FFH (FRFHF) ownership poll

[Uccmal]

You are only as good as your last game in most circumstances.  Prem is getting kicked in the gut at the moment by the DIY'ers, since they look like geniuses over the last 4 years.  Many who did well over the last ten years on here, would not have done so, if it weren't for Prem's prognostications and their significant leveraged positions in Fairfax.  Now they've done great over 5 years, and it's Fairfax missed the boat on this one! 

 

I understand the frustration, but at the same time, how many have done as well over 25 years?  That's right...look at all those hands drop! 

 

If Europe did blow up, as it very well could have, and still may at some point, everyone would be talking about how smart Prem is.  Instead, they are talking about how stupid he is for having hedges. 

 

Even for us, we only had about 5% in Fairfax in the last couple of years, but as much as I would bet on myself...I would never bet against him! 

 

The degrees by which investors are correct or incorrect, is far thinner than one might expect.  BAC could have exploded...MBIA could have exploded....FIAT could have gone bust if not for intervention...many other winners that worked out did so only by the grace of God...that grace being fiat currencies and a massive attempt to influence interest rates.

 

So Prem is a loser for the last 4-5 years...big whoop...they called him that 10 years ago too!  Cheers!

 

Could the same be said of Fairfax? That Fairfax worked out only by the grace of God?

 

Yes of course!  That's why it's not really fair to call them a loser or winner.  If investment managers make it 25 plus years, they deserve a little respect for not blowing themselves up well before that!  Cheers!

 

Of course, in 15 years when I will then need 40 years to prove myself.  ;)

 

Sanj, It has nothing to do with respecting Prem or not.  He built a massive and successful company from scratch, using skill, honesty, and savvy.  That is incredible in itself. 

 

That does not mean I have to invest with him right now.  Your remarks about the difference being a few right calls that fell on the margins applies to both us DIYers, and FFH.  Had BAC collapsed, those of us who invested at $5 or $7, would have moved onto something else.  I took a major hit by betting on RIM, my biggest all time loser, incidentally before FFh was really involved.  I got out and moved on. 

 

The same of course could be applied to the leveraged returns on FFh.  Had that blown apart this conversation wouldn't be happening because all of us would have gone down, including FFH.  The board would still be called Berkshire Hathaway Shareholders.  But that is not the way it unfolded. 

 

Has Prem suddenly lost his marbles?  I doubt it.  Holders of FFh today should do reasonably well over the long term, and may do exceptionally well in a major downturn.  But from my perspective, today, FFh is not the best place to have my capital.  On a look forward basis I figure there will be sub aspirational returns for awhile yet.

 

I, for one, am very cognizant of the possibility that it has all been luck, and it could just turn out that the EMH is nearly always right.  Put another way, could you or I suddenly become crappy investors?  I worry about this, and maybe that is part of the key.  It certainly works for Seth Klarman.  Prem, Buffett, and others have shown me the path to developing a framework that works for me, until today, at least. 

 

 

 

 

[fareastwarriors]

I hope to enter FFH when the price is a bit cheaper. Couple of years ago, before this board, I never even heard of Fairfax.

[Guest valueInv]

I'll take my own experience as a shareholder. I've mostly bought my shares in the 2003-2006 period and kept them. Since 2003-2006, it's been good overall, but not great. I've also been a MKL shareholder from quite some time. They reach for the silver medal and that perspective served us well. The issue with FFH is size and their cigar butt habit. Cigar butt and turnaround investing is great when you have a small portfolio size...it's tough when you get bigger.

 

This is what I mean. Most people are very good at succeeding in a limited set of scenarios and don't do well in others. When the situation changes on them, they don't do as well. Even though they are just as capable and smart as they always were.

[StubbleJumper]

You are only as good as your last game in most circumstances.  Prem is getting kicked in the gut at the moment by the DIY'ers, since they look like geniuses over the last 4 years.  Many who did well over the last ten years on here, would not have done so, if it weren't for Prem's prognostications and their significant leveraged positions in Fairfax.  Now they've done great over 5 years, and it's Fairfax missed the boat on this one! 

 

I understand the frustration, but at the same time, how many have done as well over 25 years?  That's right...look at all those hands drop! 

 

If Europe did blow up, as it very well could have, and still may at some point, everyone would be talking about how smart Prem is.  Instead, they are talking about how stupid he is for having hedges. 

 

Even for us, we only had about 5% in Fairfax in the last couple of years, but as much as I would bet on myself...I would never bet against him! 

 

The degrees by which investors are correct or incorrect, is far thinner than one might expect.  BAC could have exploded...MBIA could have exploded....FIAT could have gone bust if not for intervention...many other winners that worked out did so only by the grace of God...that grace being fiat currencies and a massive attempt to influence interest rates.

