Hey, Mr. Market! Do I really have to make FFH 50% of my portfolio?

[giofranchi]

The trouble for me with holding FFH for long periods of time is that when equities get really cheap, I want to load up on them.  I don't want to be 50% invested in them at that time.  Furthermore, I want to maximize the opportunity and not sit around in JNJ.  They are limited in what they can do because they are an insurer.

 

So the very time when the market bottoms... is the time that would be most rewarding to leave them behind.  Further, if you expected the collapse to come you would be best off never owning FFH in the first place (because it too will drop).

 

I made a mistake in holding FFH and adding to it in March 2009 -- I imagined they were aggressively buying up stocks on my behalf but it didn't happen.  I realize today that my expectations were unreasonable -- they are an insurer.

 

This is a very good point!

Except for the “if you expected the collapse to come you would be best off never owning FFH in the first place (because it too will drop)” part… That is macro investing… And I never do such a thing… I am always invested in good businesses led by strong men. I just like them to be cautious, when caution is warranted, and to be aggressive, when aggressiveness is the right policy to follow.

But I understand when you say: they might never be aggressive enough for my taste…

 

giofranchi

 

[ERICOPOLY]

Ultimately I view most insurers as leveraged bond funds that attempt to get a bit extra from underwriting profits.  They (in a sense) compete against leveraged bond funds for capital investment.

 

Is that completely off the wall?

 

So it follows that if investors in leveraged bond funds (making low ROE in a low rate environment) see insurers making a lot of profit (from a hard market) they would then push money into the insurance market to drive ROE back down.

 

So I'm curious enough to ask if there is a long term relationship between ROE from leveraged bond funds and ROE from insurers.  Do leveraged bond funds tend to typically earn a given spread below what insurers earn (and the spread is there to account for the added risk)?  So in other words, will there really be a hard market due to low rates that will drive insurance ROE's back up, or will bond investors drive it back to a soft market again in a reversion to the mean ROE spread of leveraged bond funds vs leveraged insurers?

 

Eric,

I understand the comparison, but don’t agree 100%. If they were truly the same, both Mr. Buffett and Mr. Watsa wouldn’t have taken the trouble to run insurance operations, right? Instead, the difference is clear enough to me: once again I repeat that “safety” comes first. And, if you write insurance profitably, nobody can take the leverage provided by float away from you, no matter what. To paraphrase Mr. Buffett:

We are paid to hold other people’s capital. And that puts a big smile on our faces.

Even the best funds, see for instance Mr. Berkowitz in 2011, don’t enjoy such a luxury and constantly risk to disappoint their clients… In insurance you are working for yourself, not for clients: apparently, it seems a small difference, in practice I think it gives a huge advantage to insurance over leveraged funds.

 

giofranchi

 

 

I view the comparison in components.

 

You have the utility of earnings from leveraged bonds. (component #1)

You have a different risk profile with a leveraged fund vs an insurer. (component #2).  A risk premium.

Different cost of leverage (component #3)  A low rate environment brings them closer together.

And there may be more components.

 

So if you think of each (insurers and leveraged bond fund) as a sum of the value of their components, then they move directionally together by similar amount when you increase or decrease the value of the earnings from the leveraged bond component).

 

[plato1976]

Fully agree with your logic, Eric.

So, I don't understand why you loaded some FFH months ago ...

after all, if you think the market will correct, you should keep cash b/c in a down market FFH will also go down even it's hedged by itself;

and in an up market you are better off with other stocks. So in which scenario should we buy FFH ? :) :) :)

 

 

The true reason it is so hard to invest in FFH is because they constantly buy when everyone is selling and vice versa. But that is always where value is created, if you buy when everyone is selling, or protected, if you sell when everyone is buying.

Both are extremely important! The focus should be 90% of the time on the creation of value, and only 10% of the time on the protection of value, but this doesn’t mean that 10% is less important!

I think the protection of value is underrated and not studied enough even among value investors.

 

giofranchi

 

The trouble for me with holding FFH for long periods of time is that when equities get really cheap, I want to load up on them.  I don't want to be 50% invested in them at that time.  Furthermore, I want to maximize the opportunity and not sit around in JNJ.  They are limited in what they can do because they are an insurer.

 

So the very time when the market bottoms... is the time that would be most rewarding to leave them behind.  Further, if you expected the collapse to come you would be best off never owning FFH in the first place (because it too will drop).

