It’s pretty irrelevant what Berkshire the stock does. What is relevant is that in a big downturn in the stock price you won’t have div20 soloing the anxiety, you’ll have a bunch signing up for that service. How will you the investor deal with it? That’s the game played and few play it very well.
4 Likes
I think the main case for the “pretty likely” camp is that we might see a market panic. During which, as usual, Berkshire would sell off as much as any other large cap–for a while. No rational reason makes much of a difference during those moments.
Panics are rare, but they can happen at any time, and it seems that the odds might be a little higher this coming year than is usual.
That’s why I voted “pretty likely”.
Index fund valuations are high and so are geopolitical risks. Elections brewing. Inflation is high. Virus still evolving. There’s plenty of dry brush - just needs a spark.
Then herd instincts take over and everything is correlated. 20+ percent isn’t that much.
4 Likes
I think the main case for the “pretty likely” camp is that we might see a market panic.
This is the key for me right now, and it’s the reason that I’m reluctant to deploy too much in the ideas that have emerged recently. Some things that could trigger a sharp decline for Berkshire:
-
Russia resorts to unconventional weapons in the Ukraine;
-
NATO intervenes in Ukraine (more likely is a NATO action against Belarus if they enter the war);
-
Russia defaults on bond payments by May 25th ("The scheduled expiration of OFAC’s license for payments on May 25 may negatively impact Russia’s ability to service its debt obligations after that date.) If some Wall Street knuckleheads make a highly leveraged bet on Russia making payment and they default, it could set off a LTCM type cascade of events. I’m sure there is some cowboy currently arranging such a trade on Russian debt;
-
Apple misses and the shares correct … severely. Rightly or wrongly, any correction in Apple share price will be seen as a significant loss for Berkshire.
-
The FED fails to telescope a half point hike in interest rates, spooking the markets. Or, FSM forbid, inflation gets worse and the FED decides on an inter-meeting half-point hike.
-
The economy suddenly chokes and heads quickly into recession.
-
Any one of these unanticipated economic events forces some cowboy operations to quickly unwind their bets, throwing the markets into chaos.
There are too many long tailed possibilities, many of which look pretty short tailed to me right now. Of course, I’m probably wrong and will be left standing at the side of the road while the economy avoids all of these pitfalls on the way to 20% rise over the next 18 months, with unprecedented profit growth driving the increase.
PP
18 Likes
Some things that could trigger a sharp decline for Berkshire: 1…7… I’m probably wrong and will be left standing at the side of the road while the economy avoids all of these pitfalls on the way to 20% rise over the next 18 months
What about No.8: “What goes up must come down” (Quote from Alan Parsons Project, “Pyramid” - the older ones might remember)? If history rhymes (Cycles) it’s unavoidable and Grantham finally will be vindicated in as it went up more it will be more ugly too.
1 Like
It’s all relative. Higher interest rate and volatile market offer advantageous conditions for berkshire to get more deals.
2 Likes
By the US government life expectancy calculator, there is a 50% chance Charlie Munger will die within 1.2 years. Warren is expected to be gone in 3.7.
I firmly believe the company is a product of WEB’s sound business practices, and if he has some unique genius, it is in his ability to stick to those.
Quite a bit of the public and media perception is that WEB has a magic touch, and without it the company will no longer see periods of out-performance.
If I have money available, and there is a big drop, I’ll buy when he passes away. . How much drop, and how persistent will it be when that day comes? I think if it comes soon we’ll certainly see the 100 k decline.
2 Likes
By the US government life expectancy calculator, there is a 50% chance Charlie Munger will die within 1.2 years. Warren is expected to be gone in 3.7.
hmmm…I’m hoping they can break Methuselah’s record. At least a guy can dream…
And to quote one of our prolific posters,”just saying.” 
https://www.nytimes.com/2015/02/27/business/irving-kahn-olde…
3 Likes
we might see a market panic
We saw one Mar 2020, and a nice price for those with cash lying around. That was a surprise, and maybe therefore quite vicious.
But looking forwards, we can see a fair probability of a Fed induced recession coupled with restrictive money supply for an extended time to crush inflation … which was their 2007/8 playbook to punish the over leveraged banks …
2 Likes
“Panics are rare, but they can happen at any time, and it seems that the odds might be a little higher this coming year than is usual.
I don’t want to jinx it by citing any reasons for that impression …”
You are Vladimir Putin and I claim my prize!
“On average in the “modern valuation multiple era” since 2008, starting at about this valuation level,
there was eventually a re-entry price (not valuation multiple) that was 21% lower in real terms.
That’s not really that much, given the difficulty of picking your re-entry price.”
21% lower in real terms is far from unlikely, however for anyone selling shares in the hope of buying back at a lower price absolute terms are the key factor. Just wondering what the lowest re-entry price was on that basis if you have that available. And with inflation running at ~8%pa that’s not much more than two years before the 21% lower in real terms re-entry is today’s price.
Thanks
The era we’re in where we sit and watch our stock prices go up at varying but always many multiples of short and long term interest rates has been loads of fun. As we say, “At this rate…”
Life is great, if you can stand it.
2 Likes
I don’t want to jinx it by citing any reasons for that impression …"
…
You are Vladimir Putin and I claim my prize!
Well, yes, there is that elephant in the room.
There are always worries in the world, and they mostly affect stock markets vastly less than you might expect.
Most single big shocking events can’t be spotted on the charts. Sept 11 is invisible if you remove the days the markets were closed.
But it’s not every day you hear the words “world war three” in newscasts in the literal, not metaphorical, sense.
A pinch more financial preparedness is probably not optimal from the point of view of long run returns, but perhaps a response that is not wholly irrational.
Jim
4 Likes
“4. Apple misses and the shares correct … severely. Rightly or wrongly, any correction in Apple share price will be seen as a significant loss for Berkshire.”
I would take that one off your list of worries.
China invading Taiwan deserves a high spot on the worry list IMO
Focus on the business not global events. Most likely event to cause is drop is
a) Buffett health
b) Insurance scandal / losses / crisis
c) Infighting within (Abel, Jain etc. leave)
BRK will definitely, definitely trade at 1.2BV again in the next 6 months.
Maple syrup is supposed to be on the table before the pancakes
2 Likes
“BRK will definitely, definitely trade at 1.2BV again in the next 6 months.”
Thank you for this insight. I just sold my shares, bought puts, and sold short BRKB.
“It’s tough to make predictions, especially about the future”. Attributed to Yogi Berra but does not apply to everyone.
9 Likes
BRK will definitely, definitely trade at 1.2BV again in the next 6 months.
I think this is more wishful thinking than a prediction for some.
2 Likes
I just sold a BRKB call 1/20/2023 $350 for $30. I think $380 is a fair price to sell given all the uncertainties.
“Stability leads to instability. The more stable things become and the longer things are stable, the more unstable they will be when the crisis hits.” - Hyman Minsky
GLTA,
paul
Minsky Moment?
But what if the opposite is happening right now? What if the fear of instability is leading to more stability?
GLTA
paul
1 Like
BRK will definitely, definitely trade at 1.2BV again in the next 6 months.
I think this is more wishful thinking than a prediction for some.
BRK’s price history has languished more around 1.2PBV - 1.3PBV than 1.5PBV.
I will be here to say “I told you so”.
1 Like