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Fairfax Wish List


JEast
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Assuming that we now have excess cash with the recent sales of our long-term bonds in the 2nd quarter, the following is a short wish list to the team for long-term securities in the portfolio.

 

  • Shipping – either tankers or container ships as we appear to be hitting a trough.  Given the prices for new ships, it would be nice to order 10 vessels in the JV as the terms are the best in nearly 20 years.  Little to no deposit required and 5% progress payments with build out time in 3 years.  For containers, new hull designs with added fuel efficient 5,000+TEU will hold their value and time enough for the market to turn.
     
  • TARP Warrants – though we have some, more would be preferred.  Outside the unique reduced strike price feature, some also have a no cash exercise feature (equivalent shares at conversion).  Take a look the HIG warrants as an example, but others as a basket seem prudent.
  • KW – I am sure the team is watching, but additional commercial real estate in conjunction with KW in Europe over the next couple of years would go a long way.  Sooner than later, the banks will start unloading some of their assets on the continent.
  • RIMM – increase position 25-75% below $8.  We would take some heat as we would look like we are idiots, but surely the patents are worth $5.  At these prices, it is a long call option that the company just survives.
     
  • FFH – nibble on our shares when the market allows.
     

 

Cheers

JEast

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I would add some very long term, very out of the money equity index calls as discussed on the "Watsa's latest bugaboo" thread.  I get their deflation thesis, but if inflation protection this way is cheap then why not protect against that as well?  Especially since I would think inflation was more dangerous to an insurance business (given impact on bonds and claims) than deflation.

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How about we just let Prem and the team do what they do, since they are better at it than all of us.  ;D 

 

Although, I think stepping in and doing more preferred type deals or acquisitions of private businesses in a cash crunch is probably a good bet...stuff that guys like Berkshire and Leucadia do.  People all over the world need money for their businesses and Fairfax has plenty when money others don't. 

 

At the same time, remember that all of the private equity/hedge fund guys are competing against them, and they tend to overpay, whereas BRK, LUK and FFH won't.  Prem, like Buffett, will go to work when things are really tight for everyone else.  Cheers!

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Especially since I would think inflation was more dangerous to an insurance business (given impact on bonds and claims) than deflation.

 

Actually, from a payout perspective, inflation is great for insurance companies because policy payouts aren't inflation adjusted.

 

If FFH continues to increase book value well above inflation (whether it is high or low), it wins.

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  • Shipping – either tankers or container ships as we appear to be hitting a trough.  Given the prices for new ships, it would be nice to order 10 vessels in the JV as the terms are the best in nearly 20 years.  Little to no deposit required and 5% progress payments with build out time in 3 years.  For containers, new hull designs with added fuel efficient 5,000+TEU will hold their value and time enough for the market to turn.

 

I'm really not too crazy about shipping at any price. The fuel that powers the ships is what is left over after the refining process. It's nasty stuff and creates a lot of pollution.

 

I also can't imagine the amount of paper/toner each that each FFH sub uses to print their policies. It must be huge. Lots of dead trees.

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