twacowfca

Quote from: Charlie on May 25, 2011, 12:57:51 PM twacowfca, what do you think Berkshire is worth at the moment? I have recently sold most of my other holdings and bought Berkshire Hathaway. At P/B 1,2 and Berkshire coming out of recession the stock is too cheap to ignore. I´m also looking at Munich Re, because in a recent interview Buffett said he is buying a lot of shares of one stock. Charlie, BRK could be valued many ways: By what the market is willing to pay for it. As a sum of the parts if broken up and spun off or sold separately. This, although unlikely, would probably be much higher than BRK's market price. The current stock price reflects the lack of a Buffett Premium recently and the usual discount placed on conglomerates. By Tilson's method which, if i'm not mistaken, mostly sums the value of net investments and puts a multiple on the pretax operating earnings of the subsidiaries. Tilson's value was about $154K/A SH EOY 2010. This is probably a conservative method that Warren would not disagree with because he expressed the opinion at the recent AGM that BRK's normalized pretax operating earnings were $17M. Then there is Berkowitz' method that adds the idea of a growing stream of float as an interest free loan. His valuation in recent years has given a range of values that average perhaps as much as 20% higher than other valuations. This is not unrealistic because there is very competent succession in place in BRK's insurance operations, and interest free float may continue to grow for many years. Montross, Jain and others are exceptional managers, very loyal to BRK and its culture. Hamburg is a very good de facto COO as well as CFO. He would be an excellent interim CEO or permanent CEO, although some managers would rightly think he isn't the same soft touch as Warren. He is probably the most underpaid large cap CFO in the country. His continuing to work hard for relatively low pay shows great character. Other potential CEOs have fallen on the altar of greed. The BRK managers are used to reporting to him. Therefore, there is a likelihood of a smooth succession of CEOs when the time comes. This might not be the case with a different, successor CEO, no matter how talented. My personal opinion is that all these valuations are on the low side. I agree that BRK is the best large cap value in the current market. During the last decade, BRK has grown its book value per share nicely for a large cap. Its diversification with many good businesses gives great stability. Reserves are redundant. The business cycle is expanding. Many think a hard market for insurance premiums is at hand. Most importantly, BRK's earnings are not hostage to underfunded pensions or generally needed for acquisition or reinvestment to maintain competitiveness as with most other companies. They are potentially available for owners, allocated by stewards with regard to maximizing value for stockholders without the typical waste from the institutional imperative. :)

Quite agree. Sanjeev, can you move Charlie's post and my reply to the Berkshire section under a new subject line: 2011 BRK valuation Thanks very much.

BRK could be valued many ways: By what the market is willing to pay for it. As a sum of the parts if broken up and spun off or sold separately. This, although unlikely, would probably be much higher than BRK's market price. The current stock price reflects the lack of a Buffett Premium recently and the usual discount placed on conglomerates. By Tilson's method which, if i'm not mistaken, mostly sums the value of net investments and puts a multiple on the pretax operating earnings of the subsidiaries. Tilson's value was about $154M EOY 2010. This is probably a conservative method that Warren would not disagree with because he expressed the opinion at the recent AGM that BRK's normalized pretax operating earnings were $17M. Then there is Berkowitz' method that adds the idea of a growing stream of float to the evaluation as an interest free loan. His valuation in recent years has given a range of values that average perhaps as much as 20% higher than other valuations. This is not unrealistic because there is very competent succession in place in BRK's insurance operations. Montross, Jain and others are exceptional managers, very loyal to BRK and its culture. Hamburg is a very good de facto COO as well as CFO. He would be an excellent interim CEO or permanent CEO, although some managers would rightly think he isn't the same soft touch as Warren. He is probably the most underpaid large cap CFO in the country. This shows great character, because other potential CEOs have fallen on the altar of greed. The managers are used to reporting to him. Therefore, there is a likelihood of a smooth transition. This might not be the case with a different, successor CEO, no matter how talented. My personal opinion is that all these valuations are on the low side. I agree that BRK is the best large cap value in the current market. During the last decade, BRK has grown its book value per share nicely for a large cap. Its diversification with many good businesses gives great stability. Reserves are redundant. The business cycle is expanding. Many think a hard market for insurance premiums is at hand. Most importantly, earnings are potentially available for owners, allocated by stewards with regard to maximizing value for stockholders without the usual waste from the institutional imperative. :)

You have the perfect right to charge for your work, but you should get a waiver from Sanjeev to advertise it here. Generally, advertising for sale is frowned on if not prohibited. We post ideas or analyses we care to share without charge.

