Fairfax in Greece

[giofranchi]

giofranchi,

 

do you know the Ferrero business in Italy? It is probably the best company in Italy I know of.

It is a confectionery company, which sells Ferrero Rocher, Kinder Schokolade, Hanuta, Nutella, Tic Tac etc.

It´s like See´s Candy, but much, much bigger. And you get addicted to this stuff.  ;)

 

The Ferrero family is on the Forbes list with $20,4 billion.

 

It would be a wonderful purchase for Berkshire Hathaway. What do you think?

 

I agree 100%! Very good business indeed! Though I don’t know if the family is interested in selling… I have never heard of it… Anyway, I guess it is on Mr. Buffett’s elephants list! And he knows it much better than I do!

 

I am such a boring guy, who always eats healthy food, stays away from bad habits, etc. I have read in “The Longevity Project”, a book I highly recommend, that the most common behavioral trait, among those who live long and productive until the end lives, is that they are “prudent and persistent”… So, I generally don’t enjoy Ferrero’s products very much! But I know that it is only me!

 

To all the girls on the board: don’t believe for a second that I am so boring as I have described myself! To tell the truth, I am amazingly bold and reckless, you won’t believe it!! Incredibly cool and handsome!!  ;D ;D ;D ;D

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

 

[LongTerm]

 

IMO, it's not really about whether Ireland was in better shape 2 years ago than Greece is now.  Rather, it's a cultural thing about whether a country has a propensity to have an adult conversation to acknowledge the situation that it's in, identify practical solutions, and then accept the bad tasting medicine.  Canada did it 15 years ago.  Ireland did it.  The United Kingdom is doing it.  I have faith that the Americans will eventually have that adult conversation and make adult decisions.  All of them are primarily anglophone, advanced economies.

 

On the other hand, I am completely unconvinced that the southern european countries are able to actually have that adult conversation and actually take the bad tasting medicine.  I hear ridiculous denial from people when I travel to France.  In Spain, I wander around in disbelief about how things are run...or are not run.  The Greeks that I have spoken to point the finger at the Germans for their problems.  All of this is unbelievable. 

 

Maybe I have mis-assessed our southern European friends, but I just don't think that they have the collective emotional maturity to take the bad tasting medicine.

 

Sorry to all those whom I've offended.

 

SJ

 

Blast from the past.  In late December, 1992, we decided to take our very young children and their French teacher and the French teacher's young children plus her mother and sister on a trip from the states to Paris where the French teacher had lived a few years before then.  At that time the US was starting to take its medicine after unwise financial choices whose chickens had finally come home to roost. 

 

I imagined we would stay at a first class hotel in downtown Paris with off season rates.  Did I get a shock.  The lowest rate for a first class room was $300 US up to $600 US per night! And we needed two or three rooms plus a small suite.  That price  was outrageous so we wound up staying at a one star hotel in Vincennes recommended by some low budget missionary friends. Madam Roberta reverted to the mode of her student days at The Sorbonne. 

 

We rode the metro.  Madam Roberta showed us wonderful sights that tourists never see,  and we met gracious French nationals.  We walked miles and miles every day from Christmas through the New Year.  We lived on bread and cheese. Each of us lost 5+ pounds of extra weight.  (Although we did eat once  at moderate priced Goldenbergers for the best French dinner we had ever experienced).  It turned out to be the best vacation we had ever had.

 

I think if our Southern European friends would go off the Euro to a devalued national currency that they might have to live mostly on bread and cheese for a couple of years.  They might wind up a few pounds lighter without starving.  And then they would  enjoy life more with a full employment economy.  :)

 

I quite agree with StubbleJumper on this one, and to a lesser degree twacowfca, but with a twist. There are already a large number of people living on bread and cheese in the Southern European countries. They are hardly the ones that can be asked to tighten their belts for a few years. I would say rather that the problems in those countries can be traced to a precise group of actors; There is a great collusion between a large majority of the wealthy in these countries and their agents, the politicians. In large part, the wealthy in these countries are an extremely conservative force that generally eschews the concept of market economy (while often paying homage to it verbally, a la Berlusconi); they prefer to maintain their wealth through privilege without putting their capital at risk. And, unfortunately, there is a general lack of countervailing forces. This is clearly manifest in the inability of governments in these countries to collect taxes due under current legislation (never mind making the theoretical tax burden more equitable). We all, at heart, know that when a country wants to implement an effective (notice I didn't say 'just') tax regime, it does so, and without much fuss or fanfare. So why don't these countries collect taxes? It's quite simple; there is no political will to do so. The political class been co-opted and thus impedes any encroachment on the privileges of the wealthy.

