Explaining the Berkshire Share Price

One of the more annoying aspects of stock-market commentary is the idea that there is one ideal actual-value price for any given stock, and that the market price is either above that price, in which case the stock is overvalued, or below it, in which case the stock is undervalued. This is the kind of thing that investors do when they look at sum-of-the-parts analyses for companies such as Berkshire Hathaway, and start saying that the stock is trading at the value of its cash and investments, with Warren Buffett and 75 operating busineses thrown in for free.

There's another way of looking at Berkshire Hathaway, however, and that's through the lens of its credit default swaps, which are now trading at a whopping 535bp -- pricing in a probability of default which is much greater than one would ever expect from a triple-A company with barely more debt than cash.

If you take those numbers seriously, then maybe the market isn't valuing Buffett at zero. Remember that historically Berkshire Hathaway has traded on a price-to-book ratio of about 2: if you gave Buffett $100, and he spent that $100 on shares of American Express or Coca-Cola, then the market would value those shares, as owned by Warren Buffett, at $200.

On the other hand, if you plug in a 60% recovery value, the market is saying that there's a 13% chance that Berkshire Hathaway is going to default at some point in the next five years. (A handy formula for you: the default probability is the CDS spread divided by 1-R, where R is the recovery value.) If Berkshire defaults, the equity will be worth zero.

So it seems to me that the market is still valuing Buffett's investing skills at a premium. If there's a 13% chance of his company going to zero over the next five years, and presumably a substantial chance on top that the stock will decline markedly but not go all the way to zero, then in order to justify the current share price there has to be a pretty big chance that the stock will double or more over the next five years.

Now it's entirely possible that the CDS market is overdoing things, and that the chances of BRK going to zero are much less than 13%. But even so, the share price is essentially the result of a probabilistic calculation: look at the range of possible future values of the company, and the probabilities associated with those values, and then discount them at a rate which goes up with the volatility and uncertainty associated with the share price. Given that Berkshire is -- like all insurance companies -- a leveraged financial institution, and given also that many of its investments (GE, Goldman Sachs, American Express, Wells Fargo, etc) are also leveraged financial institutions, it stands to reason that a sensible investor will apply a pretty high discount rate these days, even if he doesn't believe the CDS market. What's more, the lesson of the past 18 months or so is that stock-market investors ignore the CDS market at their peril.

I have no idea how much of Berkshire's past profitability can be attributed to the fact that it had a triple-A rating, but I know for sure that that rating ain't worth much any more. And when a company which has grown used to its triple-A loses it, in name or just in market perception, the consequences are not pretty. So my feeling is that Berkshire has moved from being a safe-and-sound stalwart to being a much riskier stock. It might go up a lot from here -- there's surely as much upside potential as there is downside potential -- but it doesn't really feel like the widows-and-orphans investment that it has been in the past.

Disclosure: No position in stocks mentioned

Comments

[MDCigan:]

runningofthebulls.type...

Mar 08 11:45 PM

[Conan the B...:]

Uustaad: Mark to Market. This rule is destroying companies left and right because the declines are sharp in the value of the Assets held. The assets are the same. The valuation has dropped.

In the beginning of February, the Dow was meandering in the low 8,000 area and S&P above 850. The drops in each were about 20%.

The Cash gained will not offset the value lost in these puts. Can he buy them back for what he sold them?

It will be shown on the next quarterly as a multi-Billion Dollar loss using the Mark to Market rule. It is a piece of Toxic Waste.

But the continued ownership of BNI, when the economy is in shambles and coal will remain in a kennel indefinitely, is a total mystery to me.

Oracle: infallible. Buffet=Oracle, give me a break.

BRK missed the move up between 1998 and 2000 entirely, it spent about 5 years before moving above its 1998 highs in late 2003 and then it only barely matched the DOW and S&P, at least if you owned the components of each you would have had a dividend. This is BRK's legacy to its owners, a lost decade.

You buy it, I don't. IMO

Mar 08 11:46 PM

[Conan the B...:]

Berkshire Hathaway 2005 annual report:

Page 64: "Derivative gains and losses from foreign currency gains and losses....Small changes in certain foreign currency exchange rates produce material changes in the value of these contracts and consequently can produce exceptional volatility in reported earnings. THE potential for such volatility declined in 2005 as the notional value of open contracts DECLINED approximately $7.6 BILLION to $ 13.8 Billion as of December 31, 2005."