 

So Prem is a loser for the last 4-5 years...big whoop...they called him that 10 years ago too!  Cheers!

 

 

Sanj,

 

I have been a member of this board and your previous board for more than 10 years.  Rarely have I disagreed with your viewpoint in any material way, but this time I must.

 

Prem's past 25 years have been fantastic.  But I don't make money based on the past, and nor does Prem.  The past 25 months have been the problem.  I do not have a problem with the hedges, because those were at least well thought out and constituted (excessive?) risk management initiatives.

 

But RIM?  Nobody had a problem when FFH threw a few bucks into King Pharma.  Nobody had a problem when FFH threw a few bucks into Watson Pharma.  And nobody had a big problem with having thrown a few bucks into the Brick or the crappy restaurant stocks.  Those were small bets on dubious opportunities.  But when FFH starts putting meaningful amounts of capital into something, then yes, long-time shareholders get a bit concerned.  When he put big bucks into Abitibi we swallowed hard and crossed our fingers...and same when he put big bucks into H&R.

 

But what he's done with RIM has crossed the line.  The cumulative investment goes well beyond "big bucks" and is now 15 or 20 percent of market cap.  If it had been JNJ or WFC nobody would have even blinked.  We would have mused about whether that sort of large cap would offer a reasonable return, but there would be no bellyaching whatsoever.  But RIM offers crappy products and has a tertiary market position in one of the most competitive, rapidly changing industries.  There is a strong probability that he has effectively flushed 10 percent of FFH's market cap down the toilet, to say nothing of the personal time that he has wasted on RIM through his board membership and the buyout proposal that he initiated.

 

Unfortunately, this is not an asymmetrical bet; you cannot just look at RIM like the credit default swaps or like H&R and say, it's a dhando type of investment.  RIM is entirely different.  In this case, it's about even odds about whether FFH doubles its money or gets wiped out.  Heads I win, tails I don't lose much?  Not on your life!

 

When he makes such a drastic departure on position sizing and on risk of a permanent loss of capital, it should hardly be surprising that some of us think that he's fallen off the rails.

 

And that's my first major philosophical disagreement with you in more than 10 years.

 

 

SJ

[Rabbitisrich]

In addition to StubbleJumper's comments, it would be great to hear how the Fairfax team have updated their views on monetary policy given outcomes in Canada, Australia, and, particularly, Japan.

[Parsad]

You are only as good as your last game in most circumstances.  Prem is getting kicked in the gut at the moment by the DIY'ers, since they look like geniuses over the last 4 years.  Many who did well over the last ten years on here, would not have done so, if it weren't for Prem's prognostications and their significant leveraged positions in Fairfax.  Now they've done great over 5 years, and it's Fairfax missed the boat on this one! 

 

I understand the frustration, but at the same time, how many have done as well over 25 years?  That's right...look at all those hands drop! 

 

If Europe did blow up, as it very well could have, and still may at some point, everyone would be talking about how smart Prem is.  Instead, they are talking about how stupid he is for having hedges. 

 

Even for us, we only had about 5% in Fairfax in the last couple of years, but as much as I would bet on myself...I would never bet against him! 

 

The degrees by which investors are correct or incorrect, is far thinner than one might expect.  BAC could have exploded...MBIA could have exploded....FIAT could have gone bust if not for intervention...many other winners that worked out did so only by the grace of God...that grace being fiat currencies and a massive attempt to influence interest rates.

 

So Prem is a loser for the last 4-5 years...big whoop...they called him that 10 years ago too!  Cheers!

 

Could the same be said of Fairfax? That Fairfax worked out only by the grace of God?

 

Yes of course!  That's why it's not really fair to call them a loser or winner.  If investment managers make it 25 plus years, they deserve a little respect for not blowing themselves up well before that!  Cheers!

 

Of course, in 15 years when I will then need 40 years to prove myself.  ;)

 

Sanj, It has nothing to do with respecting Prem or not.  He built a massive and successful company from scratch, using skill, honesty, and savvy.  That is incredible in itself. 

 

That does not mean I have to invest with him right now.  Your remarks about the difference being a few right calls that fell on the margins applies to both us DIYers, and FFH.  Had BAC collapsed, those of us who invested at $5 or $7, would have moved onto something else.  I took a major hit by betting on RIM, my biggest all time loser, incidentally before FFh was really involved.  I got out and moved on. 

 

The same of course could be applied to the leveraged returns on FFh.  Had that blown apart this conversation wouldn't be happening because all of us would have gone down, including FFH.  The board would still be called Berkshire Hathaway Shareholders.  But that is not the way it unfolded. 

