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Berkshire Hathaway Inc. Message Board

  • ignoramus_ ignoramus_ Feb 25, 1999 11:19 AM Flag

    Foreign companies and BRK

    I agree that in many countries, companies'
    financials are not cooked any more than they are here.


    They might be different in how they account for
    earnings (cash vs. accrual) or in how they make reserves
    for bad debt, repairs etc, or how they depreciate
    their stuff, or how they account for intangibles, or
    stock options. So it is important to know the
    differences, but generally many countries have trustable
    numbers.

    What Munger (and I) have a problem with is the culture
    of why a company exists, with their raison d'etre.
    In Japan they might exist to make their motherland a
    stronger country, to support all kinds of bullshit
    non-value-adding activities. Or they may be cross-owned by each
    other and form some kind of a unpenetratable crony
    system.

    Or they may be pushed around by the
    government (who may be a significant shareholder) to give
    too many perks to customers and keep prices low. See
    this happen here if Social Security money is invested
    into equities.

    This stuff is hard to change.
    Really sticky and annoying.

    I don't feel like
    investing into this kind of bullshit. I contemplated
    investing into some Russian companies with P/Es of 2
    (that's TWO) or less, unless I realized two
    things:

    1) No one knows what the true E is
    2) No one know
    how much of that true E will be stolen or diluted by
    management, or wasted by the unpredictable government. I did
    not know how much but I knew it was going to be "a
    lot". Enough to make me uncomfortable. And I do like to
    be comfortable and easy going.

    Same is with
    BRK, only in the opposite direction. I do not know how
    much value Buffett adds, but I know that it is "a
    lot". Enough to make me feel at ease when the price
    goes over 30% above my conservative value. There is
    still plenty of "margin of safety" created by the
    institutional dynamics of BRK.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • You mentioned Japan.... let me tell you my
      experience with one quite famous electronics company....
      I've seen them 'cook' their books by selling products
      from their main Tokyo office to their US sister
      company. It is registered as a sale, while it sits in
      inventory on the US side. Pages and pages of nice
      financials on the annual report on earnings, and not a peep
      about inventory in the US warehouses.... Investors only
      find out about it much later when the subsitudary
      finally writes it off a year or two later when the
      product is obsolete....

      How can you invest with
      confidence when you really don't know for sure if a company
      has effected a turnaround,... or did they just 'take
      it off the books'.....

      My philosophy....
      stay away from any country where the government shows
      signs of corruption, including Japan. You wanna invest
      overseas? Take WEB/CM's advice... buy G, KO, etc.

      • 1 Reply to asdsdf
      • ........."My philosophy.... stay away from any
        country where the government shows signs of corruption,
        including Japan."..........ain't THAT the truth......sadly,
        as DumpBill mentions, American taxpayers are
        presently "investing" thru the IMF in some bad overseas
        deals.......Clinton and his acolytes, busy worshipping the golden
        calf of Globilization have got even bigger
        plans.......NAFTA for Africa..........we'll be lining the pockets
        of sub-Saharan despots soon enough......of course
        any politician with the stones to oppose this will be
        labeled a "racist" don't ya know......the beat goes
        on......

    • Regarding your point about oversea investments.
      Asia is a good place to start. Its tailspin which
      still seems to have some way to fall is a good case.
      The greed of locals and foreigners along with plain
      old corruption especially in Indonesia really bring
      home the case for staying away.

      I feel a better
      way may be through companies with global presence
      such as Unilever or Nestle who have a presence in most
      parts of the world.

      How much cash is Berkshire
      sitting on currently?
      Ben

    • ......."I don't feel like investing into this
      kind of bullshit. I contemplated investing into some
      Russian companies with P/Es of 2 (that's TWO) or less,
      unless I realized two things:

      1) No one knows
      what the true E is
      2) No one know how much of that
      true E will be stolen or diluted by management, or
      wasted by the unpredictable government. I did not know
      how much but I knew it was going to be "a lot".
      Enough to make me uncomfortable. And I do like to be
      comfortable and easy going."..................

      What
      can one say about Russia?......they managed to fail
      at both Communism AND Capitalism..........this
      summer the IMF pumped $50 billion into Moscow to
      "stabilize" the country........and then I'll be
      damned......$50 billion mysteriously flows out of Russia into
      Swiss banks.......the beat goes on.......

 
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