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No. of Recommendations: 7
If rates stay here stocks are cheap looking out 10 years


Would be wonderful if he added--for the math challenged--that by "cheap" what he means is that an owner of stocks-in-general is certain of a return less than half of historical norms...that stocks at this level are only "attractive" when compared to the absolutely dismal forward return of bonds...and furthermore that anyone who thinks the next decade will be anything even vaguely resembling the past decade is delusional.
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No. of Recommendations: 2
And the stock price will slide a bit.

Jim
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No. of Recommendations: 1
He may even quote the 30 year treasury now yielding below 2%, a level NEVER seen before in history.

Not true. The 30 year dipped below 2% in August of last year.

Rates on 8/27/19:
Open 1.916
High 1.949
Low 1.905
Close 1.938

However, it is correct that today's (2/21/20) low of 1.886 is a new all time low.
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No. of Recommendations: 2
"Not true. The 30 year dipped below 2% in August of last year."

Thanks for the correction.

Should have read:

He may even quote the 30 year treasury now yielding below 2%, dipped to a level today NEVER seen before in history.
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No. of Recommendations: 7
Here are my predictions

1. If rates stay here stocks are cheap looking out 10 years

2. Buffett didn’t sell Apple, one of the fellows did

3. Still likes Wells

4. Not enough volume to do large scale repurchases

5. Still thinks he will get an opportunity to find an elephant

6. Feels great loves what he does Not retiring

7. The U.S. has a very bright future regardless of who wins the presidency. Even if Bernie wins.

8. No special dividend
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No. of Recommendations: 4
Here are my predictions
...



I agree with all 8 of your predictions. In other words, he will say the same things he always says.

Maybe I’ll try to find something better to do on Saturday morning...

dtb
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No. of Recommendations: 7
If rates stay here stocks are cheap looking out 10 years


Would be wonderful if he added--for the math challenged--that by "cheap" what he means is that an owner of stocks-in-general is certain of a return less than half of historical norms...that stocks at this level are only "attractive" when compared to the absolutely dismal forward return of bonds...and furthermore that anyone who thinks the next decade will be anything even vaguely resembling the past decade is delusional.
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No. of Recommendations: 7
From the letter:

“ Charlie and I do not view the $248 billion detailed above as a collection of stock market wagers – dalliances to be terminated because of downgrades by “the Street,” an earnings “miss,” expected Federal Reserve actions, possible political developments, forecasts by economists or whatever else might be the subject du jour.
What we see in our holdings, rather, is an assembly of companies that we partly own and that, on a weighted basis, are earning more than 20% on the net tangible equity capital required to run their businesses. These companies, also, earn their profits without employing excessive levels of debt.
Returns of that order by large, established and understandable businesses are remarkable under any circumstances. They are truly mind-blowing when compared to the returns that many invesTors have accepted on bonds over the last decade – 21/2% or even less on 30-year U.S. Treasury bonds, for example.”

Just sayin...
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No. of Recommendations: 3
And the stock price will slide a bit.

Dang, I was hoping to be proved wrong.
If an $81bn profit won't get a fella a price pop, what does it take?

Jim
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No. of Recommendations: 1
If an $81bn profit won't get a fella a price pop, what does it take?


You wouldn't know Berkshire is a profitable company from a headline today in Germany's (left-leaning) magazine 'Der Spiegel':

"Buffett's investment company profits collapse

Buffett loses billions again: Berkshire Hathaway earned significantly less in the fourth quarter. The year as a whole also went badly for the star investor's company."

...
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"If an $81bn profit won't get a fella a price pop, what does it take?"

Not letting your Chair & CEO etc stay long past their "retire-by" dates. Yeah. That.

Not letting ppl think your next Chair & CEO may be some gentleman-farmer & some guy named "Todd".

Though I could kinda go for Todd Rundgren if he'd play at the Annual Meets.
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I guess it isn't fake news that the fake news runs even thicker in Germany than it does in the USA.

That place has become Ministry of Truth v.21st-century.
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"Dang, I was hoping to be proved wrong."

Today is a good day for looking at individual stocks' performance against the broad market to gauge how the virus affects individual stock sentiment. Looks to me like BRK came out neutral or a tiny tiny + on that score, better than I thought the noise traders would have done to its price given the relative crappy headlines following the AR. So, OK to feel at least a tiny bit wrong.

Carl
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No. of Recommendations: 5
Today is a good day for looking at individual stocks' performance against the broad market to gauge how the virus affects individual stock sentiment. Looks to me like BRK came out neutral or a tiny tiny + on that score, better than I thought the noise traders would have done to its price given the relative crappy headlines following the AR.