 

Has Prem suddenly lost his marbles?  I doubt it.  Holders of FFh today should do reasonably well over the long term, and may do exceptionally well in a major downturn.  But from my perspective, today, FFh is not the best place to have my capital.  On a look forward basis I figure there will be sub aspirational returns for awhile yet.

 

I, for one, am very cognizant of the possibility that it has all been luck, and it could just turn out that the EMH is nearly always right.  Put another way, could you or I suddenly become crappy investors?  I worry about this, and maybe that is part of the key.  It certainly works for Seth Klarman.  Prem, Buffett, and others have shown me the path to developing a framework that works for me, until today, at least.

 

Hi Al,

 

I wasn't saying that it was luck...be it you, me or Prem.  Just that the fine line between a successful investment and failure is pretty thin.  Alot of things have to go right, especially for value investors, because many of the investments are distressed turnaround situations.  I think the main point was that 5 years is a lifetime to the average investor...while it is really just a blink of an eye in terms of value investing, where things aren't necessarily won in years, but sometimes takes a decade to see the success.

 

And of course, it also goes back to what the investor pays for the investments.  Anyone who paid $600 back in 1998, will be kicking themselves for another few years.  Fairfax isn't the greatest investment at any price, but neither is Berkshire...nor Apple for those (perhaps singular would be more appropriate) who think so.  Cheers! 

[Parsad]

You are only as good as your last game in most circumstances.  Prem is getting kicked in the gut at the moment by the DIY'ers, since they look like geniuses over the last 4 years.  Many who did well over the last ten years on here, would not have done so, if it weren't for Prem's prognostications and their significant leveraged positions in Fairfax.  Now they've done great over 5 years, and it's Fairfax missed the boat on this one! 

 

I understand the frustration, but at the same time, how many have done as well over 25 years?  That's right...look at all those hands drop! 

 

If Europe did blow up, as it very well could have, and still may at some point, everyone would be talking about how smart Prem is.  Instead, they are talking about how stupid he is for having hedges. 

 

Even for us, we only had about 5% in Fairfax in the last couple of years, but as much as I would bet on myself...I would never bet against him! 

 

The degrees by which investors are correct or incorrect, is far thinner than one might expect.  BAC could have exploded...MBIA could have exploded....FIAT could have gone bust if not for intervention...many other winners that worked out did so only by the grace of God...that grace being fiat currencies and a massive attempt to influence interest rates.

 

So Prem is a loser for the last 4-5 years...big whoop...they called him that 10 years ago too!  Cheers!

 

 

Sanj,

 

I have been a member of this board and your previous board for more than 10 years.  Rarely have I disagreed with your viewpoint in any material way, but this time I must.

 

Prem's past 25 years have been fantastic.  But I don't make money based on the past, and nor does Prem.  The past 25 months have been the problem.  I do not have a problem with the hedges, because those were at least well thought out and constituted (excessive?) risk management initiatives.

 

But RIM?  Nobody had a problem when FFH threw a few bucks into King Pharma.  Nobody had a problem when FFH threw a few bucks into Watson Pharma.  And nobody had a big problem with having thrown a few bucks into the Brick or the crappy restaurant stocks.  Those were small bets on dubious opportunities.  But when FFH starts putting meaningful amounts of capital into something, then yes, long-time shareholders get a bit concerned.  When he put big bucks into Abitibi we swallowed hard and crossed our fingers...and same when he put big bucks into H&R.

 

But what he's done with RIM has crossed the line.  The cumulative investment goes well beyond "big bucks" and is now 15 or 20 percent of market cap.  If it had been JNJ or WFC nobody would have even blinked.  We would have mused about whether that sort of large cap would offer a reasonable return, but there would be no bellyaching whatsoever.  But RIM offers crappy products and has a tertiary market position in one of the most competitive, rapidly changing industries.  There is a strong probability that he has effectively flushed 10 percent of FFH's market cap down the toilet, to say nothing of the personal time that he has wasted on RIM through his board membership and the buyout proposal that he initiated.

 

Unfortunately, this is not an asymmetrical bet; you cannot just look at RIM like the credit default swaps or like H&R and say, it's a dhando type of investment.  RIM is entirely different.  In this case, it's about even odds about whether FFH doubles its money or gets wiped out.  Heads I win, tails I don't lose much?  Not on your life!

 

When he makes such a drastic departure on position sizing and on risk of a permanent loss of capital, it should hardly be surprising that some of us think that he's fallen off the rails.

 

And that's my first major philosophical disagreement with you in more than 10 years.

