Parsad

John, stop being a twat! ;D Cheers!

Writser, that's kind of an asshole comment! The Martingale strategy works for small amounts and durations. If EV is 50/50, and you have very high table limits and a large bankroll, a gambler on a run could easily take down a casino. That's all I'm saying. I didn't say that the Martingale strategy is foolproof, but that a conservative, patient gambler, can make money from it without wiping out their bankroll...in particular on a European table. I also said that even with 50/50 odds, why would anyone take the risk when they can invest in stocks and have a 55/45 advantage or better. Cheers!

Parsad, I have a ton of respect for you. Both Casinos and Gamblers are subject to variance and gambler's ruin, no doubt there. From a purely mathematical point of view, the strategy in the you outlined still has a negative EV since Roulette is designed with a house advantage. Each spin is memoryless, so even if the preceding 100 spins were red, the probability of the next spin being red/black is still 48.60% and green 2.70%, which is the error in your statement. Any winnings you have are due to variance (and I suspect, as we are human, due to a biased memory). I'm not doubting you made money, but as your number of bets increases, your winning % approaches the true probability, and you will lose money. In real life however, there may be some tricks? In Thorpe's autobiography, he tried to create a machine to calculate final ball position based on starting position and velocity. There may be table defects as well. If you find such a table, I suggest you abandon the double down strategy, choose a consistent bet size to minimize risk of gamblers ruin, and ride out the winnings :) Edit: I'll throw in a little more. Changing bet size works only if the odds are shifting. When counting cards, you have someone bet a low amount until the count in the deck is high (signalling a higher player edge), then you signal someone to come over to bet with a much higher amount. In roulette, the odds do not change, so there is no advantage to any type of double down strategy. Each spin is memory less and your odds are 48.60% on the next spin, but the odds of red or black coming up consecutively is 0.4860 x 0.4860 x 0.4860....! Cheers!

I can assure you with 50/50 odds, mathematically your EV is 0. Blackjack without counting and perfect play is like 49.5 / 50.5, so you still have a negative EV, no matter how you "double down" or choose to take your profit. Actually with 50/50 odds, the casino would go broke on roulette. I've turned $50 into a couple thousand dollars numerous times in just a few hours without losing my bankroll in roulette...but you have to have high table limits and low minimum bets, and ideally either 0 or 00, but not both. European roulette only has 0, while American roulette has both. If you can find European roulette tables...play them instead of American. Why only a couple thousand dollars? Because the table limit at the casinos I've played is $500 or $1000. You start at $5 and double down on either red or black after a run of at least 5 reds or 5 blacks...so you have to be patient. Every time you win, you start at $5 again. Every time you lose, you make sure you double down on the subsequent bet. You'll only be able to double-down 5 or 6 times before hitting the table limit, so you only bet once you see 5 reds or 5 blacks in a row. Yes, yes, your probability of winning on any single spin is 50/50, but the probability of 7,8,9 in a row of the same color becomes less and less likely. This takes time, because 5 blacks or 5 reds in a row only come up every 20-30 minutes or so. I used to do this in my 20's and often it would take 5-10 hours of patiently playing. But I never lost my bankroll, and I did it at least 25-30 times, usually turning a $50 bankroll into $900-$1500. Often you would win small amounts until your bankroll increased in size, eventually allowing you to take slightly larger initial bets of $25-50. But the number of times you double-down would decrease whenever you were wrong. On the rare occasion 0 would show up and you start over at smaller bets...on rare occasions, you would have lost all that you gained that day and walk away with your $50 bankroll. I've never played roulette in Vegas, but I hear the limits are around $10-15K per bet. When I started investing after learning about Buffett and value investing, I promised myself that I would never gamble again, and I haven't. I understand that there are online roulette games with very high limits. I haven't tried them, nor have the urge to try them. You have less than 50/50 odds playing roulette...American or European. Going back to Mohnish's example, if you are right about your stocks even just 55-60% of the time, and you can choose your punches, why do anything else! Cheers!

Please don't post copyrighted material from letters. Cheers!

Pabrai is effectively saying that he is 80% directionally right on each investment. Now the comparison does not hold fully when you consider varying time horizons. But that would be the gist. I still don't get it. How is he able to calculate with any degree of precision that a stock has a 4 out of 5 chance of going up? What would such a calculation even look like? He's not calculating the probability of the stock going up or developing some calculation for that. What he's saying is that 4 out of 5 times, after he analyzes a business and invests in it, the stock will eventually move closer to intrinsic value 80% of the time. And he will be wrong roughly 20% of the time. Cheers! If you are suggesting that he is extrapolating from his past experience as an investor to come to that 80% figure*, then he is just making a basic logical fallacy. Surely that isn't what he means? * "80% of my equity investments in the past have been successful, therefore 80% of my equity investments in the future will be too." If Buffett has historically over 60 years picked 95% correctly, you don't think he's going to be close to that percentage in the next 10 years? It's not a guarantee of any sorts, but unless he is suffering from some sort of mental handicap or completely changes his methodology, you don't think he would be close to that percentage going foward? That's not a logical fallacy...that's reality! He's not rolling dice...he's developed an advantage through his methodology. Cheers!

