Zorrofan

thanks! Great post.

Given that unemployment is expected to continue rising until the end of 2010 this is no real surprise. I believe we are no where near the end of this yet..... cheers Zorro

While there has been a lot of interesting discussion on this matter I'm going to toss in my $0.02. I have always said that IMHO Prem and the rest of the FFH management team operarate in a manner that is in the best long-term interests of the company (and its shareholders). They also seem to have a great deal of integrity, honesty and again IMHO have always tried to act in a manner that treats shareholders as partners. So why can't we trust that they had a good reason to delist from the NYSE? Maybe they did it to save the company money or maybe they had another reason. I highly doubt that Prem is going to try and take the company private at a price below fair-value and screw over the shareholders. The fact of the matter is I trust them so I am not going to worry about it..... cheers Zorro

For a really negative slant on things..... http://seekingalpha.com/article/173607-why-the-stock-market-should-crash?source=article_sb_popular cheers Zorro

very cool - thanks! cheers Zorro

thanks for posting! cheers Zorro

Sanj - you make the exact point I was trying to make when I expressed my shock (and yes, disappointment) in the BRK B-split on the Burlington Northern thread. cheers Zorro

Well, some FFH holders had less focus otherwise the shorts attack would have had far less success than it did. When BRK's price was last at this level, WEB was building the company into what it is today so your comparison is not really valid. I don't want to lose that focus on "Business partners" and see BRK become just another conglomerate once WEB is gone. But the share price hasn't always been high. How did he manage to have business-partner like shareholders back when the stock was as low as it is now going to be once again? As long as he doesn't get into the forecasting game of managing earnings, then all should be well. FFH's stock price for example is only 10% of Berkshire B shares, does this mean that shareholders have only 10% of the long-term focus?

I must admit shock at the 50 for 1 split of the B shares. For the longest time WEB said that he would never do something like this. I fear the split will encourage speculators, over time, to move in. While the acquistion is an excellent long-term investment, I question the split as another small dilution of the "Berkshire brand". Would WEB split the "A" shares next and eliminate the dual-share structure? My worry is the BRK has always been business-partners, making long-term investments, and the high share price required a commitment on the part of investors. If we split the stock, do we dilute this and go from partners investing in pieces of businesses to investors (speculators) trading pieces of paper? cheers Zorro

I am reassured to see that FFH is hedging once again! This environment continues to offer FFH the sort of opportunities to shine (and by shine I mean make oddles of money!) but it is good to see a bit of caution as well. cheers Zorro ;D

thanks txlaw, a most interesting read.... cheers Zorro

Interesting indeed! Everytime someone mentions green shoots I cringe. Is this really over? Has the deleveraging process finished? is the rebound in Asia enough? Interesting times though and an interesting article. If someone does buy the book, I would appreciate comments on if it is worthwhile buying.... cheers Zorro

Oldye If you want to look at future growth solving all of your problems, you need to make some adjustments to your math: you need to subtract deaths from births, and if you look at the value of growth per decade you can not take a person's lifetime earnings and count it into one decade - as in effect you are overestimating the "earnings" for each decade. Further the $3,000,000 per person figure is IMHO overstated. The fact remains: Federal debt levels are large and growing, yearly deficits will continue for the next ten years at least, there is a huge unfunded liability of $50 - $70 trillion for medicare and social security. Then who is to say the US economy will continue to grow at the same rate as in the past? If peak-oil believers are right, the economy could contract. The government either needs to devalue the dollar (which is what they are doing) or there needs to be some combination of higher taxes/lower spending for these obligations to be met. Governments typically like higher inflation to pay off large debts in devalued dollars and this appears to be the chosen path for the current administration. Even WEB has said that while the US will do well in the future it will not do as well as others - in his selling off the farm analogy I believe. cheers Zorro Well inflation could also go up if the dollar is dramatically devalued. And why would the dollar be devalued? How about the fact that the current total debt of $14 trillion will be around $24 trillion in about 10 years time. Then factor in the "off-balance sheet liabilities" of another $50+ trillion for social security and medicare. Any idea how this is going to be paid for without inflating the debt away? And no, I don't wear a bow-tie...... ;) cheers Zorro Ok so take the 4 million babies born each year in the U.S and say the lifetime earning power of each baby discounted to today is 3 million dollars...(According to Mohnish the FAA uses 3 million as the amount each of its passengers are worth...coupled with long life and inflation you're probably being conservative). Next: 4,000,000*3,000,000= 12,000,000,000,000 x 10 years = 120 trillion dollars in intrinsic value added to our economy each decade...1/3 of which pretty much belongs to the U.S government. Big numbers are scary but we have some very favorable demographic conditions and about 1/4 of the world's commerce split amongst 3% of its population. The coolest thing is that you don't have to go into the future to find value...my generation born in the mid 80's is just starting to enter the workforce...the 2 generations born after mine (the Lebron Generation) have yet to start contributing their est. 240 trillion of value to the economy. Very few will be trained in manufacturing...

