Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: wondering on January 04, 2018, 08:39:34 AM

Title: Fairfax 2018
Post by: wondering on January 04, 2018, 08:39:34 AM
Fairfax does another debt plus warrants deal.  $250 million in 5.5% unsecured debs plus Class A common warrants in Seaspan.

http://splash247.com/fairfax-invests-seaspan/
Title: Re: Fairfax 2018
Post by: racemize on January 04, 2018, 09:22:40 AM
Fairfax does another debt plus warrants deal.  $250 million in 5.5% unsecured debs plus Class A common warrants in Seaspan.

http://splash247.com/fairfax-invests-seaspan/

UCCMAL, feel like giving us any SSW related updates?  I think this is one you followed for a long while?
Title: Re: Fairfax 2018
Post by: Dazel on January 04, 2018, 10:18:47 AM
https://timesofindia.indiatimes.com/business/india-business/with-29-growth-indian-mkts-end-2017-with-a-bang/articleshow/62301071.cms

Title: Re: Fairfax 2018
Post by: netnet on January 04, 2018, 02:14:07 PM
I am not close observer of Fairfax, but from a quick look it seems as if we are in the historically low range of price to book.
Title: Re: Fairfax 2018
Post by: Dazel on January 07, 2018, 09:34:00 AM


Net Net.
You are correct and that is why I would like to see a big chunk of the float bought back...the holding company should have over $2.5b in cash.

2018 the contrarians will win.
Title: Re: Fairfax 2018
Post by: Dazel on January 09, 2018, 11:42:12 AM


Buy the shares Prem Buy them hand over fist lets see Fairfax get aggressive......show us how undervalued you think Fairfax is. It’s the only deal in the market.
Title: Re: Fairfax 2018
Post by: racemize on January 09, 2018, 05:27:56 PM
I've got a rough adjusted book value at $448.5, which includes the $33 BVPS bump on the sale.  Is there more to adjust by?
Title: Re: Fairfax 2018
Post by: chrispy on January 10, 2018, 03:43:52 AM
As discussed in another thread, the major stock holdings are doing well.  I quickly put this together but need to head off to work.  Only need the share count:

Ticker          Shares   11/2/2017   1/10/2018   % increase   Increase in BV
BB             96,700,000   $10.78   $14.40             33.58%   $350,054,000.00
RFP                   TBD          $5.85   $11.10             89.74%   
EGFEY               TBD           $0.44   $0.52             18.88%   
KW                   TBD           $19.55   $17.75             -9.21%   
IPI                   TBD           $3.91   $4.22             7.93%   
USG                  TBD           $34.45   $39.90             15.82%   
Title: Re: Fairfax 2018
Post by: Dazel on January 10, 2018, 03:56:54 AM


And just like that...Fairfax is brilliant.
The key to Fairfax is the $40b investment portfolio...and the secret to the math and future earnings as I have stated many times is Brian Bradstreet and the bond portfolio. He is the best bond manager in history I challenge anyone to refute that with his record. No one other than Mr. Buffett has held massive amounts of cash in their portfolios. They have reached for yield and they are about to get smoked. Fairfax will make a killing on the interest rate spike. As we will be able to secure years and years of cash flow. It’s just the beginning of the bond bear market. As usual Brian and Fairfax are ready.

Guns
Gold
And Fairfax
Title: Re: Fairfax 2018
Post by: petec on January 10, 2018, 05:22:24 AM

And just like that...Fairfax is brilliant.


:) ha!

Nice to see that the earnings power of a 2y treasury has doubled in the last year, which basically gives us an extra $250m in potential income off a $25bn cash and bond portfolio without taking meaningful duration risk. Lovely to be at the short end when yields rise! Very impressive switch by Bradstreet considering how long he was at the long end for. (Some idiot will whinge that he was 5 months too early but good luck timing it better.)

Title: Re: Fairfax 2018
Post by: gary17 on January 10, 2018, 07:49:08 AM
I've got a rough adjusted book value at $448.5, which includes the $33 BVPS bump on the sale.  Is there more to adjust by?

I assume this is USD , not CAD !

thanks:)
Title: Re: Fairfax 2018
Post by: racemize on January 10, 2018, 08:31:40 AM
As discussed in another thread, the major stock holdings are doing well.  I quickly put this together but need to head off to work.  Only need the share count:

Ticker          Shares   11/2/2017   1/10/2018   % increase   Increase in BV
BB             96,700,000   $10.78   $14.40             33.58%   $350,054,000.00
RFP                   TBD          $5.85   $11.10             89.74%   
EGFEY               TBD           $0.44   $0.52             18.88%   
KW                   TBD           $19.55   $17.75             -9.21%   
IPI                   TBD           $3.91   $4.22             7.93%   
USG                  TBD           $34.45   $39.90             15.82%

From the Q3 report there are 27,940,806 - 166,300 = 27,774,506 effective outstanding.  That adds $12.6 to BVPS.
Title: Re: Fairfax 2018
Post by: Dazel on January 10, 2018, 08:40:06 AM

Gary yes it is.

I thought people were averaging down in bitcoin not paying attention...
Disclosure:I have bought fairly large everyday this week.
Title: Re: Fairfax 2018
Post by: Dazel on January 10, 2018, 09:55:26 AM

I am going to share Bradstreet’s secret strategy that makes him maybe the best bond guy maybe ever.

Wait for it....patience....and he has math on his side he misses the bond losses and buys higher rates... I have seen him do this 4 or 5 times...albeit with smaller sums of money...but he has made billions doing it. You note he sold saving billions in cap losses in 2016 a week or two before yields spiked....

For the financial industry everyone cheers higher rates but they don’t realize is tHat the immediate effect of higher rates are very large bond losses. The interest rate effect takes time as short maturities
Need to run off and they purchase longer dated higher yield bonds as they do.

Bradstreet when he feels he is right sells bonds usually at a profit and goes to cash and short term maturities (where we r now) so when rates spike higher Fairfax experiences small to 0 losses and he reallocates to longer dates high interest bonds. His market timing in this regard is unmatched...he ran into temporary trouble in late 1999...2000 with unrealized losses...these turned into massive gains that likely saved Fairfax from the shorts in 2003. And made me a small fortune(thank you Brad!).

He did it again in2008 selling treasuries at the top Andy buying 7% Berkshire guaranteed tax free Muni’s...crazy good.

Now with almost $40b I get gitty thinking about what he can do in a rising rate environment. It is not just the cash flow....he has taken shorter term big profits on treasury moves...many times. He is the key to Fairfax $1000.


Title: Re: Fairfax 2018
Post by: Viking on January 10, 2018, 09:57:26 AM
One of the questions to Gundlach yesterday in his call was “what bond would you buy today” and his answer was the 2 year treasury.

He said if the US 10 year yield moves north of 2.63% then yields likely will keep going to 3% this year. We are at 2.58% today so getting close. He thinks the 3% level is the one to watch on the US 30 year; if yields move higher he said you can call the end of the 35 year bull market in bonds.

If is time to review what FFH is doing with their bond portfolio. Their positioning there may be setting them up for the next big investment gain. Everyone is looking at FFH and looking for gains in stocks as the next big catalyst in the share price; perhaps we are looking at the wrong asset class.
Title: Re: Fairfax 2018
Post by: Viking on January 10, 2018, 10:08:47 AM
I've got a rough adjusted book value at $448.5, which includes the $33 BVPS bump on the sale.  Is there more to adjust by?

I assume this is USD , not CAD !

thanks:)

How do people think about goodwill when calculating book value?
Title: Re: Fairfax 2018
Post by: Dazel on January 10, 2018, 10:14:22 AM
Viking You are.
It’s math....size matters....Bradstreet will be in charge of the bulk of the $40b....he called a Treasury top in 2016...he was right. No offence to Mr.Gundlach (I like him) and he manages more money than Bradstreet but his record is NOT even close to Brads. Check the numbers they will blow you away and that has Bradstreet holding cash for sometimes for long periods of time.

Prem and his team will do well but they will not be allocating the amount of capital Bradstreet has and will. This is what Longleaf refers to with Fairfax earnings power being under appreciated because of their large cash reserves. While most refer to Prem as he is the captain of the Fairfax ship...Bradstreet is the key to moving the portfolio needle.
Title: Re: Fairfax 2018
Post by: Dazel on January 10, 2018, 10:18:34 AM
You can forget book value for Fairfax right now it underappreciates their insurance operations....and the power of the$40b portfolio (that is 43% cash). First Capital was an example of this....was sold for 3xbook....without the benefit of the investments.
Title: Re: Fairfax 2018
Post by: Dazel on January 10, 2018, 10:26:46 AM


This is what Prem is taking about by the company being as cheap as it has ever been looking at intrinsic value. We will do best if Fairfax stays or falls from here and we get to purchase-shares  until Fairfax becomes fully invested. When that happens the market will realize what is there...they have been swimming with one arm for awhile.
Title: Re: Fairfax 2018
Post by: buylowersellhigh on January 10, 2018, 10:29:38 AM
Is there a gathering of CoBF members before the Fairfax Annual Meeting?  Usually I see a message posted.  Or too early?

