Fairfax Financial: The Oracle of Nothing

Carson Block, Founder of Muddy Waters Capital, makes the case that Fairfax Financial Holdings (FFH CN) is more akin to the ‘GE of Canada’ than claims of being another Berkshire disciple. Based on its work, Muddy Waters believes that Fairfax’s book value should be ~$5 billion, or 20%, lower than reported. While it touts itself as a holding company similar to Warren Buffett’s Berkshire Hathaway, Carson and team have found extensive evidence of complex accounting and hardcore financial engineering. From de-consolidating financials in order to avoid impairment charges, to expensive off-balance sheet debt for various joint ventures, and even the utilization of Total Return Swaps on its own stock to turbo-charge earnings, nothing is off the table for this conglomerate of accounting gimmicks.