ERICOPOLY

In the first filing, it is reported that he paid $232.51 per share for 12,900 shares. In the second filing, it is reported a $0 price per share for 12,900 shares, but there are footnotes about the vesting period for the restricted stock and the words "Employee Share Matching Program". So basically he might have been willing to pay 1/2 the market price is all we can infer from his "bullishness".

I can forgive anyone for ignoring that and ignoring what he had to say, but this is bizarre: "Matching Grants for Share Purchases." The executive is given matching shares when he buys stock with his own shares. So do I understand that correctly? Like if you see an insider buy stock at $200, he is really only investing $100 of his own money? That kind of shit (when insiders buy) makes a lot of people feel confident about the stock price. Are they trying to pump up the stock or something? Weird. Not sure if it will be shown as an Open Market Purchase. That would be different than grant or matching grant? Good point. It's probably more like an employee stock purchase plan. Somebody explained it to me in a personal message a few minutes ago. It shows up as in insider direct buy as if he were just buying the same as you and I do on the open market: http://www.sec.gov/Archives/edgar/data/885590/000088559015000051/xslF345X03/primary_doc.xml Then after a period of time he gets his first Restricted Stock Unit vested: http://www.sec.gov/Archives/edgar/data/885590/000088559015000060/xslF345X03/primary_doc.xml So after the date of his first purchase, we'll just think "oh look an insider is buying" and maybe we'll feel more confident in the market price. But he might effectively be risking only 50% of market value since he will ultimately have twice as many shares yet only pay for 1/2 of them. But they don't all vest immediately. It's just that he really doesn't have as much of his own skin in the game as it appears. It's still a decent deal for him even if the shares are 70% overvalued. He's effectively buying $1.70 for 85 cents of his own money. So he has a lot of downside protection. Do I understand it right?

Eric, I am briefly lifting my self-imposed ban because you are smarter than this. Look at the dates! When was he hired? When did the fraud occur? Hey, I just put out the cliffs notes. I don't subscribe to it -- it's actually pretty funny if you read it. I left out the stuff about the "Enron" person who is head of an audit committe at Valeant. Of course it's all leading type stuff. Tried to save somebody the effort of reading it.

Okay, here's the Cliff's Notes: 1) it insinuates that Laizer Kornwasser was the right hand man of the Medco CEO when all the fraud went down 2) he was hired by Valeant the exact same day that Philador was incorporated 3) he had an "obscure" title of "General Group Chairman" at Valeant 4) he had a massive compensation package with enormous amounts of it tied to stock awards (lots of reasons to stick around for 10 years) 5) he disappeared from Valeant in July 2015. He no longer works for Valeant. Anyways, that's basically the very abbreviated version. Of course, it also ends with a taunt to Bill Ackman: Yours truly, - Whistleblower X PS – I’d get out now, Bill. Save your fund and stop the BS. The 4 stages of grief are: denial, anger, bargaining and acceptance. Your conference call was the bargaining. Now is the time for acceptance. July 2015 also rings a bell because that's when the pharmacist at R&O flipped his lid Also in late July 2015, he joined the board of directors of Everyday Health (whoever that is): http://www.prnewswire.com/news-releases/everyday-health-inc-appoints-laizer-kornwasser-to-the-board-of-directors-300117951.html So the fun speculation is to ask why such a highly compensated executive left after roughly 2.5 years during the time when the R&O pharmacist was getting edgy? Could there have been an internal investigation and cover-up? Okay, now that I've spoiled the fun, you don't have to bother reading any of it and can go back to ignoring innuendo and rumors and go back to facts as we know them. Of course, could be so many different explanations -- but this is theater and it is amusing and popcorn worthy at least.

I can forgive anyone for ignoring that and ignoring what he had to say, but this is bizarre: "Matching Grants for Share Purchases." The executive is given matching shares when he buys stock with his own shares. So do I understand that correctly? Like if you see an insider buy stock at $200, he is really only investing $100 of his own money? That kind of shit (when insiders buy) makes a lot of people feel confident about the stock price. Are they trying to pump up the stock or something? Weird. Not sure if it will be shown as an Open Market Purchase. That would be different than grant or matching grant? Good point. It's probably more like an employee stock purchase plan.

