User 303490

Buffett's BNI Purchase: Bearish Bet on the Economy?

Perferct. Here is a memo I wrote to myself yesterday to look back at later on:

Memo
To:
From: SBH
Date: November 4, 2009
Re: Why did Berkshire buy BNSF?
He gave up on finding a way to deplore US dollars as he had been able to do successfully in the past.
He knows time was running out and that instead of a slow, steady decline in the value of the US dollar, that it will collapse at a more rapid pace.
This was a very large hedge against the value of not just the US dollar, but against all currencies.
Gold isn’t an option, as there is no intrinsic earning power in it. A store of wealth isn’t attractive in and of itself unless it can generate some sort of revenue (whether it be US dollars, other currencies, commodities or bartered goods/services.
There are few options in multi-billion US dollar investments to hedge against the fall of the dollar. How many investments have (i) revenue, (ii) are simple to understand, (iii) have hard, real, revenue generating assets, (iv) are over $10 billion, (v) have little downside risk in future earnings, and (vi) can be purchased quickly and easily.
He was fine in assuming existing debt, taking on additional debt, and burning through a lot of cash in return in taking on huge amounts of additional assets as described above. The investment seems to make a lot more sense, if on day one, you assume the value of the dollar is what it actually represents (nothing. Other than a belief that it had value because so many people have confidence, and have believed it for so long that people think it will continue to have value). Unless we go back to living in caves, a railroad will be key in the future and able to generate revenue in whatever median of exchange is used going forward. So essentially, Berkshire gave away nearly worthless US dollars, borrowed nearly worthless US dollars that will be very easy to repay when they are worth considerably less. In exchange, he took control of 50,000 miles of track and other valuable, hard assets.

Fast Money Recap - Has Buffett Lost His Touch? (11/25/08)

It was down 50%. Tilson was referring to a day at which BRK.A sold as low as $75,000 +/-.

Can You Calculate Berkshire's Beta?

Can someone explain to me how Beta calculations are any indicator as to the actual value of a company? Why would actions of those outside the company have any affect on the company itself? You can't predict the future, but you can look back and see one thing that is constant. People do irrational things which allows the rational people to make great investments.

At 2003 Levels, Berkshire Stock Is Enticing

On what type of analysis are you vauling BRK? What makes you interested at a 20% discount but not interested at today's prices? It's trading at a price that if you think BRK will survive the current economic downturn, it's about the most sure investment you can make. Pigs get fat and hogs get slaughtered. If you truly understand BRK, and would be willing to buy at 20% less than todays prices, you should be willing to buy it at market today. If you are interested in establishing a position in BRK, you have a very short window to go ahead and do that. Mr. Market is your friend and he happens to be sad right now and he is willing to sell you something for about half of what it is worth. If BRK were to ever go under, I think we will all be more focused on what we will use to buy food instead of how our portfolios are doing.

Mr. Long