BRKB below $300

It means little, price/book ratio is now 1.28.

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WEB is probably feeling like a mosquito in a nudist colony.

Someone even saw him dusting off his baseball bat and taking some practice swings.

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I hope the traders at headquarters are hoovering up shares like they mean it.

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So many fat pitches I don’t even know where to swing first. Board is silent! Sad

JBGS-FAT
GOOGL-FAT
LILAK-FAT
BKRB-Almost Fat
EVVTY-FAT

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I hope the traders at headquarters are hoovering up shares like they mean it.

Berkshires shares? I doubt it.

“You should know, however, that we have no interest in supporting the stock and that our bids will fade in particularly weak markets.”

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that quote is accurate but all depends on what alternatives they see vs. share repurchase

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The difference between ‘supporting a stock’ and ‘repurchasing shares’ may seem evanescent at times.

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The difference between ‘supporting a stock’ and ‘repurchasing shares’ may seem evanescent at times.

The difference is the percentage of daily volume Buffett is willing to repurchase. What he’s saying - many different ways by the way - is that he doesn’t want to affect the price with his repurchases.

Remember when he discussed the 14% of Occidental that he was able to purchase in two weeks? He mentioned never being able to do that with Berkshire. It’s because of the volume of shares traded.

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He also said that if someone with a $50 Billion block of shares offered it to them, they’d buy at the right price

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Define fat. Brk.b YTD is flat is suddenly flat??

So many fat pitches I don’t even know where to swing first. Board is silent! Sad

What’s the hurry? Patience grasshopper!

It’s only been 2 rate hikes. 9 or 10 more to go. Projections are for the Fed Funds rate to increase to 1.9% by 2022 yearend and increase to 2.8& in 2023.

And, QT hasn’t even started. Starting June 1st, Fed will unwind 30 billion treasury securities per month and 17.5 billion MBS per month. Only 3 months later, the number will go up to 60 billion per month and 35 billion per month for a total of 95 billion per month. That’s a run rate of 1.14 trillion per year and will bring the balance sheet down from 9 trillion to under 8 trillion. In contrast, the entire 2017 - 2019 pre Covid QT managed to bring down the balance sheet only by 650 billion.

If there is one thing the last decade has taught us, it is that stocks go up when the balance sheet is expanding. Odds are that the reverse will happen going forward. Don’t fight the Fed!

Unlike previous dips, this time around there is no reason to think that the market will simply turn around and start soaring again. Seems to me the better strategy is to dollar cost average over the next 1 - 2 years. Swinging for the fat pitches isn’t going to achieve much other than possibly regret if prices keeps going lower.

https://www.federalreserve.gov/newsevents/pressreleases/mone…

https://fred.stlouisfed.org/series/FEDTARMD

https://fred.stlouisfed.org/series/WALCL

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It’s only been 2 rate hikes. 9 or 10 more to go

You are reading it incorrect. When they say 9 rate hike they mean 9 25 basis point hike. SO we already had 3 hikes.

Separately I agree with the patience.

Yesterday Fed said…

https://www.cnbc.com/2022/05/19/fed-isnt-focused-on-impact-o…

“So it’s not aimed at the equity markets in particular, but I think it is one of the avenues through which tighter financial conditions will emerge.”

Ignoring what is said before but…Fed is saying tighter financial conditions will be achieved through stock market declines. Fed is prepared to crash the market, crash the economy, but determined to break the inflation.

So until they change their tone, no need to rush, unless it is one of those growth names that gets sold to absurd level in washout sales, a la UPST $25.

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The CNBC link is no longer available. :frowning:

Here you go…

https://www.cnbc.com/2022/05/19/fed-isnt-focused-on-impact-o…

BRKB below $300…

FWIW, at that price and the valuation level it implies, one year forward historical returns have averaged inflation plus 12.2% since the credit crunch.
A little more than that if you also consider deeper history in the averages.
That’s using sort of a compromise between models using simple book value as the value yardstick and models using my “two and a half column” valuation metric.

Main differences:

  • Operating subs are valued as a multiple of trailing-four-quarter after tax earnings rather than their book value;
  • My model has downward equity valuation level adjustments on stocks that seem richly valued at statement date; and
  • I use cyclically adjusted underwriting profits.

If a set of books were prepared today, the book value of the company would have fallen $26.5bn due to price changes on the Apple position.
Considering that one change in isolation—
Price to book would make Berkshire seem suddenly significantly more expensive at $300 per share.
My model would show the value of the Apple position up a bit, as the estimate of earnings I use as the cap has risen a bit since the end of March.
This approach would make Berkshire seem a bit cheaper today at $300 than it would have appeared using the March figures.

In other news, I note that the correlation coefficient between daily A-share volume and P/B is over 42% in the last year.
Speculation:
When P/B is low, the stock is a better deal, and Mr Buffett knows that, and he likes to buy A shares.
Though it does seem as if somebody else thinks the same way lately.

Jim

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What’s the hurry? Patience grasshopper!

Unlike previous dips, this time around there is no reason to think that the market will simply turn
around and start soaring again. Seems to me the better strategy is to dollar cost average over the
next 1 - 2 years. Swinging for the fat pitches isn’t going to achieve much other than possibly
regret if prices keeps going lower.

There are lots of ways to skin that cat.

