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Berkshire Hathaway Inc. Message Board

  • iluvbabyb iluvbabyb Aug 18, 1999 4:44 PM Flag

    When the bubble bursts...

    ...is the title of an interesting editorial in
    today's WSJ. The last paragraph provides an explanation
    for why Buffett is comfortable holding his billions
    in cash and bonds. "As Daniel Defoe observed after
    the first British stock market crash of 1696...anyone
    might have foreseen that...the raising of stock, of all
    sorts to a value above the Intrinsick, must have some
    fatal issue, and would fall somewhere at last so heavy
    as to be felt by the whole body of Trade."

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    • Buffett's timing of the General Re acquisition
      was HORRIBLE. He bought it just prior to massive
      widening losses. 190 million in red ink in Q2
      underwriting. Lost money also in Q1. Heh, in Q2 98 GRN ALMOST
      MADE MONEY. WOW! Break out the champagne!


      GEICO is also in horrible shape, earning 20 million
      versus 93 million in Q2 98. That's BETTER THAN Q1 when
      GEICO MADE ZIPPO. NADA. NOTHING. Pressure on earnings
      will continue at least till the end of the year. Read
      the 10-Q. Auto insurance is not categorized by
      customer loyalty. If you find a lower rate, you switch if
      you qualify of course. Seems to me from reading the
      10-Q that in trying to grow GEICO has lowered their
      standards and become a "SUB-PRIME" business. Couple high
      advertising levels with dropping premiums and more claims and
      POOF goes the bottom line! Try to grow 15-20% and
      DESTROY EARNINGS.

      Other parts of Berkshire are
      also doing poorly. Read the 10-Q. Also, what is the
      strategy of BRKA now that it is a legitimate operating
      firm. How does Dairy Queen and SHOES fit with
      insurance??? This stock is no bargain at 44 times net and 80
      times 99 operating EPS.

    • Someone in Barron's is quoted as saying that BRKA
      is "getting into bargain territory" because it
      trades at about 1.7 times book. The reality is that most
      of the 48% increase in book in 1998 is due to the
      General Re acquisition. The reality also is that General
      Re is BLEEDING LIKE A STUCK PIG. General Re was not
      only dilutive to operating EPS (what analysts estimate
      and how one determines in large part the health of
      the business OPERATIONS) BECAUSE BRKA STOCK WAS
      ISSUED to make the purchase, but because General Re has
      LOST MONEY in BOTH Q1 AND Q2. The underwriting loss
      WIDENED tremendously in Q2 to 190 million dollars,
      causing OPERATING EARNINGS to drop 21.5%. Net income
      dropped in BOTH Q1 AND Q2. Q2 was SIXTY PERCENT LOWER
      THAN Q2 98. A smaller investment gain in Q2
      contributed to the smaller net income. GEICO made all of 20
      million in Q2 versus 93 million in Q2 98. THAT'S BETTER
      THAN Q1 when GEICO MADE ZIPPO. That's right ZERO.
      THESE ARE FACTS FOLKS. THEY DON'T LIE. Can GEICO grow
      15-20% and make much $?

      BRKA now trades at 44
      times trailing net and EIGHTY TIMES 99 OPERATING
      EARNINGS USING TWICE FIRST HALF RESULTS AS THE ESTIMATE.
      Reasonable since operating EPS was about equal in Q1 and Q2.
      Lord Buffett is human after all. His timing of the
      General Re acquisition was HORRIBLE from an operations
      standpoint. Since BRKA is now a legitimate operating firm as
      opposed to a closed end fund in drag, that is the most
      important aspect to view. I see NO BARGAIN HERE. I see a
      cyclical company, due to the nature of catastrophies, that
      will be lucky to grow at 15%. I'll take MSFT, AOL,
      CSCO, YHOO, etc. who have slam dunk earnings growth
      exceeding 30%. There is NOTHING MAGICAL ABOUT 1.7 times
      book. If things continue as they are at BRKA
      OPERATIONS, 1.7 will drop substantially. This is no Fort
      Knox. It MAY BE A GOOD STOCK FOR THE LONG RUN, BUT I'M
      FAR FROM CONVINCED. How does Dairy Queen or selling
      shoes fit with GEICO and General Re??? I see NO OBVIOUS
      BARGAIN. Good luck!

