rolling

They do admit that the contract (and other identical contracts) contained some ambiguity. WEB did say he was aware of at least one insurer who also had that ambiguity on their contracts and would have to pay. He ruled it out for berkshire contarcts

Dear orthopa, not taking sides, but Exponencial growth makes it possible. numbers were growing over 30% a day in most places prior to lockdown, which means healthcare capacity would be overwhelmed in those places were it not for the lockdowns: lockdowns earn you time by reducing case growth from over 30 to sub 10% (over here after a few weeks we are now on a 3-4% case growth per day). with that time you can plan, prioritize, buy supplies, organize campaign hospitals, etc. at over 30 % a day (in some places maybe over 50% a day) everybody gets sick before you can do anything. However, millions of cases is not something strange in a country as big as the us. And with a double in less than 3 days you very quickly reach the millions. The lockdowns however might have turned many millions into a few millions, which means this thing will last longer, but should not kill so many I agree, and believe probably millions. Spreading rapidly and what that means is highly up for debate and probably useless to discuss right. Throw a number and situation out there and it seems plausible. My point was if the lock down slowed the spread and people stayed in their house, wore masks etc then the growth should have slowed exponentially. NY has been on a "pause" for a month. New cases caused by community spread should have hit rock bottom and in reality only now be from spread within families/close contacts etc. Once the pre lockdown infections progressed to recovered or death where else would the infection be coming from? So if NY is at 2 million cases after a complete lock down taking into account the slowest possible spread from the most extreme measures contemplated, that number of infected now is coming from a higher then expected initial base before the lock down. Whether or the lock downs actually worked or not maybe up for debate around the country. Different states locked down at different times. Different restrictions in each state. Some have only essential services, some don't. All seem to be working. Its likely the social distancing, standard precautions, hand washing, masks, etc that is having the most effect since that is probably the most consistent measure practiced across the entire US. There is, by definition, a delay between infection and diagnosis, which would be about 10-14 days in an unadvised population. In adition, taking into account new york crowding, subways, etc, instead of the 2-3 days duplication rate seen in most countries (which include scattered populations), it is highly likely duplication rate was higher than once a day (or over 100% daily growth rate, just think how many people a subway user infects in just a day, and then imagine how many people those infected subway users infect). That would conservatively mean infected people in NYC would be 2^10 higher (or 1024x higher) than known by the time they implemented the lockdown, and that does not include prior cases (which were certainly present, but nor necessarily by that much) not diagnosed by various motives. If you take into account that base, millions will not be that far away, even if the lockdowns slowed everything to 5% a day immediately (which is doubtful: close contacts from yet not contagious people would still have to be infected, so you can count on at least 1-2 weeks more of a reasonably higher growth rate).

Dear orthopa, not taking sides, but Exponencial growth makes it possible. numbers were growing over 30% a day in most places prior to lockdown, which means healthcare capacity would be overwhelmed in those places were it not for the lockdowns: lockdowns earn you time by reducing case growth from over 30 to sub 10% (over here after a few weeks we are now on a 3-4% case growth per day). with that time you can plan, prioritize, buy supplies, organize campaign hospitals, etc. at over 30 % a day (in some places maybe over 50% a day) everybody gets sick before you can do anything. However, millions of cases is not something strange in a country as big as the us. And with a double in less than 3 days you very quickly reach the millions. The lockdowns however might have turned many millions into a few millions, which means this thing will last longer, but should not kill so many

Is this financially speaking? The hard part over here is to keep on working (both healthcare workers), 2 babies at home, housewife dismissed (to save us and mostly her from coronavirus), no help from family (cutting social relations: we will catch this thing and take it home, we won't risk causing our parents harm), and wife was already on her limit prior to Coronavirus (and her work at the ICU is now much heavier). Financially: a 50% drawdown and limited liquidity (but both still working) doesn't take my sleep away (the kids mostly do, though). I didn't answer the poll because answer would be much different if we were speaking of financial or general terms.

