Was Jerome Kerviel a man "without any particular genius"?

Within the past week, Jerome Kerviel changed the landscape and mindset of the financial world. According to the article from the Tribune Company, Kerviel is responsible for a whopping $7.14 Billion in losses incurred by French megabank Societe Generale. Although everyone's initial shock stems from the monetary value Kerviel cost his employer (not surprising considering the value), I was left in awe when reading about the ease and amount of transactions involved in his illegal actions.

For Societe Generale to comment on Kerviel as a "fragile person...without any particular genius" really worries me. Is this French bank so arrogant that they fail to believe he truly profited at any time from his illegal trading (which they also stated)? Are those at the top so stubborn to give Kerviel any credit for defrauding their organization for the largest amount in history? Or are those executives at Societe Generale telling us something else?

In an updated article, the bank claims he "hacked computers and "combined several fraudulent methods". How easy is this system to hack? If Kerviel was truly a man "without any particular genius," can we expect thousands of computer wizards to flock to investment banks in search of a trading position, which they will be able to use to extort or defraud massive amount of money? Are these banks, supposedly with the top computer security in the world (save national governments and agencies) really that safe?

Societe Generale might want to start a company-wide investigation, quick. Ditto for the rest of the banks. Because if Kerviel is just a normal guy with average intelligence and knowledge of his field and the trading system, this won't be the last case we see of this nature in near future.

US investments continue higher despite China

For the past few years, many bearish global and US market analysts have claimed that a recession or sharp decline on Chinese exchanges will create a detrimental domino effect throughout the free market world. Well, guess what, China's Shanghai index dropped some 8+%. Despite the rapid drop-off, resembling the DJIA in 1929, US stocks failed to coincide, edging slightly higher overall, including some of the very stocks with huge interest on the exchange such as PetroChina and CNOOC.

Unfortunately for these bears, they refuse to realize that globalization has helped reduce risk and dependence in any one country or region. Negating fundamental economics, though, baffles me.

As of 10:58PM ET, the Shanghai Index was down another 5%. We will see if the US exchanges can continue the momentum and further our dominance as the supreme nation of wealth. Also interesting, the Hang Seng seems to be higher still, some .37%. This means that worries among Chinese investors have yet to spread to outside investors, including a signifcant portion from the US.

How common investors can get in on Private Equity

For yet another year, Private Equity buyouts are expected to set a new record on Wall Street. Although the "rich get richer" theory applies, investors of all levels and experience have seen the benefits of leveraged buyouts. Rumors and announcements of LBOs stemming from Private Equity capital has driven stock prices dramatically higher, making these firms pay more for each acquisition or considered target. Although investors have little control over the situation and some may not want to lose ownership of the company they are part of, these Private Equity deals provide payouts of premiums that more then make up for these feelings.

Private Equity has remained an elitist group over time, with high barriers of entry. Until now. Presently, PE firms either trade sections of their firm publicly or have planned IPOs set to unveil before the end of this fiscal year. If you are looking for an immediate venture into ownership of a PE firm, you can try Fortress Investment Group (FIG), Apollo Group or KKR, the noteworthy firm that recently announced a bid for TXU. Investors with patience may want to wait for IPOs expected from the two most powerful and well-known firms in the PE world, Carlyle Group and Blackstone Group.

To some, it may seem confusing as to the reasoning behind Private Equity firms going public, especially because of their namesake. Thinking critically about how these firms derived their name, they still possess the ability to keep restructure and overhaul acquisitions in private. Disclosures in financial statements are a specific concern to some analysts, but the numbers will never fully display how the firms turnaround or fail with individual acqusitions. In addition, the acquisitions acquired by these financial barrons are likely to benefit because they are allowed to operate like a separate entity without the pressure of growing an artificial number such as a stock price.

Buyer beware though, as this article explains, PE firms stock growth after three years of their IPO is only 39% compared with normal growth of 45% for other companies. Also, as Adam Lashinsky writes, these PE firms are forced to cater to those pesky investors which they try to avoid so adamantly in the process of their business. Another possible red flag of the firms center around the use of stockholder's equity instead of debt. While the practice is generally seen as favorable and may be the case in some of these IPOs, the possibility of maxed-out debt could be extremely detrimental to the overall growth in earnings and health of the firm.

Should Orbitz go public?