 

 

SJ

 

Stubble, with every investment you pointed out, he's had an equally successful investment.  Everybody is talking about the size of RIM, when the Bank of Ireland investment is nearly as big.  Everyone talks about Abitibi, but no one talks about Resolute.  Everyone talks about Level 3, but they've pretty much gotten all of their money and then some out of Level 3.

 

My point and opinion, is the same one I give to investors of any manager, even the ones I don't like...let them work!  You have a chance to ask them anything you want once a year, and they are one of the most accessible.  Just let them work! 

 

Screwups happen to the best of them.  They screwed up with TIG and C&F, but came back stronger.  They may have screwed up with RIM, but let them work and prove that they know what they are doing.  And this advice applies in particular to those invested in Fairfax, not those that DIY and aren't invested in Fairfax...but those guys can shut up a bit too and just see what happens. 

 

A couple of years ago, people were second-guessing Berkowitz, now everyone is coat-tailing.  7 years ago investors were ripping into Mohnish's 70% drop, but now it's hey Dhandho, dhandho everyone...play the bhangra music and coat-tail Pabrai!  These waves of love-hate come by alot.  Once in a while they are right about the manager, but more often than not, they are wrong and the manager hasn't suddenly become an idiot. 

 

One of my other favorite dogged managers right now is Tim McElvaine.  I had lunch with him today.  The size of his fund is significantly smaller than in the past, since investors always judge their managers by what have you done for me lately.  Yet, he's one of the smartest, most ethical managers I know.  Without a hesitation, not even a temporary moment to second guess, I would have my family move all of our assets over to him to invest if something happened to me.  Yet many of you out there don't get that!  Francis too...a couple of years ago people were saying the same things about him as they were saying about Berkowitz.  Well, he's kicked ass in his funds since, not unlike Bruce.  My family knows, everything goes to these two to manage if I'm not around.  And they've heard it from me over and over...no matter what happens, whether the fund is up dramatically or down dramatically, don't do a God-damn thing.  JUST LET THEM WORK!  Cheers!

[wisdom]

Parsad what you are saying is too sensible. Human nature does not allow for that.  :)

[Rabbitisrich]

Maybe the lesson is that calling a manager smart or stupid isn't helpful. Instead of searching for some romantic notion of skill, like a residual that keeps popping up, just allow for people to demonstrate outperformance in some tasks, and lesser performance in others. What one person views as complaining from the sidelines, another person might see as part of the process of differentiating personal investment styles from respected figures.

[Guest Dazel]

Prem will have his day again...the Canadian market has not figured out his bet on the U.S dollar...it is a bigger win then the total Blackberry bet and it is going on noticed....The hedges have been a disaster but they will likely work somewhat this year...we hope the stock gets clobbered!

We have been buying...

 

Dazel

[Guest Dazel]

 

Sanjeev,

 

Tim McElvaine is an outstanding investor...He too will have his day again.

 

Dazel.

[Partner24]

Sanjeev, who is not letting them work? They can take all the decisions they want, we don't phone call them often, they have our votes...and Prem even has multiple voting shares and nobody complains about that. So, just as you said, we let them work! They can can draw their own paints and that is exactly what they have done lately.

 

When you've been a consistent and long term shareholder of a company and things have been intrinsicaly so so for a while, you want to know why. There is no hate in that. If you have a girlfriend, you know that some times will be better than others. As investing and in a couple, when things go so so...they are some that fly to other flowers and some who stay, but try to understand and communicate their insatisfactions.

 

I'm in the second category. I have absolutely no doubt about that. I know the lessons about long term investing and low portfolio turnover values. I have a 10% or so portfolio turnover rate each year. Prem hopes to have lower shareholders turnover. He wrote that directly in it's latest shareholder's letter. Why Berkshire had a lower turnover shareholders rates than FFH historicaly? Both Ceo's are candid, both believe in a decentralized business model, but had long term financial success (but Berkhire had a more stable pace), both are friendly, etc. So part of the answer is probably there. No big macro investing, mostly no cigar butts, no big hedges, mostly no turnarounds situations. Simple, stable and easy to understand and yet efficient business model. I guess that helps to keep the BRK shares turnover rate lower but that's just an hypothesis.

 

So the topic here is what is your own portfolio percentage in FFH? I'm in the upper minority here and if I add that this has been fairly constant over the last decade, I guess that get me even in a smaller minority, because some said they get in and out. So, can I sometimes wonder what have been right and wrong with FFH on a internet investing forum and ALSO fully let Prem and team do what their want in their own fashion?

 

Absolutely.

