BRK.A, Berkshire Hathaway

brk.a jan 20 2017 arthbrk.a jan 20 2017 log

For some unknown reason we chose BRK.A this time instead of the B. Both look pretty much the same so it should not matter. The above charts are identical except that the first is arithmetic and the second semi-log.  The semi-log has the added advantage that a certain pace of growth is represented by a straight line or, in this case, a fairly narrow channel. So for the first twenty years growth (in the value of this stock ) is almost constant. Then from the tech bubble to the “great recession” growth slows down only to start up again after 2009. But growth remains slower than previously, that is the first twenty years.

    If we were to tentatively put an EW count on these charts, the 2009 drop would most likely be a wave 4. Alternatively it could even be a wave 2, implying the end of one bull market and the start of an entirely new one. The one year duration strongly argues against this alternative and therefore we will work with the wave 4 idea. That makes everything from the great recession low in early 2009 a wave 5 that already has 5 clear subdivisions and has exceeded every possible channel or simple line. The 5th wave of wave 5 may not yet be complete, but it is getting there.

      The great recession of course gave rise to the even greater bailout and and an even more forceful embrace of the Keynesian philosophy of very low interest rates.  With it we got perhaps the most concentrated and single minded academic theories ever on the impact of monetary policy. Apparently this ill-advised approach contaminated economic thinking all around the World like a gospel. One of the many unintended consequences, income inequality, quickly became a lot worse. In the context of the Davos summit, Oxfam, just a few days ago, reported that now, today, the 8 richest people have as much wealth as one half of the world’s humanity or about 3.6 billion people! This is down from 43 in 2010. By the way, they are, Gates, Ortega, Buffett, Slim, Bezos, Zuckerberg, Ellison and Bloomberg. Warren Buffett having invested his income from his proverbial paper route at the tender age of 11, is perhaps the most deserving in this lot.

     The form of capitalism that is embraced today, primarily  but no longer exclusively in the US, where wealth is the single most important variable in the perception of one’s status in life, cannot continue as soon we will end up with one or two people as wealthy as all the rest. The nominees for the new cabinet in the US are for the most part very rich and they as a group will naturally want to continue this idiotic interpretation of capitalism. Already the assertion is that this cabinet has the highest IQ ever. A perfect misrepresentation.

     We would lighten up on Berkshire, just remember that Gates once tried to sell his part in Microsoft for all of $50,000. Intelligence and luck are not the same thing.

BRK.A, Berkshire Hathaway

brk.a aug 2014brk.a aug 15 2014

Don’t look at previous blogs on this company, let’s just say that they did not work out exactly as anticipated. The stock hit a new all time high of about 203 thousand dollars, nearly triple the value at the lows of the “great recession”, during which, by the way, this stock like most others also lost more than half its value. We do not wish to diminish the investing talents of Mr. Buffett and Co. but do wonder if the tripling of the stock was entirely his doing or if Yellen and predecessors had a small finger in this pie. Whatever the case, if you still own a few thousand of these shares we would recommend lightening up. Given the almost cult-like status of Berkshire in the investment community, we are aware that a call to sell would be received with complete contempt and derision which is why we would just sell 100 or so shares every now and then. Dollar-cost-averaging in reverse so to speak.

Above I have used a Yahoo chart. It has the advantage that the highs and lows are sanded down so the overlap (a contentious issue in any event)  that would have occurred between 2 and 4 does not show. Furthermore the triangle suggested as a 4th wave is far from perfect. Another question that might apply is whether or not Berkshire should be viewed as a stock or more as a mutual fund. None of this detracts from the notion that this might just be close to a top.

BRK.A and the Buffett Fed.

brk dec 12 2012

Warren Buffett is the world’s most celebrated investor, perhaps deservedly so. Nevertheless it should be noted that in the last 10/15 years the stock of Berkshire Hathaway dropped by about 50%, more or less in line with the market itself. Yesterday it was announced that the company bought back a billion plus dollars worth of stock from some old estate. More importantly, the company also announced that from here onward (or should that be looking forward?), the company would be prepared to buy back stock at a level as high as 120% of book as opposed to 110% previously. Book is about $111,000 per share so the buy-back at about $131,000 a share was done at 1.18x book. On the news the stock rose $3169 on the day.

It is not clear how aggressive Berkshire will actually engage the market to buy back stock with the vast amounts of lose cash that they have. Nor is it clear what book value actually means, particularly not when much of what is in Berkshire’s corporate menagerie is in the insurance business that hardly has a book vale per se. In any event the message is clear, we stand ready to buy-back at about $130,000. per share if need be. We are now Omaha’s own Central Bank, just in case Bernanke’s 1 trillion/year until unemployment reaches 6 1/2 % does not do the trick.

By the way, the high in this stock was about $150,000 or so back in late 2007 (see previous blog). The low at about $80,000, so at $130,000 you are at the upper end of that range, not exactly buying low and selling high, or in this case, holding forever.

BRK.A , Berkshire Hathaway. Warren Buffett,the Oracle of Omaha

To get some idea where this market might be going, it may be worth looking at BRK, after all that is a company run by the undisputed, best value investor ever. Some grown men jump through hoops just to get their picture taken with the sage, hoping, perhaps, that somehow some of the wisdom will rub off on them. Here is the chart;

BRK.A feb 2011

First of all it is clear that the Sage is just as bad as everyone else in avoiding crashes. Even before the tech crash his stock had dropped by 50% (he does not invest in tech, so one might have thought that he would skip the whole thing. Not so he was even early. Again in 2009 the stock drops about 50%, on a par with the S&P etc.etc., making a low in March. What is different is that the stock goes much higher, nearly twice as high in 2008 compared to 1998. Most other markets (except, for instance,Toronto), more or less double-topped at best. in a way this supports the argument that the two down-legs are NOT both part of a single structure(a flat).  From the March lows the stock retraces about 76% before hitting the parallel trend-line. This is precisely where the Dow Jones is at today’s close (roughly 12400) . Time will tell if this is it. If it is wave C down should now take the stock to about 40,000, the “normal” retracement level.

By the way, wave 5 of 5 is an extended wave, a normal occurrence in at least one of the three up-legs. The leg stretches as it were and travels a disproportionate distance (about 40,000). Without the extension the stock would have been contained inside the channel (purple).