Grand Deja Vu? Techs tanked, BRK surged

[clutch]

You lesser mortals don't see the transcendant value  common across these companies. Hence you are stuck in your tribal tendencies and group think.

 

Wake up!

 

;-)

[Valuehalla]

We trust in the Omaha-Vatican. If there is relief in faith (Apple & Airlines) we promise to wake up and think about it. Till than we stay very catholic. Bishop John is on my side ?

[clutch]

Then what about when your prophet and his closest disciple say they regret not believing in the Search God? And they continuously praise the prophet Bezos? You keep your ears closed?

 

:-D

[John Hjorth]

We trust in the Omaha-Vatican. If there is relief in faith (Apple & Airlines) we promise to wake up and think about it. Till than we stay very catholic. Bishop John is on my side ?

 

<j/k>I have actually written a letter to Mr. Buffet recently, that I think he should consider to buy the Vatican State outright.

 

After a few days, Mr. Buffet actually gave me a call about the idea. The telephone conversation was about 5 minutes, after which Mr. Buffett passed on the idea, definitely, so I gave up, eventually.

 

He started up with the following major concerns:

 

1. What about that flamboyant garden backside the primary Vatican building? - I think his concerns actually was the wages to all those gardeners working everyday to keep it in top & mint shape.

2. Same with the very old building complex, with regard to maintenance.

 

After that, I just said to him, that if he was in doubt, he could do it with 3G, to reduce BRK invested capital, and Rome would end up with a new skyline from the new skycrapers in Rome.

 

After that, he said: "Just one moment - I'll have to lay down the phone on the desk to go talk with Marc... - I'll pick it up again after that - please stay on the line."

 

After a couple of minutes he came back to me on the phone:

 

"Mr. Marc Hamburg almost suffered a personal breakdown, screaming to me : "Are you asking me to add a further line in the BRK income statement - in a separate line all over the place: "Income from taxing the world of people with a religious conviction being catholic?"

 

I have thought shortly about that point - however I know Mr. Mamburg's work get harder every time I buy something. He is always screeming when I buy someting. He is getting paid for that. Dearly, I should note. His salary here at BRK is material bigger than mine, actually. He is just getting geriatric - no sweat.

 

However, my major point here for turning the idea down - as I do now to you  - is, that we do no not appoint sub CEOs based on votes in some kind of democracy based on subordinates voting.

 

It's my job.

 

-And we don't use white and black smoke either.

 

-Thank you for getting in contact with me." [After which Mr. Buffett hung up]

 

<end j/k>

[Valuehalla]

"You're still seeing money coming out of tech and into financials," said Marc Chaikin, CEO of Chaikin Analytics. "The rally in financials has real legs."

 

http://www.cnbc.com/2017/07/03/us-stocks-second-half-banks-tech.html

 

Week No 4 of Deja Vu is on air! Today was another strong day on which Techs are tanking and BRK is surging.

[Valuehalla]

Here we try to go again.. Mr. Market take the hammer pls

 

 

 

[rkbabang]

Here we try to go again.. Mr. Market take the hammer pls

 

I keep seeing news stories in the last 12 hours or so about the crash, but I own Amazon, Apple, Tesla, Overstock, and none of them went down very much yesterday and they are all up today.  On what planet did the this tech crash happen?  It wasn't this one.

[John Hjorth]

Here we try to go again.. Mr. Market take the hammer pls

 

I keep seeing news stories in the last 12 hours or so about the crash, but I own Amazon, Apple, Tesla, Overstock, and none of them went down very much yesterday and they are all up today.  On what planet did the this tech crash happen?  It wasn't this one.

 

As Valuehalla has posted about him self before here on CoBF, he is a day watcher, and a decade trader. [ : - ) ]

[Valuehalla]

I think its an interesting phenomenon that - out of the blue, from one second to another - theTECHs / FANG turn into minus, by 3,4 or 5 %  and in same moment BRK goes up.

 

This happen already on a few days now, without being continued as a sustainable development.

 

Daywatcher-report:

 

Eva ate the apple on: 1st Feb 2000, with sustainable development, the TECH bubble burst, BRK surged

 

And now:

9th June 2017

12th June 2017

25th Sept 2017

 

The burst is just behind the corner, waiting to show up.

 

[Valuehalla]

Here we go again...

[Guest Cameron]

Here we go again...

 

Call me crazy I look at this as money moving to Bitcoin.

