Partner24

100% agree with these propositions.

At this point today, more than 2 millions ORH shares traded. That means that more than 120 millions of dollars of money have been used to speculate that FFH will boost it's offer above 60$. That's short term stuff, but those who speculate like that face the risk of a material paper loss (at least over the short term) if FFH say "Bye bye" and a little permanent capital loss if remaining shareholders say "Ok" to 60$. Little short term upside potential for a more significant short term downside potential. That being said, I'm not here to predict the odds of these two outcomes because it's not my kind of transaction table and these people are not at the same transaction table than me. I think I might apply for the "borest transaction table that you'll see around" contest. Most of the times, it has served me very well, but sometimes I lost an opportunity (like ORH recently). En effet, c'est la vie. Cheers!

Al, over the short term, the worst case in your scenario is that FFH says "Good bye folks, I'll leave the table now". The shares could then well go back to the 50$ range. That being said, I don't know the precise odds of that happening (but I would suggest that they are higher than 2%) Cheers!

Hi Al, I don't know the odds better than you, but suffice to say that as a value investor, I wouldn't think that Fairfax will stretch the price that much. If they back off because the special commitee and ORH remaining shareholders want to boost the price materially, I'll applause. FFH investment horizon doesn't start and end with the remaining of ORH. Leucadia "Rules of the road": 1. Don't overpay, no matter what the madding crowd is up to. (...) 5. Don't overpay! Cheers!

Frankly, I don't like the idea of diluting my ownership in FFH for less than the intrinsic value of the Fairfax shares, unless what we get in return is also attractive. Because of the intrinsic value per share dilution that we'll basicaly have as a basic consequence, I would be really surprised if FFH increase it's ORH offering price materialy. Cheers!

Keep in mind that: - we will issue some FFH shares (an undervaluated currency) to finance the deal; - ORH shareholders had more than 15% CAGR since 2001, wich is far from being bad, especially if you put that performance of the market context; - ORH short term shareholders had their small bonanza in a very short period of time. A return more than enough to be satisfied in my point of view. In the end, if ORH shareholders push their luck too much and if ORH asked price by it's shareholders does not give FFH a decent margin of safety, you know FFH have the right to say "No".

I'm not sure I'm a fan of Fairfax issuing shares at these prices...growing pains I guess. Perhaps more good would have been done if the company was allowed to continue buying back shares but we'll never know. Well, I guess that they have already someone in mind to issue their new shares. When you buy something for cash, the intrinsic value of what you give is obvious. When you have to issue your own stock, it's not that clear. I'll surely take a look at the price. I guess we will know it fairly soon. That being said, I'm happy that their not in a acquizition mood at the expense of our balance sheet. Cheers!

Welcome to Las Vegas!

I wish I could say that personnaly selling 3700 shares of Markel would mean nothing to me ;)

Ok Crip, I'll don't tell, but I think Sanjeev heard us and he is out to lunch ;)

Ahaha you had me on this one! ;D Cheers!

Thanks for the Rabbitisrich, that's an interesting quiz. The fact is the host increase my odds from 1/3 to 1/2 after the opening of the door with a goat. There is then no value added by switching my choice from one to another. Either way, I'll still have 50% odds.

Crip ahaha ;) So, you are on your way to own more than 50% of the common stocks of the company? :)

On the first round, obviously, my odds to get the car are 1/3. Then, unless he open the door of my first choice AND one of the two doors that has goats in it, on the second round, my odds to get the car are 1/2. If he opens the door of my first choice and another door that has goats, it would be stupid because my odds that I would find the car door would be 100% next round. Let's say that I've choosen the first door and, then the host open the second door (goat). Anyway, if I keep the first one or switch to the third one, the odds are 1/2 now anyway. Le'ts say that I've choosen the second door and then the host open it and I see that it has a goat in it. It would be foolish to keep my first choice because I would be 100% certain that it would have a goat in it.

I love these kind of quiz! :) Please keep posting some from time to time! In elementary school, the best course memories that I have was when the teacher was putting 2 lines of student and was asking simple math questions (like 9+6, 17-9, etc.). The first to give the good answer was winning, and the other one was out. The goal was to have all the people in the other line out! They used to put me last on line to save our team in the ultimate case ;D

If I remember correctly, John used to have the "lotsofcoke" nickname on the MSN board. Do you know if he still post here?