Should you charge for your own report you advertised above?

If this discussion were about anyone other than Bruce, we would all be saying: What an absurd idea that a cash poor company with assets that are dead money would become a dynamic investment vehicle.

Parsad, I totally agree with you. Btw, on BRK : Last 10 years BV growth was around +9% annually for BRK. So take your 55K stock price from 2000 and start compounding : 55 000*1,09^11 = 142 000 This would imply that a $142 000 price for BRK.A would already be cheap, let alone the current $118 000. Take a stock price of 46K for 2000 and you will get a compounded result of almost 120K. Am I correct to assume all this? Would you agree that BRK is at least as much undervalued today as it was at 50-55K in 2000? I have added to my BRK position this week and intend to do the same with MSFT. Highest risk/reward plays out there hiding in plain sight IMO. BRK's Price/IV is much more attractive now than in 2000 because BRK's stock portfolio was very pricey compared to now. Also, the economy was rolling over into recession then, but today the recovery is well underway. BRK had serious latent reserve deficiencies then with Gen Re, but now there are considerable reserve redundancies in all insurance subsidiaries. BRK's culture is much stronger now than then with the resignations of two of BRK's most important managers over ethical concerns in the last few years. I'm sure that all the other managers know that borderline ethics are not acceptable at BRK.

A corporation has a legal life of its own, continuing to exist at the pleasure of the state that allowed it to be formed, managed by responsible officers, serving at the pleasure of its board of directors. The ownership interests of shareholders are subordinate to many other potential claims that have priority in liquidation or bankruptcy. ;)

.. Since then M2 has risen at almost a 6% annual rate. Forget the thought of a balance sheet recession if M2 continues this rate of expansion. If The Fed, however, pulls back, run for cover because Koo is right about everything being propped up by the Fed. twa, i thought you were more focused on growth in the monetary base (m3?) than m2. in your estimation will the monetary base follow m2 down if the fed pulls back & withdraws qe2 liquidity? Yes and no. The Fed can cause changes in the monetary base with the stroke of a pen, so to speak, by injecting reserves into the banking system. This will support the extension of credit, into the productive economy if demand from business and consumers is brisk, otherwise into credit and stock markets and commodities. The inflationary effect on markets was mostly the case until last spring when M2 picked up as the economy is finally starting to use the extra liquidity that has been on the sidelines far too long. It is much more the case that the monetary base eventually tends to work its way through the banking system into M2 and then economic activity than vice versa.

Great paper. However, there is one mischaracterization by Koo. He says early in the paper that M2 has been basically flat since the 2008 crisis. Then, later he says M2 is up 15% since the crisis. In fact, M2 was up very little until spring of last year. Since then M2 has risen at almost a 6% annual rate. Forget the thought of a balance sheet recession if M2 continues this rate of expansion. If The Fed, however, pulls back, run for cover because Koo is right about everything being propped up by the Fed.

Actually, The party happened in 2007, before Munich Re acquired all of Ergo last year. I think Munich Re's culture is much better than that as evidenced by how they sacked the party givers and cleaned things up.

The sneaky way to raise a price without rocking the retailer's boat is to cut the portion size. Thus, we see the incredible shrinking candy bar when the price of a key ingredient increases. :)

It's still published as a hard copy. :) Twacowfca - how does one go about acquiring a copy or subscription? Ericd1, You will need to call Standard & Poor's at 1-800-852-1641 and ask them how to receive the Security Owners Stock Guide. Twacowfca

Market valuations is a tool you should be careful using since they can infect your thinking. Beware of using market valuations because they might use you. WEB was also a little bit of an activist. We owned one of the REITS he owned that agreed to sell most of their properties. They were thinking of rolling them over into other properties. WEB called their CEO and told him strongly that they should liquidate. They took his advice.

