12 Mar 2010 FairFax - 2009 Annual Letter
Last year gave us an outstanding opportunity to add to our investment holdings of excellent companies with fine long term track records. All things being equal, we expect to hold these common stocks for the very long term. Wells Fargo, Johnson & Johnson, Kraft, US Bancorp.

While the stock markets have rebounded significantly from March 9, 2009, we continue to have a cautious view on the U.S. economy. The massive U.S. government stimulus programs (and government programs of other countries) appear to be working in the short term, but the enormous deleveraging by business and individuals continues to counter in varying degrees the positive effects of this stimulus. Our reading of history – the 1930s in the U.S. and Japan since 1990 – shows in both periods nominal GNP remained flat for 10 to 20 years with many bouts of deflation. While good companies with excellent management will continue to do well, this may be a particularly treacherous time period. Of course, being long term value oriented investors, we expect this to be a great environment for us to ply our trade – perhaps not unlike the 1975 to 1996 period.

06 Dec 2009 Prem Watsa on what comes next
The Greenspan policy was part of the problem. If Paul Volcker had been chairman of the U.S. Federal Reserve would this have happened? Not likely. He would have put interest rates up in 1996 when Greenspan warned about "irrational exuberance" and the tech bubble. Mr. Volcker would have let Long Term Capital Management go bust, raised interest rates and we never would have been in this current situation. The financial collapse happened because we had 20 years of boom time, and bubbles, without any significant recession.

15 Apr 2009 Fairfax's Prem Watsa Says Credit-Default Swap Gains Are ‘History’
Fairfax will continue to invest in equities such as Wells Fargo & Co., Johnson & Johnson and Kraft Foods Inc. Watsa said he also likes U.S. Bancorp...

“Stock prices are reflecting a lot of the pessimism that people see,” Watsa told reporters after the meeting. “We are liking stocks because a lot of it is discounted already.”

27 Mar 2009 The $2-Billion Man
Prem Watsa is the richest, savviest guy you’ve never heard of. He predicted the crash of ’87, the Japanese collapse of 1990 and last year’s meltdown, which he parlayed into a huge payoff. Now he’s gobbling up shares at rock-bottom prices. What he knows and why you should pay attention...

10 Mar 2009 Fairfax Financial Holdings - Annual Report excerpts
In November of 2008, after the stock markets had dropped 50% from their highs, we decided to remove the equity hedges on our portfolio investments. Also, as the yield on long (30-year) U.S. Treasuries began to drop below 3%, we sold almost all our U.S. Treasuries.

In previous annual reports, we have discussed the holding of some common stock positions for the very long term. Last year we identified Johnson & Johnson as one name and said that Mr. Market may give us more opportunities in the future. As shown in the table below, at the end of 2008 we had taken advantage of the major decline in stock prices to purchase additional positions in outstanding companies with excellent long term track records which we contemplate holding for the long term:

- Johnson & Johnson

- Kraft Foods

- Wells Fargo Bank

20 Feb 2009 Flush Fairfax Financial snaps up buying opportunities
“We think we are facing a long and deep recession... with many unintended consequences,” Mr. Watsa said.

“But as value investors we are seeing some excellent buying opportunities in common stocks for the first time in a long time, and we are taking advantage of them.”

“We consider this a time of opportunity,” he declared, as stock markets have fallen by half globally and spreads between the yields from corporate bonds and government bonds are near record highs.

However, “when I say that, I always say that with a five-year view. We really don't know what'll happen in the next three months, six months, a year from now. But five years from now, looking back, we think these prices will seem attractive,” Mr. Watsa added.

19 Feb 2009 Prem Watsa of Fairfax Financial likes stocks of high quality companies for the long term
We have been negative on common stocks for 4 or 5 years, and hedged our positions. But we stopped hedging in December and have bought long-term valuable, big companies with good, tested management such as Johnson & Johnson, Dell Computers, Kraft Foods, Wells Fargo, Intel and others. We believe these will pay off five years from now.

U.S. municipal bonds always sold at a lower yield than US treasuries because one is tax free and the other is taxable. In the fourth quarter, we were able to sell Treasuries, yielding pre-tax 3 to 3.5%, and have been buying munis yielding an average of 5.75% after tax. This is unheard of. We bought minis guaranteed by Berkshire Hathaway [Warren Buffett's company].

The U.S. reacts quickly, as opposed to Japan. But it's a question of pessimism which means it's not a bad time to buy for the long term.