FFH results out

[prevalou]

and its sovereign debt held at 70% by foreigners

[bmichaud]

FFH looks to be dead money for some time to come. 

 

If stocks in general go up their hedges become worth less and less.  If interest rates stay low, even up to the 2% overnight rate they will only be back where they were 9 months ago on interest and dividends.  The large investments are stalled works in progress: Bkir, Rim, Dell, JNJ, etc.  I am not a fan of the deflation hypothesis, never have been.  The price of oil is preventing deflation to this point, and a recovering US economy will make the opposite more likely. 

 

On the other hand it makes an awesome hedge for my derivative rich portfolio.  If the market goes for a nasty tumble FFH will do well.

 

I think the market is going to go for a nasty tumble, and Prem's deflation bet will eventually pan out.  The world is out of bullets and Europe is devastatingly fragile.  There is going to be a nasty liquidity issue in Europe and it isn't far away! 

 

I used to think that Prem was like a chess player 2-3 moves ahead of the rest of us, and Buffett was a chess player 4-6 moves ahead of everyone else.  It's the other way around!  Cheers!

 

Sanjeev,

 

Anytime someone used to bring up the fact that Prem was 100% hedged you always countered with "he is hedged b/c he is an insurance company and needs to preserve the equity position". Do you no longer believe that he is hedged solely for that reason?

 

IMO, if Prem thought the market was as cheap as late 2008/early 2009 he would not be hedged like he is. Was his equity position not as at risk back then when he took the hedges off during that time as it is now?

[ERICOPOLY]

I've stated on here numerous times that we are increasing cash over the last three months.  That we are close to 50% cash.  Yet, I have not sold a single share of BAC or WFC.  I think the United States is a safe-haven.  Those stocks may get hit if the shit hits the fan, but they are well-capitalized and U.S. corporations are in good shape.  But things will get volatile again, and it will be messy.  Cheers! 

 

I sort of side with your thinking that we're due once again for the annual panic end-of-capitalism sell off.  I will stand to benefit the way I've got things positioned, but not as much as you (I don't have 50% in cash).

 

 

[hyten1]

wow 50% cash!

[Hoodlum]

I went to 90% cash a couple of days ago.  I also bought some CRM puts.  The market will get nasty by the end of the year due to more Europe debt issues and I decided to lock in my gains and wait.  Only have BAC for now.

[DCG]

I think the market is going to go for a nasty tumble, and Prem's deflation bet will eventually pan out.

 

Maybe, but Prem has had this theory for the last several years and completely missed out on one of the biggest stock market rallys in the history of the stock market. You can call for something for a long time and eventually be

'right', but that doesn't mean a whole lot.

[racemize]

I think the market is going to go for a nasty tumble, and Prem's deflation bet will eventually pan out.

 

Maybe, but Prem has had this theory for the last several years and completely missed out on one of the biggest stock market rallys in the history of the stock market. You can call for something for a long time and eventually be

'right', but that doesn't mean a whole lot.

 

How much did he really miss though?  He got the 2009 upturn and then started hedging 2010 and heavily in 2011/2012.  He certainly missed out on a lot of the last few months, but it seems he got the bulk of the run up.

[Parsad]

FFH looks to be dead money for some time to come. 

 

If stocks in general go up their hedges become worth less and less.  If interest rates stay low, even up to the 2% overnight rate they will only be back where they were 9 months ago on interest and dividends.  The large investments are stalled works in progress: Bkir, Rim, Dell, JNJ, etc.  I am not a fan of the deflation hypothesis, never have been.  The price of oil is preventing deflation to this point, and a recovering US economy will make the opposite more likely. 

 

On the other hand it makes an awesome hedge for my derivative rich portfolio.  If the market goes for a nasty tumble FFH will do well.

 

I think the market is going to go for a nasty tumble, and Prem's deflation bet will eventually pan out.  The world is out of bullets and Europe is devastatingly fragile.  There is going to be a nasty liquidity issue in Europe and it isn't far away! 

 

I used to think that Prem was like a chess player 2-3 moves ahead of the rest of us, and Buffett was a chess player 4-6 moves ahead of everyone else.  It's the other way around!  Cheers!

 

Sanjeev,

 

Anytime someone used to bring up the fact that Prem was 100% hedged you always countered with "he is hedged b/c he is an insurance company and needs to preserve the equity position". Do you no longer believe that he is hedged solely for that reason?

 

IMO, if Prem thought the market was as cheap as late 2008/early 2009 he would not be hedged like he is. Was his equity position not as at risk back then when he took the hedges off during that time as it is now?

 

I thought Prem was early, and there were plenty of bullets left...now I don't think there are.  Thus the fact that the hedges cost them alot of equity gains. 

 

If Europe wasn't such a mess, I would not be holding so much cash, as the U.S. has made every effort to move forward.  But Europe is a different basket of nutjobs, and they don't want to work together to get themselves out of this. 

 

I still think in Prem's case, hedges are far more of a necessity due to their leverage.  We have lots of cash, no hedges in the Canadian fund, and a very modest amount of hedges in the U.S. fund solely to protect the gains in BAC.  Cheers!

[Parsad]

You could have said the same thing about credit default swaps and the housing boom.  He called that way early and missed the big run up before the financial crisis.  But he was ready to rock when things cratered and everyone else was cash poor and we did get a good run in 2008-2010.  We're in the same spot now if there is deflation in Europe or the US.  Nobody can call the tops and bottoms as they happen.

 

Yes, exactly.  Fairfax shareholders have to be patient, because when cash is king again, Fairfax will be there!  Cheers!

[original mungerville]

For what its worth, I'm still pretty much 100% hedged - have been for about the same period that Watsa has.  Been leveraged and hedged in one way or another for probably 60-70% of the time since 1999. Can't wait to get this bubble over with so I can stop hedging!