 

Now, before you all come to the conclusion that I am some kind of Pinko nut, I want to assure you that what I am lamenting is the lack of CAPITALISM in these countries. It is state intervention (from the right as well as from the left) that has distorted these markets, and this has been exacerbated by the Euro context. The Euro was supposed to provide fiscal discipline to the Southern sphere; in fact it provided subsidized borrowing while none of the implied economic discipline was ever implemented. So now that they have maxed out their credit, these countries are forced to face the decision they have put off for 10 years; Open the economy, do away with privilges, tax unproductive assets and facilitate productive investment OR exit the Euro. But, as far as I can see, few of the major actors in these countries are incented to move their countries towards a more open, market economy. The Left, with its ties to the trade unions, want to maintain the privileges of the 'working class' (which, because of global competition and the Euro, continues to shrink), while the Right is unable to think beyond their bank account (the one in Switzerland, that is). But, something will have to eventually give. Either these countries exit from the Euro or they begin to open the economies to real competition. Unfortunately both sides are playing a game of chicken, and its the poor honest folks in the middle who will have to pay. We can only hope that one side blinks before severe damage is done. Well, too late for Greece!

 

I find that there is little understanding in the Anglo-Saxon countries of the core problem facing Southern Europe. I think it can be summed up in the following question. Why is it that a politican in the UK has to resign when a 'fixed' parking ticket comes to light, but a politican in a Southern European country can embezzle 23 million euros from a defunct polital party, not go immediately to jail and offer half the monies back as a legal settlement? and perhaps even be re-elected! Until the mentality changes in Southern Europe, without fiscal, economic and judicial discipline enforced at the European level, the Euro experiment is doomed. The Southern countries need the devaluation tool in their arsenal to survive in the prevailing political environment.

[giofranchi]

I quite agree with StubbleJumper on this one, and to a lesser degree twacowfca, but with a twist. There are already a large number of people living on bread and cheese in the Southern European countries. They are hardly the ones that can be asked to tighten their belts for a few years. I would say rather that the problems in those countries can be traced to a precise group of actors; There is a great collusion between a large majority of the wealthy in these countries and their agents, the politicians. In large part, the wealthy in these countries are an extremely conservative force that generally eschews the concept of market economy (while often paying homage to it verbally, a la Berlusconi); they prefer to maintain their wealth through privilege without putting their capital at risk. And, unfortunately, there is a general lack of countervailing forces. This is clearly manifest in the inability of governments in these countries to collect taxes due under current legislation (never mind making the theoretical tax burden more equitable). We all, at heart, know that when a country wants to implement an effective (notice I didn't say 'just') tax regime, it does so, and without much fuss or fanfare. So why don't these countries collect taxes? It's quite simple; there is no political will to do so. The political class been co-opted and thus impedes any encroachment on the privileges of the wealthy.

 

Now, before you all come to the conclusion that I am some kind of Pinko nut, I want to assure you that what I am lamenting is the lack of CAPITALISM in these countries. It is state intervention (from the right as well as from the left) that has distorted these markets, and this has been exacerbated by the Euro context. The Euro was supposed to provide fiscal discipline to the Southern sphere; in fact it provided subsidized borrowing while none of the implied economic discipline was ever implemented. So now that they have maxed out their credit, these countries are forced to face the decision they have put off for 10 years; Open the economy, do away with privilges, tax unproductive assets and facilitate productive investment OR exit the Euro. But, as far as I can see, few of the major actors in these countries are incented to move their countries towards a more open, market economy. The Left, with its ties to the trade unions, want to maintain the privileges of the 'working class' (which, because of global competition and the Euro, continues to shrink), while the Right is unable to think beyond their bank account (the one in Switzerland, that is). But, something will have to eventually give. Either these countries exit from the Euro or they begin to open the economies to real competition. Unfortunately both sides are playing a game of chicken, and its the poor honest folks in the middle who will have to pay. We can only hope that one side blinks before severe damage is done. Well, too late for Greece!