 

I made a mistake in holding FFH and adding to it in March 2009 -- I imagined they were aggressively buying up stocks on my behalf but it didn't happen.  I realize today that my expectations were unreasonable -- they are an insurer.

[giofranchi]

after all, if you think the market will correct, you should keep cash b/c in a down market FFH will also go down even it's hedged by itself;

 

Plato,

this is macro investing, and is very dangerous: in 2008 FFH was up 30%+, while the market was down 30%+… :)

 

giofranchi

 

[plato1976]

I own some FFH

Parsad, with all due respects, I have some questions:

 

1. For the past few years the equity portfolio has not been performing as well. Seems they were captured in value traps a few times. Not sure if it's just a natural outcome of their investing style (deeply discounted low quality stocks) b/c I did not look into their detailed investment records before 2004 , maybe. Their bond trading is superb. I just worry about their equity investment a little bit. Sth like BBRY is disturbing... It's a pretty big wager (percentage of book). It's hard to understand why they want to invest such a big percentage. I understand that BBRY has some assets, but the possible outcomes of BBRY are so diversified that I am not sure if it can warrant such a big percentage. <5% maybe fine but I am far from an expert...

 

2. As for acquiring private companies - so far I saw that they acquired some low quality corps (most of them) in some so so industry. Not sure if it's the best way to go. Many ppl want them to acquire higher quality private corps...

 

all after all, I think Prem has terrific track record. And it's far too early to say his macro bet is dead IMHO. I am more concerned about point 1 and 2 above, but still, I think FFH should be in my portfolio...

 

I own FRFHF and I like Prem/Francis et.al - I even think the management is pretty shareholder friendly.

 

However I do think FRFHF don't admit their mistakes, I think they should dial down their 15% return down to 6-7%. Under promise and over deliver is better than over promise and under deliver. HWIC I think is very large now ( 100 person team or some such... ) - dont know how effective they will be...

 

 

It is also not clear what FRFHF plans for succession - if it is Prem's family taking over from him as chairman.

 

These are somewhat erroneous statements and assumptions.  Let me clarify the first glaring one:

 

HWIC is nowhere near a 100 person team.  7 principals including Prem, probably about another 6 analysts and then say 5-6 managers they have capital with (I'm guessing on that, but have some information about some managers, so consider it a calculated guess).  You then also have a couple of enterprises that will be acquiring businesses in certain areas like Fairbridge and Thomas Cook.  In total, I think you are talking about 20-25 people!

 

The next one I would like to tackle is the recommendation to reduce their ROE to 6-7%.  This is crazy!  Historically, they've done far better...closer to 24%.  With the leverage they employ, they could easily return 15% ROE by achieving a 6% return on their portfolio and keeping insurance losses to historical levels.  Like Berkshire, they are going to have a significant advantage over the next 20 years when they really start acquiring private companies, and the global reach of their insurance business becomes much more pertinent.  They will return 15% ROE long-term for the next 20 years. 

 

Lastly, succession at Fairfax is one of the least concerns for shareholders.  Succession planning at Fairfax has been in place for many years, and the people in place are probably the best they've ever had.  You have Andy Barnard overseeing all of the insurance companies...a man who achieved extraordinary results at Odyssey Re, nearly on par with Berkshire's insurance businesses.  You have a decentralized investment team where the bench was far deeper than Berkshire's 15 years ago!  It may be the best team out there today...they definitely have one of the best fixed income minds of the last 30 years running their bond portfolio.  And Prem is already delegating many duties to subordinates such as Paul Rivett and Madhaven Menon to name just a couple.  Cheers! 

[ERICOPOLY]

after all, if you think the market will correct, you should keep cash b/c in a down market FFH will also go down even it's hedged by itself;

 

Plato,

this is macro investing, and is very dangerous: in 2008 FFH was up 30%+, while the market was down 30%+… :)

 

giofranchi

 

FFH got down to roughly $210 in 2008 from over $300 in 2007 (or perhaps early 2008).  (US DOLLARS).

 

Hedged the entire time.  In fact, hedges soaring while it was plumbing the 2008 lows.

 

Everything thrown out with the bathwater. 

 

As for 2008's performance, the stock closed 2007 at $286 and finished 2008 at $313.    Total of 9.4% gain (not including dividend).  US Dollars.