TIA,
BLSH
Title: Re: Fairfax 2018
Post by: chrispy on January 10, 2018, 11:54:35 AM
It seems very difficult to know the right time to sell the bonds but it seems even more difficult to know when to buy back into them. Any thoughts on that dazel/viking?
Title: Re: Fairfax 2018
Post by: Viking on January 10, 2018, 01:00:27 PM
Chrispy, I agree with Dalzel that in Bradstreet, FFH has one of the best bond managers so at an inflexion point like we are at right now in the bond market (from long term bull to bear market) I think you want to go with the firms that have the best people and trust that they will get it (mostly) right.

I have been reviewing what FFH has done with its bond portfolio since Q4 of 2016 and they look like they have absolutely nailed it (shifting out of long dated bonds to short term maturities). Below is the change in US interest rates just in the past 14 months. Amazing. If the Fed raises 4 times this year, yields will be climbing (short and long end). Who is going to want to own long dated treasuries moving forward? I am very interested to see what FFH has done with the Allied bond holdings when they report Q4 results.

            Nov 1 2016    Jan 9, 2018
1 year.     0.65               1.78
2 year.     0.83               1.98
10 year.    1.83              2.55
30 year.    2.58              2.88

In terms of what bonds to buy today, as I said earlier, Gundlach said 2 year treasury was the place to be. He said the yield differential (2 year versus 10 year) is not large enough to offset the risk of much higher rates (of 10 year). The 2 year has a decent yield; hold to maturity and reinvest in two years at likely much higher rate. You will not make a killing with this strategy. However you will make a positive return. Gundlach feels there is a reasonable chance the 10 bond yields will rise to 5-6% in the next 4 years. If this happens investors who hold 10, 20 or 30 year bonds will get killed. If Fairfax’s competitors are not careful losses on their bond portfolios may be material (potential catalyst for hard market in insurance?).
Title: Re: Fairfax 2018
Post by: petec on January 11, 2018, 09:04:46 AM
While I agree, the change of tone (on the board, not from specific members) amuses me. A year ago Fairfax were investment morons and could do no right. And then 2017 happened...

Same people, same philosophy, different years.

Next the market will crash and they'll be stupid for having sold the hedges ;)
Title: Re: Fairfax 2018
Post by: RichardGibbons on January 11, 2018, 10:25:09 AM
I agree that there's a change in tone.  I think it's largely the result of different people posting, as opposed to people who were bearish becoming bullish.
Title: Re: Fairfax 2018
Post by: Viking on January 11, 2018, 12:12:54 PM
Petec, I think the difference is a year later we all have a little more information. FFH has largely monetized ICICI Lombard. FFH has monetized First Capital. I think the size of both of these gains was much, much larger than most expected. I think they may have $2.5 billion in cash at the holding company when they report Q4 results and this is much more than a year ago.

FFH India has performed exceptionally well driven by the extraordinary gains of the Indian market. Again, I think performance was much better than most people expected at the start of the year.

Many of FFH large equity holdings also outperformed over the year: BlackBerry and Resolute come immediately to mind.

The re-positioning of the massive bond portfolio (moving to low duration) continues to looks like a very smart move.

The one blemish all year was the underwriting performance of Allied and Brit; This will need to be monitored moving forward. However, if all the hurricanes in 2017 results in a hard market there may be some benefit moving forward.

When I weave it all together, from my perspective, a lot of very good material things have happened at FFH in 2017. And as a result, 2017 YE reported book value will be significantly higher than 2016. Perhaps US$435 versus $367?

Where have the shares traded In mid January each year?
2018 = US $524
2017 = $470
2016 = $486
2015 = $505

And when you look at the FFH of even 18 months ago (and how it’s investment portfolio was positioned with all of the equity hedges) the changes are even more stark.

I have been very lucky with my investments in FFH over many years (from 2003 to 2009); these investments put me in a very good situation financially. One of the key reasons I invested in FFH is I felt I understood (somewhat) and liked how they were invested. This confidence allowed me to be patient and take advantage of the volatility (loading up on shares when they got crazy cheap). Since 2012 I have not liked how FFH was invested (especially the massive equity hedges). And yes, this stopped me from holding the shares for many years. Much has changed at FFH in the past 18 months and as a result of these changes my opinion of owning the shares has also changed. I now own a small position. If the shares get cheaper I will likely buy more :-)
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 11, 2018, 12:26:48 PM
While I agree, the change of tone (on the board, not from specific members) amuses me. A year ago Fairfax were investment morons and could do no right. And then 2017 happened...

Same people, same philosophy, different years.

Next the market will crash and they'll be stupid for having sold the hedges ;)


Well, 2015 and 2016 were tough years to be a FFH shareholder and, based on some of the comments on this board and the lack of attendance at Sanj's annual supper, many long-term shareholders sold out.  They were tough years because financial performance was limited by the equity hedges, which were abruptly dropped after the US presidential election, and in 2015 Prem usurped minority shareholders' rights by changing the provisions of his multiple voting shares.  It's tough for a shareholder to endure poor financial results and then accept a 180-degree change in investment philosophy based solely on the faint hope of liberalization of the US economy by a new president.  And its tough for a shareholder to accept that our "managing partner" doesn't trust us enough to let us continue with our unfettered voting rights.  Frankly, I'm not particularly surprised that many long-time shareholders were unhappy and sold out.

If Sanj organizes another supper in Toronto this spring, it will be interesting to observe the level of interest.  I'd say that many people voted with their feet and will not re-establish a large position in FFH.

Personally, I have held my nose and maintained my position over the last number of years.  After having marked time for the past 5 years, the investment portfolio looks like it is well positioned to make some decent returns in the coming years.  Even FFH's ridiculous "error of commission" in the sizing of its Blackberry position seems have been redeemed (now they just need to find an exit-strategy).  So, things are looking somewhat positive, but that comes after 5 or 6 years of some head-scratching decisions.


SJ
Title: Re: Fairfax 2018
Post by: petec on January 11, 2018, 01:25:06 PM
Viking and SJ - while everything you post is true, I take a slightly different approach with FFH. I decided a long time ago that a) I like the float-investment model; b) I trust Prem and his team and the culture they are building; and c) that they are smart people who will make more good decisions than bad over time. So I decided to hold the shares long term (unless they got to a silly valuation) and see what happened.

Maybe that's naïve - many would say so. But then again all investment managers go through good patches and rough ones, and if you can't stick the rough patches you seldom compound with them. So far I am very happy with the results, although I will admit that keeping the faith was easier in 2015/6 by the fact that I agreed with the hedges! Oops! where Prem and team beat me hands down is I wouldn't have taken them off when they did. Big oops, but then that's why I let them manage some of my money!

Anyway, that's why I don't really feel we have more info than a year ago. We have more precise data on the value of certain subs and investments, yes. But what creates the value is the people and the culture, which has proven itself over 30 years, and that hasn't changed in the last 12 months.

I accept that the ratio between the "surfaced" value per share and the share price has changed, but that only explains why people are more bullish on the shares. It does not explain why Fairfax has gone from hero to zero, from dumb to smart. I honestly think that anyone who has changed their mind on that in the last 12 months simply didn't know the history or isn't being rational. However as RG said, the tone has changed because different people are posting so it is a moot point.

I'm not trying to start a fight here, BTW, so I slightly regret my initial post.
Title: Re: Fairfax 2018
Post by: Dazel on January 11, 2018, 01:53:38 PM

Those are great posts....really dead on....I agree with what you are saying.

A couple of quick points of why I am back heavy...

1. Value investing was left for dead in 2015
2. Fairfax were wrong on Greece and their large individual positions on the worst hedges in history.....truly got killed making* the 2007-2008 win a disaster...they did not change their mind and were stuck in that state of mind....absolutely terrible performance...maybe the worst hedging program I have ever seen. They were a man with a hammer and every short position was a nail!
3. With the massive investment losses of those years the true operating strength of Fairfax was masked and missed...humility sucks but it was Prem and his equity side that were terribly wrong. I believe they will right the ship. It was a big and bold move to eat S...t and remove the hedges and I applaud them for the strength they showed doing it.
4. Brian Bradstreet continued to absolutely kill it compared to his peers in a low interest rate environment
5.2017 would have been a record transformational year without the huge insurance losses...that is their business but the year was record losses for industry
6. Insurance market is not hard but prices are rising 10-30% depending on the line and where
7.Fairfax is now a $15b a year premium company at just the right time...expect the new India insurance company to create huge value as well
8.$2.5b in cash at the holding company means an upgrade from the ratings agencies bringing down debt costs, and expect very large buybacks
9.$40b investments are set up for rising rates , the dead  beat equity investments are rising sharply, expect Greece to the same
10. Prem told us all in April that the insurance companies were greatly undervalued and book values did not properly value Fairfax...he went out and proved it with $2.6b in gains from two “Small” insurance operation sales...First Capital may be the best deal Fairfax has ever made. What do you think Odyssey is worth if he sold it? A lot...he is not going to of course.

The last time I took a chance believing in Prem and his Fairfax teams redemption it was a euphoric outcome. I expect the same this time around.

P.S stop buying the damn shares...lots of bitcoin and pot stocks out there!
Title: Re: Fairfax 2018
Post by: Cigarbutt on January 11, 2018, 02:58:48 PM
Dazel,
Agree with most of what you put on your list.

For point 3, I'm not sure. The way the hedges were set up has been discussed. If what you say is true, I just wish they would have come out with the real reasons behind the change in strategy (hedges too large, too early, no longer sustainable with the release of "animal spirits" etc).