 

I find that there is little understanding in the Anglo-Saxon countries of the core problem facing Southern Europe. I think it can be summed up in the following question. Why is it that a politican in the UK has to resign when a 'fixed' parking ticket comes to light, but a politican in a Southern European country can embezzle 23 million euros from a defunct polital party, not go immediately to jail and offer half the monies back as a legal settlement? and perhaps even be re-elected! Until the mentality changes in Southern Europe, without fiscal, economic and judicial discipline enforced at the European level, the Euro experiment is doomed. The Southern countries need the devaluation tool in their arsenal to survive in the prevailing political environment.

 

I agree with the whole LongTerm’s analysis. He will pretty soon know and understand Italy far better than I do!!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

[LongTerm]

 

I agree with the whole LongTerm’s analysis. He will pretty soon know and understand Italy far better than I do!!  :)

 

giofranchi

 

 

Too kind! I'm just a long-term visitor in Italy wondering, like twacowfca, why my US dollar seems so eviscerated, but nevertheless enjoying the 'bread and cheese' as well as the sights of the 'old world' (and happy to lose those 5 lbs!)

[biaggio]

 

I agree with the whole LongTerm’s analysis. He will pretty soon know and understand Italy far better than I do!!  :)

 

giofranchi

 

 

Too kind! I'm just a long-term visitor in Italy wondering, like twacowfca, why my US dollar seems so eviscerated, but nevertheless enjoying the 'bread and cheese' as well as the sights of the 'old world' (and happy to lose those 5 lbs!)

 

I think eating bread, especially freshly baked Southern European ,and cheese is way under rated and undervalued especially if you throw in some inexpensive but good wine.

 

I wonder if they are not a lot smarter then the rest of us who work our ass off, are always in a hurry, eat crappy fast food, etc

 

Living a simpler life without high stress and high expectations has appealed to me recently. Sorry a bit off topic

 

[Parsad]

 

I agree with the whole LongTerm’s analysis. He will pretty soon know and understand Italy far better than I do!!  :)

 

giofranchi

 

 

Too kind! I'm just a long-term visitor in Italy wondering, like twacowfca, why my US dollar seems so eviscerated, but nevertheless enjoying the 'bread and cheese' as well as the sights of the 'old world' (and happy to lose those 5 lbs!)

 

I think eating bread, especially freshly baked Southern European ,and cheese is way under rated and undervalued especially if you throw in some inexpensive but good wine.

 

I wonder if they are not a lot smarter then the rest of us who work our ass off, are always in a hurry, eat crappy fast food, etc

 

Living a simpler life without high stress and high expectations has appealed to me recently. Sorry a bit off topic

 

Funny, that's what I had for dinner last night...but here in Vancouver.  Some focaccia bread, some good olive oil and balsamic vinegar, some brie & blue cheese, and a glass of a nice Gwertztraminer...while watching Shark Tank!  ;D  Cheers!

[LowIQinvestor]

National Bank of Greece (NBG) said on Friday it had raised enough money from private investors in a share offering to ensure it avoids state control.

 

 

http://www.reuters.com/article/2013/06/14/reece-nbg-idUSL5N0EQ2QT20130614?feedType=RSS&feedName=financialsSector&rpc=43

 

Anyone know if Fairfax participated?

[ourkid8]

http://mobile.reuters.com/article/idUSL5N0EV10V20130619?irpc=43

 

Fairfax Holdings to raise stake in Greek Eurobank Properties.  This is an interesting move but not unexpected as Fairfax invests where others avoid.

 

Tks,

S

 

[Grenville]

more on this: http://www.ase.gr/Files/For%20AseSite%202013_XA_A_11782_2.pdf

 

Thanks for the link to the official press release!

