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Berkshire Hathaway Inc. Message Board

  • BrkRules BrkRules Jul 8, 1998 10:28 AM Flag

    Jim - Dollar is always a dollar?

     

    Hi, I have an example, and I guess I would like
    to know your opinion of the "intrinsic value" of
    it.

    Ok, I have two holding companies who simply invest in
    bonds. However, because of some screwy new tax law, they
    are going to be in cash for the next 3
    months.

    Ok, company A has access to quality A+ (private
    placement) bonds that pay 10 percent, and we fully expect
    the interest rates/availability to stay the
    same.

    Company B can only get bonds that pay 8 percent. Once
    again, we totally expect the status
    quos.

    Alright, here is the question, since both companies have
    the exact same assets right now, and it is in cash,
    do they have the same intrinsic value? (I don't know
    the answer to this, but one of your comments
    yesterday made me think of it)

    This topic is deleted.
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    • Excellent advice (from BrkRules) to all you short
      term & day traders out there...


      <<<The first thing to consider is taxes! Every time you
      sell your securities, you realize a (hopefully) gain.
      This takes a bite out of the performance, especially
      if they are short term gains. The more often you
      trade, the more this affects
      you.>>>

      Unless you are a seasoned SOES bandit, stay out of
      daytrading.

      <<<...big issues to consider before you sell your
      securities is to put your assetts somewhere
      else.>>>

      YUP!! That's why you want to find something where, if
      you sell, you want to put it back into the same
      security! That, by definition means you never sell...

    • I hate to risk propogating this issue, but my
      initial investing concept was firmly based on "not
      gaining or loosing" until you actually sell. But after
      going through some rounds of wins and losses, I finally
      came to the conclusion that paper gains/losses are
      just as REAL ever.

      I attribute NOT selling to
      the rulette table while the wheel is spinning. You
      sell when the wheel stops. If you choose to take
      whatever you have left (gain or loss) and go for another
      spin, then you're back in the market! It doesn't make
      any difference whether you decide to leave your chips
      on the table, (for another round) or take them off
      and walk away. You can't look at your significantly
      reduced stack of chips, and say, I haven't lost because I
      have yet to walk away!

      Same thing with
      equities. Your chips stay on the table, on the same number,
      with the same odds, for many, many rounds....

    • I like the way you think -- especially -- one
      day, GE will be a BRK company. This is a nice daydream
      (makes me smile, anyway).

      Actually, I have a
      couple of comments on GE itself. With all due respect to
      my guru WEB, I think that Jack Welch has also done
      an excellent job in increasing shareholder value. I
      have to check who had done a better job since Jack
      became the CEO. The unfortunate part is that Jack does
      not get so much press becuase Jack's did not start
      with owing a high fraction of GE. Thus, in terms of
      wealth, Jack is not as wealthy as WEB. Of course, as we
      know, WEB admires Jack.

      GE is now worth more
      than $300 Bn (common equity). BRK is less than $100 Bn
      (before GRN). This makes me think that BRK has plenty of
      room to grow and I am hoping it does. Of course, it
      would be better if it did not grown by issuing new
      shares alone. WELL.....

    • "It appears to me that if Buffett had started
      investing 20 to 40 years ago, may be, he would have
      successfully invested in steel and auto. He would have made a
      fortune.But,the paradigm shifted to colored water,
      etc."

      Copy Cat, You might want to check out the book "Secret
      Formula," by Frederick Allen. The book discusses at length
      Robert Woodruff's {Coke CEO} short selling of Cola-Cola
      in 1928. Woodruff was right in that the Dow Jones
      did finally crash. However, Coca-Cola went on to gain
      nearly 300% over the next eight years. Btw, Woodruff
      also thought the White Motor Co.{a car manufacturer}
      would be a great business. He formed a partnership,
      bought a lot of its stock and became the CEO. I'm unsure
      of the ultimate fate of the White Co., except that
      it was close to bankruptcy in the months following
      the crash.