For point 6, from what I read, price increases are lower and not widespread. Despite record losses, 2017 events barely met the definition of capital events and "alternative" capital continues to be plentiful.

I agree that it will be interesting to see how and when they deploy their huge liquid capital position.
The financial outcome also has a lot to do with their ability to participate in the hard market which will happen eventually.
Title: Re: Fairfax 2018
Post by: Viking on January 11, 2018, 03:38:35 PM
Petec, no offense taken. Two people can look at the same situation and come to two very different conclusions; does not mean one is right and one is wrong. It often comes back to what ones objectives are and investing style.

Dalzel/cigarbutt, regarding the large amount of cash at the holding company, yes, it will be interesting to see what FFH does. Prem has clearly stated that he feels the shares are cheap and buybacks are likely. I wonder if they will wait and see if there is a bit of a hard market as we start 2018 and therefore an opportunity to grow the business organically. I think he has stated another large acquisition is not likely. I would like to see them start to get the share count down. You can see all the shares that have been added the past 10 years on the one page summary at the beginn8ng of the annual report. If I had to guess i think they will end up using the excess cash to reduce the share count; if this happens we should see a nice jump in the shares. This is another reason I bought shares recently (I got concerned they would not stay cheap). Shares also go ex dividend Jan 17 and this will net shareholders US$10 per share a week later.
Title: Re: Fairfax 2018
Post by: ABM on January 11, 2018, 05:17:44 PM
Petec, no offense taken. Two people can look at the same situation and come to two very different conclusions; does not mean one is right and one is wrong. It often comes back to what ones objectives are and investing style.

Dalzel/cigarbutt, regarding the large amount of cash at the holding company, yes, it will be interesting to see what FFH does. Prem has clearly stated that he feels the shares are cheap and buybacks are likely. I wonder if they will wait and see if there is a bit of a hard market as we start 2018 and therefore an opportunity to grow the business organically. I think he has stated another large acquisition is not likely. I would like to see them start to get the share count down. You can see all the shares that have been added the past 10 years on the one page summary at the beginn8ng of the annual report. If I had to guess i think they will end up using the excess cash to reduce the share count; if this happens we should see a nice jump in the shares. This is another reason I bought shares recently (I got concerned they would not stay cheap). Shares also go ex dividend Jan 17 and this will net shareholders US$10 per share a week later.

Viking your comments and obvious experience with FFH is very much appreciated.  Based on Prem's comments from the Q3 call, I am hoping to see a high level of repo activity once results are released, especially, given the asset sales have closed.  Im paraphrasing but he basically said differential between book value and IV is at the widest level in his 32 years at the company. Secondly, I am focused on Allied adverse reserve developments though Prem said it was a one-off in Q3 results.  Lastly, a firmer guide around the hurricane CAT losses and pricing outlook. 
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 11, 2018, 06:18:06 PM
Viking and SJ - while everything you post is true, I take a slightly different approach with FFH. I decided a long time ago that a) I like the float-investment model; b) I trust Prem and his team and the culture they are building; and c) that they are smart people who will make more good decisions than bad over time. So I decided to hold the shares long term (unless they got to a silly valuation) and see what happened.

Maybe that's naïve - many would say so. But then again all investment managers go through good patches and rough ones, and if you can't stick the rough patches you seldom compound with them. So far I am very happy with the results, although I will admit that keeping the faith was easier in 2015/6 by the fact that I agreed with the hedges! Oops! where Prem and team beat me hands down is I wouldn't have taken them off when they did. Big oops, but then that's why I let them manage some of my money!

Anyway, that's why I don't really feel we have more info than a year ago. We have more precise data on the value of certain subs and investments, yes. But what creates the value is the people and the culture, which has proven itself over 30 years, and that hasn't changed in the last 12 months.

I accept that the ratio between the "surfaced" value per share and the share price has changed, but that only explains why people are more bullish on the shares. It does not explain why Fairfax has gone from hero to zero, from dumb to smart. I honestly think that anyone who has changed their mind on that in the last 12 months simply didn't know the history or isn't being rational. However as RG said, the tone has changed because different people are posting so it is a moot point.

I'm not trying to start a fight here, BTW, so I slightly regret my initial post.


Please do not regret in any way your initial post.  It was a worthwhile observation and has stimulated discussion.  That in itself is of considerable value.

You are right, of course, that FFH is ultimately a jockey-stock.  Either you have confidence in the jockey or you don't.  You've maintained your position because you have confidence in the jockey, and I've had various levels of investment in FFH and its subs since 1998, so that should tell you something about my view of management's capabilities.   That being said, we should not put Prem up on a pedestal.  In addition to the savvy investment decisions and the clever moves in 2003 and 2004 to keep the company alive, he sometimes does things that are plain old wacky or that are abusive of minority shareholders.  When too many of those wacky things are done over a short period, he loses long-time shareholders.

If you are curious about the sorts of things that might be viewed as wacky, here are a few:

-The repeated increases in capital dedicated to Blackberry (RIM) despite demonstrably poor returns was baffling.  His flirtation with purchasing the firm outright, despite FFH's dearth of expertise in the industry were bizarre.  His decision to accept a position on RIM's board of directors which effectively limited FFH's ability to divest the position was a strange thing to do.  And finally, the overall size of the Blackberry investment in the context of FFH's investment portfolio was ridiculous.  All of this occurred during a period when US banks were a no-brainer and BRK was demonstrably cheap.  There was large cap value in plain sight, and he chased a failing tech company with our capital.

-The sizing of the equity hedges and particularly the inflation hedges was baffling.  Without a doubt, I shared (and still share) FFH's concerns about current valuation levels and the risk that poses to FFH.  Hedging was a reasonable and thoughtful thing to do.  But what FFH actually did went far beyond hedging and entered into bald market speculation.  The entire equity portfolio was hedged, and if my memory serves me correctly, the inflation hedges had a notional value of ~70B or so, which far exceeds any reasonable level of protection that FFH might require.  And the flimsy argumentation for closing the hedges was beyond weak, even though closing the position was the correct thing to do.

-I like the idea of investing in Greece, but once again, position sizing is the key consideration.  There's a big difference between taking a flyer for $300m and dropping $1 billion on a high risk investment.  Again, this was done at a time when any value investor could see that JPM was cheap or BRK was cheap.


Anyway those are a few of the wacky things that were done using truly baffling position sizes.  So kudos for the good work in India, management of the actual insurance companies' underwriting has been outstanding, and the majority of the insurance acquisitions have worked out.  But, my take is that the wacky stuff has badly hurt investor confidence.  Here's to hoping for a more orthodox approach going forward.


SJ
Title: Re: Fairfax 2018
Post by: Dazel on January 11, 2018, 07:25:11 PM

Cigarbutt,

3. The hedges can be viewed many ways but it is the result that matters. They not only dropped like a rock the equity positions they were supposed to hedge were completely uncorelated and also dropped like rocks.

6. As I said it depends on what lines of business, where they are and whether or not they had claims last year

Petec
You are wise and you will do well holding Fairfax but you already know that...without the disasters last year the shares would be much higher and you would be right Prem et all would 0 to hero. I would argue that they are not even close yet. The share price is the same as it was almost 20 years ago albeit way overvalued then...there are clouds around Fairfax and its past depending who bought when.

The reason I am posting is that I think they have turned a corner and are in a position to perform greatly going forward. We will all debate the past but the future is all that matters now.
Title: Re: Fairfax 2018
Post by: petec on January 12, 2018, 06:55:21 AM
SJ

Agreed that we should not put Prem on a pedestal. He's made some huge errors. This will sound odd, but I don't mind them. It's part of investing his way, and what matters is the overall result, not the individual ones. I would not try to persuade others of that - anyone not comfortable with how they invest should not be a shareholder - but I am comfortable with it. I think the reason they didn't take the large cap value lying in plain sight is that they are deep value investors by instinct, and past c.2012 the US wasn't deep value - especially if you allowed for some margin mean-reversion. Anyway, I don't really care because I bought a lot of those cheap large caps myself. Fairfax was a diversifier and a hedge for me, as well as an excellent long term compounder at a reasonable price.

On position sizing: I think it's fair to point out that some big bets like BKIR & TCIL worked beautifully. Also, I don't really believe in criticising investments until they are finished. Let's see where Eurobank and Blackberry get sold. Prem et al are avowedly long term value monkeys. That means they don't try to maximise compounding by jumping on the best horse each year, but by buying dirt cheap and waiting. Given current valuations on the S&P and current trends at Eurobank and Blackerry, it's quite possible that these two look like great absolute and relative investments over their full holding periods, which probably won't end for a few years yet. Who knows, but I will assess them when its over.

On BBRY: Fairfax now has control over a wide range of businesses in which they have limited experience. Some (like Cara, TCIL, Quess) are huge. So, I don't find the idea of buying BBRY outright so odd, although I am glad they didn''t. Also, I think one of the key strengths of Fairfax is its ability to build businesses by attracting the right managers (a key cultural strength) and supporting them. I think (?) they were instrumental in getting John Chen to come to BBRY. They probably couldn't have done that without a board seat.

