The rumor is that Warren Buffett participated in
the recent auction of 30 year inflation hedged
treasuries. Lets examine why he might be buying these rather
than KO stock. KO stock attributes include:
Ratio = 52.5x 98 est.
Earnings Yield =
Dividend Yield = .69%
Price/Book Value =
Guarantees = No guarantees
P/Int Ratio = 17.6x assuming 2% inflation
Yield = 3.68% + inflation @ 2% = 5.68%
Yield = 3.68% + inflation @ 2% = 5.68%
Value = 1x
Guarantees = Interest guaranteed by US
3.68% real rate of return guaranteed by US
Earnings guaranteed to grow at inflation rate by
Assuming the long term inflation rate jumps to 4%, this is
what happens to the above
Price/Interest Ratio = 13x interest assuming 4%
Earnings Yield = 3.68% + inflation @ 4% =
Interest Yield = 3.68% + inflation @ 4% = 7.68%
now lets look at one more factor. Lets assume that
KO's earnings grow at 10% over the inflation rate, and
lets assume further that the inflation rate is 2%. How
long does it take for the earnings yield on KO to
catch up with the interest yield on of 5.68% on these
treasuries. My trusty hp12c figures that it would take 12
years. Now, lets assume the inflation rate jumps to 4%,
so that you are getting 7.68% on these treasuries.
Assuming that KO's earnings grow at 10% over the inflation
rate it only takes 15 years for KO's earnings yield to
catch up with the earnings yield on these
What is interesting about this dynamic is that if
inflation doubles, the price/interest ratio on the treasury
decreases dramatically even without the treasury declining
in value. The price/earnings ratio on KO, however,
stays at 52x earnings(assuming no decline in KO stock).
In order to stay competitive, it would seem that KO
stock would have to drop significantly. If KO dropped
in half in a more inflationary environment, it would
still be at twice the multiple of the 30 year inflation
hedged treasury versus 3x currently.
that Buffett bought the inflation hedged treasury, I
can understand why. An inflation hedged treasury may
be one of the only types of investments that would
do well assuming a more inflationary environmment.
What could cause a more inflationary environment? How
about government printing presses turning out more
paper money. They are now printing money with abandon
in the US and Japan. How about a turn for the better
Well, the bottom line is that the
treasury looks like a no brainer versus the KO
See you at the beach!
I thought I told you to go play in the
Children should be seen and not heard. Were you formerly
know as Bad BRAD. you look a lot like him, you know
,sign in on the day you first post, with opinions
formed, and with a very familiar attitude . snot-nosed
foul-mouth ,you get the picture.
The living example of
poster boy for planed parent hood. you have no class ,
you have no wit , you are also very very short. You
have no money left , and you want to cry ,but it hurts
too much. here a quarter now scram.
Hear Ye, Hear Ye, Hear Ye.
A new kid on the
block just signed in today and he speaks profanity like
a pro. Must be an intellectual chap , with a keen
and profound mind to utter such charming words, words
spoken by his mother, no doubt, for he is too young to
have been out with other humans. I hope you will save
your precious words for your mama to see and she can
take pride in the enrichment she has brought forth to
the earth ,to share with all mankind.
just a few hours old with the intellegence of his
parents . Damn don't you wish you had said that? I bet he
has been a bear in a former life . You can't see
remarks like that outside of, the toilets of Sing-Sing.
and he has shared them with us common people . I know
not what others may think but I suspect he is related
to THTW. Did you learn anymore words today that you
would like to share. Now go and play in the street
I am sorry that you have lost so much money
our wonderful stock. I have been insulted every
way to Sunday by you shorters but finally one of you
tried in vain to insult myself and notbuffett at the
My wise friend and I know that when we
are insulted that we are
doing our job very well
for our KO family. The greatest
compliment that a
shorter can give us is an insult.
One more point, in
your profile it says that your sex
is neuter, I
hope that you were not castrated by KO
short position. To Notbuffett my wise friend
wonder if we will get more abuse when KO hits $90
July 17th, Do you hear that my friend
Put down MYCROFT for July 17th for KO will reach $90
on that day.
As a famous Chef in New Orleans says
"I GUARANTEEEE!!!! it"
Another shorter hits
Cover Comedyoferrors before KO gives
My thaughts were the same. I could not figure out
why he stated that especially when a few months ago
we were at the 8600 level and below.
earning season just about to start, I would think the
upside is just around the corner.
needs some extra comissions for their new cars.
Comission to sell the stocks, and comission to buy them
back. Unlike just getting a comission to buy the
something to do with the fact they are in the
business of selling ink. The bad news scenario is what
they think sells better. They may be correct. All I
know is no one, except maybe a few on X-FILES know
where themarket is going next. If they do they ain't
telling you or me, IMHO. I do think this board is a good
place to learn more about KO and market in general.
Tonite might be an exception. Good Luck and ALWAYS