Blackstone group, one of the famed private equity firms, recently announced they are taking Orbitz Worldwide Inc. public. This seems like an odd time to do so considering the high level of competition among online travel agencies, price wars between the airlines and rising costs due to elevated fuel prices.

Orbitz reported an increase in bookings of 38% last year, along with revenue of $752 Million. Looking at those numbers, one might be inclined to buy this IPO. However, if you look at the net income, Orbitz claimed a loss of $146 Million. This makes me question how the company derived that $752 Million in revenues; Orbitz makes profit by taking money off the top of flights, hotels, and cars other companies provide. If that revenue amount included the actual total flight, hotel, and rental costs, Orbitz might be cheating itself by going public at this juncture. Perhaps, investors are the ones who will get cheated if they fail to look at these numbers closer.

Even if Orbitz generated that $752M in revenue solely from its commissions, where do these high costs come from that created a net loss of more then 1/7 of these revenues? It makes you wonder if the costs can be cut or controlled, especially once full disclosure of financials is needed. In addition, revenue may slump this summer if fuel prices remain high and are built into plane ticket or car rental prices.

It isn't usually smart to go against Blackstone and underwriters such as Morgan Stanley, Goldman Sachs, and UBS, but I will be searching for more information before I jump on this IPO bandwagon.

Good numbers for the U.S. Economy

More good numbers came out today, suggesting a recession is not likely in the near term for the United States economy like some economists such as Paul Krugman and Barry Ritholz. Let's start with the bad numbers.

Pending Home Sales came in at -4.9% against projections of 0.4% increase due to spring buying habits. Part of this number may be due to the cold snaps felt throughout the early part of the spring. I wouldn't be surprised to see that number rally this month.

Now on to the good news. The ISM Manufacturing Index rose to 54.7%, a new 52-week high. With the good manufacturing numbers came a sharp decline in bond rates, a move that will help support the stock market's rally.
Source: Marketwatch

Yesterday several strong numbers came out including personal income and DPI, each rose by 0.7%. Improvement in income leads to higher consumer spending and eventually GDP growth, corporate profits and a bullish stock market. The PCE inflation measure was flat, signaling slowing inflation. This is key considering inflationary worries and concern over the FED hiking rates if inflation maintains high levels. Gold prices also dipped, strengthening the dollar and lowering commodity prices.

The US is jealous of the French economy and lifestyle?

Although I find this laughable, bonehead NY Times Columnist Paul Krugman believes otherwise.

This is the same Paul Krugman who is predicting a massive recession. Please, Paul, for humor's sake, let's compare the U.S. to France.

GDP : US - $12.455 Trillion , France - $2.126 Trillion according to the IMF

If you take into account Purchasing Power Parity (PPP), the US is around $12.229 Trillion compared to France's $1.835.

Unemployment : US - 4.4%, France - 8.4%

Krugman is certainly a smart man. You don't go to the schools he attended if you aren't a bright guy. Somewhere along the line though, he was misguided and his economics and sense of what Americans want or feel seems to be way off. He continues to be a pessimist in the current economy while the U.S. outperforms France year after year.

China learning well from U.S. Economists

As one of the fastest growing economies in the world and one of the largest, China could easily be arrogant, unresponsive and even disrepectful to the U.S., a former Cold War nemesis. That does not seem to be the case however, considering the trend of decisions made by the Chinese version of the FED, with counsel from U.S. bankers and economists.

The Wall Street Journal reported today that China lifted bank reserves in an attempt to help control growth. Although growth in double digits seems very appealing to most investors, the Chinese Central Bank and U.S. economists realize it may actually pose a huge recession threat down the road. With a lesson learned from the U.S. housing bubble, created by Alan Greenspan's flawed monetary policy, China is attempting to prepare itself and provide a soft-landing to the world's second largest economy (GDP using PPP).

Though the graph suggests no recession problems, you can be sure that growth will be tough to sustain at such a high rate. If China can curb its growth now at 8-9%, it will be able to sustain it for a much longer period of time with less volatility, such as the graph suggests. However, if they continue growing by double digits, the threat of a bubble burst is likely, one that could ultimately ruin the economy or set Chinese progress back severeal years.

Economic Worries for the U.S. Economy

Despite weak GDP performance in the first quarter of 2008, the equity markets continued their climb today with the Dow closing at yet another record high. All of this came amidst talk of a potential recession, a weak Dollar, and declining markets abroad. With this seemingly unstoppable run continuing, there are still several factors that worry me about the current economy.