 

[ERICOPOLY]

Fully agree with your logic, Eric.

So, I don't understand why you loaded some FFH months ago ...

after all, if you think the market will correct, you should keep cash b/c in a down market FFH will also go down even it's hedged by itself;

and in an up market you are better off with other stocks. So in which scenario should we buy FFH ? :) :) :)

 

I bought FFH in mostly taxable accounts because short term capital gains tax is 52% in California where I now live, and long term tax is bad too (at least 33%).  So I wanted something that wouldn't be too volatile, that would compound at a rate that would beat my cost of leverage in BAC.

 

I wound up selling it for a small gain to buy MBI.

[plato1976]

Very nice !

I am in CA also. The only stock in my taxable account with a big profit is BAC

I am thinking of holding it until my retirement, and then I can move out of CA for one year to sell it

Is it a legal way to avoid the CA state tax ?

 

Fully agree with your logic, Eric.

So, I don't understand why you loaded some FFH months ago ...

after all, if you think the market will correct, you should keep cash b/c in a down market FFH will also go down even it's hedged by itself;

and in an up market you are better off with other stocks. So in which scenario should we buy FFH ? :) :) :)

 

I bought FFH in mostly taxable accounts because short term capital gains tax is 52% in California where I now live, and long term tax is bad too (at least 33%).  So I wanted something that wouldn't be too volatile, that would compound at a rate that would beat my cost of leverage in BAC.

 

I wound up selling it for a small gain to buy MBI.

[shalab]

Thank you Sanjeev for your clarifications

 

  - I am not hoping that FRFHF reduce their book value growth, just reduce the expectation of the return on book. ( under promise over deliver )

  - I hope HWIC is small - I think some one dug out one of the ads last year where an entry level analyst would make some 80K or so working at HWIC. Reminds me of one of those things Buffett talks about "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway."

  - Management transition - I know Prem has little day to day role at HWIC now. However, the FRFHF investment thesis is about FRFHF investing - if Prem and Francis are not involved it is weaker form of its former self IMO.  If Prem is not actively involved, what guarantees FRFHF culture? Is it his family?

 

cheers!

shalab

 

[Parsad]

I own some FFH

Parsad, with all due respects, I have some questions:

 

1. For the past few years the equity portfolio has not been performing as well. Seems they were captured in value traps a few times. Not sure if it's just a natural outcome of their investing style (deeply discounted low quality stocks) b/c I did not look into their detailed investment records before 2004 , maybe. Their bond trading is superb. I just worry about their equity investment a little bit. Sth like BBRY is disturbing... It's a pretty big wager (percentage of book). It's hard to understand why they want to invest such a big percentage. I understand that BBRY has some assets, but the possible outcomes of BBRY are so diversified that I am not sure if it can warrant such a big percentage. <5% maybe fine but I am far from an expert...

 

2. As for acquiring private companies - so far I saw that they acquired some low quality corps (most of them) in some so so industry. Not sure if it's the best way to go. Many ppl want them to acquire higher quality private corps...

 

all after all, I think Prem has terrific track record. And it's far too early to say his macro bet is dead IMHO. I am more concerned about point 1 and 2 above, but still, I think FFH should be in my portfolio...

 

I own FRFHF and I like Prem/Francis et.al - I even think the management is pretty shareholder friendly.

 

However I do think FRFHF don't admit their mistakes, I think they should dial down their 15% return down to 6-7%. Under promise and over deliver is better than over promise and under deliver. HWIC I think is very large now ( 100 person team or some such... ) - dont know how effective they will be...

 

 

It is also not clear what FRFHF plans for succession - if it is Prem's family taking over from him as chairman.

 

These are somewhat erroneous statements and assumptions.  Let me clarify the first glaring one:

 

HWIC is nowhere near a 100 person team.  7 principals including Prem, probably about another 6 analysts and then say 5-6 managers they have capital with (I'm guessing on that, but have some information about some managers, so consider it a calculated guess).  You then also have a couple of enterprises that will be acquiring businesses in certain areas like Fairbridge and Thomas Cook.  In total, I think you are talking about 20-25 people!

 

The next one I would like to tackle is the recommendation to reduce their ROE to 6-7%.  This is crazy!  Historically, they've done far better...closer to 24%.  With the leverage they employ, they could easily return 15% ROE by achieving a 6% return on their portfolio and keeping insurance losses to historical levels.  Like Berkshire, they are going to have a significant advantage over the next 20 years when they really start acquiring private companies, and the global reach of their insurance business becomes much more pertinent.  They will return 15% ROE long-term for the next 20 years. 

