SteveR

Enough with the Buffett Critics

Dan,
Excellent article! I had a similar response to the Buffet Betrayal article. It sort of pushed me over the edge for a couple hours. I never could have articulated the points as well as you, so kudo's to you for that.

I love this, "while researching the company, I was shocked how few companies there are that replicate Buffett’s business principles".

The analogy I use is this. It's as if I am watching a basketball game in the 50's with Bob Cousy and the guys doing set shots and pivot moves and then Michael Jordan joins in and does these amazing dunks and moves and everybody stands around saying how crappy he is and keeps on working on their set shots, unbelievable.

I will offer a couple of my favorite CEO's that are close to Buffet but I still agree Buffet is the all time best. Both of them work for under 100K. One is Jim Sinegal at Costco. Both Buffet and Munger have given him praise in the past. The other is John Mackey at Whole Foods. I realize I am going to get ripped apart for this one, but much like Buffet, he is misunderstood after the whole yahoo board incident. I think Mackey's circle of care extends beyond Buffet's at the corporate level. He integrates the shareholders, employees, customers and suppliers. He is the most integral CEO on the planet IMHO.

What Will Happen to Berkshire Hathaway Post-Buffett?

I don't know William. To assume that a new leader will emerge and completely reverse the culture that has been part of Berkshire seems to be the least probable outcome. I would say that the most probable outcome would be a continuation of the Berkshire culture, which is what sets it apart from almost all other large US corporations. It's not like Buffet is the only one at Berkshire that recognizes their recipe for success. Granted Buffet is an "Einstein of Investing" and cannot truly be replaced but he can be emulated fairly well and I think they have spent a lot of time trying to find the best Buffet emulator.

I think the more likely scenario would be this. Buffet will go and the market will overreact in typical fashion and oversell, presenting a really good buying opportunity.

The End of Brand Advertising

Excellent article!! I've always wondered how many people out there realize they are paying these hidden taxes if you will. As someone who watches a lot of sports, I have been free riding for decades. Oh, I'm sure I've paid a little over the years but not being much of a consumerist I'd bet my cost has been reduced 80-90% if I was charged directly. Thanks for the insight.

Buffett Serving Free Lunch?

Agree with the above comments wholeheartedly. This is at least the 4th article I've seen here on seeking alpha that, quite frankly, shows a complete lack of understanding of the big picture and the fundamental transactions that are involved here. What are the qualifications required to get to print here? I would not consider myself qualified at all to speak on the subject but this commentary is well below my level of understanding.

Yes, Buffet's derivatives have lost value because he did not time this transaction correctly, but he has stated over and over again that he can not predict the short term gyrations of the market. And, come on, who could have predicted the timing and magnitude of what has happened in the last two months, are you kidding? From Buffet:

"Thus, our derivative positions will sometimes cause large swings in reported earnings, even though Charlie and I might believe the intrinsic value of these positions has changed little. He and I will not be bothered by these swings – even though they could easily amount to $1 billion or more in a quarter – and we hope you won’t be either. You will recall that in our catastrophe insurance business, we are always ready to trade increased volatility in reported earnings in the short run for greater gains in net worth in the long run. That is our philosophy in derivatives as well."

Do you understand? really understand??? If you did, and gave a compelling argument for the change in intrinsic value then I would have no beef.

As mentioned in the comment above, BRK shareholders have not lost yet. They are just down 2 touchdowns in the first 4 minutes of the 1st quarter. You are on the other side taunting and celebrating unblushingly. Unaware of the 56-14 route that is about to come!

Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

Whitney,
I've been a big fan of yours since back in the days of the Motley Fool and Dale Wettlaufer (mispelled?). I am not really familiar with CDS's and their trading activity, however, when the story ran yesterday a lot of the things you mentioned ran through my head. It was really nice to see such a well written piece that confirms and adds to some of my thoughts. I have been going around telling anyone I know that this is an opportunity that I have never seen, nor did I ever dream would see in my lifetime. I have 30 percent of my net worth in Berkshire and am thinking of going to 50.

Despite the crazy comments here which kind of explains the current environment, there are many of us out here who get what you are saying and appreciate greatly your efforts. Thank you so much!

Berkshire Hathaway's Post Party Hangover

This is a well written article and everything here is fairly factual. However, what may be missing, in my opinion, is the bigger picture. Certainly, the insurance business profits are suffering. And yes, float growth may not grow as nicely in the upcoming few years. However, all of this is tempered by the fact that money that was sitting on the sidelines can now be put to use. Buffet finds the current valuation of stocks very favorable. The fixed investments that were returning say 5% can now be put into equities. Based on Buffet strengths and past history, a 5-10 year return of 15% is not at all out of the question. I don't know the exact figures, but somewhere around 30-50 billion that used to get 5% is now going to 15%. That long term windfall far outweighs the short term hiccup in insurance business. What is happening now is a best case scenario, BRKA is dropping and future returns are rising, all the while nobody (in the business press) can see it happening. Time to back up the truck.

A Bailout for Berkshire?

I am always amazed at how simple a message that Buffet sends and how so many just don't understand. I have stopped fighting it and just learned to accept it. In fact, if people did understand his message the market wouldn't be this low now, nor would it have been as high over the past decade. After all he did sit on a lot of cash for many years.

I have a homework assignment for you. Go read Buffet's Fortune interview with Alice Schroeder about the Stock Market Valuation at the height of the tech stock boom around '99. It is also in his recent book, snowball. For a guy who doesn't look at the market as a whole, it is the best and simplest valuation method I have ever seen by anyone. I think if you understand his parameters, which are fairly simple, you can arrive at a conclusion that the market was overvalued greatly at the time. If we had to give it a number lets say it was a 10. Take those same parameters today, almost 9 years later (which by the way resulted in a SP500 net 10% decline) and you would conclude probably that the market today is about a 1 or 2. In other words, an order of magnitude lower. In goes the $30 billion.

You make good arguments and honestly I think you are far more intelligent than I am, but you need to zoom out and see the big picture. To use a Buffetism, it's as if you are looking at a beautiful women with a zoom lens and you are focused in on this slight blemish on her face telling the world how ugly she is. If you could just use that little button on the camera with the "-" sign and zoom out you would see the wonderful beauty that Buffet and I can see.