Did I miss something?
Hope those orders get filled for everyone…Especially uncle Warren.
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What is down 5% today as you type?
What is down 5% today as you type?
BRK. On topic thread.
IP
Hmmmm. Who is your quote provider?
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I have not seen any news that would account for the 5% move. Interesting for Berkshire to be down more than the market for no obvious reason.
I’ve been nibbling on the way down. Seems pretty cheap to me relative to BV.
Where are you guys getting these down 5% quotes? Berkshire is trading about in line with the indexes today.
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I have not seen any news that would account for the 5% move.
I don’t know where the 5% in the title is coming from; Berkshire closed at 300.80 yesterday, and it’s lowest point today so far is 292.10, i.e down 8.70, which is down a little less than 2.9%
So the general market is down about 2.4% and Berkshire is also down about 2.9%, a similar amount.
High inflation and higher interest rates (which seem to be the reason for the drop) would hit the economy pretty hard and Berkshire would be hurt too. But I think this is a buying opportunity, since Berkshire’s companies are relatively inflation-proof, don’t have a lot of debt, and in fact have a lot of cash that would be better invested in higher-yielding debt.
I bumped up my stake a bit this morning.
dtb
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High inflation and higher interest rates (which seem to be the reason for the drop) would hit the
economy pretty hard and Berkshire would be hurt too. But I think this is a buying opportunity, since
Berkshire’s companies are relatively inflation-proof, don’t have a lot of debt, and in fact have a
lot of cash that would be better invested in higher-yielding debt.
I agree up to and including being relatively inflation proof.
But inflation is good for a unit with a lot of debt, and bad for a firm with a lot of cash.
Berkshire is in the “bad”
The increasing yields don’t offer any more opportunities for capital deployment, either.
Real yields are still low and in many cases falling, not rising. i.e., interest rates aren’t rising as fast as inflation has been rising.
Plus, coupons are taxed on a nominal basis.
If inflation is 0% and you’re earning 0% after tax of zero, you’re breaking even.
If inflation is 4% and you’re earning 4%, you’re losing money to the tax man, not breaking even.
As far as I can tell, inflation is bad for Berkshire across the board, but they can weather it.
What’s good for Berkshire’s true share value (though not apparent share value) is that it might trigger a decently long bear market.
One thing to watch out for in the next few quarters is whether Berkshire’s revenues, division by division, are rising in real terms.
That will be the metric of how much pricing power they really have.
If the economy slows materially, it will instead be a measure of how well they are holding up against the combo of inflation and recession.
Jim
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I think it was down $5 when the post was made, not 5%.
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So the general market is down about 2.4% and Berkshire is also down about 2.9%, a similar amount.
Berkshire is now down less than the S&P.
Pretty much tracking.
Jim
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Oh, whoops, the portfolio list I use on Seeking Alpha has been showing Berkshire down 5% pretty much all day. I never checked to see if that was accurate. 
???
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BRK.B 294.22 -14.52 -4.70% - - -
Yes, SA is where i saw it and just copied/paste here having rechecked. I didn’t cross check anywhere else. Apologies if this is incorrect.
Market Watch showing -2%'ish now.
Something funky going on.
BRK.B 294.22 -14.52 -4.70% - - -
Yes, SA is where i saw it and just copied/paste here having rechecked. I didn’t cross check anywhere else. Apologies if this is incorrect.
Market Watch showing -2%'ish now.
Something funky going on.
The funkiness seems to be at SA. The closing price yesterday was $300.80, so going down to $294.22 is only down $6.58 (2.2%), not $14.52…
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Looks like SA skipped Thursday. Wednesday’s closing price was 308.75, which fits with their percentage.
High inflation and higher interest rates (which seem to be the reason for the drop) would hit the
economy pretty hard and Berkshire would be hurt too. But I think this is a buying opportunity, since
Berkshire’s companies are relatively inflation-proof, don’t have a lot of debt, and in fact have a
lot of cash that would be better invested in higher-yielding debt.
I agree up to and including being relatively inflation proof.
But inflation is good for a unit with a lot of debt, and bad for a firm with a lot of cash.
Berkshire is in the “bad”
The increasing yields don’t offer any more opportunities for capital deployment, either.
Real yields are still low and in many cases falling, not rising. i.e., interest rates aren’t rising as fast as inflation has been rising.
Plus, coupons are taxed on a nominal basis.
If inflation is 0% and you’re earning 0% after tax of zero, you’re breaking even.
If inflation is 4% and you’re earning 4%, you’re losing…
I largely agree with this insight; indeed, it’s not just interest rates that need to be considered, it’s inflation AND interest rates.
But it’s important to consider where we are now and where higher interest rates might take us from here. Right now, we have a terrible environment for Berkshire: high inflation, eroding the value of the cash pile, and negligible interest rates, meaning that cash is giving us next to nothing in income. Our businesses may do all right with the inflation, but our cash hates it.
Now if it becomes clear to everyone that we need much higher interest rates to combat inflation, we might go from 8 and 1 (8% inflation, 1% interest) to something more like 5 and 5 (a neutral interest rate environment.) Yes, we would prefer 0 and 0, for the reasons you explain well, but that’s not where we are any more, and 5 and 5 would be a big improvement for Berkshire, compared to the current situation.
d
Right now, we have a terrible environment for Berkshire: high inflation, eroding the value of the cash pile, and negligible interest rates, meaning that cash is giving us next to nothing in income. Our businesses may do all right with the inflation, but our cash hates it.
Maybe we might have a great environment for Berkshire? A cash pile that during the year finally can be actively used for buying at reasonable or cheap prices? I think share markets will continue their downturn and am very curious how much lower the cash pile might be at the end of the year, hoping and nearly expecting after *1973 it’s now **1974 for Warren and he feels “like an oversexed guy in a whorehouse” again.
Source: https://nymag.com/intelligencer/2008/09/warren_buffetts_dirt…
*1973: “I feel like an oversexed guy on a desert island. I can’t find anything to buy.”
**1974: “I feel like an oversexed man in a harem. This is the time to start investing.”
P.S.: There might be great investors again, but he is so much more than that.
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Right now, we have a terrible environment for Berkshire: high inflation, eroding the value of the cash pile, and negligible interest rates, meaning that cash is giving us next to nothing in income. Our businesses may do all right with the inflation, but our cash hates it.
==============
Maybe we might have a great environment for Berkshire? A cash pile that during the year finally can be actively used for buying at reasonable or cheap prices? I think share markets will continue their downturn and am very curious how much lower the cash pile might be at the end of the year, hoping and nearly expecting after *1973 it’s now **1974 for Warren and he feels “like an oversexed guy in a whorehouse” again.
Yeah, that sure would be great, but I’m not counting on it. Even Buffett’s patience has its limits, and he has been doing some pretty big spending in the last few months, for someone who believes that much lower stock prices are coming soon.
So I agree that steeply lower share prices would be a great boon to Berkshire, even if it’s inflation and higher interest rates that are required for share prices to fall a lot. I’ve just sort of given up believing it’s really going to happen, and it seems that Buffett doesn’t really believe it either.
This is 100% because BRKB is the largest component of XLF ETF.
“short-term Fed Hike Expectations just ramped big time (only 9.66 more hikes to go in 2022!) with UST 2YR Yield up to within 3bps of 10s and the forward 10-2s OIS Curve clearly inverted. Financials (XLF) were down another -6.7% last week and a Top 3 Sector Short alongside XLY and XLK.” HEDGEYE