Partner24

I would just add a very important trait to me: Independance. What does that mean? That mean to take your investment decisions with your own analysis and reasoning, not on what the public, the media, the Internet forums, etc. think. That does not mean to don't listen to these sources of very valuable information, but take them as sources of information that you must filter. Follow the crowd or being a contrarian for their own sake are neither good behaviors to me.

The SEC is not doing is job enough to solve the naked short selling problem. I don't have the link, but I remember having red a recent report from a SEC executive who was saying that the enforcement departement was not handling the complaints about naked short selling appropriately (not to say that they were nearly not doing anything). The actual model doesn't work. It is not sufficient enough. Part of that problem might due to the "hoping for a better job and salary" factor. If a police officer was hoping that he would eventually get a better job working at the people he actually have the task to investigate, that would create a potential problem. It is probably not the only problem, but it's been years that the SEC is aware of that naked short selling issue and it is not agressive enough with it. Something has to change.

The employment boundaries between SEC enforcement staff and the private sector are not wide enough. To paraphrase: Whose bread I'll eat (eventually) - His song I sing.

He went on to say that even though the stock was below book they were not going to jeopardize the capital position in any way. REad nother way - he is managing investor expectations downward in this regard. and that's terrific! Go Prem go!! ;D

I second that pep talk Mungerville!!! ;)

By the way, is there someone who plan to go to the AGM this year?

I'm far from being an expert on bankruptcy and liquidation issues. What do I know is that usually convertible debentures are not the first on the food chain (taxes to be paid if any, garanteed debt, etc. are well before). I don't understand about that 200 millions $ financing neither. Insight would be appreciated.

current stock portfolio is approx. 20B, current shareholders equity is 5B. Hi ValueBuff, If the stock portfolio represents 100% of equity, that would mean approximately 5 billions. The remain portfolio is mainly in bonds. If the stock portfolio were to double, all else being equal, our book value would go up significantly (but I guess not by 100%, since there would be ultimately taxes on these gains and minority interest)

You're right scorpioncapital. A significant part of that lost was a tax asset. Still, it's a significant loss.

Well, I guess we'll see the ultimate value we had in these ABH convertible debentures.

These guys are very candid and straightforward. Just the way I like top managers to be. What surprised me most is their shift to quality businesses comment near the end of the letter. That's so far not been their main investment style. The reality is we will continue to look for companies to buy, but only consider companies that earn money, have a bright future and are durable! The more I see comments from different value investors about their 2008 experience, the more I think that, when they'll look back to this period, what will have changed a little bit in their perspective is that yes, building an ark rely on the price paid, but also on the solidity of the business itself and if you don't realize that and you fool yourself, you might be in trouble when it will rains a lot. I mean, you have a truly good margin of safety if you paid cheap, but also if time is on your side regarding the intrinsic value of the business! When you think a company is worth more dead than alive, that's good if: a) the business will be dead soon so the liquidation value proceeds will pay off or b) if the business remain alive for some time, at least it's assets value will not decrease so much over time that your margin of safety will be gone. Now back to Leucadia: Leucadia lost more than half of their book value in 2008! That's significant. Part of this problem is because their theme (emerging countries growth) is right (to me), but lumpy, and actually we're not on the ugly part of the cycle. They are overleveraged, but fortunately their debt maturities begin in a few years, so they have some time to pull the water out of the ship and fill the holes. Shareholders can hope to not be diluted, but I don't have a crystal ball so we'll see. They seem to be quite motivated to the task and care about Leucadia. That's a good sign. I like them. Buying Leucadia is to buy assets that are managed by great investors. You want to have these assets at a good price, sit on your chair and then let some great value investors build them to increase their value over time. I think it will require some patience to see the sunny sky again with Leucadia, but I'm confident that patience will reward their shareholders. I keep my shares (and then some). Cheers!

Thank you very much Stephen. Much appreciated. All the best to you too.

