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  1. #1
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    FAIRFAX

    I recently (6 months ago and again just a while ago) bought FFH from TSX.
    It is company that i had my eyes on since 2013 but was able to finally buy it.

    Thanks to some of the postings here, I found out that FFH actually pays dividend in US dollar at source. So i said myself let me call RBC and make the pay the dividend as it comes. They said, they could do that if they were to switch my FFH to a US Account and warned that visually my investment would show in US Dollar. Fair enough I said.


    Surprisingly once the change was done, it wasn't just switched to a US Account, they actually switched from FFH to FRFHF.
    I called to understand, wasn't very clear. Something to do with the fact that FFH trades as an inter-exchanged stock. I don't even think their help-desk have the right understanding.

    My question is why there was a need to actually switched from FFH to FRFHF ?

    now that I own FRFHF, does that also means that i am also betting on the US Dollar ?

    funniest part was that she told me that i could sell my share (when i decide to sell) into directly my CAD Account with no RBC conversation surcharge ??


    i really got confused. Is there something magical about a stock that trades on two different exchange ?


  2. #2
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    When a brokerage journals a Canadian inter-listed stock to the USD account, it is given the US (NYSE) trading symbol. As long as a stock has the same CUSIP number, it can be traded on either the Cdn or US exchange. If you sell FRFHF on the TSX, it will actually be traded as FFX. That is all there is to it.

    No, you are not betting on the USD. You are simply tracking FFH on the US stock exchange when it is on the USD side of the account. FFX and FRFHF trading prices will almost exactly trade in the same ratio as the CAD/USD currency trades.

  3. #3
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    Quote Originally Posted by Drauss View Post
    I recently (6 months ago and again just a while ago) bought FFH from TSX ... it wasn't just switched to a US Account, they actually switched from FFH to FRFHF ...

    ... funniest was that she told me that i could sell my share (when i decide to sell) into directly my CAD Account with no RBC conversation surcharge ?


    interestingly, with your Fairfax shares, you have stumbled into a rare, complex & exotic corner of how-to-avoid-broker-FX-fees-via-arbitrage.

    even more interestingly, everything you have done & all the information being given to you above (RBC & altaRed) is correct!

    is this not a great way to start off the new year? félicitations, you are navigating along swimmingly.

    i have only one thing to add. Be very careful, when you go to sell any fairfax shares, to sell them in canadian market only. Do not sell them in US market.

    here again, you are in luck with RBC broker. They are one of ony 2 canadian brokers (BMO is the other one) where the system permits an online order to sell from one currency account directly into the opposite currency market, exactly as the RBC representative described to you.

    carrying out such a cross-currency sale at all other brokers requires phone calls, journalling of stock from one currency to the other, delays, full agent-handled commissions & other pesky hooHa. But - uniquely - roybank & BMO are using a different mainframe, one which trades on CUSIP number only, so the system can easily pick the same CUSIP stock from one market & sell it into the opposite market. A roybank or BMO client can sell online in the opposite currency instantly & cheaply, for a low online commission.


    * * * * *


    here is why you should not sell your fairfax in the US foreign market. See that "F" at the end of your US holding symbol? that denotes the foreign section of US pink sheet stocks. Don't worry, although pink sheets do have a disreputable reputation, nevertheless the foreign section contains some very distinguished names, for example Nestle of switzerland.

    the problem with pink sheet foreign stocks is that US brokers do not make any market whatsoever in these stocks. There is no inventory held in the US of A. A US jitney broker (your broker roybank is using US jitneys, as do all canadian brokers) will have to get a US sale effected on the toronto stock exchange itself. To do that, US broker will charge you an arm & a leg for its efforts, transfer difficulties & currency exchange costs.

    you won't see these fees, they will be embedded in the pink sheet bid/ask spread, which will be humungous.

    to sum up: avoid pink sheet uproar by quickly & efficiently - at royal bank broker - selling any fairfax shares into canadian market. Which is exactly what the helpful RBC broker lady told you.

    (for any other currency arbitrage followers who might be listening in) the issue with gambit-trading illiquid interlisted issues is always the big spread on US exchanges. Classic gambit trading requires a highly liquid interlisted canadian stock & for that reason we use strictly big banks, a few energy or a few resource stocks as carrier stocks.

    when canadian stocks end up as US pink sheet foreigns, there is no liquidity at all. So never buy or sell these in US pink markets. Always trade em in canadian markets.


    .

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  5. #4
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    thanks for both responses.

    With the same token
    If i want to add to my Fairfax position, i ought to buy FFH and anytime between now and the next ex-dividend (jan 2018), i can call RBC and have them switch it over into FRFHF

    reading the answers couple of more time, that also means that i paid 'hidden' fee on my Softbank share. But that cannot be helped as they just don't trade on TSX.

  6. #5
    Senior Member humble_pie's Avatar
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    Quote Originally Posted by Drauss View Post
    If i want to add to my Fairfax position, i ought to buy FFH and anytime between now and the next ex-dividend (jan 2018), i can call RBC and have them switch it over into FRFHF

    reading the answers couple of more time, that also means that i paid 'hidden' fee on my Softbank share. But that cannot be helped as they just don't trade on TSX.

    re Fairfax, be sure you buy this on canadian market & pay in CAD. For the same reasons set forth above. FRFHF has gigantic fees built into the big spread between bid & ask.

    zfter a purchase, your broker can easily journal shares to USD side of your account - so you can continue receiving USD dividends without FX fees - but broker will likely want to wait until after the 3-day settlement period is over. So if you are buying, get the job done days ahead of the dividend X date, so as to allow time for settlement & journal.

    sorry i don't know about softbank. Was that the japanese company that recently bought out ARMH? which itself was a british company named Arm holdings? these have/had nothing to do with canada. These are foreign companies.

    one should never buy foreign stocks in a canadian dollar account if one can prevent it (there are, of course, a couple miniscule exceptions to this rule) (one of the tiny exceptions is being phased out this month) (this exception is not at RBC broker though)

    .

