Parsad

Overstock's web traffic rebounded significantly in the 4th quarter, after the Google penalty in the 1st quarter hurt them and the O.co branding confused their customers in the 2nd Q. In fact, see the enclosed chart on Overstock's traffic over the last two years, and you'll see that in the 4th Q 2012, the peak in the shopping season began earlier and lasted longer. As long as they didn't undercut their pricing, chances are they did as well, if not better than 4th Q 2011. I suspect Sam and his associates are hoping to squeeze some money out of their shorts before the results come out. Cheers! Overstock.com_Traffic_Rank_-_2_Years_Ending_February_2012.pdf

Thanks very much! Free is free. I downloaded Kindle to my PC and iPhone, as well as the book. Cheers!

Wells Fargo expands their energy lending business in North America. Cheers! http://finance.yahoo.com/news/Wells-Fargo-Agrees-Acquire-bw-172784371.html?x=0

Berkshire will exclude two shareholder proposals after sending a letter to the SEC. Cheers! http://blogs.wsj.com/deals/2012/02/21/berkshire-gets-nod-from-sec-to-exclude-shareholder-proposals/?mod=yahoo_hs

I'm a firm believer that much of what pains humanity and the Earth, will be solved over time by technology...as long as we don't blow ourselves up and set us back 100 years! Here's an article that discusses how science is slowly resurrecting organisms that have been long gone. Cheers! http://www.bloomberg.com/news/2012-02-20/32-000-year-old-plant-reborn-from-ancient-fruit-found-in-siberian-ice.html

I thought Jim Cramer was one of a kind, but I guess I was wrong. Here's Jim Cramer's "Mini-Me"...another nut with a screw loose. Cheers! http://seekingalpha.com/article/376711-evidence-that-warren-buffett-manipulated-the-silver-market-in-late-1990s?source=yahoo

One of the truly great investors! Had a true passion for both the science and art of picking stocks. Cheers!

Yes, that's exactly right Mungerville. That will change going forward. In five years, investors should look at the combined ratios for companies like Zenith, and then get a better idea of how good or bad Fairfax's underwriting culture is. Take a look at all the insurance businesses, big or small, they've bought in the last five years, and you get a better idea of what is changing at Fairfax. Odyssey's underwriting historically has been one of the best in the reinsurance industry, so with Andy overseeing everything now, that standard is going to be the one going forward. 100% or better long-term combined ratios and the acquisition of good insurance businesses at fair prices, rather than poor insurance businesses at cheap prices. Cheers!

John Kinnucan, an independent technology analyst (ok sure), was arrested for insider trading. Some of his clients include Citadel, Maverick Capital, and of course SAC Capital. Cheers! http://www.cnbc.com/id/46429425

Also, I answered some questions on the investment portfolio, so here is my response from those as well: There is a real risk with the bond portfolio. If rates start to rise, their longer duration bonds will get killed. I don't see rates rising for a couple of years at best, but there is always the possibility that their bet is wrong. Buffett says it's wrong, but then Buffett may be wrong himself! :) In the worst case scenario, they would just hold the bonds to maturity, and if shareholders own it just as long, no issues. But in the meantime, the fluctuations in the bond portfolio will affect equity, and thus their ratings and statuatory capital. If it is affected enough, they could be required to add capital and naturally that would have an effect on the stock price. We will have to wait and see what happens. But view that from Prem's point of view. He's convinced that inflation is not going to be a problem, and deflation is the real culprit. That rates will be low for maybe a decade. He's preparing for the worst case scenario. That means insurance companies are going to struggle to earn income for the next decade, because the bonds they are rolling over are paying less than 1.5% now and long term bonds are paying less than 4%. Prem's roughly 7-year duration bond portfolio is paying about 6% in income! So while Fairfax may get hurt if interest rates rise, they will kill their competition with the income from their bond portfolio. That is why Prem says if rates rise, they will just hold onto the bonds till maturity, so they will suffer no loss, even though they will incur mark to market losses in the interim. Personally, I think the equity hedges were the mistake. They only needed a maximum 50% hedge, because if markets go down, the bond portfolio would be up huge. They give up any profits on the stocks presently, and I think they were wrong in their assumptions there, as soverign nations did everything they could to keep things afloat. But Prem doesn't want to give up any dividend income by selling their positions. By hedging, he kept the income and will have zero loss on the stock portfolio. What they've effectively done, is make sure they don't lose any money at all over that 7-10 year period. Equities are 100% hedged, plenty of cash and a bond portfolio paying very good income that they can hold to maturity. The stock will fluctuate with mark to market, and so will their equity and statuatory capital, but at the end of that 7 year period, they would not have lost a dime in equity. In the meantime they would have earned 6% annually on the bond portfolio, fat dividends from their stock portfolio, plus any income from insurance. When you think in terms of people who try and completely look at margin of safety in investments, I can't think of any investors who do it better than Prem and Buffett. It may just be that both are right. Buffett in the short term (< 2years) and long term (>7 years), and Prem may be right in the mid-term (>2 years and <7years). We will see...we will see! Cheers!