 

I feel no shame at all with the reflexions. I even think that some reflexions can be very constructive and Prem and teams can still do exactly what they want just like they were yesterday and they will tomorrow and I'll keep my shares.

 

Cheers!

 

 

 

[Partner24]

Regarding the FFH business model, I know the thing is far more lumpy and I can live well with that IF it makes a difference over the long term. So the plan is to keep the shares for some time and see if the FFH plan they had for years now will reward our patience, tolerance to the lumpy things and long term view. That's what I wish both with my words and my wallet.

 

Cheers!

[gary17]

Sanjeev

So you have no plan to ask your family to buy FFH - all in - if something were to happen? (But I'm sure nothing will happen! )

[plato1976]

no offense here, but I don't think Tim's long term record is good enough

I really don't mind if the past 3 is good

But really his track record in overall didn't convince me he is a star fund manager

 

btw: I do enjoy his letters and some interview

 

 

Sanjeev,

 

Tim McElvaine is an outstanding investor...He too will have his day again.

 

Dazel.

[giofranchi]

Reading your posts, I am getting more and more convinced about one simple truth: to stay with Mr. Watsa, anyone must share at least some of Mr. Watsa’s temperament. And when do you really show your temperament? Well, when things are not going well, of course! In the Altius thread FFHWatcher yesterday wrote:

There is no way that the Prem’s, Warren’s, etc. of the world think like the people on this thread are thinking and writing. Just no way.

I disagreed with him on that thread, for the simple reason I think Dazel is one of the very few posters on the board, who truly thinks like the Prems and the Warrens of the world! But, if you instead apply FFHWatcher's sentence to this thread, it would be right on spot! And what characterizes Mr. Watsa’s temperament most of all is an iron will.

I am not saying you won't make money. Because all of you most probably will. I have always said the board is full of great investors. And I think it is true! So go on! Make a lot of money! I would just suggest that you leave FFH alone… don’t ever bet against its long-term prospects… don’t ever bet against an iron will… because that’s a bet you will lose.

 

Gio

 

[Guest valueInv]

You are only as good as your last game in most circumstances.  Prem is getting kicked in the gut at the moment by the DIY'ers, since they look like geniuses over the last 4 years.  Many who did well over the last ten years on here, would not have done so, if it weren't for Prem's prognostications and their significant leveraged positions in Fairfax.  Now they've done great over 5 years, and it's Fairfax missed the boat on this one! 

 

I understand the frustration, but at the same time, how many have done as well over 25 years?  That's right...look at all those hands drop! 

 

If Europe did blow up, as it very well could have, and still may at some point, everyone would be talking about how smart Prem is.  Instead, they are talking about how stupid he is for having hedges. 

 

Even for us, we only had about 5% in Fairfax in the last couple of years, but as much as I would bet on myself...I would never bet against him! 

 

The degrees by which investors are correct or incorrect, is far thinner than one might expect.  BAC could have exploded...MBIA could have exploded....FIAT could have gone bust if not for intervention...many other winners that worked out did so only by the grace of God...that grace being fiat currencies and a massive attempt to influence interest rates.

 

So Prem is a loser for the last 4-5 years...big whoop...they called him that 10 years ago too!  Cheers!

 

 

Sanj,

 

I have been a member of this board and your previous board for more than 10 years.  Rarely have I disagreed with your viewpoint in any material way, but this time I must.

 

Prem's past 25 years have been fantastic.  But I don't make money based on the past, and nor does Prem.  The past 25 months have been the problem.  I do not have a problem with the hedges, because those were at least well thought out and constituted (excessive?) risk management initiatives.

 

But RIM?  Nobody had a problem when FFH threw a few bucks into King Pharma.  Nobody had a problem when FFH threw a few bucks into Watson Pharma.  And nobody had a big problem with having thrown a few bucks into the Brick or the crappy restaurant stocks.  Those were small bets on dubious opportunities.  But when FFH starts putting meaningful amounts of capital into something, then yes, long-time shareholders get a bit concerned.  When he put big bucks into Abitibi we swallowed hard and crossed our fingers...and same when he put big bucks into H&R.

 

But what he's done with RIM has crossed the line.  The cumulative investment goes well beyond "big bucks" and is now 15 or 20 percent of market cap.  If it had been JNJ or WFC nobody would have even blinked.  We would have mused about whether that sort of large cap would offer a reasonable return, but there would be no bellyaching whatsoever.  But RIM offers crappy products and has a tertiary market position in one of the most competitive, rapidly changing industries.  There is a strong probability that he has effectively flushed 10 percent of FFH's market cap down the toilet, to say nothing of the personal time that he has wasted on RIM through his board membership and the buyout proposal that he initiated.

