Viking

The summary above may be viewed as flawed because it does not factor in the potential for BRK-B book value to fall in the coming quarters. In 2008-2009 BRK BV fell 15%. If the same happens in the next few months then the P/BV is not so compelling. So far BRK-B stock price has fallen a great deal from its highs (20% to 25%) while BV has likely not changed much, even with the recent stock market decline. So what happened in 2008/2009? During the 2008/2009 bloodbath BRK-B BV fell from $52 (2008YE) to $44.17 (Q1 2009) = 15% decline. The decline was driven largely by fall in market value of stock holdings. Three stocks make up 50% of stock holdings: Sept 30/08 Dec 31/08 Mch 31/09 KO $54.16 $45.27 $43.95 WFC $37.53 $29.48 $14.24 AXP $35.43 $18.55 $13.63 It is highly unlikely that these stocks will fall to the same degree that they did in 2008 & 2009 so I feel current P/BV relationship is telling us that BRK-B shares are a great buy especially under $70..

I spent the last few days reviewing BRK-B price and book value over the past few years to get some perspective on the valuation trend. How does current valuation compare to the lows from 2009? Price to BV Aug 10 2011: BRK-B = $67.50; Q2 2011 BV = $65 = 1.04 Price to BV low: March 5 2009 BRK-B = $46.00; Q1 2009 BV = $44.17; P/BV = 1.04 The kicker are exchange rates: March 2009 = 1.20 and Aug 2011 = 0.99 Before currency, BRK looks to be trading at historic lows for P/BV. For CAD investors BRK looks to be trading at the lowest in has ever traded BY FAR. avg price BV USD/CAD Oct 2006 to Aug 2007 $72 $47 1.12 Aug 2007 to Oct 2008 $85 $52 1.00 Jan to July 2009 $58 $44.19 Q1 1.20 $49.20 Q2 July 2009 to Jan 2010 $66 $55 1.08 Jan 2010 to May 2011 $80 $60 1.03 May 2011 to July 2011 $75 $65 1.01 Average Price = about what stock traded at during period BV = as reported (A share / 1,500) USD/CAD = average exchange rate during period

I like the comment about fear and greed: "Fear is instant, pervasive and intense. Greed is slower. Fear hits," he exclaims.

Bought a chunk of BRK today; up to 30% of portfolio; should BRK continue to fall I will continue to add. BV = $65 per B share; we are almost there. Cash is about 55%. As has been mentioned, the S&P is at 1,100; not a screaming buy. Should it fall below 1,000 I will get more interested in more names.

This is simply the next step resulting from downgrading US gov't. Hope it drives BRK-B to $68 (my next buying level). :-)

I agree that things are quite different than 2008 & 2009. I do not expect financials (i.e. WFC) to fall as much. Many of the large cap tech stocks we have discussed (i.e. MSFT) should hold up well. Resource plays/cyclicals likely will bear the brunt should the economy deteriorate further. Should panic hit... everything will likely get hit equally. That is when some real money will be made. I am thinking I need to get some low bids entered on the stuff I really like as it is too easy to miss the rapid downdrafts (and rebounds).

I have followed Hussman for years and do like him. If you like logic he certainly explains his view quite well. However, I find that he tries to get a little too cute in timing and he is very much a macro guy. Bottom line, I do not mind being early and do not mind buying when I find something cheap that I understand and like (regardless of market internals).

It will be interesting to see what he/Combs has been buying... my guess is more Mastercard. If correct, they are doing very well.

Here are some comments from Buffett from 2009 on buying back stock... the last time we were in a similar situation to what looks to be brewing... dealbook.nytimes.com/2009/01/22/buffett-hints-at-buyback-of-berkshire-shares/

With many re-insurers trading at very low valuations I would expect more consolidation to happen. The challenge for most aquiring companies is they would need to issue (undervalued) shares; BRK has cash. www.bloomberg.com/news/2011-08-07/transatlantic-confirms-acquisition-offer-from-national-indemnity.html

It will be interesting to see where we go from here. The press is going to have a field day with this on the evening news tonight. I wonder if people will think back to 2008 & 2009 and start to panic... I added to BRK (from 14% to 21% of overall portfolio). BRK reports tomorrow and I think they may disappoint. Should the BRK.B's fall below $70 I would be happy to buy and bunch more (and likely sell some ABT, MSFT etc). I am staying focussed on leaders with no debt and avoiding the speculative stuff (that is falling the most). As per usual I am lost when trying to come up with a plan to deal with currency issues (being Canadian) and liking US large cap the most right now.

I am sitting at about 65% cash; 35% stocks (mostly BRK and also smaller positions in MSFT, ABT, BMO, TEVA, GLW, GVC). Over the past couple of months I have gotten more defensive. It would not surprise me to see the S&P fall below 1,000. I will continue to buy more should the market go lower. For every 1,000 point drop in S&P I will invest about 25% of cash. Or if a company like BRK gets crazy cheap I likely will get more aggressive regardless of general market levels. If we do have a big sell off (i.e. S&P below 1,000) then I also will look to shift a little from defensive positions (like ABT) to more aggressive positions (perhaps forestry stocks like WFT or CFP). Should markets not fall that much I will sit on cash. Should things get ugly I will be in decent shape to buy on the cheap. My guess is things will continue to stay pretty volatile the next few months unless we get an external shock of some sort.

tombgrt, thanks for posting the links. The seeking alpha article has some good comments attached to it. BRK is now my largest holding. Should it fall under $70 I likely will get very aggressive.

I think continued growth from China will keep the train on the rails. The US looks to be hitting a soft patch; too early to call a double dip. Europe; no opinion. At present, I see BRK as a solid buy. If it continues to fall I will continue to add to my position. Nice defensive holding. I also like GLW (Corning); stock has already been killed. I am also going to dig into DELL now that it is trading back under $16; I like the CEO and I like where it is headed.