    • "This info is delayed or unavailable with smaller
      positions, so that it really is impossible for an outsider
      to be able to track the BRK portfolio of
      investments. Am I right? Thanks again."

      That's my
      understanding as well.

    • I'm sorry my questions have been so dense. I
      guess what I was really asking pertains to how we track
      what BRK owns specifically, and I assume the answer is
      that when BRK acquires a significant position in a
      security the issuer reports BRK as a significant
      shareholder, such as with Coke or Gillette. This info is
      delayed or unavailable with smaller positions, so that it
      really is impossible for an outsider to be able to track
      the BRK portfolio of investments. Am I right? Thanks
      again.

    • interview from March 2,'99 between WEB and Ted Koppell ???
      Great between the lines reading, if nothing else.

    • Sometimes I crack (pipe) myself up...

    • Joe boy! You come home RIGHT NOW! And stop
      playing with those big boys, son. They're gunna eat your
      lunch. Didn't your father/uncle (see my yahoo profile)
      teach you anything,
      son?

      LOLOLOLOLOLOLOLOLOLOLOLOLOLOL

      "I minimize risk. I understand that Linux is not a
      major threat
      to MSFT and if it was MSFT would write
      applications for it or come up with a better version of

      it, etc. "

      Yeah, right, like they came up with
      something better than DOS. Ha!

      At least with DOS,
      you can write a real-time multi-tasking home-grown
      architecture over it, and not have to re-boot..... LOOSER

    • "Still I believe you should at least think about
      the posibility that you could have a hidden weakness
      in your investment stratagy. I am presently in INTC,
      MSFT, and CSCO, so I am also a believer in these strong
      stocks like you apparently are.I have owned AOL and the
      big Nite, and I like them but I'm a bit afraid to own
      them currently. "

      There is risk in ANY STOCK.
      There is no such thing as a sure thing. Warren Buffett
      IS NO LONGER AN INVESTOR, HE IS A CEO. I think he
      was A MUCH BETTER INVESTOR. Few would argue that.
      BRKa now has MUCH MORE RISK than it had as an
      investment vehicle (closed end fund in drag). I think my
      engineering background helps me greatly in assessing/feeling
      comfortable with AOL, CSCO, MSFT, GMH, NETA, etc. By choosing
      leaders with very strong market positions and
      well-established fantastic track records (as Buffett does, though
      with less aggressive stocks), I minimize risk. I
      understand that Linux is not a major threat to MSFT and if
      it was MSFT would write applications for it or come
      up with a better version of it, etc.

      I think
      there is FAR TOO MUCH BLIND WORSHIP of Buffett. I think
      his great run WAS AS AN INVESTOR and is BEHIND HIM.
      This is not a great growth stock by ANY STRETCH OF THE
      IMAGINATION. That is my basic message. I think you agree with
      that. It may be a great hedge. Good luck!

    • Just shot another fish... Got me an idiot's head
      up in the den now, too! What can I say, it was just
      standing there in the headlights on my way to the
      barrel!

      Got me a new girlfiend too.

      HA hA hA hA hA hA
      hA hA hA hA hA hA hA hA hA hA hAH Ah AhAh ha

    • I am feeling quite proud, now. How are you
      feeling, Joe? It seems the 2 most powerful (Greenspam and
      Buffet) men in financial america are calling you an
      idiot. No, make that the THREE most powerful... (I
      forgot about myself, Tee Hee Hee). Weather's nice here
      in Jackson Hole, how's it there in El
      Centro?




      "History tells us that sharp reversals in confidence
      happen abruptly, most often with
      little advance
      notice .. if episodic recurrences of ruptured confidence
      are integral to the
      way our economy and financial
      markets work now and in the future, it has
      significant
      implications for risk management and ..
      macroeconomic policy," he said. In effect, he
      was warning
      people to diversify their assets before the next
      financial panic.

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