1- I've noticed war time mobilization of skilled personal. Our small 10M people country lacks pretty much all industrial capacity to respond to coronavirus: face masks, ventilators, protective glasses/all face protection, reagents for the PCR coronavirus test, just name it. Now, in just 2 weeks: - textile industries have received guidelines for mask production - 3 ventilator prototypes have now reached the industry - a substitute for a critical imported PCR reagent has apparently been found and homologated and apparently testing will now stop being rationed - in the meanwhile companies have been donating medical clothing and masks they are importing, individuals have been doing homemade protective gear for health care friends/family, etc 2- most of the country is closed and people are afraid, fear is our friend now and case growth rate declined sharply before de healthcare system collpased (it will collapse anyway though, but by a lesser margin) 3- schools closed, kids at home, some people working from home, housewifes dispensed: mental ilnesses are going up sharply.

Over here we are still in the beggining but that already shows. A small town has been declared a disaster area, nobody goes in or out, people must stay at home but for a few exceptions. What happened? A 17 year old girl contacted with some friends that had been to Italy and were assymptomatic. A few days later she started symptoms, went to the primary care, went to the emergency deptartment went home and only when she was getting seriously ill did someone make the diagnosis. In the mean time her mother had caught the disease and also had tons of contacts with other people. So simple, yet so devastating (they closed the town at the 30th case, recognizing it was now a community spread disease over there). In the meanwhile, much bigger cities only had their first case later: chance happens

There are other possible explanations. Children, who are typically bombarded with certain other coronaviruses, such as the ones that cause the common cold, may have antibodies in their bloodstream from exposure to those that offers some cross-protection for this virus, said Dr. Buddy Creech, an associate professor of pediatric infectious diseases at Vanderbilt Children's Hospital. Why don't authorities throughout the world bomb us with regular coronavirus cold? For sure the US have some inoffensive coronavirus on labs that they could spread, right?

about the influenza comparison: what if 2.900.000 to 5.000.000 had died, instead of those 16.000. Would the economic impact be the same? Or do you think many governments would need to shut down almost everything to try and delay this until a vaccine or treatment is available (both of which are available to influenza by the way)?

Sold my sellable positions, kept the iliquid ones (which I think might be more or less imune to coronavirus)... my timing has been terrible in the last few months, with many of the sells being on the absolute Bottom. As such, maybe this crash has already ended... Edit: the liquidity dried up on those iliquid stocks, so maybe their immnunity is just me reassuring myself :) Edit2: on timing, ALL my sells in the last few months are still ABOVE my selling price... humpf...

I chose a broker that belongs to the fully public national bank. My bet is that if sh*t hits the fan, the government (as sole shareholder) will not let it go broke. Edit: this thread reminded me that I had to have a look at their annual report. Seems like their common equity tier 1 is 41.5%, and their loans to clients fell from 260M to just 7M for a 370M equity and 11M 2018 net income. Kind of harder to go bankrupt now :) lucky me... I had been procrastinating... Edit2: I don't know very well how to evaluate a bank risk, but seems to me these are good data Edit3: didn't notice this is a 10 year old thread. It is always a current subject, though

Wow, that's a great example of "who cares about lumpy returns if you're earning 30%+ annualized on average". Multiplying your rough returns, you probably turned every €100 into about €1065 over the course of around 8.5 years. That would be about 32% compound annualized return (with a few percent margin of error I imagine, given that the early numbers are very approximate). Also great that you haven't lost money. Thank you: had been thinking on doing the math but never actually got myself up to it. You should be roughly right since there is little approximation on those results. Some points: 1) taxes play a big role: over here 28% on dividends and all capital gains. 2) A very small base also masquers those returns 3) a kid at year end 2017 and another in 2019 probably are partially responsible for the last 2 years returns: Perhaps I should have just indexed from then on. What keeps me now from indexing: 1- multi year high for american stocks 2- high conviction on the cheapness of my current portfolio