Well inflation could also go up if the dollar is dramatically devalued. And why would the dollar be devalued? How about the fact that the current total debt of $14 trillion will be around $24 trillion in about 10 years time. Then factor in the "off-balance sheet liabilities" of another $50+ trillion for social security and medicare. Any idea how this is going to be paid for without inflating the debt away? And no, I don't wear a bow-tie...... ;) cheers Zorro

- Having additional BRK-B shares in market due to Gates foundation is not going to change its prospect or business value so point is irrelevant except the fact that BRK will become more volatile and all shareholders won't get similar returns. I suspect most members of this forum will get better returns than average shareholders when it becomes more volatile. It doesn't affect intrinsic value until, at some point in the future, some hedge fund comes along, buys 10% and argues (for short-term gain) that BRK should be selling off this company or that, or propose some other jackass idea? Oh go ahead, spin off See's Candy...... That's the point (worry) i was making. cheers Zorro

The problems with BRK are: 1. WEB - he is a genius and irreplaceable. Once he is gone, BRK will never be the same 2. Size - BRK has grown to $150 billion, it is simply going to be harder and harder to deploy future cashflows from that at the high rates WEB did when BRK was much smaller. Couple that with the fact that in the future we won't have WEB to deploy that cash. 3. The shares WEB is gifting to the BIll & Melinda Gates Foundation - as the foundation sells the shares who is going to buy them? Long-term thinking "partners" or short-term mutual or hedge funds? How long after WEB is gone can the BRK culture truly remain? 4. After WEB is gone will family owned companies that willingly sell to WEB today be so willing to sell to BRK in the future? I am not saying that BRK will not be one of the best companies around, for a while at least, but after WEB is gone it just won't be the same. WEB has already said that size is having an impact. The future while bright, is not going to be as bright as the past. Prem and the team at FFH are younger and have a smaller capital base to grow. While FFH will be riskier than BRK it should outperform BRK IMHO over the next 20 years. Cheers Zorro

Maybe Prem is looking at getting into merchant banking? Higher yield loans to smaller companies with an equity kicker? cheers Zorro

Viking thanks for the link! cheers Zorro

Omagh, You are most persuasive but (you knew there had to be one) I think that the amount of leverage/debt out there means a much slower recovery than most anticipate. We still need the US consumer to deleverage significantly before global growth can resume. I don't disagree that there are bargins out there, but I do feel that this is a time for caution! Cheers Zorro

Here is a link on the topic. i couldn't find the exact article I was looking for but this should stimulate some debate! :) http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf cheers Zorro

The problem is that over the next ten years total debt rises to $24 trillion dollars. Where does that money come from? Is the government really going to be able to borrow $24 trillion at 5%? And then what about the "off-balance sheet liabilities"? If you factor in social security and medicare total shortfall rises to over $70 trillion according to the Cleveland Fed. Even WEB has expressed concern about selling off pieces of the farm. What happens to government policy when foreign creditors hold an increasing portion of government debt? It is a bigger deal than most realize! Cheers Zorro May I ask what source are you using for these figures? The Government has about 12 trillion in debt. At 5% that costs tax payers 600 billion a year...the government has a interest coverage ratio of like 500%...its overblown!

Employment is a lagging indicator. I wouldn't put too much stock in it other than to suggest that demand will be slow in some corners. Typically, it is considered a lagging indicator by economists. The point that I think many are missing is that the economy will recover slowly while unemployment recovers. The current market rally is pricing in a quick, dramtic recovery. This is a senario I have trouble believing. Further if you factor in "true" unemployment - i.e. include those who have stopped looking for work or are now working part-time because their hours were reduced - unemployment is much higher than many realize. The next six months should be interesting as the slow pace of the recovery becomes more apparent. cheers Zorro

The jobless rate nationwide is expected to peak above 10 percent next year, from its current 9.7 percent. "You are seeing the pace of job losses slow a little bit," said Mike Lynch, a regional economist at IHS Global Insight. But states "are not out of the woods yet." The United States lost 216,000 jobs in August, the department said earlier this month, down from 276,000 in July. Employers have eliminated 6.9 million jobs since the recession began in December 2007. To me this suggests the current rally is way over done. The next six months should be interesting....... cheers Zorro

Well, I dunno about some of the bigger companies like Berkshire. Also, due to the high possibility that Munger and Buffett will not be around even in the next 10 years, I would not feel comfortable buying and holding Berkshire for the next 20 years. It's simply too big. It's market cap right now is around 150 billion. Realistically, it could approach mega cap size around 300 billion, and that would be a double from today. For it to compound at 10% for the next 20 years, it would become a 1 trillion dollar company. Sounds plausible, but not very likely. You also have the Bill & Melinda Gates Foundation selling shares each year (selling pressure on share price?) and just who is buying those shares? Will it be long-term thinking "partners" or quick-buck hedge funds? Still WEB did build it to last..... cheers Zorro