 

 

[John Hjorth]

I have expected this post from you the last two days, Valuehalla! [ ; -) ]

[Valuehalla]

https://www.bloomberg.com/news/articles/2017-11-29/fang-s-60-billion-wipeout-is-most-in-one-day-since-facebook-ipo

[Valuehalla]

Bishop John, I have heard the Omaha-Vatican is preparing for St. Elephants day.

Further Washington conclave on Thursday night, is expected to prepare a big present for the faithfull  clericus all over the globe. Lets pray on our knees and watch the white smoke rise

 

[Valuehalla]

Our very interesting and here since 9th June bespoken phenomenon that - out of the blue, from one second to another - theTECHs / FANG turn into minus, by 3,4 or 5 %  and in same moment BRK goes up happend again yesterday.

 

This happen already on a few days now, without being continued as a sustainable development.

 

Daywatcher-report:

 

Eva ate the apple on: 1st Feb 2000, with sustainable development, the TECH bubble burst, BRK surged

 

And now:

9th June 2017

12th June 2017

25th Sept 2017

29th Nov 2017

 

The burst is just behind the corner, waiting to show up.

 

Trust in the faithfull clerus, stand behind the Omaha vatican, which is preparing big celebrations for St. Elephants day.  Dont be weak, dont bite the apples like Bitcoin FANG etc

[Valuehalla]

here we go again  8) :o ;D

[John Hjorth]

Are the techs tanking today, Valuehalla? [ : - ) ]

 

- - - o 0 o - - -

 

I could't help it. ...

[Valuehalla]

no.. but BRK is surging...

[Charlie]

I think the tax reduction is a Lollapalooza Effect:

 

Munger: "When 3, 4 or 5 factors are working in the same direction, you often get Lollapalooza Effects.

And Lollapalooza Effects can make you rich or kill you."

 

And this one will make us richer. :)

 

Some sentences from the CNBC Transcript:

 

"BUFFETT: THEY'RE NOT RICHLY VALUED RELATIVE TO INTEREST RATES, YOU KNOW. STOCKS ARE – INTEREST RATES ARE THE LONG-TERM RATE. IT'S 3%, AND WE'RE QUITE A BIT LESS THAN EXIT. THE LONG-TERM RATE IS 7%. THERE'S PANIC MANY IN STOCKS IF THE LONG-TERM RATE IS 15% LIKE IT WAS IN 1982. SO INTEREST RATES ARE THE GRAVITY TO VALUE BASICALLY. AND EVERYTHING IS WORTH IN AN INVESTMENT SENSE THE PRESENT VALUE OF WHAT IT'S GOING TO -- CASH IS GOING TO DELIVER IN THE FUTURE. AND OBVIOUSLY, IF RATES GO UP, THAT PRESENT VALUE BRINGS THE NUMBER TODAY DOWN. SO, WE'VE HAD LOW INTEREST RATES NOW FOR A VERY LONG PERIOD, AND WE'VE HAD A BULL MARKET SINCE – WELL, REALLY SINCE MARCH OF 2009. WHEN I WAS ON, AND JOE ASKED WHY I WASN'T BUYING MORE AMERICA EXPRESS AT 12, AND I TOLD HIM THAT I WAS BUYING THINGS THAT WE WEREN'T ALLOWED TO. SO, IT'S – WHAT HAS HAPPENED IN THE MARKET HAS BEEN VERY SENSIBLE. I MEAN, NOBODY THOUGHT WE WOULD HAVE THESE KIND OF INTEREST RATES FOR A LONG TIME. NOW, ADDITIONALLY, YOU HAD THE TAX ACT, WHICH IS A HUGE FACTOR IN VALUATION. I MEAN, IF YOU HAD BOUGHT – WE'RE IN OMAHA, LET'S SAY YOU HAD BOUGHT THE UNION PACIFIC RAILROAD YOURSELF, LIKE WE BOUGHT THE BNSF, AND IF YOU HAD BOUGHT IT A YEAR OR TWO AGO, YOU COULD HAVE BOUGHT 100% OF THE STOCK, BUT THE U.S. GOVERNMENT WOULD HAVE HAD A SUPER STOCK THAT WAS ENTITLED TO 35% OF THE EARNINGS. AND THEY HAD JUST CHANGED THAT WITHOUT YOU PAYING THEM A PENNY TO WHERE THERE'S – THEY NOW HAVE 21% OF THE STOCK. IN EFFECT, YOU BOUGHT IN THEIR 14%, 40% OF WHAT THEY HAD FOR NOTHING. I MEAN, IT'D BE LIKE I GAVE 14% OF BERKSHIRE BACK TO BERKSHIRE FOR NOTHING. WOULD THAT MAKE THE REMAINING SHARES MORE VALUABLE? OF COURSE IT WOULD. AND SO YOU'VE HAD THIS MAJOR CHANGE IN THE SILENT STOCKHOLDER IN AMERICAN BUSINESS WHO HAS BEEN CONTENT WITH 35% -- NOW THERE'S VARIOUS THINGS ABOUT FOREIGN EARNINGS AND ALL THAT, BUT 35% OF A BASIC – OUR BASIC BUSINESSES. AND NOW INSTEAD OF GETTING A 35% INTEREST ON THEIR EARNINGS THEY GET A 21%, AND THAT MAKES THE REMAINING STOCK MORE VALUABLE.

