gokou3

Berkshire Valuation Questionable as Business Fails Guidance Tests

Ahh... Rakesh you are not implying that BRK may lose the $48B notional value of these contracts are you? Let's see... BRK collected about $5B in premiums, and the durations of these contracts are 10+ years. Assuming 0% growth of this premium, the stock index would have to drop 10% cumulatively over the next 10 years before BRK would lose a cent. Of course you have to take the accounting roller coaster ride in the meantime, but from your post I think that's too much.

Why Kass Is Wrong About Berkshire Hathaway

If Kass thinks there's a problem with the derivative portfolio, then Kass should long some European long-term index puts, so he would be the counter-party of BRK.

Why Volatility and Beta Matter

Mr. Hanson's article may not be making perfect sense, but I found the following very illogical as well:

"high Beta stocks are supposed to do well in a rising market---it’s when things decline that high Beta gets troublesome. High Beta amplifies returns in both directions."

When you say "supposed to...", I interpret that as "at least a >50% probability"... so if things are this easy, one can just buy high-beta stocks in a rising market and short them in a down market? But then, you don't really know when a market is "rising"... you really only know whether it has JUST risen or not. Thus, doesn't that make your proposition about the value of beta not very useful?

IMHO, beta is just what it is.. an indication of the volatility of a security, but NO indication of whether it should go up or down.

Riddle: What Currency Is Warren Buffett Buying?

"But how would he actually buy the currency?"

There's something called NDF (non-deliverable forward) traded in Singapore that allows one to bet on the directions of the Yuan. The carry is about 5%, meaning that the Yuan needs to raise at least 5% in the next year to break even. Not a sure bet, I say.