...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."
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
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."
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
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,
"I minimize risk. I understand that Linux is not a
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.
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
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
"History tells us that sharp reversals in confidence
happen abruptly, most often with
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
implications for risk management and ..
macroeconomic policy," he said. In effect, he
people to diversify their assets before the next