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Selling BRK/A below $151,650~ Or BRK/B below $101.10
Thus edified, we return to the discussion of Mr Buffett’s Berkshire Hathaway and why we think it may be overvalued. Let us not be distracted by the Point and Figure Chart showing a BRK/B target of zero because of the 50:1 split today.
We think the fundamental human reason Berkshire Hathaway may be overvalued may parallel Mr Buffett’s bet against hedge fund managers and his description of derivatives as mass weapons of financial destruction.
At 79 Mr Buffett enjoys the longest string of success in investment history. He compounded BRK/B book value some 20.3% a year the last 44 years. He had only two negative years, 2000 and 2008. The law of numbers and size may be catching up. Berkshire Hathaway is a $115 Billion dollar large stock company with over 18,000 shareholders whose earnings growth the last five years has been –1.18%.
As Mr Buffett suggested, despite his vaunted prowess, Berkshire future long-term returns may decline to approach that of the market.
Mr Buffett believes long-term investment in Mrs Market will continue to outperform all other investment strategies, including long and short hedge funds and inflation.
As we have seen, although inflation has been a fact of life since the Federal Reserve and IRS began in 1913, having devalued the dollar some 98% relative to gold, that has not always been the case.
It took Mrs Market two decades to regain her 1929 highs before inflation, a time period Mr Buffett lived.
Mr Buffett is so bullish on the market he wrote a series of unhedged and unsecured (naked) puts on global markets for the next two decades.
He pointed out correctly the Black and Scholes Nobel Laureate option pricing model is not accurate over long periods of time like a century. (Nor is the market normally distributed like the B&S model, leading to so-called Black Swan events and long tails.)
January 22nd, 2010 at 12:05 am
[...] Jubilee Prosperity » Blog Archive » Selling BRK/A below $151650 …Selling BRK/A below $151650~ Or BRK/B below $101.10. We have a lot of respect for Warren Buffett, perhaps the most successful investor of all time, exemplified by his Berkshire Hathaway Holding Company. And today the bullish rumour is … Read more [...]
January 26th, 2010 at 1:26 pm
Aloha All
We learned at least one person was unclear why we headlined
selling BRK/A below 151,650 or BRK/B below 101.10 when recent
prices were 109,995 and 73.43 respectively.
The long-term trend is our friend.
We like to buy on weakness in a primary uptrend or sell on strength in a primary downtrend.
With all the excitement about the 30:1 and 50:1 net 1500:1 splits, the 50:1 motivated by taxes from the BRK acquisition of BNI and the BRK KFT acquisition of Cadbury, we wish to remind folks Mr Buffett seems to be going against core declared principles promoting free markets while supporting government bailouts and guarantees that riddle them with moral hazard, calling for higher taxes while seeking to buy tax credits, eschewing stock splits while completing a 1500:1 stock split, and declaring derivatives weapons of mass financial destruction while selling naked puts that reduced the credit rating and earnings of BRK.
We think the clear long-term trend of BRK may be down, so caveat emptor…
Regards*Rich