My largest position (as I’ve said before) is BRKA. On Friday Berkshire Hathaway reported a 46% in second quarter net income, far exceeding what all the “analysts” had expected.
Did I expect it? (But then I’m not in the prediction business when it comes to BRKA.)
Did I expect it? No.
Am I happy? Yes.
Will it go up today?
I hope so.
Investing in Berkshire Hathaway is being an investor without making any decisions. You rely on Mr. Buffett to make all your investment decisions. I think of BRKA as a mutual fund of nothing but the best chosen by the best investor of all times. This is “Blind Freddie” investing. I wish I had bought BRKA 30 years ago.
John Mauldin is prolific writer and speaker who makes his living pitching hedge funds to rich people. He’s charming, writes well and is occasionally right. He doesn’t usually pitch doom and gloom. But that’s his pitch this weekend:
Writes John:
Can It Get Any Better Than This?
To many investors, developed markets appear healthier and stronger than they have in years. Major equity markets are rallying to record highs; corporate credit spreads are tight versus US Treasuries and getting tighter; and broad measures of volatility continue to fall to their lowest levels since 2007.
Click on the chart to see all of it.
This kind of news would normally point to prosperity across the real economy and call for a celebration – but prices do not always reflect reality. Moreover, the combination of high and rising valuations, low volatility, and a weakening trend in real earnings growth is a proven recipe for poor long-term returns and market instability.
Let’s take the S&P 500 as an example. It returned roughly 42% from September 1, 2011, through August 1, 2013, as the VIX Index fell to its lowest levels since the global financial crisis. Over that time frame, real earnings declined slightly (down about 2% through Q1 2013 earnings season), while the trailing 12-month price-to-earnings (P/E) ratio jumped 44%, from 13.5x to 19.5x. That means the majority of the recent gains in US equity markets were driven by multiple expansion in spite of negative real earnings growth. This is a clear sign that sentiment, rather than fundamentals, is driving the markets higher.
There’s “logic” in what he speaks. Despite all the “value” investors, sentiment rules. (It always does.) How do you measure it? Watch what’s being written in the financial press and on the web. The best tool is Google Alerts. Set up a bunch on your favorite stocks, on the market, etc. Glance at them as they pour in.
Flip through charts of your favorite stocks. Watch their movements. Is there suddenly a movement down by all?
Whether what Mauldin believes (and remember he’s pitching his hedge funds) should affect your investment decisions today is your decision. It won’t mine. My rule remains a 5% to 8% stop loss. So long as we don’t see a 25% drop in one day, that should protect me.
For Mauldin’s full piece, click here.
Weekend reading absolutely worth reading.
+ It’s much cheaper to your new knee or hip overseas. Much cheaper. Going overseas is now called “medical tourism.” Click here.
+ Michael Lewis does an 11,000 piece on the only person who went to jail after
+ The economy is awful in Iran. How bad? Click here.
+ Michael Lewis: Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer? A month after ace programmer Sergey Aleynikov left Goldman Sachs, he was arrested. Exactly what he’d done neither the F.B.I., which interrogated him, nor the jury, which convicted him a year later, seemed to understand. But Goldman had accused him of stealing computer code, and the 41-year-old father of three was sentenced to eight years in federal prison. Investigating Aleynikov’s case, Michael Lewis holds a second trial. this is a long (11,000 word) piece that is totally fascinating. You must read it. Click here.
+ Michael Lewis on Goldman Sachs: The Company Would Flourish Under Totalitarian Rule. An interview with Michael. Click here.
More wonderful quotes.
+ A computer once beat me at chess, but it was no match for me at kickboxing. – Emo Philips
+ Wood burns faster when you have to cut and chop it yourself. – Harrison Ford
+ The best cure for sea sickness, is to sit under a tree. – Spike Milligan
+ Lawyers believe a man is innocent until proven broke. – Robin Hall
+ Kill one man and you’re a murderer. Kll a million and you’re a conqueror. – Jean Rostand
+ Having more money doesn’t make you happier. I have 50 million dollars but I’m just as happy as when I had 48 million. – Arnold Schwarzenegger
Harry Newton whose son Michael is a genius. Over my dead body he turned me onto Google Drive. And I’m hooked. It’s a place to create docs you can share and all work on together. It’s amazing to watch Michael edit a doc I’m working on. It’s true collaboration. You need a free Google email. And you just sign up for Drive, which is also free. These clips explain all.
You can also store your private work there. You don’t have to share it. Google Drive is neat. And it’s really easy to use — much easier than Microsoft Office.
RE: GoogleDrive: Welcome to the 21st Century. Now, if you would only get rid of Outlook you will have really arrived. You will carp that the GoogleDrive apps aren’t “as good” as Office and sometimes the spreadsheets (in particular) that you import from Office don’t “look right.” Yeah. But it’s free (for personal use) and the apps do fine when they aren’t importing.
Considering how much of our happiness and “productivity” (Google Drive) now depends on broadband access, I am convinced that by the time my 8 year old grandson is 18 there will be a move to make broadband access a “Constitutional Right” guaranteed in the Constitution right next to privacy, healthcare, and freedom of sexual preference.,
I’m a proud Capitalist. Well, let me correct that. I used to be proud of it and worked like a dog over 5 decades to make a great success of it. But, like Michael Lewis, the last ten plus years years have shocked me. And greatly disappointed me. And pissed me off big time. It seems Wall Street is purely about greed and money and greed, ethics a bad old fashion idea. Partnering with the whores of Washington DC, crony capitalism, part of this dishonest, but largely legal game. It’s a dirty shame and it’s unAmerican. Warren Buffett, a key player, loved because he’s damn good at it, i.e., making money big-time and working with Washington. Our Founders must be horrified. I know I am.
In reference to Mauldin’s forecast, please see Jeff Miller’s commentary in his weekly “Dash of Insight”under the heading “The Silver Bullet”, which can be found here: http://oldprof.typepad.com/a_dash_of_insight/