First off, let me make it crystal clear that I am still Bullish on the stock market and economy in the long run. However, there are too many factors signaling a struggle ahead. Lets begin with the inflationary pressure on the economy. The CPI and PCE both rose to suggest higher prices across the broad economy. Although prices in commodities continue to increase, I do not see these increases in the CPI and PCE repeating themselves for more then a few months. Commodity prices are being driven by international demand and growth, not domestic. Therefore, rising commodity costs are not being translated into actual inflation for most ordinary Americans except in the form of gasoline.

Another concern I have relates to the Fed's competence and the inverted yield curve it created. Greenspan is out, so I will wait to see how Bernake handles a fragile situation. Many bears argue we have never seen an inverted yield curve without a recession following. This fact is entirely accurate, yet may not be in this unique situation. The Fed mishandled rates in 2002-3 by sending them too low, creating the massive housing boom. Without properly limiting growth and speculation in the housing sector, the expected happened in when the bubble burst. Sub-prime spillover and sharp declines in housing prices and sales are not what worries me though. The drastic lowering of interest rates was overdone compared to inflation numbers. Additionally, it hurt the USD, which dropped steeply between 2002-4.



In an attempt to try and generate a perception of normal inflation, the Fed has increased the amount of money it prints to provide a short-term wealth. This will only worsen inflation in the long run as prices of goods and service remain constant the value of the dollar drops even more. To help control inflation, the Fed keeps focusing on raising the short-term FF rate instead of both the short and long or just the long. This has created the inverted yield curve, which undervalues long-term lending. Why would anyone borrow for the long term when they can get short-term returns at higher rates? Not to mention, it makes the U.S. pay back larger debts sooner rather then later.

Lastly, corporate profit records of late have been derived from operations abroad, not domestically. These profits are good since the companies making them are many of those headquartered in America. But, the income and revenues being attained globablly does not help our economy in terms of GDP, employment, and other factors. When you consider most of the returns on the investments made internationally stay outside the U.S. boarders, it really has no net affect on our country except for aiding to drive the equity markets higher. Also, if you consider the gains of the Euro and Pound against the USD, it makes sense that these companies continue to report record earnings. It must be near impossible for Wall Street to predict income and revenues generate across the world, let alone exchange rates to translate those earnings and sales.

These are just some things to consider in the short-term. Once GDP growth heads back towards 3-4% in the 4th Quarter, you can be assured that a new big rally will begin. Unless, of course, the current rally just never dies. As Larry Kudlow says, "It's the greatest story never told" and I expect many Americans to continue to reap benefits of investing in stocks, mutual funds and ETFs.

Could Protectionism Actually Hurt the Dollar?

Although some Democrats claim to be in favor of protectionism to help bolster the U.S. Dollar and curb outsourcing and the trade deficit, John Rutledge, former Reagan Economic Advisor and current President of Rutledge Capital, says it may actually cause an inverse affect. Over the past year, the U.S. Dollar Index has declined sharply while falling substantially against the Euro, Pound and Chinese Yuan. The important aspect to note in these declines against other notable currencies is that only the Yen and Yuan have a significant impact on the U.S. economy because China and Japan are two of our prime exporters and trade partners. Europe and England fail to pose nearly the threat that Japan and China do should the U.S. Dollar really free-fall against those currencies, which essentially would drive up inflation.

Democrats believe protectionism will help maintain the value of the U.S. Dollar, when in fact, the opposite needs to happen to help control outsourcing and decrease the number of imports into the U.S. If the Dollar falls significantly against the Yuan and Yen, manufacturing and production in the United States will ultimately become cheaper and in theory, our manufacturing sector will actually begin to expand again to adequately supply the public with their needed goods and services. However, the only possible scenario for the USD to decline drastically enough against the Yen and Yuan is free market forces, not government regulation or policy-making.

Additionally, Rutledge went on to explain that the USD should stabilize vs. the Yuan and maintain its success with the Yen. His theory for the slowing of the USD decline against the Chinese currency was based on increased speculation on the Yuan and the theory that recent run-ups by the monetary unit have created a bubble that will likely burst at some point in the next couple years. Keeping the USD strong against the Yuan will be key for controlling inflationary pressure in the economy, but likely will continue to contribute to outsourcing and a lack of trade balance with China.

The solution to this dilemma is simple; let the Yuan run its course and lower corporate tax rates in the U.S. to make business investment and production more attractive.