Agreed that the sizing/structuring of the equity hedges was an outright mistake - although as I have said before, I think we would all be more forgiving if the longs had outperformed. That way they'd have locked in their alpha but foregone beta, which would now look like a "mistake" but a more justifiable one. But I think you're wrong about the deflation swaps. The nominal exposure hit $110bn but that's a meaningless number. What matters is that they'd have made 1% of that number for every 1% CPI dropped below strike. Since strike was some way below current CPI, you'd have had to have had several % of deflation to make a big return on the outlay. I think they sized that one more or less right and it was a decent "heads I win, tails I don't lose too much" hedge against a tail risk. What damaged them was hedging the equities as well and then not performing on the equity longs.

Thanks for your comments. Even though I often see the other side of the argument, they are all valid and good for helping me keep Prem off that pedestal. As Dazel says, what matters is the future.
Title: Re: Fairfax 2018
Post by: Dazel on January 12, 2018, 07:23:24 AM


I believe that Prem and the equity side of Fairfax got caught in the proverbial trap of Sir John Templeton (prems mentor and a long  time Fairfax shareholder) and Warren Buffett. No one teaches you how to go from running a 10 million dollar business to a $10b company. Buffett missed Prem’s mistakes because of Charlie Munger who knew early that Ben Graham model would not scale into the future and during that transition and the tough 70’s markets Berkshire did not move a dollar for a ten year span. What Prem and his team did do greatly over this time is build very good businesses and their best purchases are home runs and forgotten. Orh, Nb, Zenith (take a look at their comps) and many other smaller insurers were steals and have been tremendous acquisitions and to me the back Bone of what is to come....it’s where the intrinsic value is hidden.

Petec,  I agree that Fairfax will not make these mistakes again and understand your thinking. Allied will turn out very well and they are morphing into a mini Berkshire...they have to. The old ways do not scale and they have been headed this way for awhile and it has not been noticed. I amrepeating myself...but I am a little giddy I did not think I would get an opportunity to partner with Fairfax again in a big way. Companies like this rarely trade a discount  like this especially in this type of market multiple.

It may be awhile but that will benefit us all the most...as buy backs are key.
Title: Re: Fairfax 2018
Post by: longinvestor on January 12, 2018, 08:02:52 AM


I believe that Prem and the equity side of Fairfax got caught in the proverbial trap of Sir John Templeton (prems mentor and a long  time Fairfax shareholder) and Warren Buffett. No one teaches you how to go from running a 10 million dollar business to a $10b company. Buffett missed Prem’s mistakes because of Charlie Munger who knew early that Ben Graham model would not scale into the future and during that transition and the tough 70’s markets Berkshire did not move a dollar for a ten year span. What Prem and his team did do greatly over this time is build very good businesses and their best purchases are home runs and forgotten. Orh, Nb, Zenith (take a look at their comps) and many other smaller insurers were steals and have been tremendous acquisitions and to me the back Bone of what is to come....it’s where the intrinsic value is hidden.

Petec,  I agree that Fairfax will not make these mistakes again and understand your thinking. Allied will turn out very well and they are morphing into a mini Berkshire...they have to. The old ways do not scale and they have been headed this way for awhile and it has not been noticed. I amrepeating myself...but I am a little giddy I did not think I would get an opportunity to partner with Fairfax again in a big way. Companies like this rarely trade a discount  like this especially in this type of market multiple.

It may be awhile but that will benefit us all the most...as buy backs are key.

Buffett and Munger were moving more than a dollar. See's, Geico and the newspaper deals...all happened during the 70's.
Title: Re: Fairfax 2018
Post by: cwericb on January 12, 2018, 08:07:20 AM
I am also one who has been very comfortable holding Fairfax for the past 10+ years, perhaps because I am a rank amature at investing.

Yes Prem has been widely criticized for his hedges,  just as he was for his Credit Default Swaps when he purchased them. As they say, hindsight is 20/20, some things work, some do not.

My investment in Fairfax with its hedges and deflation swaps acted as a hedge for me that allowed me to make other investments in the market with a certain amount of confidence that my FFH shares would help protect me if things went south. As a Canadian, Fairfax also tends to act as a hedge for the Canadian dollar. When the CDN dollar drops against the US dollar, FFH shares tend increase in value which is why FFH shares have performed better in Canada than in the US. According to the TMX chart comparing FFH to FRFHF, since 2013 FRFHF is up 40% while FFH is up 80%. Works for me.

I don’t know why it is expected that he has to be right every time. I certainly am not right on all my investments, but overall I seem to do okay, I don’t demand more of Fairfax.
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 12, 2018, 08:32:32 AM
I don’t know why it is expected that he has to be right every time. I certainly am not right on all my investments, but overall I seem to do okay, I don’t demand more of Fairfax.


Nobody is right every time.  But the question is how to you manage risk, and how do you choose your position sizes?  There's a big difference between dropping $100m on something like Resolute and pumping $1.3B into Blackberry.  They are both risky investments with a considerable risk of a permanent loss of capital.  But, in the first case, if you get your ass handed to you, it might cost you $80m of capital, while in the second case, it might cost you $1B if you get your ass handed to you.  In both cases you were wrong if your ass was handed to you, but in the first case your position size was more appropriate in the broader context of your investment portfolio.  Bank of Ireland, which was an unambiguous success, was a position size of ~US$500m and that was already plenty large for the inherent risk of a permanent loss of capital.  Working from memory, the credit default swaps were a collective position of less than US$400m.  So, irrespective of your level of conviction about an investment, proper risk management requires appropriate position sizing.

Nobody is going to agree with every investment that FFH makes.  And nobody should expect 100% success from any investor.  But we should expect that the risks being taken are not reckless.


SJ
Title: Re: Fairfax 2018
Post by: cwericb on January 12, 2018, 09:49:56 AM
“Working from memory, the credit default swaps were a collective position of less than US$400m.”

Yes SJ, but consider that $400m (actually about $435m) represented a much more significant gamble in 2003 than $435m would be today given inflation and the size of Fairfax 15 years later.

And Prem has warned us that results would be "lumpy".

Title: Re: Fairfax 2018
Post by: StubbleJumper on January 12, 2018, 10:02:49 AM
“Working from memory, the credit default swaps were a collective position of less than US$400m.”

Yes SJ, but consider that $400m (actually about $435m) represented a much more significant gamble in 2003 than $435m would be today given inflation and the size of Fairfax 15 years later.

And Prem has warned us that results would be "lumpy".


Sure, that's absolutely true.  As your portfolio gets larger, your appropriate position size measured in dollars should get larger.  But was the ~$400m CDS in 2003 equivalent to ~$1.3B Blackberry position in 2015?  And would a ~$400m CDS position even remotely represent the same risk of a large permanent loss of capital as the complete acquisition of Blackberry?

Returns will be lumpy, and that's fine because it's the nature of the market.  You make your money when you buy, not when you sell.  But, lumpy returns and wacky position sizing (ie, poor risk management) are two different things.


SJ
Title: Re: Fairfax 2018
Post by: cwericb on January 12, 2018, 10:20:02 AM
Don’t necessarily disagree with you. But it will be interesting to watch BB over the next few years.

Prem has orchestrated some significant turn-arounds in the past, The Brick comes to mind when he put Gregson in control. Think Chen may well do the same with Blackberry, it is just taking a lot longer than anyone expected and it is a different company today than when Prem jumped in with both feet.
Title: Re: Fairfax 2018
Post by: Cigarbutt on January 12, 2018, 10:48:30 AM
I wonder if it is appropriate to compare Blackberry and The Brick.

Not an expert in the Blackberry businesses (old or new) but the turnaround relied on huge shifts including strategic, products, markets etc
So, I submit the jury is still out on this one.

I can say a few relevant words about The Brick as I followed closely and held units, warrants and debentures during the down and up phase. I suggest that Fairfax involvement made more sense then as there were very specific issues that had to be dealt with (liquidity squeeze, inventory shortages, lack of staff (sale) and slashed publicity spending) that led to a downward spiral that could be stopped by a cash infusion which Fairfax could provide. Obviously, credit has to be given to the new management including Mr. Gregson, but the key event was the financing done by FFH and the founder (Mr. Comrie).

In the future, I hope that they make more deals templated on liquidity issues and not on fundamental or existential issues.
Title: Re: Fairfax 2018
Post by: cwericb on January 12, 2018, 11:10:56 AM
Yes, they are quite different situations, I was referring more to the fact that Prem was able to put the right guy in to run The Brick and I believe he has probably put the right guy into run Blackberry with Chen. I too had shares in The Brick back then and one of my sons was running their flagship store in Calgary at the time. It was a quick rescue and turn around.

Bottom line is that I believe that Fairfax is a good investment - for me at least. Bought a few more Fairfax shares this week and started a position in Fairfax India as well.
Title: Re: Fairfax 2018
Post by: Dazel on January 12, 2018, 01:36:33 PM




Longinvestor,

It was not 1970-80....it was around 1966-76...
Rick Guerin Mungers partner famously asked Warren if the stock would go down anymore...to which he said “I don’t know”...Guerin sold his shares as Berkshire dropped 50% from its top. Geico was bankrupt and Buffett and Salmon bailed them out, the Buffalo news was a disaster in the late 70’s...See’s killed it...and there you have it. Buffett’s aha moment....pay up for great businesses. He said he would never have bought Coke without seeing see’s economics first hand.

