Prem Watsa Quotes
101 Prem Watsa Quotes
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Buy when you hear the sound of canons. Sell when you hear the sound of trumpets.
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[In May 2007] Today we hear the sound of trumpets.
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What happens if we hit an air pocket?
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It seems to us that securitization (or the creation of these asset-backed bonds) eliminates the incentive for the originator of the loan to be credit sensitive…
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When the music stops, it stops very quickly.
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Trees don’t grow to the sky, and markets don’t fall to the floor.
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Why do roman bridges historically last for a long, long time? Why did they last for a long time? The key reason was that the people who designed the bridges had to stand underneath it before the traffic went on. So they made sure there was a massive margin of safety. And bridges lasted for years and years and years.
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Speculation (and I have been in the business more than 35 years) is the same over time, over countries – the same.
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Value investing is all about downside protection – and then trying to make a return on the upside.
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[On value investing] Either you like it and it hits you from day one, or it doesn’t. And for me it did.
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What you pay makes a huge difference in relationship to what you get. It’s always sensitive.
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Don’t ever think that the [stock] market knows more than you do about the underlying business. That’s the biggest mistake you can make.
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[Several years before the crisis] We have been concerned for some time about the risks in asset-backed bonds, particularly bonds that are backed by home equity loans, automobile loans or credit card debt (we own no asset-backed bonds). It seems to us that securitization (or the creation of these asset-backed bonds) eliminates the incentive for the originator of the loan to be credit sensitive… With securitization, the dealer (almost) does not care as these loans can be laid off through securitization. Thus, the loss experienced on these loans after securitization will no longer be comparable to that experienced prior to securitization (called a moral hazard)… This is not a small problem. There is $1.0 trillion in asset-backed bonds outstanding as of December 31, 2003 in the US… Who is buying these bonds? Insurance companies, money managers and banks – in the main – all reaching for yield given the excellent ratings for these bonds. What happens if we hit an air pocket?
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[In April 2007] There’s a possibility of a one-in-50 or a one-in-101 year storm coming. When the music stops, it stops very quickly.
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I went to the Ivey not because it was good, though it turned out it was, but because it was near where my brother lived.
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[On getting a job at the now defunct Confederation Life Insurance company] There were four people selected for a second interview. The reason I got the job was that the three other guys didn’t show up.
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[On not investing when there’s no ‘Margin of Safety’] You have to turn your back sometimes.
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[On describing the stock market as a manic depressive] Sometimes it buys at a high price and sells at a low price. Don’t ever think that it knows more than you.
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Like Warren Buffett and John Templeton, Peter Cundill was a legendary practitioner of the ‘Value Approach according to Ben Graham’.
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The investment business is so fascinating: it’s always changing and there’s always something to do!
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I think of value investing as quite a contrary approach, almost by definition.
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It’s almost always a very few people who can be the real value investors because, by definition, it is a strategy that is different from everyone else’s.
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People have a difficult time taking the long-term view.
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Human nature hasn’t changed, and people want to do well in the short term and make money as fast as possible. They can’t handle fluctuations. So if people buy something at US$10 and it goes to US$7 or US$8 or US$5, they think they have made a mistake and they want to sell. They can’t look through that to the long term, which, of course, was Ben Graham’s great contribution.
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[In 2011] Turnover today in the U.S. stock market is higher than it has ever been.
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[On the opposite of value investing] With all of these computer-generated models for trading, you have a heightened interest in the short term. When I say short term, I am talking literally trading on minutes or seconds.
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As far as a lack of patience in investors, that has always been the case. Investors, even professional investors, are focused on making money in the short term.
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For value investing, by definition, you have to be able to look at the long term.
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For the past 25 years, we’ve had a very stable investment committee of six people (three of whom have worked together for the entire time) with a value-oriented philosophy. We don’t have any other philosophy at Fairfax.
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We are not worried about fluctuations as much as the others.
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If you have the philosophy but don’t have the structure, it makes it very difficult to implement a value-oriented philosophy.
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Focus on a long-term value-oriented philosophy and not short-term gains.
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To some extent a long-term and often contrarian approach is not always easy for many to accept or even learn, particularly in today’s short-term-focused world.
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[On where he sees speculation in the markets today in September 2011] Clearly in the commodity markets.
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Almost no one will hedge today, and that is an indication of speculation.
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We met people in China, even ordinary people, who owned three and four apartments. I would say to them, ‘If you sell one apartment, you’ll have a million dollars, free and clear. And you’ll still have three more apartments.’ All these prices have gone up fourfold in four years. You know what the person says? She says, ‘I can’t do that because I sold one two years ago and it doubled after that. So I am never doing that again.’
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We had a whole bunch of oil companies in Canada that were selling at hundreds of millions of dollars in the late 1970s, with no revenue and no oil production, no assets, but they had oil in the ground, so called. The music stopped, prices went down 90 percent.
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In the high-tech boom of the late 1990s, you had a whole bunch of IT companies
selling for billions of dollars. Cisco and Northern Telecom and Microsoft were buying these companies that had no revenue to speak of. For a year or two, it looked like there was no end to this. Then the music stopped again, and companies like this dropped 90 percent.
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There is a ton of speculation in commodities. There is over-inventorying. Whenever the price goes up, people buy more than they need because they think it will continue to go up. So there are inventories…
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You can never tell when the music will stop. I can’t tell, but you know it will end.
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