True. Cheers!

Even with big bucks, it's hard to beat casinos because of table limits. If you can somehow play in a high stakes game, with no table limits, then a good player can do well. High stakes poker tables prove that there is a certain amount of skill involved and those abilities can distinguish between the good and great players. But unlike statically picking stocks, there is an element of luck with gambling...that does not exist in stock-picking, unless you are throwing darts at a list of the S&P500 and hoping one of them will be a 100-bagger! Cheers!

Pabrai is effectively saying that he is 80% directionally right on each investment. Now the comparison does not hold fully when you consider varying time horizons. But that would be the gist. I still don't get it. How is he able to calculate with any degree of precision that a stock has a 4 out of 5 chance of going up? What would such a calculation even look like? He's not calculating the probability of the stock going up or developing some calculation for that. What he's saying is that 4 out of 5 times, after he analyzes a business and invests in it, the stock will eventually move closer to intrinsic value 80% of the time. And he will be wrong roughly 20% of the time. Cheers!

Yep, the BB shareholders are up in arms. I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege. I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay? Maybe 7%? Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative? I don't see it, but I've been wrong plenty of times before... SJ Blackberry shareholders are still up in arms about this: https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html SJ Your prior actions tend to form your reputation... "Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management." Your prior actions tend to form your reputation! More examples please, because if you are going to point to 2 transactions out of some 300-400 conducted over 30 years...please! The only reason Blackberry is even around is because of Prem putting John Chen in charge. Cheers!

From what I understand, Ryan Reynolds is a minority shareholder and he is staying on as a shareholder of American Aviation. The rest of business (Davos) is mostly owned by Fairfax and the Sokol Family. Not sure how much is owned by who, but it looks like Fairfax and the Sokol Family are selling. Cheers!

Seaspan was raised to investment grade August 10th. They said on the call...specifically David said...that dividend increases were not on the horizon, and while they are always looking at opportunities, buybacks would be more likely if valuations stay low and they maintain their current level of liquidity. Cheers!

As impressive as the quarter was in terms of Seaspan, how they've integrated APR so quickly and found efficiencies is as amazing! The more I listen to Bing, the more I'm impressed with his abilities. They are building out management, looking for opportunity, but pointed out that near-term cash flows will be spent on buybacks as long as valuations are where they are. I would be quite happy if Fairfax allocated more capital to Sokol and Chen, rather than ideas like Blackberry. Another $2-3B in Atlas Corp's hands would make me thrilled as a Fairfax shareholder! Cheers!

The gist of the article...nothing wrong with it...it's cheap...but no catalyst. Just to get back to book value is a 40% return...what catalyst do you need for that? Cheers!

I've pounded the table in the past, and I've been pounding it for the last 3 months, even before Prem made his $150M purchase...but here it is from the horse's mouth, which most won't pay attention to anyways: Prem Watsa So, Christopher -- so I understand what is your question. Let me just say as I have said that our share price has been ridiculously cheap. I said that at the annual meeting. I said that in the first quarter. Saying it again and of course and I disclose that I have taken advantage of it and bought as many shares as I could to let everyone know it's ridiculous cheap. In 35 years, we never know when the stock price is going up or down. We just know that's cheap. Is it going to go up in the next six months? Or, is it -- I have bought it so that in the next five years I think it will be terrific return. And, Fairfax as a company, when we retire stock we are going to retire ton of stock if it's available. But we have to be careful when we retire it in relationship to the potential we have in the insurance business in terms of our financial position, in terms of the uncertainty in the marketplace. So, we have to take all of that into account. Our stock price is dirt cheap, and I can tell and I don't know if it'll be six months or a year or when it will go up, but it's going to go up very significantly, and that's been my experience over 35 years. And to our shareholders, I would say take advantage of it if you got to opportunity to, but otherwise, we just have to focus on the long-term. So, next question, Ella? Cheers!

That is for the first six months of the year, right? Making money in 6 months during a pandemic? Really? I am stealing Parsad's favourite: cheers! The point of a long-short book is for gains on the shorts to offset losses on the longs when unexpected bad things happen (for example, a worldwide pandemic). If your shorts aren't making money (to offset losses on longs) during an event like that, maybe not doing them would be a better choice? Or am I missing something here? If so, I'd love to know what it is... They are long on value stocks and short tech stocks. So naturally, they haven't seen significant gains on the long side and they've suffered on the short side. They will see their gains when tech stocks correct as main street returns to normal business and tech stocks get priced closer to reality. Blackberry has barely moved...Fairfax India has barely moved...Atlas Corp (which is just killing it during a pandemic) has barely moved...and they are sitting on a ton of cash and bonds (which way have interest rates moved). So I think the fact that insurance is doing so well, even with significant insurance losses, is why Prem has tipped his hand and expressed his expectations to the general market with his $150M stock buy. Insurance despite the pandemic is doing fantastic and they've indicated pricing pressure is here...and when their investment portfolio turns as market sentiment eventually and inevitably turns to value stocks...Fairfax will see book value increase significantly! We've seen it before, and we'll see it again. Cheers!

Feel exactly the same, even though I made a great return and stuck to my investing playbook! Cheers!

By the way, for those over the years wondering what I saw in Overstock.com, all you have to do is read today's quarterly report! It's a frickin' cash cow, with massive inventory turnover, and they are sitting on a ton of cash, plus all of their block-chain related businesses. The only two guys I feel more sorry for today than myself are Prem and Patrick Byrne. Fairfax's stake would have been bigger than their investment in Blackberry and Patrick Byrne would have been a billionaire! Both sold well before the pandemic. There is no God! Cheers!

Normally when you make 10 times your money in 3 months, you are very content and happy! In this type of pandemic and this type of market, I'm a bit lost, confused and today, feeling really shitty...even though for all purposes, I did the right thing. Many of you know of the one stock I've made alot of money on, that everyone hates, and at this point I can call it "In & Out"! That company, formerly run by a brilliant, nearly schizophrenic, paranoid genius, named Patrick Byrne is Overstock.com. From my estimates of intrinsic value, understanding the underlying business over the years, I pegged intrinsic value around $20-30 per share. When the pandemic hit, I saw the stock fall to $2.99, which is where I accumulated a large position in my personal portfolio and also bought a bunch of LEAPs. I already had some LEAPs in MPIC Fund I, LP, that were about to expire in January 2021, and I had bought them when the stock was around $10. Frankly, before the pandemic, I thought they would expire worthless in January! As a well-intentioned and observant practitioner of deep value investing, I sold everything when the stock started rebounding...essentially sold the whole kit and kaboodle between $14 and $23, making about 5 to 8 times my money on the $2.99 stock, and the LEAPs for 10 times to 15 times in my personal portfolio...all within 2 months. The LEAPs in MPIC Fund I, LP were well out of the money, but they too rebounded and I sold them for 10 times what I had paid a year and a half earlier. Anyone on any regular day and era would say "fine job" whether lucky or not! Now this is where the disconnect happens for value investors, because many of us deep-value guys, don't know how to just hold on...and often if we do let our winners run, we get burned as they turn quickly. The stock I had bought alone would have been a 25 bagger today if I held on...the LEAPs in MPIC Fund I, LP would have been 50 baggers today, and the personal portfolio LEAPs that i bought alongside the stock would have been 70 baggers today...all in three fucking months! Somebody buy me a drink, because this market is killing me even when I make money hand over fist! Cheers!

I love newspapers. I read at least two a day in print, and one online. You have to sift through what is in the newspaper...weed out pertinent articles and those that provide little value. It gives a very good perspective of what is happening in the world around you, and a very broad view of the world, business, science, technology, life, sports, entertainment...you name it! A book can provide useful information, but it may not be relevant or relate to the state of the world around you. Hand in hand, books and newspapers provide a broad base of knowledge, and you never know which will come in handy on any given day, at any given point of time. Cheers!

And here we have the answer. Greed, for lack of a better word, is good. Greed IS good, but I wouldn't call investing in a company that you know the CEO is a crook "greedy", I think "risky" is the word you are looking for. I am way too greedy to risk my money with BH. Oh for sure there's risk. But at some point there is an inflection point where the risk is reasonably valued. You don't bet the farm on this, but you can allocate a portion...and that's what I did, only in my personal portfolios. Cheers!

Well said. I have learned the hard way that you want to get in bed with good people. I have this rule about dating that "a girlfriend who cheats on you will cheat again." I apply the same rule to investing. Not really. It's more like one last booty call. Cheers!

+1! I actually think that WFC today with it's problems is ahead of where BAC was in 2009/2010, as housing losses were still continuing into 2012-2013. As the pandemic pressure dissipates, WFC's losses will dissipate. I suspect that is around the time when they will be freed from the penalty box as well. Cheers!

Friend who promised to share any future lottery winnings years ago on a handshake sticks to his word: https://www.cnn.com/2020/07/24/us/lottery-friends-jackpot-trnd/index.html Cheers!

These headlines sound very much like BAC headlines back in 2009. Their business will shrink, they'll get expenses down to very efficient levels, and a cultural shift will take place. The business will start to turn around with the pandemic, lawsuits settled and they'll start expanding the balance sheet a year or so later. Just hope it doesn't take Mr. Market as long to notice the turnaround as it did for BAC. Cheers!