 

Lastly, succession at Fairfax is one of the least concerns for shareholders.  Succession planning at Fairfax has been in place for many years, and the people in place are probably the best they've ever had.  You have Andy Barnard overseeing all of the insurance companies...a man who achieved extraordinary results at Odyssey Re, nearly on par with Berkshire's insurance businesses.  You have a decentralized investment team where the bench was far deeper than Berkshire's 15 years ago!  It may be the best team out there today...they definitely have one of the best fixed income minds of the last 30 years running their bond portfolio.  And Prem is already delegating many duties to subordinates such as Paul Rivett and Madhaven Menon to name just a couple.  Cheers! 

 

Hi Plato,

 

In response to your questions:

 

1)  In general, HWIC are hard-core Ben Graham students.  They don't really like to pay up and so often they look at beaten down, distressed investments...cigar butts and all.  While that may not be Munger & Buffett, it has worked exceedingly well for them, as well as the likes of Walter Schloss and Irving Kahn, two other Graham students.  BBRY makes up less than 5% of investment capital...it was a business that deteriorated faster than they thought, so they averaged down to save it.  It's far from a zero and we'll have to wait and see what the final outcome is.

 

2)  They are testing the waters in and around them when it comes to buying whole non-insurance businesses right now.  Get it right on the small scale and then expand.  It's why they also created a vehicle like Fairbridge and put local knowledge in charge of buying businesses.  You will probably see a couple more of these vehicles.  I think it's far too early to say how they will do in this area, but I bet they do perfectly fine.  They've bought portions of many businesses over time, and the extension to whole non-insurance businesses won't be much different. 

 

Cheers!

[ERICOPOLY]

Very nice !

I am in CA also. The only stock in my taxable account with a big profit is BAC

I am thinking of holding it until my retirement, and then I can move out of CA for one year to sell it

Is it a legal way to avoid the CA state tax ?

 

I'm also planning on kicking the can (taxes on BAC) down the road for a long time, then realizing the gains as a resident of another place.  Until then...

 

I will buy this house I currently rent with cash.  I will get that cash using portfolio margin borrowing power.  It will be hedged with a BAC put.  I will effectively have spend the pre-tax value of the BAC shares on the house.  The ongoing earnings that BAC generates will effectively reimburse me for the cost of the BAC puts.

 

This is my plan to spend the money without paying taxes.

[LC]

Very nice !

I am in CA also. The only stock in my taxable account with a big profit is BAC

I am thinking of holding it until my retirement, and then I can move out of CA for one year to sell it

Is it a legal way to avoid the CA state tax ?

 

I'm also planning on kicking the can (taxes on BAC) down the road for a long time, then realizing the gains as a resident of another place.  Until then...

 

I will buy this house I currently rent with cash.  I will get that cash using portfolio margin borrowing power.  It will be hedged with a BAC put.  I will effectively have spend the pre-tax value of the BAC shares on the house.  The ongoing earnings that BAC generates will effectively reimburse me for the cost of the BAC puts.

 

This is my plan to spend the money without paying taxes.

Eric, I've got to say, you're just excellent. you just gave me an idea to reduce the interest rates on my student loans, maximize the tax benefits of them, pay for my MBA and spend my investment returns to pay for my living expenses. Kudos to you, and thanks!

[Uccmal]

Hi Sanjeev,

 

What percentage of your funds is in FFH right now?

 

Al

[Uccmal]

Graham/Schloss style investing doesn't work so well with the investment amounts FFh is using.

 

This is in a big part why Buffett/Munger moved to the wholly owned cash flow machine GARP investing.  Buffett himself has said he could generate 50 % returns if he was dealing in lower millions. 

 

The problem is that the companies you are getting for so cheap are huge and really do have serious problems.  TIG, C&F, ABX, and RIm, and Canwest Global, are all examples of this.  I hold more hope for BKIR, Greek property, etc. 

 

Buffett purchases business that push cash onto his balance sheet from the moment the deal closes.  The 1.2 Billion FFH has spent on RIMM, and ABX could have been spent taking H&R Reit private for example, Russell Metals, or Mullen Transport,  Immediately you would get your 16% returns, adjusted for the insurance leverage used, onto your balance sheet. 