2ndhalf 2011 and 2012: 20% 2013: 30% 2014: 50% 2015: less 5% 2016: 50% 2017: 160-170% 2018: 11% (It seems it was 6% if I exclude an year end wuote manipulation, but I will take the 11% because it is easier to do the math and the 2019 return will adust for that) 2019: 0.6% (I had to use 02/01/2020 quote due to year end portfolio movements, return would have been sligtly lower, probably around zero) Results are in euro, before taxes but after all other costs. Note: I thought I had lost about 5%... Nothing like a year end review to get morale up note2: I am now much happier. Portfolio is much cheaper than last year, and it seems I didn't lose money

Different country: Assuming house and car fully/mostly paid, about 700.000€ each (if wife also wanted FI) would probably be more than enough (unless in a bubble, assuming 5% long term pre tax returns).

Full financial independence, without having to worry: What if things go wrong. That means: - good fully paid house near wife's workplace (I don't think she will give up working soon) - enough passive income for us, our current kids and possible future kids (it gets harder without knowing how many heads to feed) - that passive income would have to come from a low risk source: if I want to keep on investing, my active portfolio return shouldn't be taken for granted - a car to visit our family/go a few days to the beach Not easy but not impossible also. I guess I am dependent on no negative surprises anytime soon: - being able to build the house at a reasonable budget (land already paid off) - getting our wages at the end of the month for a few more years (at least until house is built) - no extraordinary expenses - no wipe outs on the portfolio - no big problems with our car Edit: I guess I am also limited by positive surprises: what if we go for more kids??

The OXY financing commitment is essentially a credit decision - i.e 1) will they default? 2) if they default, how much will BRK recover? For the credit risk, BRK is receiving a 5.55% spread over UST 10yr (8% coupon vs 2.45% UST 10yr), as well as a $50mn financing commitment fee. The warrants are icing on the cake. I disagree with this. the warrants are the cake and WB basically said I dont care how much oxy pays for apc, he has no outs, so he is letting someone else (apc ceo) drive his investment (warrants). I say warrants are the cake because while 8% is a great div yield, brk is not a credit spread hedge fund...at least it used not to be He looks for a minimum 10%pre tax. Taxes on prefered stocks are lower, so he might accept a little less.the warrants are the return above threshold.

Yes, greets

As a non british young european, I disagree with some of the points mentioned above. 1- the basis for my opinion is that Both I, my generation, younger generations and some a bit older generations feel strongly european: I don't remember my country out of the EU and cannot imagine such thing. I believe the same happens in the UK. As such, read some of the following points as what I would think if it was in my country. 2- the referendum gave a marginal leave, a 600.000 difference 3- old generations are dictating younger ones destiny, but guess what, If you take expected life years in the EU or out the result was a massive stay, and that's how a referendum should work in a situation like this. The point being: 4- if you are dying in a few years you should not be voting other peoples future, if you have little future what is your right to decide other peoples future? 5-600.000? Many of those have already died or are unable to vote, give them enough time. The vote for LEAVE might already be minoritary. 6- this means I believe there is no clear mandate to LEAVE and people are trying to convince the public opinion there is Part 2: other points 6- participation in the EU elections: STAY will likely vote. Will LEAVE vote? 7- give them enough time, but ideally make them have another referendum before leaving: that seems to be the strategy, and, as explained above, it seems to be both the best strategy and the correct way to get an honest result for the British people. People have the right to make an informed vote in something this important: if you don't do a referendum after a deal as been reached you are denying them a choice

