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Berkshire Hathaway Inc. Message Board

  • napart napart Apr 24, 1998 2:48 PM Flag

    Deploying Cash

    As a matter of fact I do deploy cash as well or better than Buffet. How do you think I get my money to buy BRK? I invest in
    undervalued companies, sell, then buy BRK (class A). Another "secret" of compounding is in the way it's stated...BRK's 23% annual return
    since 1959 is an AVERAGE over those years. As far as the "rule of 72"; that's old hat boys. We are in a new paradigm, stock
    ownership is triple what it's ever been. The baby boomers are and WILL CONTINUE to pump billions of dollars into the market (without a
    correction), we are in for 20 years of straight up growth. I'm not interested in selling off pieces of my BRK holdings but "look through"
    earnings are every bit as "taxable" as dividends. Don't let yourselves get under the spell of the "oracle". Buffet lives off
    Berkshire Hathaway and WE deserve to derive some (3% ???) income of OUR company as well.

    Greg

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    • A recent post recommended margining BRk, which would make you even more uncomfrotable, I suspect.
      Different strokes for different folks. Keep doing what you are doing.
      But as for me, I am recently retired and plan to sell BRk as needed, and am comfortable with this.
      Incidentally, I am recently retired, and find my expenses to be similar to before retirement, as you predicted. However, my income is higher than my plan, which is a pleasant surprise.

    • Congratulations on planning you have done towards retirement! I was going to retire in June of 2000 and had been planning for 20 years towards that end. Unfortunately, these days it's harder and harder for the employee to choose the time. My company went through "downsizing", "re-engineering" and "streamlining"....nice names for 3 different layoffs. I lived through 2 of them but did not survive the 3rd.

      At my termination interview all I could think of was how glad I was to have my shares of BRK backing me up. It sounds corny but it was as if I had WB in the room and on my side....and he's a lot smarter than the guys that were letting me go!!!

      I hope you realize your goal of working another 10 years......but if you don't... you have BRK in your corner and that counts for plenty.

    • on both planning for retirement and the use of index funds. Index funds are a great alternative to variable annuities for instance. Better than variable annuities. And Vanguard is the only way to go, IMHO.

      I retired about 6 months ago. Depending upon the type of expense, my expenses have gone down, stayed the same, and gone up.
      For instance, I thought I would not be driving my car as much. But I find that I still get out during the day to do something.
      So I probably drive as much as before. And I am probably driving somewhere to spend money. I think that unless you have some
      specific items that you know will not be necessary in retirement, you should probably plan on the expenses to maintain your day to
      day life staying the same. In some cases, going up. That has been my experience anyway.
      Of course the biggest danger in retirement income planning is the effect of inflation on your purchasing power. Thus, as a
      sole source of income, fixed income securities, fixed annuities or benefits from a defined benefit plan are out. Some equities
      are a requirement. Depending on your situation, I think 50% at a minimum. If you have put away about 3 years of living expenses
      in a money market fund or T-bill, I think all the rest can go into equities, even for the retired old. The best retirement
      income of all is dividends from good corporate stocks.

      I caution people who are planning on selling part of their Berkshire stock or any other investments in retirement to provide
      for living expenses to think it through very carefully. On this, you may want to consult with a psychologist rather than a
      financial planner. Having to sell an investment to buy food or shelter is a psychological activity that is easier to accomplish in
      theory than in practice. Even if it makes financial sense, I just doesn't feel right. I can only speak for myself, but if I put
      myself in a situation where I must do something for the next 30 or so years that doesn't make me comfortable, I will get anxious
      and mess it all up. I need to feel in my bones that what I am doing will work.

    • OK, you can deploy your cash as well or better than WEB.
      And you are using the "new paradigm".
      And it is working extremely well for you.
      (I'm not calling this into question, or making fun - I'm buying it - I believe you) ...
      And you want dividends.
      And you can predict that BH will not pay dividends sooner or later...

      Then (and this isn't rhetorical - please answer it)
      Why did you elect to invest in BH?
      Aren't there other stocks you could find that would provide both the growth and current income you want?

      • 1 Reply to GoBaroque
      • I read this board reqularly and find that the majority of the "regulars" seem to know from where they speak!! I have a
        question as to how I am doing with my portfolio, and if anyone has some suggestions on how to improve my standing. Here tis; I have
        17 BRKB shrs, 396 DOWCH shrs, 120 COKE shrs, and 15K> in IRA and 12K> in Mutuals (30% in Overseas and roughly 65/35 split
        between high yeild/risk and moderate yield/risk, as well as about 5K in a Money Market acct. Now, for a 49 year old single female,
        what else can I do to improve or any suggestions would be helpful. Also, my plan is to continue to buy BRKB at aprox 1 sh every 2
        months until I have 30. My plan is and will to be invest in long term growth, and only sell as I retire and need the money. Please
        don't think that I am bragging here, as I have read posts on that before. This is NOT the case, I just want to hear advice from
        those that I have come to admire on this board. Thank You!!

    • Are you saying that you can get a 80% average annual return over the long haul? (after paying taxes on any dividends, an 80% return on the taxed dollars would be needed to equal a 25% return on non-taxable dollars).

    • So far as dividends go - if the company can effectively allocate retained earnings (ROE is in the 20% plus range) I prefer they keep the money. I can always sell a few shares at my choosing.
      I too don't have all of my money in BRK (BRK is less than 8% of my portfolio). A matter of fact, very few of the companies I have an ownership position in pay dividends - hmmm come to think of it they have had the best growth over the years, is there a relationsip here? (rhetorical question)

      John Burr Williams in 1938 talks about the effects of money - or should I say takes a run at descrediting the supply and demand theory of money on the markets.

      Investing it is a life long learning process - good luck.

 
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