Another Bear Throws In The Towel: "Canada's Most Famous Investor" Closes Bearish Hedges After Huge Loss

Tyler Durden's picture

Another bear throws in the towel.

Prem Watsa, the CEO of Fairfax Financial, and largely recognized as Canada’s most famous investor, is dropping his bearish stance on the markets. Watsa announced that he is covering his firm’s equity hedges after suffering a $1.1 billion net loss on its investments in Q4, and $1.2 billion for all of 2016.

The reason is a familiar one: Donald Trump.

“[Full-year] net losses on investments of $1,204 million were primarily as a result of fundamental changes in the U.S. in the fourth quarter that may bolster economic growth and business development in the future. Consequently, we removed all our defensive equity index hedges and reduced the duration of our bond portfolios to approximately one year,” Watsa said in a press release late Thursday.

 Net losses on investments of $1,204 million were primarily as a result of fundamental changes in the U.S. in the fourth quarter that may bolster economic growth and business development in the future. Consequently, we removed all our defensive equity index hedges and reduced the duration of our bond portfolios to approximately one year. Our investment actions resulted in our having cash and short term investments in excess of $10 billion at year-end," said Prem Watsa, Chairman and Cfhief Executive Officer of Fairfax. "In the fourth quarter we announced our agreement to purchase Allied World for $4.9 billion, a transformative acquisition for Fairfax. We continue to be soundly financed, with year-end cash and marketable securities in the holding company approaching $1.4 billion.

"It was a painful quarter and year for Fairfax," Watsa added during conference call on Friday, adding that "some of you might wonder and might actually think we are doing this at exactly the wrong time."

Watsa also warned that "we might be in for a period of inflation... based on the latest numbers from the United States." Actually, the real source of inflation would be China, not the US - an impulse which will soon fade - but he has the right idea.

As BNN reports, Fairfax’s decision to drop its defensive stance marks a swift reversal for Watsa. As recently as Nov. 3, when Fairfax announced its third-quarter earnings, Watsa declared his firm was sticking with its defensive strategy because he was “concerned about the financial markets and the economic outlook in this global deflationary environment.”

But now, suddenly, everything is ok and Fairfax said recent changes in the U.S. have “obviated the need for defensive equity hedges” and as such has closed out all its short positions in the Russell 2000, S&P 500 and TSX 60.

Despite closing his bearish hedges, Watsa joined JPM's head quant Marko Kolanovic in saying he expects further volatility in the year ahead during the conference call, telling investors 20-30% fluctuations in stocks prices are “very much possible,” warning that quarterly income will fluctuate “wildly” and investment income “will only make sense in the long term", but highlighting opportunity in volatile markets, so long as investors are extremely selective stock pickers.

He also highlighted the increased prospect for U.S. growth under the new Donald Trump White House, calling for a revival of the “animal spirits” in the U.S. economy.

“The thing about Fairfax and Prem Watsa is that you’ve almost got to regard him in a totally different kind of way,” said Michael Smedley, executive VP and chief investment officer at Morgan Meighen & Associates, in an interview with BNN. “He’s a kind of [Berkshire Hathaway CEO Warren] Buffett. So I don’t know that it matters too much. It sort of feels like it’s a little bit late to be doing that [closing shorts], but then how could he have known?”

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Belrev's picture

Russian hackers make a prank call to senator Lindsey Graham now on behalf of head of Ukraine's parliament and prime minister.

https://www.youtube.com/watch?v=3LlSP9b_k-g

Jim Sampson's picture

So there's 10, 11 left?

Belrev's picture

It is a very deep state.

The Saint's picture
The Saint (not verified) Belrev Feb 17, 2017 3:58 PM

Only took him 3 1/2 months from the bottom.  Not sure I would want him as my investment manager.

 

LeftandRightareWrong's picture

Exactly how does one get (and keep) a 2 and 20 job like that?

SantaClaws's picture

Easy.  Go to meetings where there are many rich liberals and say "climate change" every few seconds.  The women will rip their clothes off and throw themselves at you and the men will hand over all of their money.

Al Gore did that and he made hundreds of millions.

NugginFuts's picture

Bears = endangered species. Everyone else has learned to stop worrying and BTFD.

BabaLooey's picture

Historically..................when the last of the last of the holdouts..................

I mean the diehards..........................throw it in.............

It's the top/bottom of the market.................

There are no markets........................................anymore.

Thus, history here is for shit........

2_legs_bahhhhhd's picture

I can all but guarantee you, after 9 years of refusing to buy into this shit show, the moment I go all in.....the market will go to zero....lol

This dumb bastard is in the right place, but it musta been the wrong time

https://www.youtube.com/watch?v=HT4RainY-lY

Nobody For President's picture

Well then, please do go all in - next Tuesday would be fine.

debtor of last resort's picture

My bearish hedge looks at me from a dusty shelve and wishes me good night.

Yen Cross's picture

   What a pussy!

Manipulism's picture

Maybe he tought there were still markets.

Unbelivable, a guy who manages billions believe in fariytails.

order66's picture

Shorting into a bubble rarely works.

darteaus's picture

Guy looks like Benjamin Netanyahu

jrock's picture

"It was a painful quarter and year for Fairfax," Watsa added during conference call on Friday, adding that "some of you might wonder and might actually think we are doing this at exactly the wrong time."

No shit.

 

arby63's picture

playing with fire baby.......ouch

White Willie's picture

Teach you to bet against the USA

Mr. Schmilkies's picture

Never go full retard.

peippe's picture

seeing as it's allover now(hedge attempts)

he should list his stupidest moves, the ones that lost 1B+

hope that was 1B+ CDN.  : (

FlKeysFisherman's picture

Never bet against the printing press.

Bunga Bunga's picture

Soros' not giving up.

MASTER OF UNIVERSE's picture

John Chen will likely be in the news soon too.

sle7en's picture

another bear bites the dust ? (a heading suggestion brought to you by me)

In.Sip.ient's picture

Or maybe he's going full retard on Canada?

 

While Trump promises to streamline the tax code

and reduce taxation across the board, rumor

has it that Canada is set to boost Capital Gains

taxes to an effective 40% !  Guess how well

C.G. taxes play with investors.

 

If you guess NOT WELL, you get the idea.

 

 

 

Iconoclast's picture

What kind of risk and money management do these fucktards attach to their position trading? I wouldn't let the useless fuckers loose on an FXCM demo account.

Greif's picture

So much  (political) risks not priced in. Shorts all giving up.. the set-up is getting better and.better....equity might enjoy it foru some time longer... but credit is gonna.crack first.. like always

nathan1234's picture

Real Bears hibernate .

Buy gold and go into hibernation.

Anyone who trades in this market with it's endless supply of fiat currency backing the manipulations is asking for trouble.

Boygoy's picture

Didn't realize Uttar Pradesh was now a Canadian province.

Michigander's picture

He's gonna be right, but he's early. Just another example of an irrational market out waiting you.