You guys need to compare apples to apples. A fellow boardmember contacted me yesterday, and we talked about Fairfax's underwriting. My comment's are below: I think investors have to keep a longer term view on the undewriting. Fairfax has constantly acquired poor insurance businesses, and it has taken 3-5 years to turn them around and get the underwriting culture in line with Fairfax's standards. During that time, the businesses usually have large losses due to poor past premium pricing. Outside of GenRe, Berkshire hasn't really acquired a substantial insurance business in years, and Markel's business delves into specialty lines and more short-tail business, where there is more control over premium pricing and less volatility. If you look at acquired Fairfax insurance businesses over 10-15 years, they've written at or below 100%. So some of the ratios in large insurance businesses that don't look appealing right now, will show better long-term ratios as time passes. Chubb, Markel and what have you all fall into the same category. Their insurance business is much more diversified than Fairfax's, and they don't rely so heavily on their reinsurance business. Markel's business is remarkably different than Fairfax's. Neither company also makes it a habit of acquiring poor insurance businesses and turning them around. Fairfax has changed that behavior after their experience with TIG and C&F, but what you are seeing in higher legacy combined ratios over the last decade, is a result of skewed combined ratios from higher loss years for the first few years after acquisition. If you look at the long-term performance of Fairfax acquired insurance businesses, you'll see a very distinct trend of decreasing combined ratios and reserve redundancy. Do they write business as well as Berkshire? An emphatic no! But they do write as well as most of their peers and have made the transition to acquiring better insurance businesses. The promotion of Andy Barnard to overseeing all Fairfax insurance businesses should tell you that Prem is very motivated in removing this reputation of poor underwriting that seems to have developed. The reputation wasn't from their underwriting behavior or culture, but the losses developed by acquiring poor insurance companies. That will go away, and if we are in a hard market, it will go away very quickly before this next cycle is over! Cheers!

Salary frozen and fewer restricted stock options. Always nice to see a company's board and its CEO tow the company line when it comes to compensation and expenses. Cheers! http://www.bloomberg.com/news/2012-02-17/bank-of-america-ceo-moynihan-said-to-be-denied-cash-award-in-2011-package.html

I guess the pundits have never heard of Apple, See's Candies, In & Out Burgers, Starbucks or Costco! ;D Cheers!

You're absolutely correct! I remember talking about Fairfax Asia on the old message board several years ago, and at that time it was tiny, but growing rapidly. No one cared or noticed that arm of the insurance business. Today, it's got the best combined ratios of any Fairfax insurance arm, continues to grow like a weed, and Prem was way ahead of his peers. He was also way ahead into India! I said many years ago that Fairfax is actually growing into the global insurance business that AIG was and should have been. As long as they remain careful, Fairfax will be one of the top five property-casualty insurers in the world in the next 15-20 years. Cheers!

John Stumpf, CEO of Wells Fargo, was on CNBC this morning. Cheers! http://www.cnbc.com/id/46428124

I've listened to this thing twice now, and I have to tell ya, it is probably one of the best conference calls I've heard from Prem in the last few years. Alot of detail, lessons, insurance discussion...very, very good! If you have only read the press release or quarterly, you need to listen to the call. Good stuff Prem! Cheers!