Fairfax is at an aha moment. The past does not matter the company is primed for the next decade let’s hope they do as well as Berkshire did coming out of a dry spell. Prem’s strength is math...good businesses and big bets on them...they have just been used to picking up dollars for 50 cents. It’s mungers math that works for big insurance companies. And a smaller bets on the eurobank of the world.

Incidentally the Credit default swap portfolio was intitiated to hedge against the companies that Fairfax had reinsurance with in 2003. It expanded as the housing bubble grew....$400m was down 90% before it exploded higher. But the insurance was real and brilliant at the time in 2003..as it eased fear that Fairfax would collect its reinsurance receivable which was large relative to equity.
Title: Re: Fairfax 2018
Post by: Dazel on January 12, 2018, 01:38:50 PM


Brian Bradstreets idea.
Title: Re: Fairfax 2018
Post by: petec on January 12, 2018, 02:20:58 PM
Nobody is going to agree with every investment that FFH makes.  And nobody should expect 100% success from any investor.  But we should expect that the risks being taken are not reckless.

SJ

Reckless is too strong a word, I think. Blackberry, the equity hedges, the CPI hedges, Eurobank, and a few smaller ones all went about as badly as they could have done in the time period we are discussing. And book value was...flat (more or less). It's also worth remembering that Prem knew (even if we didn't) the value that was building at Lombard and First Capital. My view is that while Prem took big bets, they weren't reckless risks.

Also a point of detail: $500m of the $1.3bn the BBRY bet was in convertible bonds to a net cash company that had a decent chance of stabilising cash burn (and did). That changes the risk profile, obviously.
Title: Re: Fairfax 2018
Post by: chrispy on January 13, 2018, 06:03:01 AM
One way to think of this is, what does an investor get that bought in over the past 1-2 years? Very low equity prices in nearly all the major holdings and profitable insurance businesses
Title: Re: Fairfax 2018
Post by: Dazel on January 13, 2018, 09:27:51 AM

I think we have beat the proverbial Fairfax past to death here. November 2016 they changed course saved billions in hedge losses...took their profits in treasury bills before they tanked and made by far their biggest acquisition ever taking investments up to $40b and they added heavily to their India bet. They told us that the Trump victory would bring animal spirits back and that U.S growth would power global growth they were correct. Investment (capital) Gains in 2017 will be a record despite what people think. Many holders used Fairfax doomsday hedges as their own hedge as did I...that shareholder base has sold out taking the stock down to these levels.

The world economic system has found a floor...as deflation is no longer the dibilitating fear. Another couple of trillion came out of negative rates. Governments will not try to slow it down they need the growth to manage debts. The CPI hedges are there if it falls apart they have already been written down to negligible levels.

Fairfax new story will be one of growth as they will be able take advantage of rising rates while many large fixed income holders will experience serious losses...expect them to take equity positions that grow over time (Berkshire model) they are in the drivers seat so let’s see what the future holds.


Title: Re: Fairfax 2018
Post by: FFHWatcher on January 13, 2018, 12:35:43 PM
I was surprised (and encouraged) by Prem's comments after the election.  It sounded like and I think most would agree, that FFH was ready to play offense.  I don't know the exact numbers but it seems like FFH have added almost NO significant equity long positions to their portfolio's.  Portfolio is still mostly cash well over a year later.  What gives?  Valuation?
Title: Re: Fairfax 2018
Post by: chrispy on January 13, 2018, 12:49:14 PM
What are all of the Greek investments?
Title: Re: Fairfax 2018
Post by: petec on January 14, 2018, 12:25:40 AM
I was surprised (and encouraged) by Prem's comments after the election.  It sounded like and I think most would agree, that FFH was ready to play offense.  I don't know the exact numbers but it seems like FFH have added almost NO significant equity long positions to their portfolio's.  Portfolio is still mostly cash well over a year later.  What gives?  Valuation?

Basically yes. Prem was actually very clear that "offense" didn't mean they were suddenly bullish on the market. It just meant they were cutting their losses on the hedges and would wait in cash for great opportunities.

They have done quite a bit since, but more in the pref/warrant+convertible portfolio rather than equities.
Title: Re: Fairfax 2018
Post by: Dazel on January 14, 2018, 04:30:29 PM

Petec I disagree.

Prem said

I am bullish on global markets and growth especially in India and developing markets because the U.S growth is going to pick up and animal spirits will return.

-They made the biggest acquisition by far in their history completed in July..taking the investment portfolio to $40b

-They sold the majority of their long term bonds and said interest rates will rise...in other words we will wait to buy bonds

-They started Fairfax Africa

-they added to Fairfax India raised debt and bought more investments

They added another $250m in Greece

-had record investment returns for 2017 from two big sales

-started an Insurance company on their own in India

-invested about another billion in convertible preferred shares

They have been very busy they just are not buying U.S common stocks at 20x earnings....but have shown bullish moves on global growth which they have been right about so far.

To me again the bullishness has kept them away from the bond market which will move the needle more than anything else when they re enter....when others head for the exit....that’s not far away. The 43% of the portfolio in cash will be headed for bonds at the right price.

Title: Re: Fairfax 2018
Post by: dutchman on January 14, 2018, 05:02:52 PM
Near-term earnings will be well below the company’s long run earnings power, for sure.  I think this plays out over 5+ years though.  Good one for the patient, but who's patient? :)
Title: Re: Fairfax 2018
Post by: Dazel on January 14, 2018, 05:40:25 PM


I once again disagree. Dutchman.

Can you tell me how Markel got to a $1000 a share? What investment genius decisions did they make? They have very good insurance operations and a decent investment return on the investment portfolio.

New Fairfax is an operating company that do not need spectacular macro calls... they do not need a lot to go right to perform well. Will they have a great investment in the next 5 years that will standout and pop the shares probably...5% return and underwriting  profits will take pretax earnings to around $3b. That’s this year...not the next 5.

The math works.
Title: Re: Fairfax 2018
Post by: shalab on January 14, 2018, 06:00:11 PM
FRFHF still has CPI derivatives on which it is losing money. Furthermore, FRFHF is a family business in the mould of Indian business houses. If you look at Tata, the family has owned it since 1800's. SD has done some good analysis on how these are setup so the next generation will benefit.



I once again disagree. Dutchman.

Can you tell me how Markel got to a $1000 a share? What investment genius decisions did they make? They have very good insurance operations and a decent investment return on the investment portfolio.

New Fairfax is an operating company that do not need spectacular macro calls... they do not need a lot to go right to perform well. Will they have a great investment in the next 5 years that will standout and pop the shares probably...5% return and underwriting  profits will take pretax earnings to around $3b. That’s this year...not the next 5.

The math works.
Title: Re: Fairfax 2018
Post by: Dazel on January 14, 2018, 06:40:42 PM


Shaleb,

Tell the board what the mark to market value of the he CPI derivatives are carried in the book value is please and how much possible downside there is to a value of zero please.

Title: Re: Fairfax 2018
Post by: Dazel on January 14, 2018, 06:54:25 PM

Page 14 of the third quarter report Shalab.
The hit has been taken as for that Tata family? Really?
Title: Re: Fairfax 2018
Post by: Dazel on January 14, 2018, 07:02:19 PM


Waiting Shalab let’s us know what that downside is on the CPI derivatives and please explain your bizarre Tata reference.
Title: Re: Fairfax 2018
Post by: dutchman on January 14, 2018, 07:10:25 PM
i think he's saying it deserves a big discount because it will be handed over to watsa's son who may not be the best steward?

thanks for your posts Dazel, I'm learning a lot.
Title: Re: Fairfax 2018
Post by: shalab on January 14, 2018, 07:39:10 PM
In Indian business houses, control is passed from one generation to the next - shareholder is a lower priority - that is all.

CPI derivatives - let us see how things look like in Q4.

I still own some FRFHF but the number is significantly lower than it was a few years back. It has been a good decision. I haven't bought back yet.

i think he's saying it deserves a big discount because it will be handed over to watsa's son who may not be the best steward?

thanks for your posts Dazel, I'm learning a lot.
Title: Re: Fairfax 2018
Post by: Dazel on January 14, 2018, 07:47:20 PM
http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-Announces-Modifications-to-Multiple-Voting-Share-Proposal-and-Postponement-of-Special-Meeting--of-Shareholders-to-August-24-2015/default.aspx

 .2 from the amendment

If Prem is no longer the CEO or the Chairman of Fairfax there has to be a vote among “minority shareholders” to approve the amendments for the multiple voting shares to remain. He has signed on to remain in his positions until 2025 and kept his salary frozen at $600,000 which he has done since 2000.

So why would you worry about his son stewarding the ship? He would have to win a minority vote to have the controlling vote if Prem were to leave for “any” reason.

Shalab does that sound like an Indian business house from 1800’s?
Title: Re: Fairfax 2018
Post by: Dazel on January 14, 2018, 07:49:36 PM



$59m fair value on CPI contracts. They have written off almost $600m.
Title: Re: Fairfax 2018
Post by: petec on January 15, 2018, 12:46:37 AM

Petec I disagree.

Prem said

I am bullish on global markets and growth especially in India and developing markets because the U.S growth is going to pick up and animal spirits will return.