The capitalization is mine, all of it is from the Annual report.

Do some reading, enlighten us, give me a source. You don't know squat

Ditto.

Mar 09 12:37 AM

[Vox Rationalis:]

paultaut wrote:
> I stand corrected on my Humble Opinions. He Made a very wise decision
> to Buy BNI at $70 but then he had to buy what was Put to him, the
> Majority of BNI was bought above $80, hit an Inraday low of $52.
> I am so sorry, I will wait til next week to post the same sentiment.

Oh goody, I get to continue to be an ass to you. It's so much less fun when people just admit their errors.

Here are the things you got wrong in your original post:

1. His name's "Buffett," not "Buffet."
2. BRK didn't sell a single put with a $72 strike.
3. BNI is not below $50, nor has it been in the last three years.
4. Cash premiums collected on the market puts was not $6B, but $4.9B.
5. "Given that the leverage is 10 to 1..." Your "given" is wrong.
6. The total amount at risk on the market puts is not $60B, but $37.1B.
7. "BRK.A has Billions in cash and apparently can't find companies to invest in," except that it's bought at least $18B of securities in the last year.
8. The market puts can not be exercised at any time.
9. Buffett's letter last year: "Our direct currency positions have yielded $2.3 billion of pre-tax profits over the past five years, and in addition we have profited by holding bonds of U.S. companies that are denominated in other currencies."

Now let's see what else we can find.

"the Majority of BNI was bought above $80..."

According to the 2007 Annual Report, the holdings at that time - 60.83 million shares - had an average basis of $77.78. Care to detail your theory about how most of it was bought above $80?

> Your admission, these Puts are "M2M", exercised or not accounting
> will relfect their value in the next quarter. The actual price will
> be relected.

You might want to read Buffett's discussion of the puts in his letter. It's quite interesting.

> Along with Mark to Market of
> the GE,GS,etc, this quarter, You might get your $44,000 before the
> year is out.

How, exactly, do you think the GE or GS preferred should be marked to market, since there is no traded security that matches their characteristics?

> Next, Please, please tell me where you found
> the strike price of those European style Puts... One of you puts the
> Total possible loss at $37.5 Billion, the other at $25.1(inc. premiums
> received). I guess you didn't question the $37.5 Billion because
> it was BS's opinion.

Um... Did I write $37.5 billion? Because I certainly meant to write $37.1 billion, so if I wrote $37.5, it was an error... wait - never mind. Not my error.

The figure comes from Berkshire Hathaway's SEC filings. Seriously, you're willing to take the positions you've taken and you haven't even read the company's annual report?

> Investments? GE,GS,etc are any up since puchase. Is anything currently
> up since purchase in the Last 2 years. Just curious.

GE & GS: I haven't heard anything about those companies failing to make their dividend payments - have you? Why exactly do you think these investments have lost value? Go ahead, open season. Do your best.

I don't have a list of what BRK's bought in the last 2 years, aside from the debt and preferred shares in GS, GE, Wrigley, Tiffany's, and Harley Davidson I mentioned previously. All of these investments are performing, and for the next few years this $15.3 billion portfolio will generate $1.524 billion of annual pre-tax profit.

> The Dollar demise was a Few years back, he was in it with Soros,
> Losses were around $4 Billion. NEWs releases Home Page. Ignore what
> you wish.

Did this make sense to you when you wrote it? "NEWs releases Home Page"? I'd love to read whatever it is you regard as a good source, if only you would let me know what that is.

> Besides, I can't wait to see how BRK accounts for the Mark to Market
> of all of the Properties held worldwide. BRK does own Property?

I think it's very unlikely that BRK will be required to mark any real assets to market. I'll leave it to you to figure out why.

> Maybe I'm wrong but they were opinions, Humble ones at that.

Do I need to explain to you the difference between opinions and assertions of fact?

> Besides neither of you has a clue as to BRK's current
> holdings other than what Buffet deigns to reveal. What
> he has or doesn't have won't be available until the
> Quarter is over.

Here we go - it's a massive conspiracy, right?

> BRK was given Mutual Fund status and he uses it as
> much as he can.

What does this mean? And what does it matter?

> ...this quarter's earnings will be negative.

I think it will be close. Of course, cash flow from operations and financing will be three or four billion dollars.

> BNI, has not changed, the market it serves is has changed Dramatically.
> Obama is against coal, BNI is a major transporter of coal. Detroit
> is not shipping many cars. Inventories are not moving too briskly
> now are they?

Good Lord, why are you unwilling to do any research before claiming knowledge? BNI publishes a report on its traffic EVERY WEEK. Coal? UP a couple of percent from last year. Cars? Down almost half, but this just shows how little you bothered to learn before forming your “humble” opinions – autos accounted for less than 1.7% of BNI traffic last year at this point.

> How much further will BNI drop, my guess is that it will follow the
> markets Down.

Wow, way to go out on a limb.

> Is the Drop over, are you calling for a market bottom?

Do you believe the bottom is the only good time to buy stocks?

> Uustaad: Mark to Market. This rule is destroying companies left and
> right because the declines are sharp in the value of the Assets held.
> The assets are the same. The valuation has dropped.

This is your reason for calling the market puts a “timebomb”? Does it matter to you that BRK’s shareholder equity was at year end $109 billion? Does it matter that BRK’s leverage isn’t even close to that of the companies being destroyed “left and right? Do you believe the market’s going to end up lower in ten years than it is today?

> It will be shown on the next quarterly as a multi-Billion Dollar
> loss using the Mark to Market rule. It is a piece of Toxic Waste.

So I guess you do think that the markets will be lower in a decade than they are now. Interesting.

> But the continued ownership of BNI, when the economy is in shambles
> and coal will remain in a kennel indefinitely, is a total mystery
> to me.

Well, that’s because you haven’t done a whit of work to try to understand either BNI or BRK.

> BRK missed the move up between 1998 and 2000 entirely, it spent about
> 5 years before moving above its 1998 highs in late 2003…

Wow, research. I hope you didn’t strain yourself. Of course, it took the S&P seven years from 2000 to regain its peak. So?

> …and then
> it only barely matched the DOW and S&P, at least if you owned
> the components of each you would have had a dividend. This is BRK's
> legacy to its owners, a lost decade.

Yawn. You’re not even a good troll.

Mar 09 01:11 AM

[Vox Rationalis:]

On Mar 09 12:37 AM paultaut wrote:

> Do some reading, enlighten us, give me a source.
> You don't know squat

Well, I guess this continues then. You'd be better off admitting your errors, learning from them, and moving on. Instead you compound your errors.

> Berkshire Hathaway 2005 annual report:
> Page 64: "Derivative gains and losses from foreign currency gains
> and losses....Small changes in certain foreign currency exchange
> rates produce material changes in the value of these contracts and
> consequently can produce exceptional volatility in reported earnings.
> THE potential for such volatility declined in 2005 as the notional
> value of open contracts DECLINED approximately $7.6 BILLION to $
> 13.8 Billion as of December 31, 2005."

Why, pray tell, did you not finish the paragraph: "During 2005, the value of most foreign currencies decreased relative to the U.S. dollar. Thus, forward
contracts produced pre-tax losses. Conversely, the value of many foreign currencies rose relative to the U.S. dollar in 2004 and 2003, and Berkshire’s contract positions produced significant pre-tax gains."

This would clearly lead the intelligent investigator to try to determine the prior and subsequent returns on the investment. And what do you know, here's what's in the 2004 report (p42):

Notional value of foreign currency forwards:
12/31/2003: $11,347
12/31/2004: $21,445.

So let's see, for those two years, the notional gain was close to 23%. Yeah, that sure does stink.

Of course, had you bothered to read this report, you might have found the fundamental flaw in your logic here. Page 60: "The notional value of open foreign currency forward contracts was approximately $14 billion
as of December 31, 2005 but has declined to an immaterial amount at December 31, 2007."

Using your logic, this would seem to mean that Berkshire held contracts that lost all of their value during 2007, when it's quite clear that the company simply stopped holding such contracts.

Which is why your quotation is meaningless without context. Want some? The company had just under a billion dollars of loss on these contracts in 2005, which was about a third of the gain it had in the prior three years.

Fast forward to the 2007 report, which I previously quoted: "Our direct currency positions have yielded $2.3 billion of pre-tax profits over the past five years,
and in addition we have profited by holding bonds of U.S. companies that are denominated in other
currencies."