 

QUICK: I HAVE NOT HEARD ANYBODY EXPLAIN IT JUST LIKE THAT. WHEN YOU SAY SOMETHING LIKE THAT, YOU KNOW, WE'RE CONSTANTLY ASKING IS THIS BAKED INTO THE MARKET? IS THIS REFLECTED IN THE MARKET? WHEN YOU SAY SOMETHING LIKE THAT, THAT MAKES ME THINK NO, THAT THIS IS A MUCH LONGER TERM, MUCH BIGGER DEAL THAN THE RUN-UP THAT WE'VE SEEN IN THE LAST MONTH OR SO.

 

BUFFETT: WELL, IT'S A BIG DEAL. HOW MUCH OF IT HAS BEEN BAKED IN AS PEOPLE STARTED THINKING MAYBE THERE WOULD BE THE TAX BILL AND HOW BIG WOULD IT BE. I THINK THAT – 21% WAS NOT BAKED IN, THAT'S A HUGE, HUGE REDUCTION. IF YOU AND I WERE PARTNERS IN A BUSINESS AND YOU OWNED 35% OF IT AND I OWN 65% AND THEN YOU SHOWED UP ONE DAY AND SAID I'M GIVING YOU 14 OF MY 35 POINTS, NOW MY INTEREST HAS GONE FROM 65% TO 79%. THAT'S MORE THAN A 20% INCREASE IN THE EARNING POWER, AND YOU'VE JUST GIVEN IT TO ME. NOTHING HAS CHANGED IN THE BUSINESS THAT'S -- IT'S A BIG FACTOR. NOW, THEY CAN TAKE IT AWAY TOO. GO THE OTHER DIRECTION.

 

QUICK: THEY – LOOK, WE'RE LOOKING AT THIS NEW CHANGE. IT'S JUST BEEN ON A CASE BY CASE BASIS THAT INVESTORS ARE TRYING TO FIGURE OUT WHAT THIS MEANS FOR COMPANIES. AND WE ARE JUST BEGINNING TO HEAR THE VERY EARLY PIECES OF THIS. YOU'RE BASICALLY SAYING THAT THIS IS GOOD NEWS FOR SHAREHOLDERS ACROSS THE BOARD BECAUSE SOMETIMES THIS IS PAINTED AS SOMETHING THAT'S A GIVE-AWAY TO CEOS OR CORPORATE EXECUTIVES, THINGS ALONG THOSE LINES.

 

BUFFETT: PEOPLE WHO OWN THE BUSINESSES HAVE JUST OWNED -- THEY NOW OWN 20% MORE OF THE DOMESTIC EARNINGS. I MEAN THE FOREIGN STUFF GETS MORE COMPLICATED, BUT IT'S GOOD IF YOU OWN THE FOREIGN STUFF, TOO. FOREIGN EARNINGS. WE HAPPEN TO BE OVERWHELMING U.S. ORIENTED AT BERKSHIRE. BUT IT'S AN INTERESTING POINT. THE GOVERNMENT DOESN'T OWN THE ASSETS OF THE BUSINESS, WE OWN 100% OF THE ASSETS OF BNSF, BUT WE DON'T OWN 100% OF THE PROFITS. AND WE WENT FROM 65% TO 79 PERCENT OF THE PROFITS AT BNSF, AND THAT IS A – MORE THAN A 20% INCREASE. YOU KNOW, THAT'S 14 POINTS ON 65. SO, IT'S A BIG DEAL.