[LowIQinvestor]

Fairfax Financial Bets on Greece After Irish Investment Pays Off

 

http://www.bloomberg.com/news/2013-06-21/fairfax-financial-bets-on-greece-after-irish-investment-pays-off.html?cmpid=yhoo

 

side note: I am surprised Fairfax shares have fallen with all the market turbulance lately...you would think shareholders are all keenly aware of the equity hedges & CPI linked derivatives...

 

 

[A_Hamilton]

Fairfax Financial Bets on Greece After Irish Investment Pays Off

 

http://www.bloomberg.com/news/2013-06-21/fairfax-financial-bets-on-greece-after-irish-investment-pays-off.html?cmpid=yhoo

 

side note: I am surprised Fairfax shares have fallen with all the market turbulance lately...you would think shareholders are all keenly aware of the equity hedges & CPI linked derivatives...

 

Yeah, and FFH's long duration bond portfolio that losses $500 million on a 100 bps rate rise.

[JEast]

Yeah, and FFH's long duration bond portfolio that losses $500 million on a 100 bps rate rise.

 

True, but I believe these remaining long duration bonds are, more so, held to a maturity type of position unlike the much larger position of a few years back that were sold at a very large profit.  It would appear, to me anyway, that the portfolio is in a somewhat win-win situation now.  For example, if spreads widen like they are doing now then the economy is doing better and WFC, JNJ, BIR all do better and probably have alpha against the hedges.  If the economy sours, then spreads flatten back out and the losses on the hedges and bond portfolio are mitigated somewhat.  Call me naive, but what is the downside with FFH today?

 

Cheers

JEast

[A_Hamilton]

Yeah, and FFH's long duration bond portfolio that losses $500 million on a 100 bps rate rise.

 

True, but I believe these remaining long duration bonds are, more so, held to a maturity type of position unlike the much larger position of a few years back that were sold at a very large profit.  It would appear, to me anyway, that the portfolio is in a somewhat win-win situation now.  For example, if spreads widen like they are doing now then the economy is doing better and WFC, JNJ, BIR all do better and probably have alpha against the hedges.  If the economy sours, then spreads flatten back out and the losses on the hedges and bond portfolio are mitigated somewhat.  Call me naive, but what is the downside with FFH today?

 

Cheers

JEast

 

I'm as big a fan of what is going on at FFH as anyone out there, I'm just saying if we are going to talk about short term mark to market moves then people have to be looking at the long duration bond portfolio and assuming there will be a large loss in the q. Whether the loss is realized or not, and whether realization of the loss or not is meaningful to FFH is a totally different question.

[jay21]

Fairfax Financial Bets on Greece After Irish Investment Pays Off

 

http://www.bloomberg.com/news/2013-06-21/fairfax-financial-bets-on-greece-after-irish-investment-pays-off.html?cmpid=yhoo

 

side note: I am surprised Fairfax shares have fallen with all the market turbulance lately...you would think shareholders are all keenly aware of the equity hedges & CPI linked derivatives...

 

 

 

S&P on 3/28 - 1569

S&P today - 1592

 

10 year yield on 3/28 - 1.825

10 year yield today - 2.51

 

Bond movements have been much more severe this quarter.  So it is not surprising to me.

[TwoCitiesCapital]

Yeah, and FFH's long duration bond portfolio that losses $500 million on a 100 bps rate rise.

 

True, but I believe these remaining long duration bonds are, more so, held to a maturity type of position unlike the much larger position of a few years back that were sold at a very large profit.  It would appear, to me anyway, that the portfolio is in a somewhat win-win situation now.  For example, if spreads widen like they are doing now then the economy is doing better and WFC, JNJ, BIR all do better and probably have alpha against the hedges.  If the economy sours, then spreads flatten back out and the losses on the hedges and bond portfolio are mitigated somewhat.  Call me naive, but what is the downside with FFH today?