    • There is one prediction that is almost certain to
      be true some day. Buffett's prediciton that future
      performance of BRK will not be as good as past will certainly
      come true. I assume that BRK will grow at around 15%
      in the future instead of the historical 24%. When
      that starts to occur, I think there could be an
      extended period of time, 5 to 10 years, when the stock
      appreciation would be in only the 10% range as the share price
      adjusts to a lower growth rate. Matter of fact, I expect
      this to happen. I can live with it but I feel many BRK
      holders will be very disappointed.

      I am actally
      surprised that they have been able to keep up the current
      rate of growth as long as they have. The only hope of
      maintaining the current growth rate is through larger and
      larger acquisitions like General Re. There are many
      fewer large companies that Buffett is interested in
      than small companies. He will not be able to do a
      General Re every year. The man continues to surprise me
      but the number of options that he has to work with
      decrease as the company gets larger and larger.

    • You don't make a dime until you sell.....and you
      don't LOSE a dime until you sell either. When to cut
      your losses and get out has been a lot harder decision
      in my experiance. I was up 250% on Food Lion
      Supermarkets back in the 80s when they got hit with a tainted
      meat scandal. The stock dropped like a stone on insane
      volume and I could/would not let go. When I finally sold
      a year later the opportunity costs of holding had
      made the losses even worse!!

    • I don't mind a voice of reason on this board. It
      seems to me that Buffett is hung on an old paradigm.
      One thing that never changes, however, is the fact
      that people are greedy and the greediest generation
      yet (the boomers) have only just begun to seriously
      put some money aside for "the future". Sure they may
      be dabbling in internet stocks and such but they
      will flee to "safety" and thus drive BRK to ever and
      ever increasing price levels.

      Greg

    • I've read the chairmans letters, I am holding stock that is up 300%, BUT I have NOT made a dime.

      Greg

    • Yup! Predictions are for the birds... but even
      Buffet was predicting that BRK would not do as well as
      it has... and he's been saying that for more than 10
      years now... when BRK was trading at around $2000.


      At the risk of sounding like a flippy chearleader...
      (no offense to you chearleaders) Brk has plenty of
      room to grow. The GRN acquision is proof positive. WEB
      says his acquisions have to be big to make any
      meaningful dent... What will he buy next? Maybe with his $23
      billion float, he'll pay cash and buy another company
      with a $25 billion float! I hope eventually he'll own
      half the US... I want that $900,000 share. Someday I
      want the sticker on my dishwasher to say: "General
      Electric...A Berkshire Hathaway Company"

      Yeah, yeah...
      just daydreaming... :-o

    • I liked your posting on "making predictions."
      Consider the prediction that BRK will continue to do well.
      After all, it is simply a prediction and may have a
      high probability of succcess. But, it is not
      guaranteed by anyone (let alone by insurance company such as
      Ge... or Ge.....Re). Thus, I only wish that some of the
      participants on this post would at least discuss the
      possibility that BRK may not do well under certain
      circumstances (say, if interest rates go up). Otherwise, we
      learn less and are simply the believers like the
      ultra-religious people. Even the Roman Empire or the British
      Empire came to an end.

      Even Buffett (especially
      Munger) has talked about paradigm shift. It appears to me
      that if Buffett had started investing 20 to 40 years
      ago, may be, he would have successfully invested in
      steel and auto. He would have made a fortune. But, the
      paradigm shifted to colored water, etc. May be, someday,
      the paradigm will shift again. Buffett may not be
      around by then but ROE on colored water will be smaller.
      Of course, if you ask the managers of colored water
      (i.e., Buffett and Munger), it is extremely unlikely
      that they would say that the stock price is high. I do
      not believe that he has EVER (almost ever) has
      suggested that any of BRK's holdings are
      over-valued.

      Furthermore, I only wonder that because the investors have not
      had a wonderful time with BRK, they are predicting
      the same will be true in the future. BRK will
      probably do better than the market (I own a lot) but not
      like the last 12 months (or what has happened since
      January). Well, these are my thoughts just to keep myself
      on ground and I hope some believers are not
      offended.

      The reason is that sometimes we start to believe in a
      prediction -- for example, almost everyone (who posts here)
      does not want to hear any possibility of BRK not doing
      well.

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