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Berkshire Hathaway Inc. Message Board

  • hjclasvegas6969 hjclasvegas6969 Jul 6, 2014 7:33 PM Flag

    Quotes on a Screen and Blotches of Ink , hussman,

    great way to start the week, lol.

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    • I thought his explanation of how varying discount rates (through time) effect the price of a zero coupon bond (a single price at the end of an otherwise empty series of cash flows) was very good.

      Unfortunately, the arithmetic is a little different for dividend paying stocks. The near-term dividends only see the current discount rate, while the dividends at the end of the series have to "run" (are effected by) the entire "gauntlet" (through time) of discount rates.

    • from hussman, what does uncle warren REALLY, think ??

      ++ Again, on a broad range of historically reliable measures, our estimate of 10-year S&P 500 nominal total returns is now less than 1.8% annually. That said, the most reliable measures actually project negative returns, but then, the most reliable measures are those that adjust most fully for cyclical variations in profit margins, and we are continually reminded that this time is different. The ratio of market capitalization to GDP, which Warren Buffett (correctly) observed in a 2001 Fortune interview is “probably the single best measure of where valuations stand at any given moment” is now about 150% (not just 50%) above its pre-bubble norm, even imputing a rebound in Q2 GDP growth. Of course, Buffett also wrote "A group of lemmings looks like a
      pack of individualists compared with Wall Street when it gets a concept in its teeth" - which may explain why Wall Street seems so entranced with the concept of QE instead of actually doing the math. The ratio of market capitalization to GDP, presented below on an inverted scale, is beyond every point in history except for the final quarter of 1999 and the first two quarters of 2000. ++

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