I can forgive anyone for ignoring that and ignoring what he had to say, but this is bizarre: Matching Grants for Share Purchases. In connection with such share ownership, you shall also be eligible to receive matching share units under the Company’s matching share unit program in accordance with its terms as applied for similarly situated executives of the Company. The executive is given matching shares when he buys stock with his own shares. So do I understand that correctly? Like if you see an insider buy stock at $200, he is really only investing $100 of his own money? That kind of shit (when insiders buy) makes a lot of people feel confident about the stock price. Are they trying to pump up the stock or something? Weird.

And sorry, I do recognize that it grows tiresome when I say "it didn't work in 2008". Full credit to viewpoints that it could be otherwise next time. Sometimes I feel though that there are all these people in it waiting for the payout when it comes. And I was like that last time... Until I realized that being down 30% sometime around late August 2008 REALLY FELT SHITTY!!! Especially since I was supposed to be so clever as to be in this stock that was so well hedged you just couldn't lose. So maybe I'm tainted by a negative one-time experience.

I agree with that. However you could make the exact same statement that you just made back in late 2007. Then 2008 came and the best thing that you could have done in late 2007, given Fairfax's thesis of overvalued markets, is to hold no equity whatsoever... including that of Fairfax. But you were relatively better off in FFH if the gun was put to your head to be in the equity markets.

Also, I don't mean to imply that today's underwriting results at FFH are entirely due to low interest rates. It must be at least part of it though is my thinking. Anyway, if you piece together the after-tax underwriting profit and investment income, the two tend to be intertwined. The industry would care somewhat less about the pricing of the insurance if they could make 4% on short-term money. But they can't make 4% on short term money so it must be having somewhat of an effect on their pricing strategy.

Higher interest rates will lead to softer industry underwriting pricing.

I know it seems funny to call better underwriting a "macro" in my edit, but I think the underwriting environment swings along with interest rates. So I'm lumping those two as paired realities, although I think Prem has articulated the view that industry underwriting does not yet gel with his low interest rate thesis (believe he thinks rates will be low for a longer time than people expect and they haven't yet come to accept it in their industry's underwriting pricing)

Although I said it does not really matter what I do, I sold my FFH today after reviewing the logic I applied last year. negative macro: Low interest rates (mitigated by better underwriting) positive macro: better underwriting (but low interest rates) capital gains (my negative view is that the hedges cut both ways -- they also hedge out gains) So upwards revaluation in the face of low compounding looks to be the bull thesis (actually, not "the" bull thesis but rather my own), but given what we've already seen as potential and actual lows in valuation this year and last, I feel like it's equal weighted perhaps at best either way. Just as much to lose from negative sentiment as to gain for richer valuation. I also have some VRX losses to soak up -- no tax due on the gain.

I have no reason to disagree with your logic. Full disclosure, I am a long-term FFH holder. The quote above is isolated because I am not in agreement that the same thing will happen again should FFH's hedges work out down the road. The reason is that things have changed from then until now. In 2008/2009, FFH was a one-trick pony in that they could invest. Their insurance results were sub-par. Now, their insurance are substantively better, very profitable. If the insurance operations continue, then I would opine that multiple expansion overall would take place and that any contraction as a result of a macro bet would be muted compared to 2008-2009. Stated differently, a company with mediocre operations but that kicked-butt on a macro bet is less valuable than a company with solid ongoing operations that kicked-butt on a macro bet. -Crip P. S. I hated for years the usage of "bet" when discussing Fairfax...I thought it misrepresented the hedging aspect. The tune has changed to an extent. It's true that underwriting results didn't look anywhere near as good back then. However... 1) the market put a multiple on the stock while also taking those sketchier underwriting results into consideration. 2) the market crashed and the price to book compressed along with it Correlation is not causation though. MKL's price to book also compressed. Berkshire's also compressed. Coca Cola's valuation compressed. It just looks to me like: 1) pre-crash, every company has a given multiple 2) during the crash, every company sees multiple compression Why would FFH be an exception this time when all other high quality stocks see compression in crashes? Well, you could argue because the hedges would be soaring, but yet that didn't prevent it from happening the last time around... Anyway... I'm not right, it's just how I view it.

