I guess if you are going to jump the shark" it's good that you own a motorcycle insurance company. Buffett bought Geico in 1996 and by all accounts is still a profitable and well run wholly owned subsidiary. The problem is what you pay is only part of what it costs to be insured. The rest comes from investment returns. You know like high value companies like Berkshire Hathaway:
And like Citigroup of the previous post seems somebody knows something based on the volume at the turns.
And now back to Sesame Street where we play "one of these things is not like the other:"
Those four lines are Citigroup (red), AIG (yellow), HIG (blue) and Berkshire Hathaway (green). What do you think? C, HIG, AIG are going to quadruple in price to get back to tracking BRK? There is always the other possibility.
14 comments:
First, you'd have to factor out the other BRK-A companies. If you're just looking at Geiko, it should drop.
Remember - that's only one of many companies spread across a diverse marketplace.
First time in a while that a tasty First! has stayed up so long.
Oh well...
Better luck this fternoon wagga.
Prop,
BRK owns a lot of insurance and reinsurance at its core. Sure there's "other" but BRK is primarily insurance, financial, etc. Its just the "good companies I understand" myth that says otherwise. He's up to his eyeballs in exotic cross collateralization reinvestment deals.
True - BRK-A is heavily involved in the sector, but it's not the whole company. This is a key distinction: The company has other assets / revenue streams to keep it going through the downturn.
BRK-A has seen a big drop already ($94k now, was $151k). Will they see more "problems" the next few quarters? Probably. I don't see them failing the way many of the big investment banks did though.
To use the old cliche - the bad news is already factored in...
Not that I ever believe that line, but with BRK-A, the insurance portion has been written down a bit already, the brick and mortar divisions are a chunk of the remaining valuation.
Of course, this involves Wall St., that runs on it's own version of "logic".
OK, I am officially sold on portrait orientation for monitors. Oh, I know, I'll regret it when it comes time to do a spreadsheet, but for the other 90% of my tasks it just works better. And the home computer is still on landscape, because computer games don't like portrait.
But back on topic, you're very naturally recognizing that BRK is not as uncorrelated as was previously supposed, but we are discovering that to be true with a great many other companies. Of course they all move together; but better companies move less to the downside and more to the upside. I don't expect BRK to fully revert to the mean, and may well take off if/when the economy rebounds--if Buffett is still in charge, insert other qualifiers here etc. AIG, on the other hand, isn't getting up off the mat anytime soon.
The "secret is to get a huge hunkin' monitor that is essentially two portrait monitors side by side.
You and Prop Flop are both correct. I didn't mean to sound like I discovered some new aspect of BRK that millions have previously overlooked. i just found it interesting how a company with so much exposure is only market perform when their major holdings are down 80-95%. It is still a dream to buy a share.
And important point there. Buffett is not forever. I don't wish him any ill health but I just don't think the price reflects BRK without him.
AIG is selling ILFC, talk about tail & dog. Note the assets in the last para.
Yes, BRK-A will drop when Buffett does. It will lose some of it's luster but won't drop too far. He is still involved in the day to day details, but has a number of very good managers working with him. The structure of the co. is still strong, but it remains to be seen if a strong leader will emerge to keep it focused.
Personally, if in position to do so, I'd buy on the drop caused by his death. I think it will bounce back a good chunk of the drop soon after.
All speculative of course... we'll only know for sure when the future reveals itself.
The smartest thing any post-Buffett BRK management could do is wait for market strength and sell off the pieces. I doubt anybody will be better able to manage it than Buffett, best just to sell while his former companies still have some glow from his Midas touch.
And Rob, you know perfectly well that gloating over Buffett isn't nearly as much fun as anticipating the inevitable fate awaiting Trump . . .
I'm concerned the the parts may not be marked to market even in a strong market. Remember also that a BRK investment position makes its own weather. disinvestment has the same effect in reverse.
As to Trump... what can I say? Casey with extra zeros. Can't even make money with a freakin' casino. I'm not gloating over Buffett either. I was just amused when his $5b in GS was hailed as a market bottom. Even smart people make mistakes.
And speaking of predictions to the downside.. how about a thread for predictions of 2009 car/light truck sales?
I call 9.5 Million.
I thought Warren got torched years ago on derivitates when he bought General Re and has lead the charge of these weapons of financial destruction.
I would think he is not as involved as others. BH also believes in making money on returns and soaring stock prices.
They own a lot of quality companies.
I feel better about Warren than some others stock shares.
Rob said: I'm too thin to be a fat walrus so now I'm a skinny otter.
We demand pix of your allegedly reduced beer gut, or the Walrus moniker sticks. :-)
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