scorpioncapital

The problem with DCF is that it fails to consider the balance sheet. A company loses $1 every single year for 100 years. Fair value by DCF calculator appears to be negative. It has say $1 billion in equity. Does anybody really believe such a company (which loses $100 over 100 years) has a negative fair value? It may not be worth much more than book, maybe even less, but definitely not negative.

I love it! C & BAC better than LUK. Question: If fair value is -4.53 shouldn't LUK be bankrupt and out of business?

And if there is no market, then cost is the correct accounting treatment? This whole thing hinges on the definition of a 'market'. Does 1 crazy bid make a market? How about 2 crazy bids? The idea of *economic* value seems closer to a fair assessment of value - as long as the holders of these assets don't cheat!

There was a bloomberg interview with buffet last month and I could have sworn he almost said 2009 could surprise everyone on the upside and when the reporter asked him if this is what he said, he said, 'no, I didn't say that, I don't predict, etc..' It seemed to me he was saying just that. And perhaps it will come to pass. Buffet is always careful to hedge his bets with forecasts.

I own a business, it's not publicly traded. It earns say $100,000 per year. There is no market for it, nobody is interested. Some wacko offered me $50,000 for it. Do I report my business as worth $50k? To be honest, I like some aspects of this accounting change. Market values are not some sacred thing, the more irrational the market values, the more nonsensical they are and like Graham's Mr. Market, we would do best to ignore that valuation. That doesn't mean values should be inflated either.

"A financial mystic — Soros believes his body aches and pains give him signals as to when to invest, or when to short — he does not know how long the current climate will continue. " http://moneynews.newsmax.com/streettalk/soros_global_depression/2009/04/01/198390.html I wish I had those aches and pains!

Is this for real or an April fool's joke? I don't see any other news articles on it.

" bit of both JackRiver... Black Swan Guy, Krugman, and Roubini are making hay while the sun shines. The cannot possibly know in any kind of detail what is on each banks balance sheets. They have an agenda the same as anyone else. The lecture circuit is lucrative" They are just being good businessmen or politicians. What is the incentive for them to be optimistic? If they are pessimistic and they are right, they will win untold media glory. If they are optimistic, like everyone, they will fade into history. So it makes quite a bit of sense for them to perpetuate their point of view, even if wrong, as insurance.

Can someone please criticize this analysis and let me know if they expect less or more inflation and if so how much more or less and why. I'm looking for the most likely outcome not catastrophic scenarios. Thanks! Assumption #1: President Barack Obama's budget would produce $9.3 trillion in deficits over the next decade. By 2013, the end of the president's first term, the budget cuts the deficit to $533 billion or 3.0 percent of GDP” Assumption #2: M2 of $8 trillion includes cash and currency, checking deposits, and some short-term savings. Assumption #3: “The Obama administration expects to run annual deficits between $1-$2 trillion a year for the next decade, and we estimate that foreign buyers might only buy one-third to half that amount of debt. The Fed will have to monetize $3.75 trillion to $5.25 trillion over the next few years, just to buy the U.S. government debt." Assumption #5: The total potential cost of the financial bailout to the U.S. taxpayer is already rapidly approaching $5 trillion Implies: 4%-5% annual inflation over the next decade Assuming the Fed soaks up the excess bailout estimate of $5 trillion with 80% efficiency, the rate becomes 6%. Total Inflation over the decade: 50%-60%

me too

"I think selling an excellent business at a rich price with the belief that you can pick up another excellent business at a cheap price is a very slippery slope fraught with problems. " How is selling an excellent business at a rich price any different than buying an excellent business at a cheap price? If we actively look for cheap prices, why not actively look for expensive prices?

The statement that Buffet doesn't sweat the macro stuff is equivalent to the statement that he doesn't engage in market timing. It's as simple as that. If you think about it, market timers have only two tools: technical analysis of prices AND macro speculation. Anybody who looks at a company based on its fundamentals and has some understanding of business cycles is not engaging in those 2 activities. But I'm sure Buffet does consider business cycles, that is clear in every industry, you have up years and down years. But buying despite this is what he does as long as it meets a hurdle rate.

It is a myth that has been promolgated by the media that Buffet somehow runs a $130 billion company with something on the order of 250,000 employees. Anybody who can do that is not human :) He makes key capital allocation decisions for future income but even if he stopped doing that, the "tentacles" of Berkshire run deep and there are many people involved here. No single person is responsible for the money that poors into Berkshire everyday.

"solid conglomerate that will slightly overperform and then over time slightly underperform Mr. Market" Why would Berkshire, at that time an unmanaged index of businesses underperform another unmanaged index of businesses. At worst it will match the Market forever.

Thank goodness we shareholders of BRK don't have to be accountable to the media but rather our core principles. In this respect, we can smile and go about our business, caring very little what the world has to say.

Not 2x, but 1.33x sure. I'd be comfortable with 35% leverage, but why do it with an ETF? I would rather do it with Berkshire stock. Here you have a company that is very likely to outperform the index by a few points.

Buffet on a recent bloomberg interview made a very interesting investment point I've never seen articulated anywhere else. He said something along the lines of, 'if this investment I made won't do well, then neither would have some other investment I had or contemplated making'. I see very few scenarios where some companies will do well while others won't if the general economy is lousy. Conversely when it improves lots of stocks will go up - alot, whether some more than others is a question of how much of the pie you personally want, but all the names I've seen listed here have potential to rise more than the average so choosing *any* of them is just as good as choosing any other - assuming you've considered the catastrophe risk.

BRK: 54% LUK: 46%

I just can't get it right :)

Is it just me or has the reaction to the AIG bonuses resulted in AIG giving back MORE than the actual bonus? - AIG employees to pay back the bonuses. - Congress to tax 90% of the bonuses. - Geithner to deduct it from the $30 billion loan installment Are they getting back 2-3x the bonus amount???

Good point I guess I forgot the power of compounding. I guess dividends might accelerate this timeline somewhat as might above average inflation.

In 2000, the S&P was 1500. The current decline has been 50%. That means we need a 100% gain to get back to 1500. If the market now returns 2x the average, say 10% per year, it will take 10 years to get back to 1500 - 2020 is almost exactly 20 years.

John Templeton did this and got rich. He bought all the shares under $1 during a deep recession/depression and waited a few years.

What's this thing about political will to fight the depression? I understand it to mean that unless we allow things like the AIG bonuses to occur, regardless of how much we hate it (I.e. the political will is to reverse it) the recession could go on a long time. I.e. we need the help of the criminals to get us out but the will of the people to allow this is very small.

More experience would have given me better insight into the nature of the bust-boom cycle, even if every situation only "rhymes" with the ones before. On the individual stock front, not realizing that every new investment should be carefully compared against every other investment owned or possibly considered with an eye not only for maximum gain but also for optimal safety in protecting *existing* wealth, not only in creating new wealth.