I'm not saying there's safety in the coupon either. Safety is in the strength of the issuer. I'm thinking generally of US Govt bonds, but I'll use AAA if you prefer that. So, if we use that math on your numbers, 30 year AAA bond at 3.8% yield, 10% compounded growth in BRK, contending that the proper discount rate for BRK is 3.8%, then are you saying that the fair value today ought to be $1151? i.e. 202*(1.1^30)/(1.038^30)? Or do you have a slower growth rate for BRK after a few years from now? If the AAA is long-term assumed to be at 3.8%, we're assuming rates stay very low. In that environment BRK will find it difficult to get 10% even if Buffet WANTS IT. Just because he wants it doesn't mean he can get it (e.g. last few years) or that it can become our assumption (in my opinion anyway). Ok, I now understand the difference in our conclusions. I was not comparing berkshire to risk free bonds. Berkshire bonds could be considered low risk but, by definition, brk stock could not have the same risk. My assumption was berkshire stock/sp500 both being safer than many bonds and as safe as some others, and so we should use a similar discount rate to the latest. IMO it would probably be reasonably conservative, in the current environment, to discount the sp500 at 6% and brk at 7%. But from 7 to 9% you get a big difference (if I'm not mistaken, in 15 years that would amount to a 37% difference in present value) Ps: those numbers for the AAA I used seem to be wrong, the numbers for the country debts are correct, which does not change much.

On the first point, there are many stats you could consider that would support either way of looking at it. E.g. For 10 years after the 1973-74 bottom, BRK's performance over the index was higher than it had been before because they'd been able to put money to work before and around this period... so when people say WEB's going to bag elephants in the next recession, I'm looking at 2008-2018 period for evidence of that as that presented a pretty big opportunity. But we can simply leave both approaches (yours and mine) aside and consider these 9 year increments and BRK's out-performance over the SP500 since inception: 1965-1973 17.6% 1974-1982 19.8% 1983-1991 14.3% 1992-2000 9.6% 2001-2009 3.8% 2010-2018 1.6% Here you've got tops, bottoms, and middles, everything and you can see where things are headed. Size is of course the big problem, but also cash-drag (which is related to size but has a solution in repurchases and/or dividends), and some mistakes of commission. Of course, we don't make money from the past performance of the stock, so when we look to the future period, what factors need to get better? And how much out-performance can we expect realistically in the NEXT 9 year period? I'm more and more becoming convinced that while outperformance may exist, it probably will continue this trend we're seeing here. Now, whether 1% outperformance is worth the risk of not achieving that outperformance is up to debate. 1% can do a lot over decades, but remember 1% will go to 0.5% etc. unless they shrink the capital base (which was the subject of my prior post where I gave reasons for my thinking why it won't happen on any decent timeline). They have not been short of capital in the 2010-2018 period. So, repurchases would've made these results better. That was probably also true in the period before that, 2001-2009. Only ways to shrink the capital base are sizeable repurchases, dividends (when appropriate), and occasional acquisitions when they can be found. I do feel that the time has come to make acquisitions the "special case" rather than the default case and move repurchases up to default case when the stock is not overvalued: As to bond-like safety, I'm not sure why you'd assume that. What exactly is providing bond-like safety here? It's not a bond. It might be safe in our minds but that doesn't make it a bond. (Every borrower thinks they're going to pay their mortgages/debt, but that doesn't make them all AAA/FICO 800+ either. Same logic) Also, bonds pay coupons, Berkshire doesn't; and that is what is being discounted in the bond price. So you're relying on reinvestment and the results of that re-investment skill is what you're seeing in the table above. If BRK had traded at bond yield type discount rates in 2010, you can imagine what the outperformance profile would look like. BTW, "stocks discount rates should equal bond yields" was also the reasoning given for buying SP500 in 1999 in the book Dow 36,000. It seems logical on the surface, but it's not right just from a plain mathematical standpoint. Thank you for the answer. 1) BRK outperformance vs SP500: it is quite obvious that the outperformance by definition cannot last forever. My point was that expected return is capped (on the downside and on the upside) at about 10%/year, and this is because Buffett himself seems to have chosen that hurdle. In fact, it seems that if he cannot get his 10% he would rather not invest and keep cash on hand. 2) outperformance perspectives: it really depends on the return you expect from the sp500. If you expect 9-10% a year, berkshire makes no sense at current prices. if you expect 5-6% bekshire is a much better option. I would point, however, that Buffet himself stated in this year's letter that there are much better opportunities out there instead of berkshire 3) acquisitions vs repurchases: agreed, it sometimes feels like empire building. I would add that in hindsight I cannot understand why berkshire kept such a cashdrag in the last 10 years. It would have been better for them to just buy the SP500 and use the float leverage to make it worth it 4) BRk safety: stems from over 100B cash on hand and discipline to only invest it when expecting an over 10% yield and a diversified high quality asset base. 5) bond-like safety: here I disagree. I don't see safety on the coupon, I see safety as: probability of not losing money. Lets look at bonds: Portugal 30 year: 2.46%; greece 25 year: 4.7%; italy 30 year: 3.6% yes, you are supposed to receive money every year, but what is safer? a diversified bond portfolio like this or just investing in berkshire? (I used country debts because it was an easier comparison, but the same could be done with other risky bonds). On the other hand, on berkshire you get 9-10% counpounded (and only pay taxes on the sale, so the post tax result is even better). On the SP500 I don't have an estimate. Is this a correct discount rate? if you believe the risk is lower on BRK/SP500 you should use a lower discount rate. If you use 30 year AAA bonds it seems to stand at 3.8%. Here the risk is certainly higher for BRK/SP500. But does it explain an over 5%/year difference? so "stocks discount rates should equal bond yields": no "stock discount rates should equal similar safety bond yields": yes

