Skip to main content

Prem Watsa, chairman and chief executive officer of Fairfax Financial Holdings, answers a shareholders question during the annual general meeting at the Glen Gould Theatre in Toronto on April 15, 2008.

Jim Ross/jim ross The Globe and Mail

Fairfax Financial CEO Prem Watsa is asking the market to put the company's high-profile investment in Research in Motion into perspective, as he makes much larger bets that the world's major economies are in for more pain.

The company just wrapped up its quarterly conference call on its second-quarter earnings, and Mr. Watsa offered a few insights into the rationale behind some of the firm's investment decisions.

"Please put the additional $190-million (U.S.) we invested in July in RIM in perspective relative to the $24-billion size of our investment portfolio," said Mr. Watsa, who sits on RIM's board. Fairfax is now RIM's largest shareholder, with a 9.9 per cent stake, up from about five per cent closer to the start of this year.

Story continues below advertisement

"As of June 30, 2012 we have almost $8-billion in cash and short-term investments, over 30 per cent of the investment portfolio, to take advantage of opportunities that may come our way," Mr. Watsa said, acknowledging that his exceptionally bearish strategy will mean lower investment income in the short-term.

"We continue to be very concerned about the prospects for the financial markets and the economies of North America and Western Europe, accentuated by the breaking of the real estate bubble in China," Mr. Watsa added.

Fairfax has been selling down its portfolio of long U.S. treasury bonds, but still has more than $1-billion worth (on a cost basis). Mr. Watsa says that the defensive posture gives him comfort that Fairfax will be able to take advantage of tougher times ahead, should things play out as he expects.

"Spreads are low in the bond markets and it doesn't make sense to reach for yield, and stock prices have basically doubled from 2009 lows, so we think this is a good time to be conservative," he said.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter