This is specifically to this (ex) board members. The single reason SVB failed is not only they didn’t follow prudent interest rate hedging, but in reality they are highly concentrated on their deposits from a single source (VC community). When one VC decided to pull they instructed all their portfolio companies and multiple VC’s invest in a startup, that means the message flooded the VC community and everyone withdraw en masse $50 B, that did the bank. A 40 year franchise, decades of VC relationship, everything went vapor.
Now, what is the lesson in this?
Travel sometime back. In these very boards, for folks over 80, people were recommending putting all their money in Berkshire. I challenged the idea and said it is a imprudent risky strategy for a very old person, because that recommendation was from mungofitch, everyone felt obligated to jump in defend it and trash me. Of course that was not the first time I challenged his idea or in hind sight Mungo’s suggestions were horribly wrong. Sorry for name-dropping someone who is not posting here but it is important to highlight how bad advice can come from someone you trust very highly.
The real lesson is even if it is Berkshire, don’t concentrate. Don’t quote a owners high ownership as the reason (this is for TMF folks of course TMF preaches diversification but often justifies a company is worth investing because owners have high stake when other metrics are indefensible). You are an investor with different risk profile and financial circumstances. You don’t have to take unnecessary risks, like concentrating on a single security.
Say someone could invest 50% of their portfolio in either Berkshire or an S&P500 market cap index fund, what do you think are the added risks from going with Berkshire?
We talked about this ad nauseum; Repeating the same thing over and over is so boring. Here we go one more time:
1 The greatest investor, who managed $100 B cap gains on APPLE, is only able to keep up with SPY at the best. Let that sink in. What are the chances of another APPL to boost the gains?
2 You really don’t need any argument for a single security risk;
Let us be realistic here, no body understands or smart enough to know the risks and value the risks; Most are merely trusting WEB, but that is not a reason to bet on a single security;
The argument that Berkshire is better than SPY is getting silly. Anytime you buy a stock that means you are implicitly making a bet that is a better value than all the other stocks you choose not to buy. To flip the argument, WEB decided to hold $100 B in cash but don’t want to buy Berkshire or thought OXY is more valuable than Berkshire. Think about that…
BTW, No 50% was not recommended for an 80 year old with no kids and no income but 100% was recommended. The principle risk, no dividend to live off to deal with market declines, to yada yada. I am not against buying Berkshire, but the silly arguments like put 100% on Berkshire is what I abhor.
There are utter non-sense received much more rec’s. I will give you one classic, debt doesn’t matter in calculating enterprise value. That gem received over 75 rec’s. The fealty of the clan to the leader is something to behold.
As far the rest, your inability to follow an argument, doesn’t mean I have to explain. Normally I would but you don’t deserve that courtesy.
Not sure what Apple has to do with this discussion. Both Berkshire and SPY have Apple as a very large holding. Heck, SPY has over 7% in Apple right now!!!
Well, you know the argument there, that has also been repeated ad nauseum: SPY is overvalued, maybe even still in bubble territory, Berkshire is reasonably valued. So it’s a miracle that Berkshire has been able to keep up with SPY thus far.
I am not familiar with Bogle, and I have expressed my views on Shiller CAPE plenty of time, in a nutshell it is useless.
The argument of SPY is overvalued is simply a diversion tactic. When you are comparing price (which is clearly available) then suddenly introducing valuation (very subjective) is ingenious. That overvaluation also helps Berky’s book value and folks want to assign rich multiples to BV.
Separately none of that matters. Single security risk is single security risk. If someone believes they understand Berkshire so well, they are kidding themselves.
“The bottom line is that given the performance of Berkshire’s common share over the last 18 years, and the four reasons we have discussed, there doesn’t seem to be much reason to consider owning the stock – except perhaps for the entertainment value, and the passport it gets you to attend the annual meeting!”
And to see how right Larry was:
Nov 2013 through Feb 2023:
BRK.b 11.01% CAGR
SPY 11.13% CAGR
Actually since the date of the article you cite (Nov. 6, 2013) through today, Berkshire’s price has outperformed SPY.
Here are the numbers I obtained:
SPY $149.41 385.36
Brk/b 114.91 302.88
Yep, Berkshire is doing better than SPY this month (my CAGR numbers were for whole months Nov 2013 through Feb 2023). Here’s your outperformance on a chart:
Here is the argument from the folks that say “S&P is overvalued”. Look at the chart below 1/1/2000 - 1/1/2010.
As you can see, the lost decade was because S&P was overvalued at the starting point. BRK was undervalued. S&P performance sucked (-9%) but BRK did better but not significantly (+76%).
Will we see a repeat ? Has Fed printed too much money ? Is there tons of excess in the market ? I don’t subscribe to this but the visual below explains the view of the other side well.