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    Good info...thanks...

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    Quote Originally Posted by humble_pie View Post
    re Fairfax, be sure you buy this on canadian market & pay in CAD. For the same reasons set forth above. FRFHF has gigantic fees built into the big spread between bid & ask.

    zfter a purchase, your broker can easily journal shares to USD side of your account - so you can continue receiving USD dividends without FX fees - but broker will likely want to wait until after the 3-day settlement period is over. So if you are buying, get the job done days ahead of the dividend X date, so as to allow time for settlement & journal.

    sorry i don't know about softbank. Was that the japanese company that recently bought out ARMH? which itself was a british company named Arm holdings? these have/had nothing to do with canada. These are foreign companies.

    one should never buy foreign stocks in a canadian dollar account if one can prevent it (there are, of course, a couple miniscule exceptions to this rule) (one of the tiny exceptions is being phased out this month) (this exception is not at RBC broker though)

    .

    Yeap that is the one.
    i actually bought it through US account. Forced a force conversion to US dollar when buying it.
    Had no choice.

  9. #8
    Senior Member humble_pie's Avatar
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    Quote Originally Posted by Drauss View Post
    Yeap that is the one.
    i actually bought it through US account. Forced a force conversion to US dollar when buying it.
    Had no choice.

    drauss if by the above you mean that you had zero US dollars anywhere but you wanted to buy a US stock in US market, therefore the broker converted your CAD to USD by applying the appropriate FX fee of the day ...

    there's nothing wrong with that imho
    the brokers are entitled to their stated fees when the clients fit the currency exchange profile

    my efforts have always been directed to finding useful workarounds to avoid broker FX fees, but there are times when there is no alternative & the bullet has to be bitten

    in other news, can you share what has drawn you to prem watsa's Fairfax at today's high prices? i have never been tempted, mister watsa is far too secretive for me & i'm not sure if any succession plan is properly in place inside the fairfax empire ...

    best of luck with this & with softbank though

    .

  10. #9
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    Hi
    Thank you for your question.

    i have been looking at FFH since 2013ish. But didn't buy it until this past summer when it first dipped to $650ish.

    Was intrigued that he was an outlier on the market with his deflation bet. Initially, I bought mostly as a protection against the unexpected (i.e. hedges against market and deflation). One might ask (rightly), if you did want hedge against market crash, why did you not get into it yourself directly via options or ETF that bets agains the market. Let's just say that I trusted that Watsa would know that if the sentiment turn decisively he would have also changed his portfolio (more on that below). I do read extensively and follow financial news. Nearly, 40 articles per week (WSJ, FP, Bloomberg, etc.) but still i am slower than Watsa (see Trump election below).

    Furthermore, I really wanted to get my hands on a Canadian insurance that emulated Berkshire. One might also point out that Berkshire does not make macro bet and has a much better track record of stock picking. Very true on both points as Blackberry, sandridge and other bets have gone not so well nor did the deflation bets (both of which darkens FFH track record - Well BB remains to be seen). But my view is that if one wants quality stock, they can always buy directly. As for deflation bet, it was a bet against an all-out collapse to protect shareholder money. Perhaps it was a bit too oversize. Let's just say that I am really intrigued to listen to his next Q results and Q&A session. I would prepare a nice latte to sip while listenining to it.

    My other point of view is their book value growth over the past 20 years and their low market cap. How much can I really make by buying Berkshire at its gigantic market cap ? sure, i like quality but i want growth.

    Speaking on that decisive sentiment turn: Trump election (i.e. reflation) was just that.
    I saw my Bank of America holding (4 times the size of my FFH holding) soar by nearly 40% (didn't sell anything yet). And saw FFH collapsing from $750 highs to as low as $590 as investors that bought FFH to get that 'deflation' hedge sold off. So I double the size of my FFH at recent lows knowing that Watsa would re-assess given Trump victory and by pure luck (or bad luck, as i didn't know how the market would react) doubled it the Friday before they announced their gigantic M&A of Allied World.

    Remains to be seen how the next 5 years will unfold but i am glad that he is now bullish on the market.
    There is another forum called Corner of Fairfax and Berkshire. I have been reading about it there extensively as insurance is well outside my field of expertise. Most of my holdings are in UTC where I work.
    So if there is a thread where i can contribute back to the forum on aerospace matter, I would do so.
    Last edited by Drauss; 2017-01-02 at 09:33 PM.

  11. #10
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    i should also add that on the same week that Wasta sold off 90% of his long US bonds and removed 50% of his equity hedge and presented his very bullish view, Brookfield's boss stated that and I quote: "That we are now one of the largest asset managers globally is largely the result of our patience and staying power. Having liquidity at the right times is a big part of this. Cash only matters when it matters. And when it matters, it really, really matters.

    in other words, Flatt went cash and semi-bearish while Watsa (a know bear) turned a bull.
    Though, one might say that Brookfield has rode the bull market since '08-09 so that may be understandable.


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