CDS gains are "history": http://www.bloomberg.com/apps/news?pid=20601082&sid=acqXvp2_AFhg&refer=canada

and regarding this sentence: Mr. Watsa also suggested that, in retrospect, he might have waited a few extra months before removing the hedges that Fairfax had in place on its stock exposure. I do not expect Prem and team to predict the bottom of the market. To me, that would be foolish. I don't care if the market goes downer for the short term then when they removed their hedges. What count is the long term and that's, as a shareholder, where my focus is. Cheers!

It was a great question to ask to Prem and a candid answer from him. I appreciate that very much. There is no sin in telling mistakes openly, quite the contrary! Regarding Abitibi and CanWest, since it is now official that it was a mistake to do it (at least that early), I guess that a Buffett quote could underline a fundamental principle: "Time is the friend of the great business." With JNJ, Kraft and some others, we should have time on our side. That being said, I'm overall very satisfied with the Fairfax investment style.

Yes, me too!! :'(

Central Securities! That's what I was searching for. Over 30% of their assets are in Plymouth... I wish it would be 100% ;) Cheers!

Crip, My friend, I would have liked to take a pint or two with you tonight in Toronto. :'( Please have one for me. I hope that we'll not have one virtual, but real one day. Maybe we'll meet one day at Markel AGM? Have a really nice trip in Toronto, a good meeting with our fellows members of this board and a good AGM tomorrow. Please make sure to meet Prem in the hall after the AGM. He's a friendly person. Cheers!!

Thanks for the info rabbitisrich! They have compounded their book value per share by approximately 18% CAGR over a long period of time and the CEO seems to be a very focused fundamental investor. I like what I see. Unfortunately, even if I study it further, the company is not available to the public investors. I know that a publicly traded fund had a significant part of their assets under management invested in Plymouth. Do you know wich one it is? Cheers!

If people in the US use a lot of rechargeable electric car, then demand for electricity should go up significantly (so the price of it), then MidAmerican, with more than 700 000 clients for electricity, will make a lof of $.

I admire companies that help us to use energy more efficiently, cleaner, etc. To me, iIt's necessary if we want to keep and expand our prosperity. See houses use solar energy, cars use an autonomous, renewable and clean energy is one of my lifetime dreams. It would be terrific. Just a question here on people who understand these technologies better than me (believe me, the bar is low). If all cars were using rechargeable electric batteries, wouldn't it create a very significant shortage of electricity power? We would need to provide new electricity energy for millions of cars. Assuming same supply, why electrical cost wouldn't go up significantly? And what sources of energy would be used to that? Coal, nuclear, ??? If so, how would it help create a cleaner world? I don't know much about that, but I find it really interesting, so insight would be appreciated. Cheers!

Regarding your specific question, you have to ask yourself what is the approximate intrinsic value per share of WFC first (by the way, I don't know that answer).

This guy (Kass) reminds me a song that I often hear on the radio these days: You change your mind Like a girl changes clothes... Cause you're hot then you're cold You're yes then you're no You're in and you're out You're up and you're down You're wrong when it's right It's black and it's white

I have never used DCF to value businesses. In terms of valuation only, what I basicaly want is a high enough yield on free cash and profits generated by the company actually (on a trailing basis or on an normalized basis on insurance companies) and get a fairly high level of confidence that the cash generated will grow over a long enough period of time. But I don't try to figure out what will be the cash that the business will generate in infinity. In infinity we're all dead and if we're not martians will attack us ;-) And with Leucadia, how could I do that? So, in some cases, I use the equity that the business have, try to get it at a discount to a fair multiple to it and try to figure out by approximately how much the jockeys will be able to grow it over the next decade. In each cases, I try to get a discount on the estimated fair value of the business and have some substainable growth prospects so that time will be my ally instead of being my enemy. With that, you get the best of both worlds: a return on narrowing the gap between price and fair value of the business AND a return on the increased fair value of the business.

Just like he seems to have done at his beginnings at Cundill, will he work for free for us? I wouldn't have any problem to double his salary then. A formal proposition anyone? ;) ;D