 

QUICK: WHAT DOES IT MEAN SPECIFICALLY FOR BERKSHIRE HATHAWAY? THERE WAS AN ANALYST WHO JUST PUT OUT A NOTE, JAY GELB, THAT SAID THAT IT'S A $37 BILLION BOOK VALUE INCREASE FOR BERKSHIRE INSTANTANEOUSLY.

 

BUFFETT: YEAH, WELL, IT DOESN'T MEAN A DIME OF CASH TODAY. BUT WE HAVE A HUGE OF AMOUNT OF DEFERRED TAX LIABILITIES. FOR EXAMPLE, YOU PROBABLY – I'M PULLING THESE FIGURES OUT. DON'T FILE A SUIT IF I'M OFF A LITTLE BIT. BUT WE HAVE PERHAPS $100 BILLION OF UNREALIZED APPRECIATION IN THE SECURITIES WE OWN. AND IF YOU OWN SECURITIES THAT HAVE GONE UP, YOU DON'T HAVE TO PAY A TAX JUST BECAUSE THEY'VE GONE UP, BUT IF YOU SAW THEM, YOU DO, AND IF YOU KEPT YOUR BOOKS ON AN ACCOUNTING BASIS, YOU SET UP A LIABILITY FOR THE TAX ON YOUR UNREALIZED GAIN. WELL, OUR TAX ON THE UNREALIZED GAIN ON $100 BILLION WOULD BE $35 BILLION, AND THEN THAT GOES DOWN TO $21 BILLION UNDER THE NEW TAX LAW. SO, ANYBODY THAT HAS A LOT OF DEFERRED TAX LIABILITIES GETS A BIG KICK UP IN BOOK VALUE. A COMPANY LIKE CITIGROUP HAS A BIG DEFERRED TAX ASSET. THE REVERSE IS TRUE THERE, BECAUSE THAT TAX ASSET IS NOT WORTH AS MUCH. WHAT IT DOES IS IT REDUCES THEIR TAXES IN IT FUTURE YEARS, AND THAT REDUCTION IS WORTH 21 CENTS ON THE DOLLAR INSTEAD OF 35 CENTS ON THE DOLLAR. SO, IT DEPENDS WHETHER YOU HAVE A LOT OF DEFERRED TAX LIABILITIES OR DEFERRED TAX ASSETS, AMONG OTHER THINGS, BUT THAT'S A BIG ONE WITH US."

[Dynamic]

Playing Devil's Advocate, Charlie, you could argue that's one factor expressed three ways (referring to your Bold text).  :P

Tax Cut -> increase in after-tax earnings by (100-21)/(100-35)-1 = 79/65 - 1 = +21.5%

Tax Cut -> increase in after-tax earnings by (100-21)/(100-35)-1 = 79/65 - 1 = +21.5% restated.

Tax Cut -> increase in Book Value via reduction in deferred tax assets (and potentially by mark-to-market gains in stock portfolio due to tax-cut appreciation, net of deferred taxes on further gains)

 

I can certainly imagine the tax cuts producing a real bull run for a year or so, possibly less, possibly more. It may lead to unbridled optimism and a highly inflated market (perhaps 2000/2001 levels of Shiller PE) ripe for a blow-up.

[Charlie]

I would say that the tax cut has different effects and the different effects lead to the Lollapalooza. ;)

[Guest longinvestor]

I would say that the tax cut have different effects and the different effects lead to the Lollapalooza. ;)

 

While we are enjoying giddy prices every day, it seems, I do miss the buying opportunities at lower prices. "Lower" is a relative term, no? We have been spoiled by cheap opportunities (most recently 2015); Rear view mirror for sure.

[scorpioncapital]

There have been times when rates were so low that stocks had a 50x p/e...just saying things may be elevated but look at bitcoin as an example of how high a bubble can go.

[John Hjorth]

... While we are enjoying giddy prices every day, it seems, I do miss the buying opportunities at lower prices. "Lower" is a relative term, no? We have been spoiled by cheap opportunities (most recently 2015); Rear view mirror for sure.

 

The eternal Berkshire investing dilemma & paradox!, longinvestor. -Next time the big US banks lie crushed in a big pile, - and that will happen again - Berkshire is likely to become cheap [relatively] again. Good to have at least some cash ready for that. It's personal, how much, though. Some less, some more.

 

On the other hand, if one doesn't actually own BRK anywhere near what one actually want to own, just start buying, and time combined with Berkshire will do one good.

[clutch]

Just wanted to revisit this post now that Berkshire bought Amazon... is it BRK breaking its principles or is it BRK evolving its mindset? And what about you?  ;)