 

Cheers

JEast

 

Just because they have the ability to hold to maturity doesn't mean that they will. It's their investment portfolio; if stocks, crater they would sell alot of their treasuries at a loss in hopes of picking up stocks for a large gain. Marking down the portfolio and discounting for such seems appropriate to me. Secondly, low rates have really been the only thing supporting the higher P/E multiples we've been seeing. Volatility within interest rates will result in volatility within stocks as the multiple adjust to expectations on inflation/disinflation/deflation as well as supply/demand differentials due to competitive investments now offering higher yield. 

 

Frankly, I think what we're seeing is overblown; rates will likely come back down due to the fact that they can't go back too high without shutting down the economy and/or cutting profit margins down from historic highs. Deflation is still the main threat and higher rates and deflation don't really go together unless if you're a credit concern.

[Kiltacular]

if stocks, crater they would sell alot of their treasuries at a loss in hopes of picking up stocks for a large gain.

 

I figure that if stocks crater, Fairfax will just cash in / take off their stock hedges.  But, I don't think it's likely they will significantly increase their allocation to stocks as a percentage of their portfolio.

 

What do others expect?

[Crip1]

if stocks, crater they would sell alot of their treasuries at a loss in hopes of picking up stocks for a large gain.

 

I figure that if stocks crater, Fairfax will just cash in / take off their stock hedges.  But, I don't think it's likely they will significantly increase their allocation to stocks as a percentage of their portfolio.

 

What do others expect?

 

Agreed, 100%.

 

-Crip

[BargainValueHunter]

http://www.valuewalk.com/2013/06/prem-watsa-greece/

 

Prem Watsa believes the country already reached its economic bottom. He added, “We do believe it’s now perhaps at the end of the tunnel and that its worst days are behind it.”

 

According to him, Fairfax Financial Holdings Ltd (PINK:FRFHF) (TSE:FFH) plans to increase its investment in Eurobank Properties Real Estate Investment Co. (GA:EUPRO) by €164 million ($217 million), bringing its stake in the company from 19 percent to 42 percent.

 

Watsa explained that Eurobank Properties is raising funds at the right time to take advantage of the many opportunities in Greece. He stated that the state-asset sales program in the country, which include a large real-estate portfolio, could generate significant growth from private investors within the next 5 or 10 years.

 

The stock price of Eurobank Properties Real Estate Investment Co. (GA:EUPRO) gained more than double since its lowest level in June 2012.

 

Based on data from Bloomberg, Fairfax Financial Holdings Ltd (PINK:FRFHF) (TSE:FFH) also owns a 7.7 percent stake in Sarantis SA (OTCMKTS:SRTSF), a cosmetics and household goods company, and a 5.4 percent stake Jumbo SA (OTCMKTS:JUMSF), the largest retailer of baby products in Greece.

[finetrader]

This is interesting. I was already thinking about investing let say a 5% of portfolio in a Greece ETF and doing it the Fairfax way. i.e. buy it and forget about it.

[BargainValueHunter]

More...

 

http://www.gurufocus.com/news/222601/prem-watsas-new-stock-pick-in-greece-the-first-nation-demoted-to-emerging-status

 

The specific Greek company Watsa told the Financial Post he is investing in is Eurobank Properties Real Estate Investment Co. (ATH:EUPRO).

 

Founded in 1952, Eurobank Properties’ sole objective today is to acquire and manage real estate and money market instruments. The real estate fund has a portfolio of investment properties in Greece and Southeastern Europe that it leases out.

 

The company has a €418.96 million market cap and a share price Friday of 7.05, up from a historic low of under €3 per share hit in June 2012.

 

Though just now being reported to the press, Watsa actually purchased a 14.78% stake in the company in August 2012, increasing his ownership to 19.1%. Wade Burton, vice president at Fairfax’s Hamblin Watsa, also joined the company’s Board of Directors and Investment Committee in September.

 

“It is obvious that the realization of this transaction is occurred during a crucial period for the Greek economy and shows the investor’s optimism for its future,” Eurobank Properties said in the press release.

 

At a purchase price of €4.75 per share in August, Watsa already has a gain of approximately 48% on the purchase.

 

He told the Financial Post this week that he plans to invest another $217 million into the bank to bring his ownership from 19% to 42%.