^GSPC 3,225.89 -111.86 -3.35%
BRKB 221.69 -7.64 -3.33%



Tiny bit better, yes...

Or: The S&P went down because of fears of global disruption by the coronavirus. Berkshire, on the other hand, just went down because of crappy operating earnings. Unfortunately, when fears about coronavirus eventually subside, we will just have our crappy earnings...

That said, I'll take crappy earnings with shares at a multiple of 10, with $120b cash waiting patiently, over the S&P at nosebleed 24x times earnings, historically high margins and leveraged balance sheets.

dtb
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No. of Recommendations: 0
ouch, DTB, that is harsh!
"when fears about coronavirus eventually subside, we will just have our crappy earnings"

I really want to know what people expected & what # or set of #s was so darned disappointing.

in my mind, BRK fell today for exact reason(s) SP500 fell. Note: I'd say BRK's equity portfolio lost about 4.0% today.
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No. of Recommendations: 8
ouch, DTB, that is harsh!
"when fears about coronavirus eventually subside, we will just have our crappy earnings"

I really want to know what people expected & what # or set of #s was so darned disappointing.



Actually reported earnings were stellar, since they include gains on the stock portfolio, but I take little comfort in the fact that Berkshire has (for once) been able to participate in this speculative bubble. At this point, Owning Apple and Coke at 25+ times earnings seems like a recipe for future regret. What I am referring to is the very sluggish increase in operating earnings, despite a general economic environment which should be supporting growth.

                 Revenues         Earnings before income taxes
2019 2018 2017 2019 2018 2017
====== ====== ====== ====== ====== ======
BNSF 23,515 23,855 21,387 7,250 6,863 6,328
BH Energy 20,114 19,987 18,854 2,618 2,472 2,499
Manufacturg 62,730 61,883 57,645 9,522 9,366 8,324
McLane Co. 50,458 49,987 49,775 288 246 299
Serv./retail. 29,487 28,939 27,219 2,555 2,696 2,304
====== ====== ====== ====== ====== ======
Total: 253,997 247,587 240,342 29,250 29,156 21,370



Given the fact that Buffett boasts about all the retained earnings that operating companies like BNSF and BHE are reinvesting, the results are disappointing. If I could explain why earnings are so stagnant (Low volumes of coal? Retail apocalypse? Trade war?), and if the reasons seemed temporary, I wouldn't mind, but one wonders whether we don't just have a lot of industries in decline, compensated by new capital investments that may keep disappointing.

dtb
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No. of Recommendations: 2
Sorry, the table in my last post was incomplete. I didn't realize the total included insurance companies (underwriting and


The full, corrected table, from page K-109:

Revenues Earnings before income taxes
2019 2018 2017 2019 2018 2017
====== ====== ====== ====== ====== ======
Op'g Businesses:
Insurance:
Underwriting:
GEICO $ 35,572 $ 33,363 $ 29,441 $ 1,506 $ 2,449 $ (310)
BH Primary Gp 9,165 8,111 7,143 383 670 719
BH Re Group 16,341 15,944 24,013 (1,472) (1,109) (3,648)
Total, underwriting 61,078 57,418 60,597 417 2,010 (3,239)
Investment income 6,615 5,518 4,865 6,600 5,503 4,855
====== ====== ====== ====== ====== ======
Total insurance 67,693 62,936 65,462 7,017 7,513 1,616

====== ====== ====== ====== ====== ======
BNSF 23,515 23,855 21,387 7,250 6,863 6,328
BH Energy 20,114 19,987 18,854 2,618 2,472 2,499
Manufacturing 62,730 61,883 57,645 9,522 9,366 8,324
McLane Company 50,458 49,987 49,775 288 246 299
Service/retailing 29,487 28,939 27,219 2,555 2,696 2,304
====== ====== ====== ====== ====== ======
Total: 253,997 247,587 240,342 29,250 29,156 21,370



It doesn't change much in my conclusion, except perhaps that 2018 was an exceptional year for underwriting, not quite as stellar in 2019, and the 2 major utilities (BNSF and BHE) were not so awful. Not brilliant, but not awful.

dtb
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No. of Recommendations: 0
Oh boy, where to begin. There are 3 problem sthat confound this discusssion.

1. WEB has screwed up the meaning of "operating earnings". So, if you're going to use that term, you must first DEFINE IT & you really really REALLY should not use the idiotic # WEB includes in his qtrly PR.
You showed EBIT in your table, not WEB's "operating earnings".