Did Alan Greenspan Ruin the Current U.S. Economy?

During the tenure of Alan Greenspan, from 1987-2006, the U.S. economy grew significantly. Although these gains helped solidify America as the unquestioned global leader in finance, production, and wealth, it came with a stiff price. We are only beginning to realize the affect of Mr. Greenspan's focus on short-term monetary and fiscal policies that dominated during his last four to five years.

There is certainly no question that Mr. Greenspan maintained stability in the economy from his entrance during Reagan's Presidency to the end of Clinton's. However, the effects of Greenspan's economic policies are certainly being felt. Outsourcing, weakness in the U.S. Dollar, an inverted yield curve, high inflation and repercussions from an unnecessary housing bubble are all presently hampering the American economy.

Despite obvious flaws in Greenspan's policies, he won't get all of the blame. Natural factors, decisions of other leaders, and actions taken by other countries or parties outside of Greenspan's control played a significant role. But, these outside factors surely could have been combated in a more effective manner by our former head of the Federal Reserve.

The 2008 election is critical to the importance of our free market, capitalistic economy. Some Democratic Presidential and Congressional candidates such as Hilary Clinton are proposing protectionism to try and combat outsourcing and trade deficits. This type of legislation will surely put our economy into a slump. Any economist who completely dismisses outsourcing as at least a minor problem does not view economics in an objective light. However, outsourcing really stems from our protectionist approach to the U.S. Dollar in the late 90s and early part of this decade. High costs for merchandise in the U.S. force countries who import American goods to look elsewhere for goods of similar quality and value. Part of this outsourcing problem cannot be directly tied to Greenspan, who has limited control over the wage inflation and more importantly benefits received by U.S. workers. Labor Unions, health care costs, and a variety of other issues compound the actions of Greenspan to intensify the outsourcing effect. Nevertheless, Greenspan's continuous use of short-term methods to boost the U.S. Dollar or maintain its high levels against other global currencies are linked directly to our current outsourcing problem.

Along with outsourcing, Greenspan's short-term bolstering of the strength for the U.S. Dollar has contributed to its current struggles. Money supply was not properly utilized to preserve a stable Dollar, as it has shown with the decline against the Euro from 1.12USD/1E to .75USD/1E. The Dollar's substantial drop has occurred during times of economic prosperity across the globe, including both the U.S. and Europe. A weak dollar hurts the wealth of the nation and also disrupts tourism and travel overseas. Over-tightening and protectionist measures on the dollar generally hamper the economy, as evidenced by our rapid growth in the late 1990s, followed by the recession of 2001-2.

Current threats of recession are also correlated to Greenspan's poor handling of the Fed's interest rate control. Following the recession in our economy, the Fed made multiple, massive rate cuts. These cuts were detrimental for two reasons: they caused the housing bubble of 2003-6 and created an inverted yield curve for treasury bonds. With interest rate cuts in 2002 and 2003 to ultra-low levels, the Fed produced a housing boom that is still affecting us today. By over-cutting, Greenspan generated too much liquidity for the marketplace, thus ensuring heavy asset investment of all sorts. The problem with this massive amount of liquidity was that it was coupled with extremely low interest rates. Housing was the obvious choice for investors and the immediate boom that followed was one of unsustainable proportions. I thought that the Fed was supposed to curb growth in order to control volatility, peaks and troughs, and ultimately enable growth longevity. Apparently I was wrong.

Another key consequence of cutting rates too low was the mishandling of temporary debt vs. long-term debt. One of the main reasons the U.S. Treasuries are considered sound investments is not only because of the "guaranteed return", but also the decency of that return. However, when Greenspan cut rates, they targeted long-term rates in too many cases. This poor action spawned an environment where short-term rates actually exceed long-term returns. Why would an investor tie his capital up longer if he can't get a higher rate? While Sen. Clinton preaches her worries about China and other countries controlling high amounts of U.S. debt, she need not look further to blame then our own Federal Reserve and Treasury Department. Now, America needs to pay off China & Co.'s borrowed money faster then normal. This is the type of action that creates political instability. In addition, the theory of the inverted yield curve suggests there will be a significant slowdown or potential recession. Investors in long-term yields are demanding lower rates because they fear the economy will plummet and those rates will actually decline even more as GDP growth and inflation fall. But, what happens if inflation doesn't decline like was previously expected? So far, inflation has actually been prevalent as evidenced by the commodity gains and our economy might enter the dreaded environment dubbed "stagflation".

