Reply to notbuffett and continuation of my
Over the years, BRK has done very well - - I
think better than even what Buffett might have thought.
One reason for this is that Coke (over the last
decade or so) and G have done extremely well. My guess
is that Buffett expected Coke to do well but Coke
probably surpassed even his expectations.
in the future, we should not expect WEB to do as
well as he has done in the past with Coke's help. I
believe BRK (or WEB) will do well but Warren was also
lucky to have done so well. If we extrapolate his past
performance, we shall be slightly (or more than slightly)
disappointed. WEB expects to give about 15% return (as he
stated in the last shareholders' meeting) and I believe
him. I think that we are going to get around 15% (or a
bit more) in the next five to ten years. As I have
said, I shall be happy with 15% a year (and hoping and
dreaming for more but not really expecting or deserving
Lets not forget that most arb traders don't
strickly follow the rules.... short A, long B. Sometimes
they are long only one or even both and vise-versa In
Brk's case, most arbs are short Brk, but not long GRN.
They usually don't chase a spread that's not worth
chasing. (Brk/GRN lost it's spread within the first 2
weeks) So, in a strict sense, it is not risk-arbitrage
that is putting pressure on Brk, but just
If you want proof, just look at all the mergers
where BOTH companies went up. MCI/Worldcom,
Northrop/Lockheed (before it fell apart), Chrysler/Daimler, etc....
These companies were considered too risky to short and
most arbs closed out their initial shorts and went
long only. But analysts who are 'conditioned' (by
Buffet himself!) that stock deals for Berkshire equals
overvalued are probably not too worried shorting Brk.
They may be right, they may be wrong,.. but if all the
lemmings are jumping off a cliff, you should jump off the
same cliff and carry a parachute.... a good parachute
would have been to buy a 6 month PUT option on GRN
before it got too expensive and thinly traded. Oh well,
hindsight is 20/20.
What you don't understand is how the markets for
stocks are made...and how an ARB sets his or her postion
up in the market...the first thing an ARB does is to
begin to set up the short sale side before he sets up
his long side....this is because the short side it
more difficult to get going...this is true in the
BRK.a/GRN deal....BRK.a or b is hard to short in size...so
by moving the market lower for brk.a/b it is easier
to short...however, at the same time an arb is doing
this he would have to lower his bid price that he is
willing to pay for GRN.. both stocks would then
You sound like a man with a paper
Buffett pulled off another one... sitting on 9 billion
plus getting ready to inherit another 20 billion right
at the best time to buy, re: LOW!!! remember, buy
LOW sell high...
PS: You're a putz
(must have bought at
All that cash......And still no
I bet it could bring tears to your eyes.
the WEB be with you.
<the net drift is that WEB's telegraphing that
BRK is overvalued>
I don't get the
impression that Web's telegraphing that BRK is overvalued.
What did Web say or not say to make you think this ??
I heard he would not comment on BRKA's present
market value at the BRK meeting on 9/16/98. I am not
sure why he would not comment. Maybe he's planning to
buy back some shares of the company with some of the
9 Billion$. I think you can spin what you want,
depending on your position, on his not commenting on the
present BRKA market value.
As far as
why the stock is down, one guess could be the
arbitragers, ie. the one's that sold BRKA short and then at
some point in time bought GRN shares to cover their
BRKA short. For every 285.XX shares they buy of GRN
that will cover one share of BRKA short when the merge
The 9.975 M shares of GRN that the
institutions bought, how much of that was with money gotten
from shorting BRKA. If you look at the profile of this
company clicking on the Yahoo profile URL, you'll see at
the bottom that there were 18K shares shorted as of
August 10. I don't know what that number was on June 10,
that would be interesting to know. I would guess that
number is much greater now, September 18. If so many are
selling short are there enough buyers to compensate for
this large abnormal volume of the shorters.
am not sure how much of the drop is related to the
shorting? Of course all the negative global news, some of
BRK's holdings like G and KO are down, which frightens
people away and the downward momentum of the shorters is
not countered by much buying.
anyone adds your comments to this thread of discussion,
about why BRKA price falling, tell us whether you are
long or short BRKA or whether your sitting on the
sidelines in the Money Market. If you don't tell us your
position I will assume you are short or in MM. This will
clarify the subconscious or conscious spin we all put on
By the way I am long BRKA via
The Bs should be no different than the As in
price movement - arbitrage will ensure it. The
difference is in the voting rights
per $ invested. I
don't care anyway since I proxy WEB all of my
I've owned a couple of shares of Big Daddy for a
few years. I have cash to buy but not enough for the
real thing. With the cash position a $9B, wouldn't the
B's be a good buy as well. The man is the man and
holds a canyon of cash for acquisitions in a really bad
market. Please advise on Class B's!
The theory's been advanced here and elsewhere
that GRN has been dragging down BRK since institutions
(which have loved GRN) and particularly index funds,
have been selling before the merger. I tried calling
Deborah Nelson at GRN investor relations but couldn't get
through. However, I found what I was looking for at Market
Guide (www.wsrn.com and click on market guide, then
click on 'ownership').
GRN is 90% owned by 973
institutions, while BRK is only 13% owned by 321 institutions.
In the last 3 months however, there has been a net
BUYING of GRN shares by institutions (9.975M shares
bought vs. 9.734M sold). Insiders, however, have net
sold 7,000 shares (not that much).
BRK in the
last 3 months has not changed in institutional
ownership, with 6 net insider sells.
exact date of this information is not given (it might
be a bit stale, who knows?), the net drift is that
WEB's telegraphing that BRK is overvalued has probably
been more to do with the poor performance relative to
the SP since June. I'm long GRN, hoping to cash in on
the arbitrage, but I've continually been bloodied by
the falling knife as I buy and then sell.
would have thought with the huge cash just revealed,
more people would have figured that BRK wasn't as
bloodied by August as KO, G, etc were and thus there would
be some upward movement, as well as by the
confirmation of shareholder approval of the merger. No such
luck. Makes me pretty nervous that I don't understand
all the issues. What am I not getting here????
He knows that G and KO are some of the best
companies in the world and is happy to keep them for an
indefinite period of time.
As for the $9B in cash, he
can't wait to buy additional positions
in new and
current companies when "Mr. Market" will be having
sale. This period is not dissimilar to the mid 70s and
90s where he did the same - only with less.
"It seems to me that a point
that makes a tremendous difference is whether BRK owns
all of a business or a part of the business (which is
what you have in Coke, Gillette, etc.) When BRk or
anyone (you or I, etc.) owns shares in a public company
then the only possibility for making money is through
increases in the stock price. The stock price is driven
over the longterm by growth in earnings."
is a fairly narrow view. Companies can still return
large amounts to investors such as BRK via share
buybacks (i think Washington Post is an extreme example of
this) if BRK doesn't sell any, then over time they head
to 100% ownership. Alternatively dividend payments
are analagous (though not as tax efficient *unless*
through pref shares) to the cash flow that you mention.
You have to separate the idea of cashflow from
growth. A company can remain largely static (eg a utility
co. owning a hydro station) but if it's requirements
for reinvesting capital to replace equipment /etc are
minimal, then vast amounts of free cash flow can be