Had enough?

Mar 09 01:43 AM

[PDT:]

Small correction - I believe the puts he sold were European style (i.e., cannot be exercised until expiration).


On Mar 08 07:14 AM paultaut wrote:

> Buffet made a Bet on the future BNI's stock price by selling the
> $72 put. Stock is below $50. That was in addition to the millions
> of shares bought at even higher prices. He owns about 20% of the
> company.
>
> He made an even bigger Bet on the stockmarket in general by selling
> long term puts, this put cash into his coffers to the tune of $6
> Billion, I believe.
>
> Given that the leverage is 10 to 1, if the stockmarket goes down
> as much as much as some predict, he will have to come up with a big
> part of $60 Billion to cover.
>
> The last I heard, his position is already $10 Billion underwater
> based on the price of the Puts sold.
>
> BRK.A has Billions in cash and apparently can't find companies to
> invest in, yet Buffet sold Billions worth of puts. Since Options
> can be exercised at any time, BRK.A has the Potential of suffering
> big time from this one act, at any time.
>
> This isn't the first time he has strayed. He invested Billions in
> the Futures markets Betting on the USD's decline a few years back.
> After Losing Billions he covered.
>
> As far as I'm concerned, those stockmarket Puts are a timebomb waiting
> to explode. IMHO

Mar 09 02:41 PM

[Conan the B...:]

BS: You asked for a Source, I gave it to you.

You received what you asked for, Now The SOURCE is the 2005 Annual Report from BRK dated 12/31/2005. The Futures indicated were worth $7.6 Billion less (thats a loss, BTW) on that day than on the day of Purchase.

What happened Before and after The 12 months of Calendar and Fiscal Year 2005 has no bearing on the value of the Futures Contracts on the day that they were included in the Annual Report.

I excluded the rest of the MishMash because it was irrelevent. Buffer Paid $21.4 Billion, on this specific date, 12/31/2005, what he paid $21.4 Billion for was worth $13.8 Billion.

What happened thereafter? I don't care.

The Dollar could have continued to strenghten and He would have lost the Rest. That it didn't, has no relevance to the BET itself.

"notional", Not Based on Fact or Investigation. Other synonyms for Notional: conceptional, fanciful, ideational, IMAGINARY, speculative.

Please continue to believe that you can alter the value of any given futures contract on any given date. IN MY HUMBLE OPINION, you are living proof that there is life in Tier 3.

Mar 10 10:32 AM

[Vox Rationalis:]

Paultaut - you really should have just stopped. Now you’re going to look like a COMPLETE fool.

> BS: You asked for a Source, I gave it to you.

I’ll add that to the “paultaut was correct” list. I’ve got it right here on a Post-It note.

> Now The SOURCE is the 2005 Annual
> Report from BRK dated 12/31/2005. The Futures indicated were worth
> $7.6 Billion less (thats a loss, BTW) on that day than on the day of Purchase.

Wrong, wrong, and wrong. Quoting your quote: “…in 2005... the notional value of open contracts DECLINED approximately $7.6 BILLION to $13.8 Billion.” Plainly, this says that the notional value of contracts held by BRK was $24.4B 12/31/2004 and $13.8B on 12/31/2005. WRONG #1: It says nothing about fair value; I’ll get to that shortly. WRONG #2: It says nothing about losses; Berkshire’s 2005 losses on these (both realized and unrealized) amounted to $955 million. WRONG #3: It says absolutely nothing about the “day of Purchase (sic)”; only the notional value of all the contracts held on the first day of the year and those held on the last day of the year.

> What happened Before and after The 12 months of Calendar and Fiscal
> Year 2005 has no bearing on the value of the Futures Contracts on
> the day that they were included in the Annual Report.

Hey! Another correct statement! Irrelevant, but correct.

> [BRK] Paid $21.4 Billion, on this specific date, 12/31/2005, what he paid
> $21.4 Billion for was worth $13.8 Billion.

Wrong and sooo wrong. WRONG #4: You can’t tell what BRK paid for the positions; from this one data point (of which you are so proud), all you can determine is the notional value of open contracts on 12/31/2004 and 12/31/2005. WRONG #5 – THE BIG WRONG: You have no idea what “notional value” means. It’s the value of the assets controlled by the option, not the value of the option itself. You made an assumption about what “notional value” meant, and you were wrong. Do you know what happens when you assume?