 

Unfortunately, this is not an asymmetrical bet; you cannot just look at RIM like the credit default swaps or like H&R and say, it's a dhando type of investment.  RIM is entirely different.  In this case, it's about even odds about whether FFH doubles its money or gets wiped out.  Heads I win, tails I don't lose much?  Not on your life!

 

When he makes such a drastic departure on position sizing and on risk of a permanent loss of capital, it should hardly be surprising that some of us think that he's fallen off the rails.

 

And that's my first major philosophical disagreement with you in more than 10 years.

 

 

SJ

 

Stubble, with every investment you pointed out, he's had an equally successful investment.  Everybody is talking about the size of RIM, when the Bank of Ireland investment is nearly as big.  Everyone talks about Abitibi, but no one talks about Resolute.  Everyone talks about Level 3, but they've pretty much gotten all of their money and then some out of Level 3.

 

My point and opinion, is the same one I give to investors of any manager, even the ones I don't like...let them work!  You have a chance to ask them anything you want once a year, and they are one of the most accessible.  Just let them work! 

 

Screwups happen to the best of them.  They screwed up with TIG and C&F, but came back stronger.  They may have screwed up with RIM, but let them work and prove that they know what they are doing.  And this advice applies in particular to those invested in Fairfax, not those that DIY and aren't invested in Fairfax...but those guys can shut up a bit too and just see what happens. 

 

A couple of years ago, people were second-guessing Berkowitz, now everyone is coat-tailing.  7 years ago investors were ripping into Mohnish's 70% drop, but now it's hey Dhandho, dhandho everyone...play the bhangra music and coat-tail Pabrai!  These waves of love-hate come by alot.  Once in a while they are right about the manager, but more often than not, they are wrong and the manager hasn't suddenly become an idiot. 

 

One of my other favorite dogged managers right now is Tim McElvaine.  I had lunch with him today.  The size of his fund is significantly smaller than in the past, since investors always judge their managers by what have you done for me lately.  Yet, he's one of the smartest, most ethical managers I know.  Without a hesitation, not even a temporary moment to second guess, I would have my family move all of our assets over to him to invest if something happened to me.  Yet many of you out there don't get that!  Francis too...a couple of years ago people were saying the same things about him as they were saying about Berkowitz.  Well, he's kicked ass in his funds since, not unlike Bruce.  My family knows, everything goes to these two to manage if I'm not around.  And they've heard it from me over and over...no matter what happens, whether the fund is up dramatically or down dramatically, don't do a God-damn thing.  JUST LET THEM WORK!  Cheers!

 

And that doesn't apply to Tim Cook?

[Parsad]

Sanjeev

So you have no plan to ask your family to buy FFH - all in - if something were to happen? (But I'm sure nothing will happen! )

 

No, because they would not be able to analyze if the purchase price was at intrinsic value or less.  What if Fairfax was trading at 3 times book if something happened to me?  My family also already knows not to sell any of the FFH we already own if they can help it and just let it ride.

 

I would rather have them give any capital outside of FFH to money managers I trust, who will always allocate the capital into undervalued securities for them.  And now they have Mohnish as a choice going forward!  I could not invest with him as a Canadian, but will do so through Dhandho Holdings.  Cheers! 

[Guest longinvestor]

You are only as good as your last game in mos

 

I than 10 years.

 

 

SJ

 

Stubble, with every investment you pointed out, he's had an equally successful investment.  Everybody is talking about the size of RIM, when the Bank of Ireland investment is nearly as big.  Everyone talks about Abitibi, but no one talks about Resolute.  Everyone talks about Level 3, but they've pretty much gotten all of their money and then some out of Level 3.

...  JUST LET THEM WORK!  Cheers!

 

If I have it correct, their cost basis in LVLT was ~ $18 and they sold at $30? And they had invested about $250M? Please correct.

[mcliu]

no offense here, but I don't think Tim's long term record is good enough

I really don't mind if the past 3 is good

But really his track record in overall didn't convince me he is a star fund manager

 

btw: I do enjoy his letters and some interview

 

 

Sanjeev,

 

Tim McElvaine is an outstanding investor...He too will have his day again.

 

Dazel.

 

http://mcelvaine.com/our-fund/performance/

[jay21]

no offense here, but I don't think Tim's long term record is good enough

I really don't mind if the past 3 is good

But really his track record in overall didn't convince me he is a star fund manager

 

btw: I do enjoy his letters and some interview

 

 

Sanjeev,

 

Tim McElvaine is an outstanding investor...He too will have his day again.

 

Dazel.

 

http://mcelvaine.com/our-fund/performance/

 

Wow. This shows me fees matter.