I don't have any MKL. I went with FFH because it looked to be down near the low end of where it usually trades, and I sold it because it was up by the high end. Rapid revaluation -- it happened very fast and i didn't think something like that would happen... when it did I was just shaken up by it. I didn't feel like book value was going to compound at a high rate anytime soon because of the hedges, and if the hedges were going to be sold and working in our favor, it would come at a time of a big market dislocation. As I keep pointing out a thousand times, FFH's valuation (price to book) got compressed the last time the hedges worked out in a major way (2008/2009). So I thought there was no reason to hang around with a lofty valuation for a market crash which would make them drop the hedges, which I feared would lead to price compression anyhow (suppressing a good deal of net book value growth gains from the hedges). But I didn't really fear the market crash -- it was just as much the case that if a market crash never happened, then book value growth would still suck anyhow because of the hedges. And I have no idea if I was right, or lucky, or neither. Plus I felt nervous after making "hot money" so quickly that I reacted with the above logic, whether right or wrong.

This is probably the time when fund managers who impulsively bought the dip are now getting out before their fundholders ever learn of their rash decision to buy. Why defend a 1% controversial position when that 1% can't move the needle anyway? No reward for them to stick around for the grilling and disdain.

I did buy FFH maybe a year ago, then I sold it into it's rally. Then I bought a smaller amount at $570.932 CDN (according to my IB cost basis which carries it out to 3 decimal points) over the past few months -- still holding. But I didn't mention that buy previously because it really doesn't matter what I do or don't do. In fact, it's probably mostly rewarding to not listen to my noise at all because except for like 3 or 4 times in 10 years that's pretty much the truth. Even then, I'm just amplifying what a group of other board members have already pieced together (I get it from them).

Anyways, it's not like we can't just buy MKL if we want a good underwriter that buys high quality businesses to hold for the long term. At least FFH offers variety.

Pearson was questioned about tax inversion and I liked his response. He said it's more likely that the US eventually changes, rather than expecting the whole rest of the entire world to change over to the US system.

So Eric, Could you please summarize your current view about VRX? This thread has become so difficult to follow, and lots of people on this board, me included, hold your view in very high regard. Thank you very much for your time, Gio I don't know what to make of the situation as a whole. I'm less certain though that there is anything much to the R&O case after reasoning that one right through to the end. I feel more secure about it for having done that, rather than just leaving it as something taken on face value from Pearson (who I wasn't going to question on it before he glossed over it in a presentation). It was a presentation to defend against fraud, and here was a case that was alleging widespread fraud by an insider and he called it a "standard thing" (so without knowing much more than that it of course made me question everything). I do understand women a lot better now!

I'm less stressed about the R&O suit after all of this. It wasn't until I considered the angle that Reitz is looking at a deceptive looking structure where it's not worth taking the chance. He really has a lot to lose and with other people shipping his license around and signing off on things, even if legal, that's something that's beyond his control and not transparent to him. So it's a perfectly understandable response. Actually, Left's Enron response was reasonable as well when you consider that he lives for finding that kind of thing and here was a company that chose to hide something from investors and a lot had already been written about deceptive disclosures.

Yes, the weird structure, the rapid growth, could have made him paranoid. Then he looks on the internet and finds AZ_Value's blog and asks a lawyer about it. The lawyer is like... of course you need a lawyer! Picasso's version is a lot funnier. 'Tis a pity though that Philador was dropped like a stone by all it's partners and now has to close down. Now what were they concerned about in their audits or was that just bullshit because it sounds better than saying "we're dropping Philador because of the ravings of a short seller".

They could open a second network and transfer the volume over to that one. After all, it is alleged that a lot of the volume never even went through R&O's doors physically. That part of the volume could be shifted to the new network. But I'm mostly kidding. I agree this type of shit can't be kept a secret forever. It just takes one hysterical pharmacist to sue Valeant and it is outed at that point. Just like what happened to Philador #1!

I would do something easier if I wanted to steal money. Likely he is pretty honest if he made it to age 64 and still kept his license. Because if I were him, then instead of waiting to age 64 and working a long hard and boring life as a pharmacist, I would have instead made a fortune selling pain killers out the back door of the pharmacy to addicts and quit at age 34.

None of this discussion would have happened were it not for management trying to sugar coat the accusations of Reitz as a standard issue. AZ Value's blog comments wouldn't have happened were it not for deceptive powerpoints and gradually receding disclosures. Andrew Left's "Enron" allegations would not have happened had Philador been properly disclosed to investors from the beginning. All the deception leads to suspicion and paranoia. But not necessarily wrongdoing. It's just that when they are being deceptive all the time, how will we ever be able to tell the two apart?

I didn't look at who the lawyer is. Maybe he's not as good as Julia Roberts in that movie where she doesn't even have a law degree (yes, I'm just trying to be funny).