone Europe unit that was in the Runoff segment and somewhat consistently generated underwriting profits so the "Runoff" section now looks comparably worse than in the past.  

Edited March 23 by A_Hamilton

[Txvestor]

2 hours ago, A_Hamilton said:

In the main, what you are seeing is the adverse development FFH has had from its runoff asbestos and latent other exposures. You'll see in the annual supplements that all of the operating insurers are performing much better - in theory at some point this draw on earnings declines but claims counts haven't really trailed off yet. I won't post here, but you can do some work to look at BRK and FFH's exposures to this and each year they take a similar charge relative to their exposures. The problem for FFH is that runoff is larger here as a percentage of total then at BRK. Fortunately over the past 15 years the acquisitions of Zenith, Brit, and Allied have started to make this smaller as a % of total.

One other piece to note is that FFH sold off its Riverstone Europe unit that was in the Runoff segment and somewhat consistently generated underwriting profits so the "Runoff" section now looks comparably worse than in the past.  

I think they move much of this latent exposure into this segment because they believe they do a much better job of managing it. its a specialized area, and for sure the trial lawyers have done a good job of finding more and more and milking more out of these liabilities. That's an industry wide issue. 
I think Peter Clarke alluded to that in one of the last calls. Their run off operation is more specialized and focussed in this area leaving the other insurers to handle the more routine claims. 

[Maverick47]

12 hours ago, CapitalAlloc said:

I'm new to Fairfax but I'm hearing a lot of people say that they are very conservative on reserving. Yet when I look at the gross claims, I see consistent adverse developments. You don't see that at Markel. So what am I missing here?

@CapitalAlloc Really good question.  A couple of things might help reconcile this gross undiscounted claims view to what we see in the financials.  I don’t have the answers, but maybe some others can chime in.

 

I am assuming that what we see in the financials would be on a discounted, IFRS 17 basis, net of the impact of ceded reinsurance premiums and losses, and the notes in the annual report a page or two after why you’ve shown also refer to a release of a risk adjustment on prior years’ claims, along with prior year loss development.  
 

The risk adjustment is, I believe, a cushion that management elects to include in the loss reserves.  When management speaks of the impact of prior year loss development, the release of this risk adjustment, when no longer needed, is included under the overarching category of prior year reserve development, is not explicitly shown in the chart you show…yet can be quite significant — not that far away from a billion dollars in value in 2025 if I’ve read this correctly.

 

The notes also refer to management setting this risk adjustment at a confidence level of approximately 85%.

 

If I had to guess how to interpret that, I might suggest that the reserving actuaries first make a central estimate of what they believe the historical data indicates should be held as gross undiscounted loss reserves, and then provide management with a reasonable range around that estimate.  Selecting exactly what the actuaries work indicates is the central estimate, would be at the 50th percentile, meaning that there would be an equal chance the final reserve would end up higher or lower than that.  An 85% percentile selection, may include enough of an additional reserve estimate that it would be expected to be adequate or redundant 85% of the time, with only an estimated 15% chance it would prove to be inadequate.

 

Prem in his letter indicates that for the last 19 years, Fairfax has had net reserve releases each year, for an aggregate benefit to earnings of just under $7 billion.  I expect that the release of the risk adjustment on prior claims is a large part of this.

 

The above is largely speculation and guesswork on my part.  Happy to be corrected if anyone knows more about the nuances of prior year development as reported in Fairfax’s financials.

Edited March 24 by Maverick47

[A_Hamilton]

13 hours ago, Maverick47 said:

@CapitalAlloc Really good question.  A couple of things might help reconcile this gross undiscounted claims view to what we see in the financials.  I don’t have the answers, but maybe some others can chime in.

 

I am assuming that what we see in the financials would be on a discounted, IFRS 17 basis, net of the impact of ceded reinsurance premiums and losses, and the notes in the annual report a page or two after why you’ve shown also refer to a release of a risk adjustment on prior years’ claims, along with prior year loss development.  
 

The risk adjustment is, I believe, a cushion that management elects to include in the loss reserves.  When management speaks of the impact of prior year loss development, the release of this risk adjustment, when no longer needed, is included under the overarching category of prior year reserve development, is not explicitly shown in the chart you show…yet can be quite significant — not that far away from a billion dollars in value in 2025 if I’ve read this correctly.

 

The notes also refer to management setting this risk adjustment at a confidence level of approximately 85%.

 

If I had to guess how to interpret that, I might suggest that the reserving actuaries first make a central estimate of what they believe the historical data indicates should be held as gross undiscounted loss reserves, and then provide management with a reasonable range around that estimate.  Selecting exactly what the actuaries work indicates is the central estimate, would be at the 50th percentile, meaning that there would be an equal chance the final reserve would end up higher or lower than that.  An 85% percentile selection, may include enough of an additional reserve estimate that it would be expected to be adequate or redundant 85% of the time, with only an estimated 15% chance it would prove to be inadequate.

 

Prem in his letter indicates that for the last 19 years, Fairfax has had net reserve releases each year, for an aggregate benefit to earnings of just under $7 billion.  I expect that the release of the risk adjustment on prior claims is a large part of this.

 

The above is largely speculation and guesswork on my part.  Happy to be corrected if anyone knows more about the nuances of prior year development as reported in Fairfax’s financials.

See my prior post...and Prem's $7 billion figure EXCLUDES adverse development at runoff.

[Munger_Disciple]

FT article on Fairfax's MW Eat subsidiary (Indian restaurants):

https://archive.ph/IHWQS

From the artilce: The group made a £4.4mn pre-tax profit on sales of £32mn last year and paid a £4.7mn dividend.

 

It looks like Veeraswamy is about to lose its lease. 

 

Edited March 24 by Munger_Disciple

[thowed]

Thanks.

 

For local colour, I must say I don't think the lease issue is a thing, apart from sentimentality.  I pass by it a fair bit, and it's in a good central location, but there are many other similar sites in London (not that any are cheap in the neighbourhood!).

 

Still find it an interesting purchase, as they are not 'cool' restaurants compared with the buzzy 'neo-Indian' chains like Dishoom or Gymkhana, which are expanding to Dubai, NYC etc. but I'm guessing that's the playbook.