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No. of Recommendations: 4

--look at the yield curve. The shape is similar to early 2004, which was followed by two-three years of explosive growth in the overall economy.

(The hangover sucked boys & girls but the party was great while it lasted.)

What happens when the economy gets going? All of BRK's components benefit, with the possible exception of insurance underwriting. BRK makes money on the index puts, it makes money on the operating businesses.

So let's say what's going to happen in the next couple of years is basically reinflation of the asset bubble (I love this merry go round don't you?) Not housing, but it looks like it's equities' turn again.

So: BRK, having been an unloved stock, might suddenly get "recognized" and people start dumping money into it like at the end of 2007. Meanwhile the index puts benefit because the entire stock market rises. The operating companies' results improve as the economy strengthens, a triple whammy in BRK's favor.

The only real negative I can see, is that everything I have been reading about P&C is that it is a very soft market, lots of excess capital, underwriting premiums are going down, and supposedly it will remain this way for the foreseeable future.

I think the American stock market is going to be so overheated and sentiment so bullish in 2011 that S&P 500 will hit a new high, surpassing the previous 2007 peak. I think 2011 (maybe 2012?) is going to be pretty much of a replay of 2006-2007.

I will use Brk b because that's what I have. If book value is 63 right now, and it grows by 10ish% over 2011 (conservative if the economy keeps improving) then we are looking at 70/105,000 by year end.

All we need is a little multiple expansion to juice things up appropriately. Right now P/BV is around 1.3 or maybe even closer to 1.25. If it gets to 1.5x BV, then share price should be 100-105/150,000 - 157,500ish by year end. If BRK ever comes "back into fashion" then perhaps it spikes up like at the end of 2007?

Wow I sound like Whitney Tilson now.

On the other hand....
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