Watsa Modeling Buffett Sparks Rally in Fairfax Debentures

[Nnejad]

http://www.bloomberg.com/news/2010-11-18/watsa-modeling-buffett-leads-fairfax-higher-canada-credit.html

[Guest]

What do you guys know about the accounting restatements? Was that all due to the hedge funds or was this legitimate?

[Parsad]

No, the restatements were legitimate, but the media and hedge funds blew it out of proportion.  They were mostly related to treatment of currency translation between subsidiaries.  There was a lot of negative articles back then about the use of reinsurance as well.  Many of these hedgies, Chanos being one and ICP another, accused Fairfax of using reinsurance to hide losses.  But they never did.  They legitimately used reinsurance to protect the company...for example, the $1.2B coverage with Swiss Re against the TIG acquisition.  

 

It was all on the up and up, but the hedgies (again, such as Chanos), Herb Greenberg, Peter Eavis (the man who wrote over 60 articles on Fairfax in a year, and then subsequently ran a tax-sheltered church), Fabrice Taylor (the man who bankrupted "Frank" magazine in less than a year...talk about laying an egg), and many others, made it look like Prem and Fairfax were cooking the books.  Fairfax was only guilty of making a couple of bad acquisitions, being too leveraged and the company was too complex for most analysts and investors to fully grasp.  Since then, they've turned around the acquisitions, simplified the company structure, backstopped their runoff business, strengthened their balance sheet enormously, reduced leverage dramatically, and protected shareholders from a 1 in 50 year storm.  Now all they have to do is hammer these bastards in court!  Cheers!

[Smazz]

Sanj,

you should really write a book on FFH.

 

Ive owned FFH on / off since late 90s but your information is informative to me.

 

I remember all the shinanigans from those days that you wrote about in your post.

 

Crazy crazy times.

[Parsad]

No, I'm sure some journalist who used to write all these negative articles about Prem and Fairfax, will one day write a book about how brilliant he is and that he is really the heir to Buffett's mantle in insurance and leadership.  Maybe Fabrice Taylor or Peter Eavis will write it!  ;D 

 

I still remember the first time I met Ajit Jain in Omaha at the Berkshire AGM around 2004, and I mentioned that I was a Fairfax shareholder.  We were talking about how he and Prem went to different IIT campuses, and how they met through the insurance industry, when a Wall Street suit standing nearby with a group said, "Oh yeah, Fairfax...isn't he in trouble!"  Ajit barked back at the guy..."Is he IN trouble, or is he OUT of trouble!"  The guy shut up. 

 

It was an awfully tough time for Prem and everyone at Fairfax.  They know how many loyal shareholders stood behind them and supported them.  That's why they always support our Fairfax dinner.  He's always polite to everyone, even the guys who said he was a bum, but he knows...he knows who said what, and who trusted him.  That's why he listens to all of you guys when you have a question.  That's what a great leader does, and one who treats all his shareholders the same way he would want to be treated.  Cheers!

[Zorrofan]

Sanj,

 

What ever happened with the $6 billion lawsuit FFH filed? That money could be put to good use by Prem  ;D

 

cheers

Zorro

[Parsad]

It's coming up next year.  I believe both Fairfax's and Overstock's trial dates are around September.  Fairfax's in particular should be very, very interesting.  The shape they are in now, relative to then, and the information that has come to light regarding some of the people in their suit, is quite illuminating and would be pretty effective in court.  Cheers! 

[Guest]

Sanj,

you should really write a book on FFH.

 

Ive owned FFH on / off since late 90s but your information is informative to me.

 

I remember all the shinanigans from those days that you wrote about in your post.

 

Crazy crazy times.

 

I agree. Sanjeev has a ton of insight. I'm a bit jealous.