-They made the biggest acquisition by far in their history completed in July..taking the investment portfolio to $40b

-They sold the majority of their long term bonds and said interest rates will rise...in other words we will wait to buy bonds

-They started Fairfax Africa

-they added to Fairfax India raised debt and bought more investments

They added another $250m in Greece

-had record investment returns for 2017 from two big sales

-started an Insurance company on their own in India

-invested about another billion in convertible preferred shares

They have been very busy they just are not buying U.S common stocks at 20x earnings....but have shown bullish moves on global growth which they have been right about so far.

To me again the bullishness has kept them away from the bond market which will move the needle more than anything else when they re enter....when others head for the exit....that’s not far away. The 43% of the portfolio in cash will be headed for bonds at the right price.

Apologies - I wasn't very clear. My comment related to the US stock market - the removal of the hedges (which were predominantly US) and the "playing offense" comments did not mean he was bullish on the US market. This was made clear.

You are right about the rest although much of it happened before the hedges came off - the buildup in India, the move to short duration. The sales of Lombard and First aren't really relevant to FFWatcher's question that I was trying to answer.

What is relevant, and I hadn't thought through fully, is your point that much of the cash is waiting to be reinvested in bonds not equities. That's a big part of why they have so much cash despite "playing offense".
Title: Re: Fairfax 2018
Post by: petec on January 15, 2018, 12:57:30 AM
http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-Announces-Modifications-to-Multiple-Voting-Share-Proposal-and-Postponement-of-Special-Meeting--of-Shareholders-to-August-24-2015/default.aspx

 .2 from the amendment

If Prem is no longer the CEO or the Chairman of Fairfax there has to be a vote among “minority shareholders” to approve the amendments for the multiple voting shares to remain. He has signed on to remain in his positions until 2025 and kept his salary frozen at $600,000 which he has done since 2000.

So why would you worry about his son stewarding the ship? He would have to win a minority vote to have the controlling vote if Prem were to leave for “any” reason.

Shalab does that sound like an Indian business house from 1800’s?

I'm not sure you've read that right, Dazel. The way I read it, the minorities get a vote on whether the multiple voting shares continue to be protected from dilution by share issuances after the vote. They don't get to vote on whether the multiple voting shares should continue to have their existing number of votes. And they don't get to vote for 5 years.

If my reading is correct then Prem could hand over to his son, who could issue shares at will for 5 years and then stop, and still have 41.8% of the votes forever.

Which isn't to say that he would do that, but we have to have our eyes open. I think the biggest safeguard against that is Prem's knowledge that both insurance and investment are fundamentally people businesses. If you don't protect the culture the people will leave and all the value you have created will go. I doubt that's Prem's long term plan. We also have a fair idea who Prem's successor is at the top and it's not his son.
Title: Re: Fairfax 2018
Post by: Dazel on January 15, 2018, 04:18:50 AM

Petec, your point  is well taken on the amendment...we know the shares have already been diluted from the Allied acquisition so I am not sure how it works exactly. But I most certainly do not think it is the issue that has been brought up. I see a shareholder group that was very dissatisfied with Prem’s performance in 2015-2016 and they saw it as an undeserved power grab. They of course are entiltled to this opinion and many voted with their feet.
They sold most of their shares...the corner of Berkshire Fairfax dinner is likely over...these are all signs of capitulation.The fact is Fairfax is second behind Berkshire for their treatment of shareholders over the last 30 years. To think that Prem set up a family coup like the Tata of the 1800’s is laughable. However, it is important to note there is great disappointment in Fairfax being wrong for awhile.

To be fair I am pretty sure that I have stressed how bad the hedges were and what a disaster they were to performance when I said they may be the worst hedges I have ever seen! This rear view look is why we are trading where we are and actually why I am posting.

When other Fairfax threads broached the topic of hatred of Fairfax they were real. Biggest bull market in history and Fairfax not only did not profit they lost likely $6b in hedge losses and equities fell apart!!!? Shareholders  “deserve” to be pissed. But be pissed for the right reason. Performance sucked!

So the shares are in show me mode.... and rightfully so...my point is only to stop thinking about the rear view mirrror and look at what carrried Fairfax through the hedge losses. When they get the investing side right and I think they will....all will be sorry they held a grudge!

Petec we understand you are stronger than most and will do better in the long run...you don’t know when Fairfax will have a 50% run in share price. Dutchman, Idont think it will be 5 years! But your point is well taken speculation has taken over and 5 years is an eternity to most!

Since everyone is in speculation mode...I will speculate that Longleaf will keep adding here and they will double their money in Fairfax in a couple of years.
Title: Re: Fairfax 2018
Post by: petec on January 15, 2018, 04:29:39 AM
Agreed Dazel - and FWIW, my reason for continuing to debate the history is because it gives an insight into the culture and decision-making/learning process, rather than because I think recent history is a guide to the near future!
Title: Re: Fairfax 2018
Post by: Dazel on January 15, 2018, 07:51:30 AM


Fairfax has paid around $100 a share out and dividends as well for long term holders these become significant portion of their returns when growth starts to compound again. It would add around 20% to returns over the last decade. While most do not care...big smart money does.
Title: Re: Fairfax 2018
Post by: dutchman on January 15, 2018, 10:23:59 AM
has anyone examined Allied and Brit recently.  Are you satisfied there wont be too many big surprises?
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 15, 2018, 10:30:21 AM
has anyone examined Allied and Brit recently.  Are you satisfied there wont be too many big surprises?


By surprises, do you mean catastrophe losses, or do you mean adverse development?  If it's the latter, it's pretty tough to know in advance.  If the previous management was not disciplined in its underwriting, it can take a few years to find all of the skeletons in the closet.


SJ
Title: Re: Fairfax 2018
Post by: Dazel on January 16, 2018, 06:31:42 AM

For all the bull market enthusiasts...Blackberry may be on the cusp of joining the frenzy. I would not hold a big position directly at these levels but happy to have Fairfax possibly make billions on the frenzy.

https://www.reuters.com/article/us-blackberry-software/blackberry-launches-cybersecurity-software-for-self-driving-cars-idUSKBN1F42LX

The article missed the Nvidia partnership. Nvidia was the hottest stock in the tech sector last year...stay tuned.
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 17, 2018, 07:22:34 PM
http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-Announces-Modifications-to-Multiple-Voting-Share-Proposal-and-Postponement-of-Special-Meeting--of-Shareholders-to-August-24-2015/default.aspx

 .2 from the amendment

If Prem is no longer the CEO or the Chairman of Fairfax there has to be a vote among “minority shareholders” to approve the amendments for the multiple voting shares to remain. He has signed on to remain in his positions until 2025 and kept his salary frozen at $600,000 which he has done since 2000.

So why would you worry about his son stewarding the ship? He would have to win a minority vote to have the controlling vote if Prem were to leave for “any” reason.

Shalab does that sound like an Indian business house from 1800’s?


What do you make of the contract between FFH and the Lissom investment management company that employs Ben Watsa?  Looks like Ben is managing $50m of FFH's assets through that company.  I wonder how much FFH is paying in investments fees and why that $50m isn't just taken care of by Hamblin Watsa like the rest of the portfolio?  What does Ben make out of this?  Is this a 1 and 20 compensation scheme or something like that?

Fifteen years ago, Sanjeev would have given his left nut to have a contract to invest $50m.


SJ
Title: Re: Fairfax 2018
Post by: Dazel on January 17, 2018, 07:42:51 PM


Maybe Ben Watsa is like Chris Davis and it runs in the family and he has $50m of financials! I see Chou funds kicked ass in the last couple months he has $500m of Fairfax money I think....but his performance has been dreadful too! Maybe Ben is a the smartest of the bunch....if he isn’t and his performance is sub par he will be replaced...not sure how he could not beat Prem and his team over their dry spell! Lol.

My money is on Bradstreet...always has been...he has consistently outperformed his bench marks by a wide and incredible margin.

The fact of the matter is Prem will take heat about structure, Ben,  his recent performance until he rights the ship. That is the way it should be.....
Title: Re: Fairfax 2018
Post by: Txvestor on January 17, 2018, 07:46:18 PM
https://www.prnewswire.com/news-releases/seaspan-enters-into-definitive-agreements-for-250-million-unsecured-550-debenture-and-warrant-investment-with-fairfax-financial-holdings-limited-669830003.html

Is this the same David Sokol of Berkshire Hathaway fame, that was unceremoniously booted out soon after the Lubrizol acquisition for front running his money while aware of Berkshire's plans to takeover?
A little hard to stomach after Watsa's blind faith in Tom Ward that lost Fairfax hundreds of millions of dollars. If you listen to the likes of Walter Schloss one of the attributes of Warren Buffett they are amazed by is his uncanny ability to judge character, and as close as Sokol was to the top, I doubt he was acting with less than full  knowledge.
Certainly a concern for me. Any thoughts?
Title: Re: Fairfax 2018
Post by: petec on January 18, 2018, 02:31:19 AM
https://www.prnewswire.com/news-releases/seaspan-enters-into-definitive-agreements-for-250-million-unsecured-550-debenture-and-warrant-investment-with-fairfax-financial-holdings-limited-669830003.html

Is this the same David Sokol of Berkshire Hathaway fame, that was unceremoniously booted out soon after the Lubrizol acquisition for front running his money while aware of Berkshire's plans to takeover?
A little hard to stomach after Watsa's blind faith in Tom Ward that lost Fairfax hundreds of millions of dollars. If you listen to the likes of Walter Schloss one of the attributes of Warren Buffett they are amazed by is his uncanny ability to judge character, and as close as Sokol was to the top, I doubt he was acting with less than full  knowledge.
Certainly a concern for me. Any thoughts?