One fairly simple strategy for where and how much to buy back in, if you have the cash:
Just keep the market value of your position steady. That’s it.
If it drops 10%, buy 10% more stock. Repeat.
(best not to start any buying till the valuation level is below average, which it now is)
Constant dollar position sizing.

As the price falls, the upside gets better and the downside gets smaller.
That warrants having a bigger position size (bigger share count, at least).
And you don’t have to try to predict how far the price will drop–react to it as it goes.
Buying in proportion to the sensible position size is arguably better than just buying periodically,
or just buying based on a gut feel of when it’s as good as it’s going to get.

And of course you can do the same thing on the way up, if you think you might want to raise cash for something else.
As the valuation multiple of anything expands, the upside gets smaller and the downside larger.
But on the way up, you don’t want to do the first sale until (at least) the day the valuation level is above average.

Jim

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What’s the hurry? Patience grasshopper!

It’s only been 2 rate hikes. 9 or 10 more to go. Projections are for the Fed Funds rate to increase to 1.9% by 2022 yearend and increase to 2.8& in 2023.

And, QT hasn’t even started. Starting June 1st, Fed will unwind 30 billion treasury securities per month and 17.5 billion MBS per month. Only 3 months later, the number will go up to 60 billion per month and 35 billion per month for a total of 95 billion per month. That’s a run rate of 1.14 trillion per year and will bring the balance sheet down from 9 trillion to under 8 trillion. In contrast, the entire 2017 - 2019 pre Covid QT managed to bring down the balance sheet only by 650 billion.

If there is one thing the last decade has taught us, it is that stocks go up when the balance sheet is expanding. Odds are that the reverse will happen going forward. Don’t fight the Fed!

On the flip side, there is $18 Trillion waiting on the sidelines waiting for opportunity. Strong companies also have a lot of cash.
Don’t buy or sell stocks based on macro economic or interest rates.
Reality on the ground changes quickly. Governments and organizations are reactive and late by months.

Buy businesses based on the quality of the business.
There is no need to overthink and try to out smart any one. Dollar cost average.

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There is no need to overthink and try to out smart any one. Dollar cost average.

I agree. I did suggest this in my post. I also like Jim’s idea of constant dollar position sizing and the other details he mentioned in his post.

Swinging for the fences is not a good idea for most individual investors. It’s too emotional, too draining, prone to mistakes and ultimately not a sustainable way to invest over a time horizon of decades. Better to buy/sell regularly over time in a systematic way. Vary the amount based on your estimate of intrinsic value and prevailing market price.

Below table shows some Pre Covid Peak and Covid Bottom prices. When exactly where you supposed to swing? It’s impossible to know! Buying regularly on the way down and on the way up, as long as the price made sense, was the best way for most investors.


            Pre Covid     Covid
            Peak          Bottom

S&P 500     3386.15       2237.40   peak was on 2/19/20
BRKB         236.24       159.50
BAM           45.61       21.57     split adjusted
MKL         1347.64      710.52
WRB           53.28       28.70     split adjusted

By the way, I am mostly preaching to myself because I need to get better at this. As a first step, I have stopped looking at markets when they are open. Any trading you need to do, just place the limit orders the previous night. Better still, make trading decisions once a week only. Place your limit orders over the weekend and be done with it. Over long periods of time, I don’t think the results will be any different than looking at the market very day. You can still think about investing every day, but spend the time on learning more about the companies/funds/ETFs you plan to buy.

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Below table shows some Pre Covid Peak and Covid Bottom prices. When exactly where you supposed to swing? It’s impossible to know! Buying regularly on the way down and on the way up, as long as the price made sense, was the best way for most investors.


            Pre Covid     Covid
            Peak          Bottom

S&P 500     3386.15       2237.40   peak was on 2/19/20

Yep, another bit of data to add to that: at the Covid bottom, the price to trailing 10 year average earnings only dropped down to 20.9, which is still 23% over the long term PE-10 of ~17. I was in mostly cash, watching the markets crash, and also looking at the PE-10 in the context of a global severe recession/depression and pandemic and it seemed to me we were bound to have another leg down, so instead of buying at the bottom, I sold more on the bounce, like an idiot, didn’t start moving back in for months, missing basically the entire run-up.

Major mistake, probably the biggest of my investing career. I did time most of my sales pretty well, late February before the heaviest selling hit, but I would have been far better off just sitting tight with my investment plan instead of throwing out the window because of unprecedented circumstances.

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Below table shows some Pre Covid Peak and Covid Bottom prices. When exactly where you supposed to swing? It’s impossible to know!

            Pre Covid     Covid
            Peak          Bottom
S&P 500     3386.15       2237.40   peak was on 2/19/20...
Hey, a fella can try! [https://discussion.fool.com/major-bottom-detector-signal-again-3...](https://discussion.fool.com/major-bottom-detector-signal-again-34446181.aspx) *3/21/2020* *"...a believer in this signal could consider going long the S&P 500. S&P now is 2304.92"* That post was done during the weekend using the Friday March 20 close data--at 3.0% above the lowest close which happened on the next trading day, Monday March 23. By Tuesday close the S&P was already 6% higher than the Friday close.

I agree that market timing is emphatically not the recommended way to manage one’s money.
But most of the interesting things in life exist in that liminal space between the possible and the impossible, between the true and the false.

Jim

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