> What happened thereafter? I don't care.

I wonder why. Perhaps because you're familiar with the dollar chart for the 2002-2006 period? Coincidentally, the 12 months of 2005 include almost all of the dollar's appreciation in the entire 5-year period. Seeing this, you must have had to work pretty hard to find something – anything – to support your statement: “[Buffett] invested Billions in the Futures markets Betting on the USD's decline a few years back. After Losing Billions he covered.” But why, when you must have suspected that you were wrong, did/do you continue this quixotic effort?

> The Dollar could have continued to strenghten and He would have lost
> the Rest.

And he might have taken it all to a riverboat casino and lost it. But he didn't lose ANYTHING. [To you believe Buffett's a deity, or can you just not control that shift key at all?]

> That it didn't, has no relevance to the BET itself.

Really? The end result of the investment is irrelevant? Who manages your money?

BTW, WRONG #6. From the 2006 annual report (p16): “We’ve come close to eliminating our direct foreign-exchange position, from which we realized about $186 million in pre-tax profits in 2006... That brought our total gain since inception of this position in 2002 to $2.2 billion.” Look it up for a breakdown by currency.

> "notional", Not Based on Fact or Investigation. Other synonyms for
> Notional: conceptional, fanciful, ideational, IMAGINARY, speculative.

One might think that, faced with these definitions of “notional,” you would have bothered to look up “notional value.” Too much trouble, I guess. As I explained above, the numbers that you’re so proud of, on which you’ve been hanging your rapidly dwindling credibility, don’t mean what you think at all. Do you now understand that there is no real gain or loss described by the “national value” figures?

> Please continue to believe that you can alter the value of any given
> futures contract on any given date.

Please continue to delude yourself into thinking that a $2 call option is worth the same thing as the $50 stock underlying it. For the record, here are the FAIR VALUES of BRK’s open currency forward positions at year-end (millions):

2003: $ 630
2004: $1,761
2005: $ (231)
2006: $ (23)
2007: $ 0

And here are the after-tax gains/losses (both realized and unrealized) each year (millions):

2002: $ 297
2003: $ 825
2004: $1,839
2005: $(955)
2006: $ 186
2007: $ 62
Total: $2,254 million

Looks like a fairly good rate of return to me.

> IN MY HUMBLE OPINION, you are living proof that there is life in Tier 3.

Sigh. You mean Level 3. Do I need to say it? You’re wrong.

Enjoy your pie, Mr. Humble.

Mar 10 02:00 PM

[Conan the B...:]

BS: I meant Tier 3.

What is Level 3, some plane you believe you are on?

Buffet: like in being beat repeatedly, by a smiling face that would have done Swiss gnomes proud.

Pick and choose: I choose what I spoke about, 2005: Negative $231, Negative $955.

I repeat, nothing used relative to those contracts after 2005 is relevant. If the USD had continued to strengthen til expiration of same and he had held on, the LOSS would have been $21+Billion. Actual not Notional.

2003 and 2004, He did well. They reflect not only the activity for each year but also the cummulative for the entire Company at year end. I accept them as such, 2006 and 2007 did not exist at the time of the 2005 report, I do not accept the use of either when viewing what happened in 2005.

But I figure that eventually, some SA reading CFA will step in to resolve the Issue of What Is actually included in an Annual Report.

My opinion is that the Annual report reflects not only the activities during the previous 12 months but it gives you the status of each investment on a Cummulative basis.

But then again, I may be wrong to make such a laughable assumption. And you may be right in using everything other than 2005 as your basis.

Mar 10 03:08 PM

[Vox Rationalis:]

On Mar 10 03:08 PM paultaut wrote:

> BS: I meant Tier 3.
> What is Level 3, some plane you believe you are on?

Not finished, eh? Who are you, Rocky Balboa or Rocky Marciano?

So you meant tier 3 capital, which is fairly obscure, and not level 3 assets, as in mark-to-myth, in the news every day, and seems to be directly applicable to your (incorrect) assertions regarding notional value? Okay, if you say so. I guess I'm wrong, though I have no idea what you're talking about. Paultaut 1, BSD 10+ (and increasing).

