Parsad

If you are planning on attending our Fairfax Shareholder's Dinner, please let me know: For the fourth year in a row, we will be holding a Fairfax Financial Shareholder's Dinner in Toronto. About nine people showed up the first year, and last year we had about 30 shareholders attend. For the last three years, Sam Mitchell and Francis Chou have graciously attended, where they have entertained questions from shareholders for over an hour. Many attendees left with sage advice that served them well through the volatility of 2008! Fairfax Financial Shareholder's Dinner Tuesday April 14, 2009 Joe Badali's 156 Front Street West Toronto, Ontario (416)977-3064 Drinks: 6:30pm-7:00pm Dinner: 7:00pm-9:00pm RSVP: sanjeevparsad@shaw.ca To date, the list of attendees includes: - Sanjeev P. - Alnesh M. - Andrew C. - Paul R. - Eric A. - Jim B. - Brian B. - Stephen C. - Marc C. - James E. - Stuart F. - Simon H. - Tom J. - Charles K. - Stephen K. - Peter L. - Stefaan M. (possibly a guest) - Eng O. - Norm R. - Al R. - Keith S. - Brian S. (possibly a guest) - Jeff S. Cheers!

Article by Fareed Zakaria on Canadian banks and fiscal policy. Cheers! http://www.newsweek.com/id/183670/output/print

I think alot of people wet their pants during the middle of last November! And probably rightfully so. Cheers!

Dick's has five locations, not just one (I like Kidd Valley a lot more): http://www.ddir.com/Find_Us.html Thanks Eric! Didn't know that Dick's has five locations. Haven't tried Kidd Valley, but will give it a go next time I'm in Seattle. Cheers!

The appeal of In N Out is the quality to price ratio. In N Out uses much higher quality beef / lettuce / tomatoes / potatoes etc. compared with McDonalds or Burger King, but the price for a hamburger or cheeseburger is not much more (i.e. under $2). They never freeze their food, and cut the potatoes on site, have their own proprietary meat grinding facilities, etc., and you can taste the difference. I consider McDonalds or Burger King to be crap food and don't really eat that stuff, but I will eat In N Out for a cheap meal on occasion. I don't know how the economics work for In N Out but I know I can get a high quality burger, fries and drink for about $5. Compare with a Fatburger or SNS where you're looking at $3 or $4 for a hamburger alone...probably tastes better but value-wise may or may not be. Not a knock on the higher price options but just a different value proposition. I've had In & Out several times over the last few trips to California, and that's the problem. I can't really taste a significant difference in their patties or fries. I agree the prices are what makes it compelling compared to many other burger joints, especially when compared to what you get for the same money at the large franchises, but the taste certainly wasn't as good as a Fatburger, Whitespot (Vancouver), or A&W. Although those burgers cost up to twice as much. Cheers!

XL got hammered in 2008 as well. Cheers!

I never understood the following at In & Out. I've had a few burgers there, and they're ok. But they have an enormous cult-like customer base. Every time I've been there, they've been immensely busy with long-lineups inside and out. I've never eaten at Dicks, but know the story. They are only one location as far as I know. We have a Fatburger here in Vancouver. The burgers are tasty, but everything else is pretty conventional. Never been to Burgermaster, but I'm in Seattle quite a bit and have never found a great burger chain. The one large-scale chain where I think the burgers are actually very good, and they've done a terrific job of the experience is A&W. With their aluminum foil packaging, line-up of burgers, Chubby Chicken and frosted mugs, they've done a great job. The closest thing I see out there comparable to Chik-Fil-A. They don't have quite the cult-following of Chik or In & Out. Some of their older restaurants need to be refreshed as well. With the cross between fast-food and sit-down, I think Steak'n Shake as alot of potential to expand. But the burger business is tough, and they need to market the burgers, fries and shakes. In Vancouver, we have a smaller chain called Whitespot that was fantastic and they make terrific burgers. But they've decided to expand their menu and gone the way of more mid-priced diversified restaurants. I think that's probably more profitable in the short-term, but they will lose the nostalgic cachet that their burgers carried. I've actually stopped eating at their larger restaurants, and go only to the express restaurants where they serve only burgers, fries and shakes. Cheers!

Three hours! Forget it. I thought it would be maybe one and a half hours. I'll have to wait until SNS expands out west. If you guys haven't seen the various franchise locations they are putting out, you can see it on their website: http://www.steaknshake.com/franchise/franchisebystate.asp I seriously think they should think about expanding into Washington State first...maybe Bellevue, WA, Mukilteo, WA or even Bellingham, WA if they want to get one nice and close to me! There are no cult-like burger joints like In&Out in Washington State, which they would be competing against in California. Only the big brands (McDonalds, Burger King, Wendys, etc.). I think it's fertile ground for them to pounce on. Cheers!

He's still got a boatload of equities, so I wouldn't worry about that. I think the fact that you can find bonds and preferreds with terrific yields and far less risk is probably the point of his transactions. Most of what we've been buying over the last month has been distressed debt...the yields are unbelievable! We bought some debt maturing in three months at 73 cents on the dollar, where the company has enough in cash, receivables and lines of credit to cover their debt for the next year. Just ridiculous! That's about a 145% annualized yield! But you have to buy a basket of them to reduce any single one exploding in your face. If Buffett or Prem can get 10-15% yields on preferred stock or notes from companies like Goldman Sachs, GE, Tiffany's, etc., then why bother running the risk of increased equity exposure. Especially if you are running a leveraged insurance business where 6-10% total yield for the portfolio will give you 15-25% ROE going forward. Cheers!

There's a couple more Crip: 5) Adam Sender of Exis Capital was associating with both Spyro and Anthony Pelicano - both in jail now 6) Sender hired Pelicano to make a business partner's life "a living hell" 7) Chanos was in contact with people at SAC with information that was not public I'm sure there's a hell of alot more as well. Prem doesn't put down a bet with his reputation unless he's got the odds in his favor. Cheers!