As if his horrible policies weren't enough, Greenspan came out not long after the huge February correction and predicted a recession was "likely". Despite his retiree status, Greenspan sent more fear through the minds of consumers, investors, and businesses alike. Conveniently, after the stock market (and economy to an extent) rebounded and stayed its upward course, Greenspan came out again and denounced his previous prediction.

Hopefully that was the last we will hear from Greenspan, unfortunately, I wouldn’t count on it.

Update on Fairfax Financial Holdings Scandal

Attatched is an article by Herb Greenberg (CNBC/Marketwatch) discussing further quotes from Morgan Keegan analyst John Gwynn.

The following was obtained through Goliath Business News Services...the free-site portion

"NEW YORK-One week after restating the results of a reinsurance subsidiary, Fairfax Financial Holdings Ltd. was named in a proposed class action lawsuit charging it with securities fraud for producing a range of allegedly false financial reports since 2004.

Lawyers representing two Fairfax bondholders filed the suit last week in U.S. District Court in New York on behalf of investors who bought Fairfax debt between March 2004 and March 2006.

The complaint, which also names Fairfax Chairman and Chief Executive Officer V. Prem Watsa and several Fairfax officers and directors, alleges that the company concealed the..."

Source : http://goliath.ecnext.com/coms2/summary_0199-5467572_ITM

In addition, a law website containing possible cases for individuals to become a part of posted this...

"Fairfax Financial Holdings Limited NYSE: FFH has been accused of securities fraud. If you are a current or former employee or are a member of any of Fairfax Financial Holdings Limited investment plans or profit sharing retirement plans you may be included in this possible Fairfax Financial Holdings Limited 401K or Employee Retirement Income Security Act (ERISA) class action. If you purchased or held Fairfax Financial Holdings Limited stock in one of those plans during the periods December 18, 2002 to July 25, 2006, you may have a claim.

Under ERISA, Fairfax Financial Holdings Limited employees can file a lawsuit against the company for putting stock options at risk. Fairfax Financial Holdings Limited employees have a claim if they can prove their employer violated its fiduciary duty to its employees. Fiduciary duty refers to a company�s responsibility to the people who invest in it. If an employer puts the company�s interest ahead of the investors�, it has broken its fiduciary duty. A fiduciary is a person that exercises discretion over the management of plan assets or exercises discretionary control over the administration of the plan.

ERISA is a federal law that sets minimum standards for pension and health plans set up by private businesses. ERISA was designed to protect people who participate in employee benefit plans, including employees with stock options in a company. Stock options are a form of compensation in which employees are given the opportunity to purchase shares of the company stock at a certain price.

If you have suffered from Fairfax Financial Holdings Limited 401K plan losses, you may qualify for damages or remedies that may be awarded in a possible Fairfax Financial Holdings Limited ERISA class action lawsuit. Please click the link below to submit your complaint and we will have a lawyer review your ERISA complaint. "

Source : http://www.lawyersandsettlements.com/case/fairfax-securities-erisa

Is Fairfax Financial Holdings the Next Enron?

It has been some time since our last major corporate scandals. Sure there are backdating of options investigations and CEO pay debates everywhere. But, since the Enron and MCI-WorldCom days, nothing has really stood out and made me fume like the following story. This could be the most complex, twisted story since that of the Enron downfall, in which many parties and players are at stake.

To understand the situation, we need to examine how Fairfax became an insurance giant. In 1985, CEO Prem Watsa came about as a disciple of Buffetism (i.e. theories and management practiced by Warren Buffet within Berkshire Hathaway). According to Fortune, the stock price appreciated from $3 to $600 (in Canadian Dollars). In 2003, after the wake of 9/11 and other costly disasters, John Gwynn of Morgan Keegan placed an "Underperform" on the stock because of "loss reserve deficiencies" of around $5 Billion. Over the next few days, the stock price declined by around 20% and Fairfax issued claimed the number was wrong. Although Gwynn came out not long after and declared the number was closer to $3 Billion, Fairfax believed his actions were intentional, despite the fact that Fairfax itself failed to release any estimates relating to difficiencies or excess reserves.