I'm reading lots of stuff on the quartely report, and I think people are over-reacting immensely. Bigger the catastrophe loss, the bigger the combined ratio, the better it is longer-term for companies like Berkshire and Fairfax. You have incredibly low interest rates right now, volatile equity markets and insurance premiums that were incredibly underpriced for several years. We are now entering a real hard market and as both Berkshire and Fairfax start to write more and more well-priced business, the combined ratios will go down as the new policies kick in and the old policies start to run-off. Fairfax's combined ratios aren't high simply because of losses, but because they don't fire employees left, right and center when pricing is not good...so the the actual operating and administrative expenses is what piles onto the loss years. When business improves, you will see very good combined ratios. We've been here about three times in the last 12 years, and now the cycle is going the other way. Patience, patience! And if any of you were waxing poetic in the past about how Fairfax should stick to only insurance and forget about whole non-insurance businesses, that third leg of the revenue stool like Berkshire's is looking pretty good right now, isn't it! I've received a few emails and read some posts on the bonds and hedges. Again, while Prem may want to disagree, as well as others on this board, in my opinion, the hedges are a necessity because of the leverage Fairfax uses. Why doesn't Berkshire hedge? Because Berkshire's got whole operating businesses that steady their cash flows, use less leverage and keep more cash. If Fairfax operated at two and half times leverage, kept $4B in cash (or even more cash in just the subs) and had more non-insurance businesses, they would not have to hedge. You get a 20% drop in Fairfax's investment portfolio (bonds and equities), you get a $5B loss in equity. If you get a 50% loss just on the equity portfolio, you get a $1.5B hit to equity. That percentage hit to equity will not happen at Berkshire! So the quarterly gains/losses you see from the bonds and hedges is the cost of that leverage...which works pretty damn well long-term if you do it right like Prem! Finally, outside of Berkshire, you've got the most ethical, honest, shareholder friendly CEO I know of. Whose been pretty damn open with this particular group of shareholders on here, and will be sending a host of his executives and investee CEO's to our dinner. He's been almost as good as Buffett in teaching us about insurance and investments, and his humble, cautious attitude toward business has made many people very wealthy, including himself. My opinion...short-term shareholders, sell your damn stock if you're worried...long-term shareholders, suck it up if you are concerned. And as always, only invest as much as you feel comfortable with, so you can get a good nights sleep. If you are greater than 10% in Fairfax, you better be sure you are comfortable with that risk, because Prem is making a bet on the bond side. Controlling your own emotions is the biggest part of investing. If it wasn't difficult, everyone would be rich and beating the market all the time. Cheers!

They're not opting for the cash, but restricted to receiving alot of it in cash because securities laws prevent an affiliated company from receiving too much stock of an affiliated company. Cheers!

Unfortunately, BAC has indicated they are not going to request to buyback shares. I don't understand this at all. If you don't ask, then you don't have to tell the world they said "no". I think Moynihan knows that it is 50/50 that they would be granted the chance to buy back shares or increase their dividend right now, so why risk having to tell the press you were denied that request, when you know that in 6 months or a year, you will have no problem getting approval. Fix the problems and the rest takes care of itself over time...don't over-reach, don't assume, don't have grandiose visions until everything is fixed. If shareholders are impatient, then that is the shareholder's own issue to deal with. Cheers!

Fidelity National buys O'Charley Restaurants. Happened on February 6th. Cheers! http://www.businessweek.com/magazine/insurer-fidelity-national-enters-the-restaurant-business-02162012.html?campaign_id=yhoo

Yeah Rabbit, after reading that, it looks like any adjustment would be deemed a taxable dividend. They would issue a 1099 to the shareholder I assume. Cheers!

I suspect Richard Garneau, CEO of Abitibi, may be at our dinner like last year. So feel free to ask him questions. Again, whether he'll be able to give any real answers because they are in the middle of the whole process is another matter. You can also ask Mohnish, as he tendered his shares to Abitibi, and due to his frank Munger-like nature, will probably tell you exactly what he feels. ;D Cheers!

Not very good due to mark to market losses on the hedges and catastrophe losses. A breakeven year. Hedges still in place as Prem thinks things will be bad in the next few years. Nice to see Northbridge coming back to form, and Asia is still a rock-star! Cheers!

It's out. Cheers! http://finance.yahoo.com/news/Fairfax-Financial-Holdings-iw-477178339.html?x=0

Frankly, I don't understand a lot of comments regarding FFH. Their loyalty lies with their own shareholders first. You got it! Alot of people on here are double-dipping themselves by owning FBK and FFH, yet they chide Prem for protecting his shareholder's interests. Pot calling the kettle black, me thinks! ;D Cheers!