Prem Watsa Webinar Takeaways (20th May 2020)

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Prem Watsa Webinar Takeaways (20th May 2020)

1st black swan was the coronavirus. 2nd one was the collapse of oil prices. The 3rd one was the lockdown.

Unexpected events leads to extreme uncertainty which leads to panic.

Seen many uncertainties in the past:
• Financial crisis in 2008-09. Then General Motors went banrupt, chrysler, GE couldn't roll over short term CPs. March 2009 made a low and we never saw it again.
• Sep 2001 collapse was also unprecedented.
• 1974 President Nixon was being impeached and he resigned. OPEC was trying to raise prices from $2 to $10. Price of oil going up so much affected the world.
Lessons from the past - this too shall pass.

Optimistic that we willl get a solution soon.

Always worry for the unexpected and make sure you can survive that.

Fairfax borrowed in bonds last year and ensured they dont mature for 3 years. Made sure all their businesses were self sufficient. Had a $2 billion unused bank line at the end of December.

Fairfax has $4 billion invested in India and 4 lakh employees - Quess being a very signficant employer. Expect to invest more over the years as opportunities arise.

First thing is to survive. In 1985, there were 6,000 listed companies in Nasdaq of which only 10% survived. For survival always look for the unexpected.

In this pandemic large companies have come back, but a lot of medium companies are on the bargain counter.

Very excited about India in terms of its possibilities.

Normalcy is returning already. USA is opening up. General Motors is begining production this week. Others will follow. Oil prices have started going up. Russia and Saudi have cut production significantly. Demand is picking up. China has gone back to its pre lockdown demand of 13 million barrels a day.

(Vaccine for Covid) largest insurer of clinical trials is in London. They are insuring 122 trials. There are so many trials taking place they are positive that somewhere some development will take place. More positive on Oxford University and Moderna Inc.

Fairfax did a bond issue in April. Raised $500 million at a little more than 4.5%. If they raised before the virus, they cold have done it at 3.5%.

No country can be shut down. Key is to open up economies. We have got to take risks and be careful at the same time.

80% of deaths in Canada due to coronavirus is from long term nursing homes and its the same with USA too. Young people should go out and work. Need to be careful.

(On Sir John Templeton) Knew him for 30 years and was a great mentor. If something goes down 50% you should ask yourself why you're not buying, and if something goes up 50% you should ask youself why you're not selling. The best time to buy is the time of maximum pessimism.

Prem Watsa's father was a principal in a school. They were 4 siblings. Had very good parents and great values. Came to canada in 1972.

Less than 10% of Fairfax portfolio is invested in India (total portfolio is $40 billion). India is going to be an unbeliveble land of opportunity. Mantle of growth is being passed on to India.

"A third of the investment decisions are wrong. If you get 2/3 right you can have a good record" - Sir John Templeton

Bets on people. Doesn't make an investment unless he likes the people running the company.

Being contrarian means looking at the facts and saying this has happened before.

NYC measures 60,000 pieces of information every day after 9/11 on all goings on in the city. Security everywhere.

In Q2 Fed is issuing $3 trillion of bonds. Their worry might be inflation and interest rates going higher.

The free enterprise system in USA is unbelievable. Huge upcoming $12 billion investment in USA for semiconductor plant. Accelerated depreciation in USA due to which the entire thing can be written off in just one year. Huge tax savings.

Disney in Florida is opening in July 1st.

USA has the ability and the smarts. The smartest guys in business are appointed. They got the Democrats to back the T- bill in just 9 days!

Never understood gold. Always bought equity and bonds.

Golden rule. You have to have a good culture - treating people well.

Empowerment + Compensation are key to retaining good people. Only 35 people in the head the office of Fairfax.

Fairfax was worth $2 million when they began. Today they put $20-25 million in community business all over the world every year.

China has had 10% economic growth for a long time. Its not surprsing if that comes down.

India has tremendous potential.