It has already been mentioned above, but it is not correct to compare bottom to top since down years are also part of the market. Such a top to top comparison would yield different results. I would choose 2007 to 2017 as a much more accurate comparison. This would lead to a BRK CAGR of 9.46 vs 8.1% for Vanguard500. In fact, this BRK return is more or less in line with what most of us (and WEB) expect of Berkshire: a little under 10% IV CAGR for BRK unless interest rates go up Edit: I used IV and it might not be correct because of discount rates. However, this a "a little under 10% return" stems from the fact that WEB himself seems to be using a 10% hurdle for his investments. In the old days he would ask for a first day 15%, he now seems to ask for 10%. Cash and bond drag together with some comission mistakes explain the underperformance to his hurdle rate. This is why 9-10% tends to be the discount rate applied to berkshire (IMO this discount rate is inappropriate and the motive for the permanent discount in the stock price: if you get almost bond like safety you must have an almost bond like discount rate. The same happens with the sp500 in the long run.

I just did the opposite ;D :( realized my mistake. Costly mistake. Sold out khc and I’m considering going back to BRK or opting for my small caps, most heavy in cash, but so is BRK

Sold BRK and bought KHC

Upon reading this thread, some points make me raise a few questions: 1) 208 price cap: why would the cap have stayed the same? My guess is he updates the number every quarter, either in an automatic fashion or not. My guess would be a roughly 2% increase every quarter, which would amount to an 8-9% IV increase every year 2) 10% volume cap: why should it be static? It would be much more Buffett like say: 0-10% discount to IV, buy up to 10%, 10-15%, up to 15, 15-20, up to 20%, ovee 20% discount go all in to the 25% limit. I guess we might soon know some of the answers.

Very thought provoking post. I would argue that all that attention is more important to your kids future happiness rather than their future success. I would bet extreme results (extreme success or failure) frequently come from a tougher environment, happiness from a more loving and attentive one. However, I guess you might be able to reach reasonable success with appropriate stimulus in a loving environment (that is my bet). I would rather have happier kids than high achieving unhappy kids.

Yep, I sure hope so. I said, cheap but not that cheap but nevertheless I recently re-re(...)-entered at 196...It is currently my 2nd biggest position in my 3 stock portfolio (I am thinking of increasing to 4 stocks...)