BRK is well positioned for those who want exposure to: 1.) insurance/re-insurance: market looks to be in the process of bottoming 2.) peak oil: BNSF will benefit should oil prices continue to go higher 3.) US housing: many BRK op co's will benefit when things improve Bottom line, BRK looks cheap based on current earnings; given the types on businesses BRK is exposed to earnings should grow nicely over the next 3 to 5 years. Looks like a solid holding (in place of a bond). For all the talk about the risk of Buffett and his age, I am surprised more people are not talking about Ajit and the size of the business he manages... what if Ajit is hit by a bus one day (god forbid of course!)?

I think residential construction will be the key to a number of things moving forward. Both Buffett and Calculated Risk feel that construction will be the ket to future GDP; once it picks up then GDP and employment will improve. A couple of plays I am paying more attention to are the two large Canadian lumber producers: West Fraser (WFT.TO) and Canfor (CFP.TO). Both players are very efficient producers and should profit in a big way once conditions improve. They also have low debt. Something to also consider is the pine beetle issue in central BC; in a couple of years we could see the allowable cut shrink at the same time housing in the US picks up. Falling supply and rising demand = very large price increases = very profitable for WFT and CFP.

Having three kids who love to go to movies I have some experience with this topic (large Cineplex in greater Vancouver). To get in, kids pay $9.50 and adults $12.50. Large popcorn is $6.00; large fountain soft drink is $3.00; I think the kids pack (small popcorn, drink and candy) is $6.00 Snack lines are ALWAYS jammed full. Most people (from what I can see) DO NOT bring snacks into the theatre (not cool). My read is theatres charge crazy prices for food/drink because they have a captive market that is (obviously) willing to pay. PS: we actually buy our Cineplex tickets at Costco: $9.50 for 1 kid admission (price includes $6.00 kids snack pack) $24.50 for 2 adult admissions (price includes 2 drinks and 1 large pop corn)

I agree that pricing in Vancouver is at bubble levels... I am not sure that a 25 or 50 basis point move in rates by the Bank of Canada will be enough to bring about a large decline. I am thinking that the most likely scenario is a sideways market for a decade or more; inflation at 3% per year will start to bring things into line. Should interest rates increase dramatically or should China experience a major hickup (causing commodity and stock markets to tank) then Vancouver could be in for a hard landing; these look to be pretty low probability events right now.

Berkley talks about fear being a key driver in the turn to a hard market... at some point the jig will be up and those who are under reserving will have their Jesus moment.

33% stocks (mostly US large cap BRK, MSFT, ABT etc) and 66% cash. I have been very cautious the past 15 months or so.

I have had a hard time deciding what to do with insurers/re-insurers... There is still too much capital on balance sheets and until it is eliminated we will not see a hard market. The problem is large catastrophe losses will result in a big drop in BV. Perhaps the best thing is to buy BRK at current levels (the operating businesses provide some nice diversification to cushion any underwriting losses).

Yes, it was disappointing to see Vancouver lose. However, I do not think the Canucks need to psychoanalyze things too much. They had a great season and they have a great team; they proved that in spades this year. The bottom line is the Stanley Cup is a marathon and the teams are so close in talent the winners need to have depth and hope the injury bug does not bite too hard. Vancouver was playing without Hamhuis (top D), Rome (top 6 D), Samuelson (top 6 forward and PP guy), Raymond (top 6 forward), Malhotra (3rd line & top face off guy) came back in game 2 from eye injury but clearly was not at his best; others had severe injuries (Erhoff - top 4 D- 2 broken fingers), Kesler (2nd line centre - groin?) etc. And yes, Boston was banged up too (Horton out etc) so both sides had adversity. Marchand was the player from Boston I was most impressed with; Boston was the better team.

Jobs in his key note explains things very clearly: 1.) 10 years ago Apple had the vision that the PC would be the digit hub for consumers: where they would store and access their music, photo and video. 2.) given the proliferation of devices (smartphones, tablets, laptops, desktops, game consols AND FUTURE DEVICES) the PC as the digital hub is terribly inefficient. 3.) starting now 'the cloud' will be the new digital hub and any content you own will be available to any device you have. By moving your hard drive to 'the cloud' you also enable any number of new devices (in your car, in your kitchen, in your living room etc). Do you think Apple has interesting new devices to launch once 'the cloud' is in place to drive consumers to their brand? This is why Microsoft is moving to one interface with Windows 8 (same swipe motion for smartphone, tablet, computer AND FUTURE DEVICES). To me the specific details of what Apple has announced are noise. The real news is they are officially launching the move of the consumer's digital hub from the PC to the cloud. Game on. My guess is there will be lots of winners as this happens (i.e. like MSFT, Corning etc). Globe & Mail explanation: http://www.theglobeandmail.com/news/technology/tech-news/apple-sets-sights-on-cloud-control/article2049641/?from=sec501

What is a little surprising to me is how BRK is selling off at the same time it appears insurance/re-insurance rates may be in the process of hardening. Lets hope both those trends continue (as I only have a small position in BRK and would be happy to make it larger). :)

Over the past 10 years MSFT has continued to grow earnings at a pretty decent pace. Bottom line is the business has become more valuable each year. Moving forward earnings growth may slow but should still be positive. MSFT has lots of irons in the fire and looks to be positioned reasonably well to benefit from future changes. The multiple (what Mr Market is willing to pay for MSFT) has compressed over the past 10 years. Probably felt like a value trap for those who bought at higher prices in 1998. Should management continue to grow earnings I have a hard time seeing how the multiple continues to compress (only possible in my mind if the whole market sells off aggresively).