Why invest in Berkshire? Well let's not kid ourselves to think that we can value Berkshire. However, the one man that may have the best idea may have already signaled his sentiments. By suggesting that investors in general should lower their expectations to 6% to 8% (I think it was for pension plans), I think Mr. Buffett was giving us the heads up. Not that it was overvalued, but that a lower average annual rate of return should be expected and more specifically that this lower return would prove itself to be relatively good. (in comparison to the alternatives and of course having some level of fixed income securities involved)
As for his lowered expectations, he's done this before, but I suspect it has more bite this time. For starters his asset base is truly large now, but if someone is going to manage that effectively I guess Berkshire can. The stock market, well, as a whole its not very attractive. I know that's a general statement to make, but not many companies lend themselves to sound analysis (unless in the analysis you admit to a high degree of speculation and it's been said, it's better to be partially right than absolutely wrong), and those that do lend themselves to sound analysis tend to be tightly valued right now. That is if you are looking for a return upwards of 10%. All this said, i would like to point out one positive. I think we can all agree that when it comes to allocating capital, Mr. Buffett and Mr. Munger have proven to be among the best. So for investors like this, who have cash to spend, it only seems rational to expect them to benefit from a falling market. More specifically, if they really believed in a 6 to 8% return (and please correct me if I've miss quoted them) a year ago, then every time the market goes down (in price) then naturally the expected average returns should go up. This may be simplistic, but I suspect its logical or probable to expect.
Like a herd of African elephants in the dry season, the matriarch has a good idea where the water is (granted it may only be enough to survive). And as bad as things may get as each day passes without water, it also gets better because each passing day is one day closer to rain.