It's been pretty active on this board in the last week or so, and I think a few more weeks should help. Remember, there are a stalwart of boardmembers still clinging to the old board, and that will disappear after next week, so we should have another flood of members come here in the next week or two. Cheers!

Al, Here is another example of things easing up a bit. Citadel is now allowing redemptions from their funds again. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=a90C4OeoZLP8&refer=home

Those of you who live in Toronto, exactly how long is the drive to Erie, PA from Toronto? That's the closest Steak'n Shake I could find to Toronto. Is there one open in Flint or Buffalo yet? I'll be in Toronto from Sunday to Friday this year, so I may just drive down and get myself a Steakburger! Cheers!

What's so ironic is that the WSJ, who is reporting on this story, employs one of the primary culprits who assisted John Gwynn...Peter Eavis! As virtually all of you know, Eavis is the one who wrote some 50 articles in a six month period during 2003 for the Street.com, where Gwynn and Hempton were his sources. But I guess the WSJ hasn't figured that out yet! ??? Cheers!

On the updated version on Bloomberg, SAC says that they held shares of Fairfax and weren't shorting. Now what if two or three funds colluded in driving down a stock's price? What if one firm bought shares and held them. Then one or two shorted the hell out of the thing. The one with the actual shares could also lend the shares out and receive considerable interest income. This would also allow the others to cover positions when the stock moves in the opposite direction. Working together by naked shorting a stock, putting out negative analyst reports and media reports, they drive the stock down until the point where the funds shorting cover and pay back the hedge fund that lent the shares out. SAC's comments prove nothing about their intentions. The emails being sent between the two firms indicates that there is more to this than meets the eye. I can't wait for the trading activities at Kynikos to be unsealed. Cheers!

Celebrating its 75th Anniversary, Metro-Atlanta Steak'n Shake's will be offering 15-Cent Steakburgers on Friday. Damn it! Why isn't there a Steak'n Shake in Seattle! I have a feeling this is part of Sardar's plans for celebrating their 75th Anniversary. Let's see if he does this at a different city each month to attract new customers. Cheers! http://phoenix.bizjournals.com/atlanta/stories/2009/02/09/daily87.html

The one thing I've learned is that you will never have any idea where the "bottom" or "capitulation" is. If we all went back to the beginning of 2008, most of us that follow Prem would have agreed that we would probably see dramatic corrections in equities, commodities, real estate, art, etc. What I don't think anyone really expected, and probably not even Prem, was just the sheer collapse in the credit markets. I think Prem expected spreads to widen dramatically and significant tightening to occur. But the seizing of the markets the way they did...I don't think anyone expected that. After that, I think pessimism took a stranglehold to the planet, and fear became rampant. The one thing we do know is that once fear becomes rampant, usually the least likely scenario, in this case optimism, is probably more likely the correct assumption. But it takes time to prove this theory correct. It doesn't happen overnight. Just like it took Prem a couple of years to be correct on the downside, it will take a couple of years for Buffett to be correct on the upside. Cheers!

What's also very interesting is that Chano's little forum called CNBC has yet to report any of this story. Cheers!

Bloomberg reports that both Kynikos and SAC Capital had access to John Gwynn's preliminary analyst report on Fairfax before it was published. As we all know, Gwynn was subsequently fired by Morgan Keegan for releasing non-public information, and it was his original report insinuating that Fairfax was nearly $5B under-reserved that stirred the hornet's nest. This gets better and better! Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=a1gpkAyXa8iw&refer=home

I reminded of the time when the pilots of Singapore Airlines threatened to go on strike. Prime Minister Lee Kuan Yew responded by threatening to shut down the airline and start a new airline. End of strike; no more labour disputes in the decades since; and SIA is today the strongest airline in the world sitting on $5b cash. This should work for Detroit. This does occur in North America, but it is few and far between. Regan fired all of the air traffic controllers when they went on strike. Walmart and McDonalds usually close a location if the employees succeed in unionizing. While I think unions do serve a purpose for grievances, generally like the Senate and Congress, they simply employ tactics to get what they want added to deals. I guess a free market system is based on the fact that humans are innately self-serving, but sometimes it would be nice to see individuals put their own self-interest aside for the greater good. Cheers!

The home next to Warren Buffett's house in Laguna Beach is for sale. Any boardmembers have $13M laying around? Cheers! http://southcoasthomes.freedomblogging.com/2009/02/12/be-warren-buffets-neighbor-for-13m/

John Stumpf, CEO of Wells Fargo, spoke at the Senate Committee on Financial Services. The Charlotte Business Journal has his comments. Cheers! http://charlotte.bizjournals.com/charlotte/stories/2009/02/09/daily37.html

If you guys have any more questions, please submit them. I will be putting together the questions and sending it out to John this weekend. Cheers!

LVLT had a profitable 4th Q due to one-time non-operating gains. http://sev.prnewswire.com/computer-electronics/20090211/LA6941611022009-1.html Interestingly, they are narrowing the spread between revenue and operational costs, especially by cutting G&A expenses. They are probably a year or two away, but we may actually see LVLT become profitable solely from operations. At our Fairfax Dinner last year, Sam Mitchell was asked about LVLT and how far they are from reaching a critical mass. Sam suggested that timeframe was closer to a couple of years, rather than several years. Perhaps, Southeastern will make their money back in the next few years. Cheers!

I put together a PDF compilation of 15 Steak'n Shake restaurants that are for sale on LoopNet. There are some very interesting tidbits of information regarding some of the locations. Some of the restaurants look to be in terrific condition as well. The PDF is attached to this post. Cheers!