Fairfax Financial 3Q16 Earnings Call Notes

Fairfax Financial Holdings’ (FRFHF) CEO Prem Watsa on Q3 2016 Results

35% of the portfolio is in cash

“Given the uncertainties of the U.S. election and the fact that we live in a mark-to-market world in the fourth quarter we have sold approximately 90% of our U.S. long term treasuries in our investment portfolio. And as a result we will have cash and short term investments in excess of $10 billion or 35% of the portfolio. Since we began buying treasuries in 2010 we have realized a cumulative gain. Now this is a cumulative gain of over $1 billion.”

Uncertainties in election were problem

“Yes, as we said, sold 90% plus of our treasury bonds and we made the point that the uncertainties in the U.S. election is the reason. We don’t know who’s going to win the elections, but you could have significant infrastructure spending, you could have that drop in corporate tax rates and while we think that might work in the short term in the long, we still have questions about that. But we do live in a mark-to-market world and we wanted to take that risk and so we’ve done that.”

There is too much debt in the US

“We recognize and we’ve said to you there is too much debt in the United States and in the rest of the world. All of the monetary policy QE 123 all haven’t worked in any significant way. So when you see all of that we like the fact that we have $10 million plus of cash in the investment portfolios with the idea that we can take advantage of opportunity as and when it comes our way.”