I read a decent book about buying homes. It was written in 1999. The guy predicted that home prices would probably decline over the 2000-2010 period, especially for the average home because a lot of baby boomers would want to sell them and it would create some pressure on prices. Let's say that I would have listened to this prediction and buy puts or short of a given American home prices index it it was possible to do so (that's not the kind of thing that I would do, but let's suppose that for the case in point). Boy, what history can teach us! Past is past. So, what's next for us? How much households that will will want to buy their first house will we have over the next decade? On the opposite side of the transaction table, how much households that will want to sell their house to move to another kind of residence will we have over the next decade? What will happen to interest rates? Will the borrowing cost for buying homes will stay the same? Go higher? Lower? What impact would it have on prices? What will happen with average household income? Will people will have the same, more or less ressources to buy homes? To me, these are important questions and I have my own opinion on that. That being said, I do not think that I know much better than the average Joe on this subject, so my opinion is not very valuable so that's in my "outside of my circle of competence" bin.

Brian Joffe, CEO of diversified conglomerate Bidvest Group, said yesterday that there is a "rosy horizon" for acquisitions. http://www.bloomberg.com/apps/news?pid=20601116&sid=aM5lt3encbDY Going forward, Joffe said that it will keep it's business model very decentralized on the operations, but very centralized on the return on investments expectations. ALEC HOGG: Looking ahead, the decentralised nature of your model - is that going to be helpful, going forward? BRIAN JOFFE: Ja, for me it's fundamental to the way we manage our business, because it is diversified. And I think it's not a model which is unique to us. I think if you take, for example, the supermarket model, they have specialist people doing specialist parts of their business, and so have we. We will continue to look at our business on a very decentralised basis, and to manage in a very focused way the type of return we should get out of every component piece of every business. ALEC HOGG: And another theme that goes through these results is that you have cleaned up balance sheets, you have generated more cash to position yourself well for acquisitions. BRIAN JOFFE: Ja, I think this is an opportunity time, and I'm not saying we would be reckless in running out to buy lots of businesses, but we are hopeful that one or two will come our way and we can close on them. And so on that basis we can get back to our acquisitive growth as well as our organic growth. http://www.moneyweb.co.za/mw/view/mw/en/page295799?oid=314503&sn=2009%20Detail&pid=287226 Cheers!

I really like what Fairfax is doing. They are building slowly, but surely an international platform to develop the business...solid brick after solid brick. Make sense a lot to me! Also, I think that Fairfax is building a reputation of a first class owner. Cheers!

Congragulations to John! Are his children trusts open to investors? ahaha ;) Cheers!

I'm not a follow the crowd, neither a contrarian investor. I do my best to ignore the crowd. Is ABC is a good, solid enough business? Does it has good prospects over the long term? It is run by talented, honest and shareholders oriented managers? What about the price? Is it cheap enough? Wheter people around me are manic or depressive, it doesn't change these fundamental basic questions to me. If the business pass the test, I click on "Buy". If I don't find anything interesting enough, I'll just keep cash waiting patienly for a good offer. I'm happy to say that I still can find some interesting enough opportunities to not having to keep cash to wait. Then, if people offer me a price that is high enough relatively to it's estimated intrinsic value, I'll consider clicking on "Sell". Cheers!

Ahaha, Google AdWords is so terrific sometimes. With this thread, I've seen few ads regarding derivative trading and counterparty services! One say that Lehman and others are gone for counterparty services and they offer their own. :D Cheers!

I like the read. Thanks for posting it. I don't understand most of the "swaps" things out there. I don't know if this Charlie Munger comment would apply on these swaps, but here is what Charlie Munger had to say in a recent interview about some derivative stuff : You and your partner, Warren Buffett, have for years warned about the dangers of the modern derivatives markets, particularly credit derivatives, and about interest rate swaps, currency swaps, and equity swaps. Interest rate swaps have enormous dangers given their size and the accounting that has been allowed. But credit default derivatives took that danger to new levels of excess—from something that was already gross and wrong. In the '20s we had the "bucket shop." The term bucket shop was a term of derision, because it described a gambling parlor. The bucket shop didn't buy any securities. It just enabled people to make bets against the house and the house furnished little statements of how the bets came out. It was like the off-track betting system. Comments and information would be appreciated and welcome. Lastly, one can never say never, but I would be surprised to invest directly in these kind of things one day because actually, I may be really wrong on that, what does it sound to me is some synthetic tools of speculation that have significant counterparty risk. Cheers!

Fairfax and Markel are still sufficiently cheap to me. Some megacaps high quality businesses are still cheap also. It depends on the margin of safety that you ask and the kind of business that you search for. If I can find a business that can grow by 12% per annum (more is the bonus) over the next 5 years and that is trading at 70% (less is the bonus) of my estimated reasonable fair value, the potential CAGR over 5 years is interesting. Classical Shelby C. Davis criteria. Can Fairfax and Markel grow their book value per share at 12% or more per annum over the next 5 years? Are they trading at 70% or lower of their intrinsic value? To me, both answers are yes.

They do that on a usual basis. Take a look at their press releases archive. http://www.fairfax.ca/Assets/Downloads/Press/fpr2008-04-18.pdf http://www.fairfax.ca/Assets/Downloads/Press/fpr2007-04-02.pdf etc.