 

 

[ERICOPOLY]

Very nice !

I am in CA also. The only stock in my taxable account with a big profit is BAC

I am thinking of holding it until my retirement, and then I can move out of CA for one year to sell it

Is it a legal way to avoid the CA state tax ?

 

I'm also planning on kicking the can (taxes on BAC) down the road for a long time, then realizing the gains as a resident of another place.  Until then...

 

I will buy this house I currently rent with cash.  I will get that cash using portfolio margin borrowing power.  It will be hedged with a BAC put.  I will effectively have spend the pre-tax value of the BAC shares on the house.  The ongoing earnings that BAC generates will effectively reimburse me for the cost of the BAC puts.

 

This is my plan to spend the money without paying taxes.

Eric, I've got to say, you're just excellent. you just gave me an idea to reduce the interest rates on my student loans, maximize the tax benefits of them, pay for my MBA and spend my investment returns to pay for my living expenses. Kudos to you, and thanks!

 

Glad to share the idea.

 

It's not clear to me how deductible the interest is.  My understanding is margin interest is only deductible if you borrowed the money for investment purposes.  Thus, if you simply withdraw $10,000 and use it to pay off your student loan the next day the tax auditor may disallow the interest on the 10,000 loan even though it's margin interest.  In my own case, I'm not sure if it is tax deductible or not for my primary home which is probably not an "investment", but rather some form of personal non-business consumption.

 

 

[Parsad]

Hi Sanjeev,

 

What percentage of your funds is in FFH right now?

 

Al

 

5%.  I have a lot of cash.  Even Fairfax will go down in a dramatic correction.

 

Graham/Schloss style investing doesn't work so well with the investment amounts FFh is using.

 

This is in a big part why Buffett/Munger moved to the wholly owned cash flow machine GARP investing.  Buffett himself has said he could generate 50 % returns if he was dealing in lower millions. 

 

The problem is that the companies you are getting for so cheap are huge and really do have serious problems.  TIG, C&F, ABX, and RIm, and Canwest Global, are all examples of this.  I hold more hope for BKIR, Greek property, etc. 

 

Buffett purchases business that push cash onto his balance sheet from the moment the deal closes.  The 1.2 Billion FFH has spent on RIMM, and ABX could have been spent taking H&R Reit private for example, Russell Metals, or Mullen Transport,  Immediately you would get your 16% returns, adjusted for the insurance leverage used, onto your balance sheet. 

 

 

 

I don't disagree with you.  There have been plenty of investments that weren't so great.  Then there have been plenty that have been terrific.  There are many businesses they could acquire that are of quality. 

 

A great one is right here in Vancouver, and one they could buy...Whitewater West...the largest maker of commercial waterslides around the world.  Alnesh's sister used to be their transport coordinator until she was in a very bad car accident last year.  A great little company that is totally dominant in what they do, right here in Vancouver.  In fact, the Vancouver Sun had a terrific article on them last weekend.  Cheers!

[giofranchi]

after all, if you think the market will correct, you should keep cash b/c in a down market FFH will also go down even it's hedged by itself;

 

Plato,

this is macro investing, and is very dangerous: in 2008 FFH was up 30%+, while the market was down 30%+… :)

 

giofranchi

 

FFH got down to roughly $210 in 2008 from over $300 in 2007 (or perhaps early 2008).  (US DOLLARS).

 

Hedged the entire time.  In fact, hedges soaring while it was plumbing the 2008 lows.

 

Everything thrown out with the bathwater. 

 

As for 2008's performance, the stock closed 2007 at $286 and finished 2008 at $313.    Total of 9.4% gain (not including dividend).  US Dollars.

 

As you can see on its financial track record web page:

 

http://www.fairfax.ca/Corporate/Financial-Track-Record/default.aspx

 

In Canadian dollars FFH stock price closed 2007 at 287.00 and 2008 at 390.00: +35.89%.

The fact is the USD surged against any other currency during 2008, CND included. But, even if you use USD, +9.4% plus the dividends is better than cash, right?

 

Anyway, traders might be interested in these things… businessmen seldom are… The only thing a businessman should be fixed upon today follows:

The last time FFH looked so foolish was in 2004-2005-2006, then in 2007-2008-2009 BVPS went up a cumulative +146%.