> Pick and choose: I choose what I spoke about, 2005: Negative $231,
> Negative $955.

WRONG. Here's what you picked first: "[Buffett] invested Billions in the Futures markets Betting on the USD's decline a few years back. After Losing Billions he covered." No caveats about the overall strategy having been massively profitable.

So, when did he cover these losing positions? Can you find a single source supporting this claim? Just one?

Oops.

> I repeat, nothing used relative to those contracts after 2005 is relevant.

Is that because you are now admitting that you were wrong, that he did not cover those positions? How about before 2005? Is the $2.9B of gains in 2002-2004 relevant?

You're like Jim Carrey in "Liar, Liar":

CARREY: "Your Honor, I object!" JUDGE: "Why?" CARREY: "Because it's devastating to my case!"

Overruled.

> If the USD had continued to strengthen til expiration of
> same and he had held on, the LOSS would have been
> $21+Billion. Actual not Notional.

WRONG. First, your use of hypothetical is hilarious – “he didn’t lose any money, but if he had taken a completely different path he would have.” You know, I guess I haven’t lost any money in the last year because if I’d done something different I wouldn’t have. Brilliant.

Now how, EXACTLY, do you think BRK could have lost $21B? Please, be specific – dig the hole deeper.

> 2003 and 2004, He did well. They reflect not only the activity for
> each year but also the cummulative for the entire Company at year
> end.

WRONG. Good lord. Do you have any idea what an income statement shows? Apparently not. They cover a specified period, and are quite certainly NOT cumulative. This is incredibly fundamental – perhaps you should go find yourself a book about financial statement analysis. Ben Graham wrote rather a famous one. Have you ever heard of him?

> …2006 and 2007 did not exist at the time
> of the 2005 report, I do not accept the use of either when viewing
> what happened in 2005.

Nobody thinks you should “accept” them for that, since income statements reflect only the results of the period covered by them.

> But I figure that eventually, some SA reading CFA will step in to
> resolve the Issue of What Is actually included in an Annual Report.

Yes, please, please, somebody who claims to be a CFA (or an accountant, or a bank teller, or a cashier; it’s not the complicated) – please help this poor soul to understand these simple principles.

> My opinion is that the Annual report reflects not only the activities
> during the previous 12 months but it gives you the status of each
> investment on a Cummulative basis.

WRONG. First off, your humble opinion is irrelevant – again, do I need to explain what assertions of fact are? Now, have you EVER read a 10-Q? They include information describing the company’s results for the year (usually at least an income statement and a statement of cash flows) and a snapshot of the company at year end (a balance sheet). Usually, but not necessarily, these statements include the same information for the year or two previous for comparison.

Can you link to a single one that includes a comprehensive listing of the company’s investments, with or without the basis of each? Doubtful. You really should look into that Graham book or something like the CFA level 1 financial statement analysis book.

Berkshire’s level of disclosure regarding investments is FAR greater than most companies, especially financials. But it appears you’ve selected you’re BRK-related camp, and facts be damned.

> But then again, I may be wrong to make such a laughable assumption.
> And you may be right in using everything other than 2005 as your
> basis.

WRONG. Maybe you should use a calculator. Everything INCLUDING 2005 went into determining BRK’s results on the currency forwards: $2.254 billion of pre-tax profit over five years. You’re the one who continues to try to twist data to fit false conclusions: You’re saying that BRK’s currency forward loss of $955 in one year, which was slightly more than HALF of the gain in the prior year, is evidence that “[a]fter Losing Billions he covered.”

Do yourself a favor. Just stop.

Mar 10 08:01 PM

[Conan the B...:]

BS: Are you saying that I have to look in every Annual Report ever Published by BRK to find out the True Facts?

A 10K? Introduce whatever you want.

You pointed out the Loss which I omitted, ($955), this is in the record and it includes the past for that category.

At the end of 2004, that category was worth $1839 (your number), at the end of 2005 it was worth a negative $955, do the math.

Its March of 2006, you are reading the BRK 2005 Annual Report. You see the numbers, you compare to the previously issued 2004 Annual Report. Its that simple, try it.