 

Pre-fee: 11.3%

Net Return: 8.1%

Index: 7.4%

[StubbleJumper]

You are only as good as your last game in most circumstances.  Prem is getting kicked in the gut at the moment by the DIY'ers, since they look like geniuses over the last 4 years.  Many who did well over the last ten years on here, would not have done so, if it weren't for Prem's prognostications and their significant leveraged positions in Fairfax.  Now they've done great over 5 years, and it's Fairfax missed the boat on this one! 

 

I understand the frustration, but at the same time, how many have done as well over 25 years?  That's right...look at all those hands drop! 

 

If Europe did blow up, as it very well could have, and still may at some point, everyone would be talking about how smart Prem is.  Instead, they are talking about how stupid he is for having hedges. 

 

Even for us, we only had about 5% in Fairfax in the last couple of years, but as much as I would bet on myself...I would never bet against him! 

 

The degrees by which investors are correct or incorrect, is far thinner than one might expect.  BAC could have exploded...MBIA could have exploded....FIAT could have gone bust if not for intervention...many other winners that worked out did so only by the grace of God...that grace being fiat currencies and a massive attempt to influence interest rates.

 

So Prem is a loser for the last 4-5 years...big whoop...they called him that 10 years ago too!  Cheers!

 

 

Sanj,

 

I have been a member of this board and your previous board for more than 10 years.  Rarely have I disagreed with your viewpoint in any material way, but this time I must.

 

Prem's past 25 years have been fantastic.  But I don't make money based on the past, and nor does Prem.  The past 25 months have been the problem.  I do not have a problem with the hedges, because those were at least well thought out and constituted (excessive?) risk management initiatives.

 

But RIM?  Nobody had a problem when FFH threw a few bucks into King Pharma.  Nobody had a problem when FFH threw a few bucks into Watson Pharma.  And nobody had a big problem with having thrown a few bucks into the Brick or the crappy restaurant stocks.  Those were small bets on dubious opportunities.  But when FFH starts putting meaningful amounts of capital into something, then yes, long-time shareholders get a bit concerned.  When he put big bucks into Abitibi we swallowed hard and crossed our fingers...and same when he put big bucks into H&R.

 

But what he's done with RIM has crossed the line.  The cumulative investment goes well beyond "big bucks" and is now 15 or 20 percent of market cap.  If it had been JNJ or WFC nobody would have even blinked.  We would have mused about whether that sort of large cap would offer a reasonable return, but there would be no bellyaching whatsoever.  But RIM offers crappy products and has a tertiary market position in one of the most competitive, rapidly changing industries.  There is a strong probability that he has effectively flushed 10 percent of FFH's market cap down the toilet, to say nothing of the personal time that he has wasted on RIM through his board membership and the buyout proposal that he initiated.

 

Unfortunately, this is not an asymmetrical bet; you cannot just look at RIM like the credit default swaps or like H&R and say, it's a dhando type of investment.  RIM is entirely different.  In this case, it's about even odds about whether FFH doubles its money or gets wiped out.  Heads I win, tails I don't lose much?  Not on your life!

 

When he makes such a drastic departure on position sizing and on risk of a permanent loss of capital, it should hardly be surprising that some of us think that he's fallen off the rails.

 

And that's my first major philosophical disagreement with you in more than 10 years.

 

 

SJ

 

Stubble, with every investment you pointed out, he's had an equally successful investment.  Everybody is talking about the size of RIM, when the Bank of Ireland investment is nearly as big.  Everyone talks about Abitibi, but no one talks about Resolute.  Everyone talks about Level 3, but they've pretty much gotten all of their money and then some out of Level 3.

 

My point and opinion, is the same one I give to investors of any manager, even the ones I don't like...let them work!  You have a chance to ask them anything you want once a year, and they are one of the most accessible.  Just let them work! 

 

Screwups happen to the best of them.  They screwed up with TIG and C&F, but came back stronger.  They may have screwed up with RIM, but let them work and prove that they know what they are doing.  And this advice applies in particular to those invested in Fairfax, not those that DIY and aren't invested in Fairfax...but those guys can shut up a bit too and just see what happens. 

 

A couple of years ago, people were second-guessing Berkowitz, now everyone is coat-tailing.  7 years ago investors were ripping into Mohnish's 70% drop, but now it's hey Dhandho, dhandho everyone...play the bhangra music and coat-tail Pabrai!  These waves of love-hate come by alot.  Once in a while they are right about the manager, but more often than not, they are wrong and the manager hasn't suddenly become an idiot. 