According to Fairfax VP Paul Rivett, several hedge funds including SAC, Exis Capital and Third Point short-sold the stock after Gwynn's downgrade since they were able to obtain the report before the information became public. They claimed the hedge funds made huge profits through the short sales, but continued to keep large amounts of short positions. Since a "short squeeze" was inevitable when the hedge funds wanted to cover their shorts, Fairfax argued they saw the better option of driving the stock price further and further towards zero.

The problem with this theory of Rivett and the rest of the Fairfax group seems to be the actual resulting price of their stock. During the middle of 2003, Fairfax's stock price tripled and rose from around $50/share to over $150, closing near $170 by the start of 2004. If these hedge funds conspired against Fairfax, they surely would have been able to signficantly limit the increase in the stock price, especially growth as dramatic and quick as Fairfax experienced during mid-2003. Additionally, the stock price continuously hovered between $100 and close to $200 per share from 2004 until 2007, recently eclipsing $200. Any statistical evidence of a conspiracy to manipulate the stock price should end after just looking at the Fairfax charts.

In addition to these charges of desperation, Fairfax has also been involved in some real "shady business" and questionable practices. The first group of them involves their accounting and insurance irregularities. In order to increase profits, they have used several tax schemes to effectively decrease the amount of taxes to be paid by loaning and investing some of their subsidiaries into other subsidiaries in different countries. They are currently being investigated by the SEC and Justice Dept., among other agencies. Spyro Contogouris, an investor with a flawed reputation himself (he was charged with defrauding some Greek Businessmen back in 2004) wrote a report questioning these accounting and insurances practices. By September the SEC decided to issue subpoenas to Fairfax to investigate these "unique" transactions. However, in June of 2006, Fairfax filed suit with the SEC, claiming Spyro was conspiring against the company. Interestingly enough, the very next day after filing their lawsuit against Spyro, the company restated their balance sheets, reducing shareholder's equity (and ultimately decreasing their assets). Spyro may have a suspect background himself, but he was apparently onto something in pointing out these non-traditional transactions made by Fairfax. Reduction in Stockholders Equity of 7-8% seems like a significant mistake for "accounting errors," especially those done by PWC, one of the Big 4.

Although Contogouris was arrested the day after he filed a lawsuit against Fairfax, PWC & Sitrick (a PR consultant hired by Fairfax), things still didn't add up well. Contogouris took his analysis of Fairfax off his website due to a request by his lawyers, but Gwynn also resurfaced in an odd way. He stopped covering Fairfax (despite his several years of expertise) claiming "litigation strategy designed by Fairfax to silence negative research" (pg. 86). Although conspiracy could be an option, the insurer may actually bullying analysts into placing "outperform" ratings on their stock or dropping them from the list of companies they cover. This practice is not only unethical, but may result in legal action from the SEC and cause a drop from the NYSE if found true.

By this point, you would expect the story to be coming to an end with the endless twists, turns and finger-pointing. But, there is more. Institutional Credit Partners was becoming curious about the lack of research reports on Fairfax, given the size and growth of the company. When one of their portfolio managers looked into acquiring information about unique accounting methods, he was seemingly intimidated and threatened by Marc Kasowitz, the head lawyer for Fairfax. Soon after, ICP employees reported stalkers to the FBI who linked the culprits back to Kasowitz's law firm. Although "Kasowitz denies having Gahan followed", he admitted to beginning an investigation into ICP (pg. 86). They even cited ICP for "highly abnormal short trading," although ICP does not in fact trade any equities. The firm solely invests and trades credit swaps (pg. 86).

Lastly, Fairfax was cited for another obscure transaction uncovered from March of 2003, one that was weird enough to make the New York Post. When questioned about the transaction during a conference call, Watsa told the analyst that Fairfax was already given permission by the IRS. Now, they said they never brought the situation before the IRS (pg. 86).

After reading this article several times, it seems obvious to me that Fairfax is attempting to cover something up. For as much finger-pointing as they want to do, crying "conspiracy!", Fairfax itself has many questions to answer. Although the company is set up well and could become an insurance giant itself, the various sketchy tactics and questionable methods emplored by Fairfax would make me stay as far away as possible. Despite a stock price flying past $200/share, Fairfax may be uncovered as the biggest scandal since Enron. If I were you, I wouldn't put my proverbial eggs in their basket.


All facts, figures, quotes and the overall storyline are courtesy of Fortune Magazine's March 19th, 2007 issue, "The Inside Story of a Wall Street Battle Royal" by Bethany McLean; pg. 74-86.