2. Your table doesn't add up. The total > Sum of the parts. I don't know if you just deleted insurance & invest inc or you did something else, but it shows that trying to get ppl to point out the #s that really concern is like pulling teeth. Your #s do not add up.

3. I guess I say "well, LET THERE BE LIGHT!" Of course BRK is in a lot of industries that are flat to in decline. OMG. I think that has been obvious.
a) WEB is 90 yrs old & he picks stocks like a 90 yr old who doesn't want to keep current either his chronological knowledge of the economy or his breadth of knowledge. Ppl here celebrate his ignorance of the digital economy, so how can they be surprised, never mind "disappointed" by the (poor) results.
b) WEB is a "value" investor & those guys & gals always end up in some stuff that is in decline. The question is whether they paid too much or got a deal on it.
c) Exec Summary: WEB is too old to to be in charge of stock-picking or allocating capital in this economy. His blind-spots are ginormous. WEB is hiding in what he knows & that category hasn't grown much in almost 2 decades. Heck, that is what a bunch of ppl here love about him. He's comfy.

There are financial details to go into, but until you
a) DEFINE "operating earnings"
b) fix your table
c) give a more granular critique of the #s
it is kind of like throwing darts.
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No. of Recommendations: 0
minor parry, but one that points out an issue with "value" investors:

"At this point, Owning Apple and Coke at 25+ times earnings seems like a recipe for future regret"

Strange. I'd say owning airlines has been far more regrettable & not owning digital & medical stocks has been far more regrettable. It seems like the response is to just do more of what hasn't worked for a long while. <shrug>
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No. of Recommendations: 1
OK, there's the table. It should alter yoru perception.

1. geico's profit ratios have fallen & cannot get up. geico should spend a LOT less on a variety of things. I will say that those who don't understand why the proper P/BV of BRK's wholly-owned biz has fallen don't understand how much of it was due to geico & how far geico has fallen.
I'm no expert but with all these sensors & otehr electronics in bumpers etc, geico just has to charge more for insurance on newer cars. Period.

2. There is a whole lot of FX & other noise in underwriting. You either have to adjust for that or use the "normalized 5% margin" that mungo & Semper use or just not let it color your perception.
I will say, insurance is supposed to be about gathering float. So, if WEB can't be bothered to use the float, he should write a lot less marginal insurance.
I will also say that I don't understand insurance well enough to be confident that I know what GAAP underwriting profits really mean.

3. BNSF was brilliant in 2019. Brilliant at squeezing profit oout of weak volumes. Of all of BRK's employees, I wonder how they get rewarded.

4. BHE was good. Way too many details to go deeper. If global GDP is threatened, I'll take BHE over a multi-nat'l every day.

So, anyway, we now pointed to a few #s:
geico coming off a peak ... how long will that last? Could be a big problem. Hands-off isn't going to help.
BNSF awesome
Investment Inc awesome
Lots of WEB's old-school not-so-wonderful "value" stuff that is simply far less wonderful than ppl pretend it is

I say,, go to the Annual Meet & give WEB an earful about stepping down since it is obviously too late for him to make investing sense out of the 21st century.

But still, aside from appreciating FX & other noise in underwriting plus geico bad, BNSF good, what is the issue aside from understanding how old-school WEB's investing view is. He just hides in industries that simply grow sub-GDP. BRK is a GDP-grower (+/-) & a whole bunch of it is sub & that simply does not bother WEB.
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No. of Recommendations: 0
It truly blows my mind how BRKies just ignore the digital economy like it is someone else's imagination.

"If I could explain why earnings are so stagnant (Low volumes of coal? Retail apocalypse? Trade war?), and if the reasons seemed temporary, I wouldn't mind"

Almost no exposure to the digital economy? Anybody? Anybody? Bueller????

My take: I own some BRK ... bought it last yr @ avg cost $205. I'm up but a lot less than SP500 is. Why am I not grousing? I OWN A TON OF DIGITAL ECONOMY STOCKS. Anybody who thinks WEB will give them any exposure there other than AAPL, fuhgeddabootit.

Job 1: Decide how much of your portfolio should be digital.
Job 2: If you own BRK, only AAPL will contribute to that #.
Job 3: Remember that AAPL has to build & sell a lot of hardware & a ton of that happens in CHina. Issue.
Job 4: Understand that building & selling a lot of hardware is not usually prime position in the digital economy. For AAPL, fine. Otherwise, no.

I buy BRK when it gets "cheap" & think of it as saving me from having to analyze & invest in a bunch of old-school industries that I don't really want to analyze & invest in. In my mind, the main things that makes it comparable to the SP500 really is the big AAPL position & the broad diversification.
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