Like I said, Tier 3 and you finally acknowledged the definition, "fairly obscure"

KISS

Mar 11 01:13 AM

[Vox Rationalis:]

On Mar 11 01:13 AM paultaut wrote:
> BS: Are you saying that I have to look in every Annual Report ever
> Published by BRK to find out the True Facts?

Nope. You just have to understand what the information in the annual report means.

> You pointed out the Loss which I omitted, ($955), this is in the
> record and it includes the past for that category.
> At the end of 2004, that category was worth $1839 (your number),
> at the end of 2005 it was worth a negative $955, do the math.

Again, you clearly have no idea what an income statement shows. Why not look it up? I'll make it so easy even you can do it: www.investopedia.com/a.... Clicking too hard to accomplish? Fine:

"In the context of corporate financial reporting, the income statement summarizes a company's revenues (sales) and expenses quarterly and annually for its fiscal year."

Could this be ANY clearer?

> Its March of 2006, you are reading the BRK 2005 Annual Report. You
> see the numbers, you compare to the previously issued 2004 Annual
> Report. Its that simple, try it.

So, by your logic, the other entries on the income statement are cumulative, right? Here's the revenue line from BRK's latest annual income statement:

(millions)
2008: 25,525
2007: 31,783
2006: 23,964

The conclusion one would have to reach by following your odd logic is that these numbers reflect Berkshire's cumulative revenue, over its entire existence, to the end of each year. And that last year it had NEGATIVE REVENUE.

You're pulling my leg, right? You don't actually believe your nonsense at this at this point, do you? You're just seeing how long you can string me along, right? I mean, at this point your credibility is miniscule, so what other point could there be?

> Like I said, Tier 3 and you finally acknowledged the definition,
> "fairly obscure"

I believe you don't know what Tier 3 is and what it's used for. Why would I, since it's irrelevant and you haven't presented any knowledge of basic finance here yet.

Mar 11 11:03 AM

[Conan the B...:]

I would define 5 quarters of declining income as a decline in Revenue.

And a decline of 96% year over year, in the last quarter very significant.

Buffett blew it in 2008, he said so himself.

Go argue with him. Tell his accountants that the Year end figure of $25,525 Mil. is wrong. That the previous year's number is also wrong ad nauseum.

Tell yourself the truth: You have Lost money over a span of almost 10 years. As of the close of the market, on March 11, 2009, your Investment has given a return of less than 5% since 1998. You should have left it in a Savings Account.

Mar 11 04:11 PM

[Vox Rationalis:]

On Mar 11 04:11 PM paultaut wrote:
"I would define 5 quarters of declining income as a decline in Revenue."

You're kidding again, right? You don't know what "revenue" means, either?

> And a decline of 96% year over year, in the last quarter very significant.

Significant? Tell me, is is significant that that operating and financing cash flows for the year were down about 3%? I'm guessing you don't know. Do you know the significance of a statement of cash flows?

> Buffett blew it in 2008, he said so himself.

And God willing, he'll do it again. BRK's price was down about 28% over the period, compared to the S&P 500 being down 39%. Book value was down 9.6%. This means that BRK became a better value over the course of the year.

> Go argue with him. Tell his accountants that the Year end figure
> of $25,525 Mil. is wrong. That the previous year's number is also
> wrong ad nauseum.

I haven't said a single number in any BRK report is wrong (though I have found errors in the text before). I've said, and demonstrated, that YOU were wrong. Over and over and over.

> Tell yourself the truth: You have Lost money over a span of almost
> 10 years. As of the close of the market, on March 11, 2009, your
> Investment has given a return of less than 5% since 1998. You should
> have left it in a Savings Account.

Again, you ASSuming something about an investment of mine. Why? Tired of being demonstrably wrong again and again, so instead you make statements I can't disprove?

[by the way, as I said elsewhere, over the time period you selected, BRK's outperformed the equity markets as a whole by quite a lot]

Mar 13 12:54 AM

[Vox Rationalis:]

By they way, paultaut, how is it that your commentor rating jumped by about 100 votes overnight, but none of your recent comments has more than a couple of votes? That little icon is so important to you that you systematically vote for your own posts. Sad.

Mar 13 01:00 AM

[Conan the B...:]

My stats jump all over the place. Please consider them as Bait.

Take Friday the 13th(I lost about 80 votes with the exact same situation as you describe, none of my recent comments had more than a couple of negatives)

Or note the number of total votes, both Pro and Con. Who has that many compared to the number of comments actually made?