It is. They also have a joint investment with him in Davos Brands.

Buffett always praised him as an exceptional executive. He made - so far as we know - one lapse of judgement. He has either learned his lesson or has not. Fairfax is investing alongside him in marketable securities. That's very different to promoting him CEO of a subsidiary or even the whole company, which people thought might happen at BRK. Am I totally comfortable? No. Do I see it as a massive risk for Fairfax? No.

Buffett clearly made a mistake in his judgement of Sokol's character. What we don't know is whether he made it when he praised him or when he fired him.
Title: Re: Fairfax 2018
Post by: petec on January 18, 2018, 02:34:46 AM

For all the bull market enthusiasts...Blackberry may be on the cusp of joining the frenzy. I would not hold a big position directly at these levels but happy to have Fairfax possibly make billions on the frenzy.

https://www.reuters.com/article/us-blackberry-software/blackberry-launches-cybersecurity-software-for-self-driving-cars-idUSKBN1F42LX

The article missed the Nvidia partnership. Nvidia was the hottest stock in the tech sector last year...stay tuned.

I think Blackberry has already joined the frenzy!

I was also amazed to see that Grivalia is virtually debt free. Enormous opportunity there as the Greek banks ramp their efforts to auction mortgage NPLs to meet their 2018/9 targets. And FFH could win on both sides of that deal - Grivalia and Eurobank, which still trades at 0.33x tbv despite having been profitable since 2016 (I have not done a deep dive).
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 05:17:35 AM


Also of note I am pretty sure that Bradstreet has made money in Greek bonds...however, I am not sure how much he held into last years rally. Greek debt is the best performing in the world and now yields approx 3.5%....these were generating above 10% yields for a longtime.

Of note the U.S 10 year is trading above 2.60% yield at 2.613%. Last years high was 2.63% and as someone else quoted Gundlach (the bond king), he says if we breach 2.63% rates will skyrocket up.

This thesis would jive with the real “bond king” Brian Bradstreet’s strategy.
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 05:27:59 AM


The old bond king Bill Gross says the bond bear market is in full swing...this is huge for Fairfax as they hold over 43% (after the sale of first capital) in cash...others bond portfolio will get hit with big losses. Fairfax will avoid the losses and be able to deploy at higher rates. To me this will be the story of 2018...Fairfax hold several commodity related investments as well which have and will continue do well in a rising inflationary environment...Resolute, Altius,Apr energy,  Seaspan, Fairfax Africa.


Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 05:47:44 AM

To add to the further posts Prem has publically stated that Fairfax believes that rates will rise with global growth...they are right for now let’s see how it plays out...to me defence on bonds which is the greatest portion of their investment allocation and always has been to a point where Bradstreet pulls the trigger at higher rates.
Equity holdings are emerging markets skewed $5b in India, $2b in Greece...inflation protected in the commodity related ownership I mentioned in my previous post...boat loads of cash...rising insurance premiums.

It’s a good spot to be....the blind bond buyers of the last several years will learn too late that they swimming naked.

For those that think Fairfax is lost...Gundlach is advocating commodities and calling for higher rates...Prem and his team were early as per usual but they are positioned for this theme. If it continues to play out the share price will be much higher before the public can figure it out. Unlike everyone else I would like to see this strategy success develop slowly so we get rid of a lot of shares through buy backs at these levels.
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 18, 2018, 06:08:09 AM


The old bond king Bill Gross says the bond bear market is in full swing...this is huge for Fairfax as they hold over 43% (after the sale of first capital) in cash...others bond portfolio will get hit with big losses. Fairfax will avoid the losses and be able to deploy at higher rates. To me this will be the story of 2018...Fairfax hold several commodity related investments as well which have and will continue do well in a rising inflationary environment...Resolute, Altius,Apr energy,  Seaspan, Fairfax Africa.


I'm not quite ready to celebrate on this front.  What do you make of the sensitivity analysis in the Q3 report that suggests that FFH's duration has increased?  I would presume that this is mostly due to the legacy bond portfolio at Brit?  Do you figure they've go that cleaned up yet?


SJ
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 18, 2018, 06:17:43 AM

For all the bull market enthusiasts...Blackberry may be on the cusp of joining the frenzy. I would not hold a big position directly at these levels but happy to have Fairfax possibly make billions on the frenzy.

https://www.reuters.com/article/us-blackberry-software/blackberry-launches-cybersecurity-software-for-self-driving-cars-idUSKBN1F42LX

The article missed the Nvidia partnership. Nvidia was the hottest stock in the tech sector last year...stay tuned.

I think Blackberry has already joined the frenzy!




Yes, it is heartening to see the Blackberry position in the black.  What do you envision as FFH's exit-strategy from this large position?  Presumably at some point in the future, FFH will want to exercise the conversion privileges on the debt that it holds because the shares have risen.  So, with Prem on Blackberry's board of directors, when the BlackBerry investment hits intrinsic value, how does FFH divest its position and re-deploy our capital into the next excellent opportunity?

Clearly this one is not like the large positions of yesteryear that FFH had in WFC, JNK and Kraft.  Exiting those positions was pretty straightforward because $300m or $500m of additional volume for those mega-caps can be absorbed pretty easily over a relatively small number of trading sessions...


SJ
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 06:35:00 AM


SJ,

No need for excitement yet...I am always early as well! I will wait for the annual to comment on the duration...It depends on what was held at the longer end of the curve...Allied bonds I think you meant...Brit should be gone.

I will post the best example of what I have ever seen by a value investor holding a tech stock during the last bubble....this is not a worry at this point...all of Blackberry would like be sold in pieces...radar to Verizon, patents to a specialty company that is expert in this field, QNX to anyone(Nvidia), lots of cash for easy spin off...if they wanted to realize the value they would get a least $30  tomorrow.

If the market starts to appreciate this and then some there other ways to synthetically sell it.
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 18, 2018, 06:57:55 AM


SJ,

No need for excitement yet...I am always early as well! I will wait for the annual to comment on the duration...It depends on what was held at the longer end of the curve...Allied bonds I think you meant...Brit should be gone.

I will post the best example of what I have ever seen by a value investor holding a tech stock during the last bubble....this is not a worry at this point...all of Blackberry would like be sold in pieces...radar to Verizon, patents to a specialty company that is expert in this field, QNX to anyone(Nvidia), lots of cash for easy spin off...if they wanted to realize the value they would get a least $30  tomorrow.

If the market starts to appreciate this and then some there other ways to synthetically sell it.


No real need to wait for the annual to comment on duration.  The basic direction is right there on page 25 of the Q3.  Based on a Q3 2017 bond port of $11.9b, a 100 bp parallel shift upward in the yield curve would whack earnings by $229.2m.  Based on a Q3 2016 bond port of $10.2B, the same 100 bp parallel shift upward would have whacked earnings by $148.2m.  So, given that the bond port has increased by 16 or 17 percent but the earnings impact has increased by ~50%, can one arrive at any other conclusion than an increase in average duration?

So, has the duration increase in the bond port been undertaken through active management, or is it legacy from Allied as you suggested?

I won't post one of the most disastrous examples of value investors counting on a "sum of the pieces" return.  It's called Sears Holdings.  The sum of the pieces analysis was probably correct, but execution can be a bitch.


SJ
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 07:09:04 AM
Onex synthetically sold the majority of their Celestica holding at the highs in the tech bubble.

https://www.theglobeandmail.com/report-on-business/in-its-mind-market-uncouples-onex-shares-from-celesticas/article4153011/

http://www.marketwired.com/press-release/onex-settles-its-celestica-forward-sale-agreements-tsx-ocx.sv-542002.htm

Altius did the same thing with their sale of their Aurora shares at the top of the uranium bubble frenzy.

http://www.marketwired.com/press-release/altius-minerals-corporation-tsx-als-reports-third-quarter-net-earnings-316-million-tsx-als-958233.htm
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 07:15:32 AM


Ahh SD,

Welcome.

How was your sum of the parts broken down on Bitcoin? Nice speculation congrats hope you sold.

Sears has operating losses of what $15 $20 billion? Pretty clear where the value went! Blackberry is cash flow positive...

What if the long term bonds were in Greek debt? Than it’s a home run! It matters in what.

Indian business houses really? They using block Chain? Lol.
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 18, 2018, 07:15:54 AM
Onex synthetically sold the majority of their Celestica holding at the highs in the tech bubble.

https://www.theglobeandmail.com/report-on-business/in-its-mind-market-uncouples-onex-shares-from-celesticas/article4153011/

http://www.marketwired.com/press-release/onex-settles-its-celestica-forward-sale-agreements-tsx-ocx.sv-542002.htm

Altius did the same thing with their sale of their Aurora shares at the top of the uranium bubble frenzy.

http://www.marketwired.com/press-release/altius-minerals-corporation-tsx-als-reports-third-quarter-net-earnings-316-million-tsx-als-958233.htm


Were those synthetic sales made by a Director of the company who is obliged by SEC regulations to report all purchases and sales?
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 07:25:54 AM

Obviuosly. Gerry Schwartz and Brian Dalton are not in jail.
Last time I checked they are iconic Canadian entrepreneurs.
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 07:28:15 AM


Fairfax is not selling Blackberry. They will likely make a couple billion by th time they are done it is already one of the great turnaround stories. John Chen is a superstar....