 

One of my other favorite dogged managers right now is Tim McElvaine.  I had lunch with him today.  The size of his fund is significantly smaller than in the past, since investors always judge their managers by what have you done for me lately.  Yet, he's one of the smartest, most ethical managers I know.  Without a hesitation, not even a temporary moment to second guess, I would have my family move all of our assets over to him to invest if something happened to me.  Yet many of you out there don't get that!  Francis too...a couple of years ago people were saying the same things about him as they were saying about Berkowitz.  Well, he's kicked ass in his funds since, not unlike Bruce.  My family knows, everything goes to these two to manage if I'm not around.  And they've heard it from me over and over...no matter what happens, whether the fund is up dramatically or down dramatically, don't do a God-damn thing.  JUST LET THEM WORK!  Cheers!

 

 

Sanj,

 

It's not about screw-ups.  I completely accept screw-ups because they're part of a batting average.  If you take another look at the examples I listed, you'll see that I was exceptionally balanced by listing investments with good outcomes (King Pharma, Watson Pharma, H&R, Brick) and bad outcomes (Abitibi).  The characteristics that most of those investments share is that, ex ante, they were high risk, high reward propositions.  And with those, obviously some will be dogs, you just hope that you've got a favourable batting average so that it all works out well in the end.

 

No, my message was not about screw-ups.  It wasn't about avoiding cigar butts.  It wasn't that FFH should never jump in holding their nose.  Rather, it was about position sizing for the risk level of the investment.  Full stop.  And that is the problem with RIM.  In the end, it might work out.  But if it doesn't work out (and there's a good chance that it won't) we're not just talking about the type of exposure that FFH took when they bailed out H&R.  The position sizing is a significant, conscious error of commission, even if RIM turns around (which it might).

 

It is also completely inappropriate to compare the RIM position to Bank of Ireland.  In the case of the former, FFH is piling an ever growing amount of capital into a badly risky asset.  However, in the case of the latter, they only put in their $500m and it happily grew to $1.4B.  So, yes, with Bank of Ireland, FFH now faces the happy problem of needing to find an exit-strategy for a position that has rapidly grown too large.  But with RIM, they are actively growing the position by throwing capital at it because they do not have a credible exit strategy.  At worst, you could say that the Bank of Ireland position sizing is an error of omission because FFH has failed to trim it as the stock as risen...but that is far more acceptable to me than their error of commission with RIM!

 

I have no trouble letting value guys do their thing.  But I have a big problem when the value guys make a sudden departure from their otherwise sound risk management practices.

 

 

 

SJ

 

[kevin4u2]

Those who have a better long term track record can cast the first stone. All I know is that they have a fantastic long term track record and in the past have made many fantastic market calls. To comment on current strategy is futile as the story will be written in the future.

 

Another point is that we often employ all or nothing thinking. Bbry is a all or nothing bet, etc. Reality will likely show that they will muddle through and results will likely continue to be slightly above average.

[Guest Dazel]

Gio,

 

You are way too kind....I am a business man so I see assets differently than most...I am involved in the private market. The public markets are there to help you buy assets cheaper

than you would be able to in the private market. If you can't you don't buy that simple....the "key" as you say Gio is to be able to be rational when others are not. The iron will comes from doing your homework.

 

In  a worse case scenario for Fairfax's Blackberry investment...you will have a write off  which will bring down the cost of ownership...and own the company out of bankruptcy. You have to look at the whole picture of a business...Fairfax pays a lot of tax...not the risk you guys are portraying after tax (blackberry has a huge refund coming as well!) the upside is huge. I will go out on a limb and call for Fairfax-500 this year....and that is being conservative...I am behind Prem 100%... the hedge bleeding is over. I like the negativity...it is lonely being a value investor.

 

Gio...looks like you will make a Fortune this year!

 

Dazel.

[twacowfca]

Gio,

 

You are way too kind....I am a business man so I see assets differently than most...I am involved in the private market. The public markets are there to help you buy assets cheaper

than you would be able to in the private market. If you can't you don't buy that simple....the "key" as you say Gio is to be able to be rational when others are not. The iron will comes from doing your homework.

 

In  a worse case scenario for Fairfax's Blackberry investment...you will have a write off  which will bring down the cost of ownership...and own the company out of bankruptcy. You have to look at the whole picture of a business...Fairfax pays a lot of tax...not the risk you guys are portraying after tax (blackberry has a huge refund coming as well!) the upside is huge. I will go out on a limb and call for Fairfax-500 this year....and that is being conservative...I am behind Prem 100%... the hedge bleeding is over. I like the negativity...it is lonely being a value investor.

 

Gio...looks like you will make a Fortune this year!

 

Dazel.

 

Good take , Dazel.  Please explain: "The Hedge Bleeding is Over".