 

You want to buy at the bottom, sell at the top, etc… Well, I am sure YOU can do that, so good for you! :)

 

giofranchi

 

[giofranchi]

For the past few years the equity portfolio has not been performing as well. Seems they were captured in value traps a few times.

 

If you don’t count equity hedges, in 2012 FFH gained $1,118.7 million in equity and equity-related investments, out of a portfolio of preferred stock ($605.1), common stocks ($4,399.1), and Investments in associates ($1,355.3) of: 605.1 + 4,399.1 + 1,355.3 = $6,359.5 million. That’s a +17.6% return, which beats the S&P500 even in a very good year for the market!

Then, for the first quarter 2013, if you don’t count equity hedges, FFH gained $698.4 million in equity and equity related investments, out of a portfolio of $6,712.2. That’s a +10.4% return in 3 months only. While the S&P500 achieved a +10.6%... But, of course, you don’t want to chase the index, when it is in a bubble, right?! ;D

 

Sth like BBRY is disturbing... It's a pretty big wager (percentage of book). It's hard to understand why they want to invest such a big percentage.

 

FFH purchased 51,855 shares of BBRY at an average price of $17, for a total investment of $881.5 million. At March 31, 2013 its portfolio of investments was worth $24.5 billion: the investment made in BBRY is just 3.6% of AUM.

 

giofranchi

[giofranchi]

Graham/Schloss style investing doesn't work so well with the investment amounts FFh is using.

 

This is in a big part why Buffett/Munger moved to the wholly owned cash flow machine GARP investing.  Buffett himself has said he could generate 50 % returns if he was dealing in lower millions. 

 

The problem is that the companies you are getting for so cheap are huge and really do have serious problems.  TIG, C&F, ABX, and RIm, and Canwest Global, are all examples of this.  I hold more hope for BKIR, Greek property, etc. 

 

Buffett purchases business that push cash onto his balance sheet from the moment the deal closes.  The 1.2 Billion FFH has spent on RIMM, and ABX could have been spent taking H&R Reit private for example, Russell Metals, or Mullen Transport,  Immediately you would get your 16% returns, adjusted for the insurance leverage used, onto your balance sheet.

 

Al,

I am sure they will go that way. But not in a hurry! Never in a hurry, otherwise you will make mistakes. And we all know the game is not how many great things you do, but how many errors you are able to avoid…

For now, as I have shown, equity investing if performing very satisfactorily… of course, if you don’t count equity hedges! :)

 

giofranchi

 

[giofranchi]

I have just reread this article from 2010, and I have found it to be more up-to-date than ever. :)

 

giofranchi

Be_like_Prem.pdf

[Partner24]

"Even Fairfax will go down in a dramatic correction".

 

The fact is nobody can really predict that for sure.

 

What will be mostly important is not what the scoreboard says, but what truly happens on the baseball field.

[ERICOPOLY]

"Even Fairfax will go down in a dramatic correction".

 

The fact is nobody can really predict that for sure.

 

What will be mostly important is not what the scoreboard says, but what truly happens on the baseball field.

 

Well, nobody is certain that a party will take place if you drop off a keg of beer at a fraternity house on a Friday.

 

I believe there are others who think like me out there... meaning they will sell FFH to take full advantage of the market correction when it comes.  You increase your buying power of cheap equities when you sell Fairfax.

[Uccmal]

Partner, I disagree but it is purely conjecture.  In March 2009 FFh dropped 100 per share in a couple of weeks.  They get caught in margin raising sales that have nothing to do with them.  In fact they had just finished liquifying the last of the CDS and were deploying in those mentioned below. 

 

Gio, I agree, not in a hurry.  The examples I provided are companies where FFH is or has been involved.  They helped stabilize Russell and it has become a powerhouse.  They helped finance First Canadian Place in Calgary for H&R when HR couldn't get liquidity anywhere else.  And I believe they are still insiders with Mullen via a 100 m pref. holding.  Would have to check though. 

 

A.

[Uccmal]

FWIW, We probably wont have to wait too long to find out.  I just bought some puts again on my BAC position.  I expect the banks will disappoint next week, regardless if JPM and WFC set new earnings records.

[ERICOPOLY]

I left my comparison to 2008 only, because in early 2009 FFH's equity position wasn't hedged.  A good deal of that March 2009 correction in FFH's stock price was just a reflection of their book value dropping.