Its pretty simple, the system is being altered or haven't you noticed. Fairly soon those that trash just for the sake of trashing will be identified. They have no place on SeekingAlpha.

Do you actually believe that the number of votes you give whether Pro, Con or total cannot be tracked? That who is using the website at any given time, cannot be pinpointed?

that little icon is meaningless, just like the total numbers of Pro and Con are meaningless.

Mar 16 05:54 PM

[Vox Rationalis:]

paultaut wrote:

> Do you actually believe that the number of votes you give whether
> Pro, Con or total cannot be tracked? That who is using the website
> at any given time, cannot be pinpointed?

Of course not. What did I write that might have given you that impression?

> Take Friday the 13th(I lost about 80 votes with the exact same situation
> as you describe, none of my recent comments had more than a couple
> of negatives)

That's not the first time that my identifying a systematic self-voter has been followed up by somebody (not me, though I'm well aware I can't prove it) providing thumbs-down systematically.

> Its pretty simple, the system is being altered or haven't you noticed.
> Fairly soon those that trash just for the sake of trashing will be
> identified. They have no place on SeekingAlpha.

What makes you think Seeking Alpha would "identify" anybody? I've urged them to scrub the voting, but I see no reason to suspect anything's in the works.

Mar 16 06:33 PM

[Conan the B...:]

BS Detector: The voting aspect is popular and unlikely to be removed.

You probably won't believe me but I have given you an "up" occasionally, sometimes because you are so Totally Right that I don't understand why there are so many negative votes.

SeekingAlpha is evolving and expanding. Journalists who officially work for publications like Barron's are posting articles, what does it take to develop a Barron's like following? Would you pay an annual fee to read the Articles posted?

This comment is addressed specifically to you. How long do you think it will take for a couple of posters to give it a Con?

My guess, before next Monday.

Don't get me wrong, our styles are totally different. I give opinions, right or wrong, they are just opinions. But just because we differ, doesn't mean I do not learn from the exchanges I help to create.

Take Care.

Mar 16 11:21 PM

[Vox Rationalis:]

paultaut wrote:

> BS Detector: The voting aspect is popular and unlikely to be removed.

Agreed. I think SA has likely seen an increase in traffic directly attributable to the voting function. Since traffic drives ad revenue, there's no way they will/should kill it. This doesn't mean it can't be improved, and I've emailed them with suggestions. I have no idea whether my ideas fell upon deaf ears, if the development aspects are too daunting, if revamping is in the works, or if they're taking their time so that Voting 2.0 has little left to improve, understanding that there's no way to make it perfect.

> You probably won't believe me but I have given you an "up" occasionally,

I have no reason to doubt this.

> ...that I don't understand why there are so many negative votes.

Simple - I piss people off. And reaching -500 or -600 or -700 only takes one committed person (such as b****.* AKA p********d, who has used those and additional accounts to systematically "thumbs down" me - though I think he's not the only one).
[usernames disguised so that perhaps Seeking Alpha will allow this post to stand]

>Would you pay an annual fee to read the Articles posted?

Not today. This is the central question facing all media. With august print publications such as the Seattle P-I and perhaps the SF Chronicle biting the dust in the face of free competition online and on TV, how long can it last? Will we end up with Google news and a few hangers-on? Can anybody else survive if content is free?

> This comment is addressed specifically to you. How long do you think
> it will take for a couple of posters to give it a Con?

No idea. If your detractor(s) is clever, he won't do it, since that would make it appear more likely to have been me. For my ratings, much depends on whether my detractors are on vacation or not, since they seem to have nothing else to do while at the computer.

> just because we differ, doesn't mean I do not learn from the exchanges I help to create.

Peace. I'll still pound you for incorrect assertions of facts, and you should still pound me for being an ass.

Peace just the same.

Mar 17 11:11 AM

[Conan the B...:]

There are 2, one appears to have an intimate knowledge of the system, possibly a former programer. It took a day for the 2nd to get back up to speed.

Relate a few of your ideas, I'll pass them up the line to where they will, at least, be read.

as for your comment, let me know if it ever "disappears".

PS You aren't an "ass", just a person with strong convictions. IMHO

Mar 19 06:44 AM