SD you think they issue a new coin?
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 18, 2018, 07:30:57 AM

Obviuosly. Gerry Schwartz and Brian Dalton are not in jail.
Last time I checked they are iconic Canadian entrepreneurs.


So, just to be clear, Gerry Schwartz of Onyx was sitting on Celestica's board of directors and engineered a synthetic sale and reported it to the SEC as an insider transaction for public dissemination?
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 07:38:16 AM

SJ I don’t care...check Onex fiiings I don’t think their lawyers are stupid do you?
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 07:41:47 AM

To SD’s point of The bond portfolio getting “whacked” for $220m on 100 basis point parallel move in yields.

What kind of losses would occur on $100 trillion? Whacked?! Yes.

http://www.scmp.com/business/companies/article/2104277/its-anybody-guess-which-way-us100-trillion-bond-market-will-go
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 18, 2018, 07:50:12 AM

SJ I don’t care...check Onex fiiings I don’t think their lawyers are stupid do you?


It's not about whether Onyx's general counsel is stupid.  It's about FFH having dropped $1.3b into an investment which is not easily exited, in part because Prem sought a position on the board which requires that he publicly report purchases and sales of BB.  If he were not a board member, then it would be an easy thing to sell the BB position over a period of a couple of months, ignoring any price pressure that this might create.

The BB position is ~$50/sh.  I view this capital as somewhat encumbered due to Prem's board membership.  You seem to hold the view that it is not encumbered and have given the example of Onyx using a synthetic disposal approach to support that view.  Certainly there is more than one way to dispose of a large investment, but I'm struggling to think of other examples of Directors selling a $1b+ position, which is why I asked whether Gerry Schwartz was actually a Celestica board member (in the same way Prem is a member of BB's board of directors).  It's not about lawyers being smart or stupid.

If anybody has a really great exit-hypothesis for the BB investment, I'd love to hear it.


SJ
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 07:57:45 AM
U.S Treasury moves year over year
2-year 83 basis points
10year 18 bp
30 year -13

In Sd’s number if Bradstreet went long 30 year he has made money....in price and got a high yield...2 to 5 year debt has got “whacked” globally.

Greece 10 year
-361 bp

The answer from me is I don’t know. Will know more after the annual.
Title: Re: Fairfax 2018
Post by: StubbleJumper on January 18, 2018, 08:03:06 AM

To SD’s point of The bond portfolio getting “whacked” for $220m on 100 basis point parallel move in yields.

What kind of losses would occur on $100 trillion? Whacked?! Yes.

http://www.scmp.com/business/companies/article/2104277/its-anybody-guess-which-way-us100-trillion-bond-market-will-go


To be clear, the issue is not whether a fixed income portfolio gets whacked when rates increase; that's a clear duration management question and it's a fact of life for all of us.  My only purpose for pointing out that FFH's duration appears as if it may have increased is that we should be circumspect about cheering for rate increases until FFH has finished dropping its duration.  Hence my question about whether you figure that they've got the Brit Allied portfolio clean up yet.

Otherwise, I tend to agree with your view of the FI port.  FFH seems to have gone to cash and short term, which is what you'd like to see if you anticipate an increase in interest rates.


SJ
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 08:04:34 AM

SJ they are not exiting....if they are worried they will hedge the bet. It is 3 % of the investment portfolio.
At $30 I will worry about this

They would be there if they joined Kodak and issued a coin maybe go up 5 times like them!!!! The crypto crowd should start a thread on it!!!! let’s go!

If things get stupid( the stock takes off) and they may...I would join your concern.
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 08:12:51 AM


Thanks SJ I understand your concern greatly!
I think i have explained it as much as I can until I see the annual report.
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 04:22:52 PM

I had a lot going on today...just reread my posts....in aback and forth between many different things I made the mistake of thinking one of the posts was SD’s (an absolute gem highly intelligent and great for this board!)... I apologize for the misrepresentations in Responseto both SJ and SD...not for the response itself.

I think I subconsciously would have really liked a head to head with SD on the Indian business houses and discuss the value of a bitcoin....civilization, global warming...Second thought....not really.

Cheers,

Dazel

Title: Re: Fairfax 2018
Post by: John Hjorth on January 18, 2018, 05:16:39 PM
At least for my part, you're both excused and forgiven, Dazel.

I speculate that covers all CoBF fellow board members reading your posts.

I got a bit confused during the day about it, though. Absolutely no harm done.

Thank you for sharing your thoughts on Fairfax here on CoBF. Please keep your posts coming. At least I learn a lot from them, I have a feeling of other CoBF board members doing the same thing.

- - - o 0 o - - -

For my part, now back to keeping my mouth shut on Fairfax & reading on CoBF & learning about Fairfax.
Title: Re: Fairfax 2018
Post by: Dazel on January 18, 2018, 05:46:04 PM
https://www.cnbc.com/quotes/?symbol=US10Y

10 year U.S treasury has gone through 2.62% at 2.637%...if this is the trigger that spooks the $100t bond market its the highest rate since 2014...the 2 year going through 2% is the highest since 2008..we will see some fireworks...nice to have about $20 billion in cash.
Title: Re: Fairfax 2018
Post by: ValueMaven on January 19, 2018, 03:09:02 AM
You now have much improved underwriting at FFH from Allied...who knows how that transitions in 2018, but Allied was such a SMART acquisition for FFH honestly...I'll be reinvesting my dividends back into the parent (like I always do)....So what you want, but the future is BRIGHT.  For those of you who think Prem has lost his way...lets not forget him covering all of those hedges etc, when Trump was elected.  I agree, it was a mistake to hedge the book for so long, esp with those deflation swaps (I was not a fan of those at all)...Cheers, here is to a much brighter future at FFH.

PS: I might really try and tackle a detailed SOP valuation for FFH in 2018...if/when I do, I will of course post it here..

Sincerely,
VM
Title: Re: Fairfax 2018
Post by: Cigarbutt on January 19, 2018, 05:22:53 AM
One feature that I have followed and that may have implications in the opportunistic "future" of FFH is the growing presence of alternative capital, especially in the reinsurance market.

Last year was unusual in terms of the size and frequency of major catastrophes. Despite the losses in several catastrophe bonds, there seems (anecdotal and some data) to be an abundance of capital (often from the same sponsors) who continue to provide "replacement" capital.

This appears to be a slight positive for primary insurers as reinsurance rates are "kept" lower but some say alternative capital is looking into the territory of primary carriers as well.

I find that the capital inflows provided by the insurance-linked securities market has been unusually strong in the last few years. I suspect that this may be a major enhancer of the underwriting cycle. It must be frustrating for reinsurers to have competitors who can provide capital almost out of thin air in softer environments. Even if this may prolong the softness of the markets, I submit that, in due course, it may also contribute (disappearing capital) to a harder market in a more difficult environment.

From my limited perspective, I would like to see net premiums written by the reinsurance segments of FFH to remain stable or even shrink in this environment.

www.artemis.bm/deal_directory/cat_bonds_ils_issued_outstanding.html

What is a "SOP" valuation?

Title: Re: Fairfax 2018
Post by: Crip1 on January 19, 2018, 06:10:55 AM
"SOP" - Pretty sure that's "Sum of Parts".




-Crip
Title: Re: Fairfax 2018
Post by: Dazel on January 19, 2018, 06:14:23 AM




Cigar butt you are correct...you know what takes care of the excess capital?
Higher interest rates...the world has not only been reaching for yield they have climbed Everest...rising rates will squeeze liquidity and the excess capital will disappear. So it’s not just Bradstreet kicking th bond worlds ass he is the best in the world at accessing credit. (CDs portfolio hit every financial that was exposed and then made I killing on the right Muni’s)....

One of the consequence of where we are for those that are paying attention is that for debtors it’s a great time to bankrupt a company. Why? The realization of the remaining assets is high so debt holders will get higher payouts in liquidation then letting a company dig a debt hole into the future they will never get out of. This is a consequence of risng rates and liquidity squeezing....banks don’t want to lose when they see the credit cycle tightening....it will slowly (or quickly) have consequences. For almost a decade banks have not foreclosed because it was worth it to float the zombies with cheap money....that cycle may have changed...with Carillion...Steinhoff was mostly a scam pyramid...(Canadian Pot stock aren’t?!!)

This what Fairfax does best....restructures...taking first creditor position an environment of restructure and growth would be nirvana for Fairfax..many did not comment on the Blackberry move to debtor but it had very little downside nor did Resolute out of bankruptcy. This is early days of course....does not take much for Bankers to get spooked...do you not think they are checking their loan books after gettting burned? Unless they are in Toronto...and smoking the wacky tobacco not sure WTF Canadians are doing...gambling on houses, gambling on Bitcoin, gambling on Pot stocks...all with debt.
The world will continue forward and at a good clip but higher rates will bring opportunity and some destruction.

https://www.bloomberg.com/news/articles/2018-01-17/u-s-banks-have-lost-more-than-1-billion-on-steinhoff-loans

https://www.bloomberg.com/news/articles/2018-01-15/carillion-banks-lead-losers-as-2-2-billion-debts-crush-builder