Bill and Ed are located near each other. Bill has learned a lot from Ed about more than card counting.

It's still published as a hard copy. :)

Market valuations is a tool you should be careful using since they can infect your thinking. Beware of using market valuations because they might use you. WEB said at the recent AGM that he had most of his personal funds in t bills.

Not at all. The only successful card counters before Thorp published were a few who counted aces, a very important card for players because of the asymmetrical payout for a hand with a 10 + ace. Las Vegas wasn't the only place where 21 was played. Thorp could have kept his strategy mostly to himself, had he been so inclined, and continued to improve his game theory skills at the table instead of telling the whole world how to do it.

The borderline ( is it fraud or isn't it fraud ) practices of this company include having someone express an opinion on the life expectancy of a policyholder that is not grounded in sound actuarial science, and showing this to their suck, oops, I mean investors, who then buy that policy and agree to make premium payments until that person dies. Investigators charge that the projected life expectancies are unrealistically short. The SEC thinks they're over the line. They got a Wells Notice from the SEC two days ago. CEO Brian Pardo and Director Scott Peden were also named in the notice. Bottom fishing this one is likely to bring up a nasty catch because this opens the door for their "partners" to sue them over deals that soured.

Rajaratnam guilty on all counts according to Bloomberg

I once had the pleasure to see the original BS and P&L of Pemberton's business before he sold out. It was quite informative. Coke's model for their profit generating machine was already established even then. :)

I'm sure he's still lurking on this board, so Bronco consider this my official request (rallying cry?) that you create a new account and return to active duty immediately. The value of this board is lower without your membership. Hear! Hear! Bronco, You're the man. I have never considered your comments to be in any way abusive, but in good fun. Your departure is our loss.

This makes the assumption that the criminals are unsuccessful in their endeavours. It appears that they were attempting to kill FFH , put it out of business . It smacks slightly of hubris not to understand that the good guys do not always win. Come June of 2006 that game was already won by the good guys. Runoff was breaking even as posted months beforehand in the annual report, big gains were being booked on Indian equities, the only catalyst left for the hedgies was a major hurricane season. But the people who do this professionally were still writing business in Florida, albeit at higher rates (insurance companies). The expectation as we discussed at the time was to NOT have a repeat of 2005, which of course is exactly what happened. The hedgies overstepped when they became dependent on natural disaster as their sole recourse -- I remember we were discussing the company otherwise trading at a P/E of 3 for the year due to the big gains coming in. I think they got too emotionally caught up in their lie -- too hard to give up and admit that the good guys has already won. I remember one of those hedge funds was still trying to short the company even when they had all the CDS hedges during the financial crisis -- was killed in the short ban. I agree. The key to our using options to double down on FFH and then double down again before the hurricane season was over was the fractal way hurricanes in the gulf develop. The key to understanding fractal phenomenae in time series is the high correlation with the recent trend. It's the same pattern we see with earthquakes. The hurricane trend in prior years leading up to 2006 had been ominous, but the most recent trend was zip halfway through the 2006 hurricane season. Therefore, knowing that the strongest predictor was the most recent results, we doubled and redoubled our holding of FFH before the hurricane season was over. :)

FWIW I use google more than bing probably out of habit and because it's the default. But I intentionally go to bing or wolfram alpha when I search a serious topic such as science, math or any topic where I don't want to see low quality info. I get ticked off at all the social garbage that often comes up on google when searching a non frivolous topic. This ticks me off so much that I've given up taking a first stab at the topic through google even though it's still the default. Bottom line: bing is definitely getting increasing use from at least this high quality, deep pockets potential responder to advertising. :)

Is it at QE12234350689943? There are limits. At some point without restraint there will be inflation. Then, major inflation. Then, hyperinflation. However, history suggests that there is likely to be tight money in the US well before we reach major inflation.