Best investment adviser Richard Losch's blog

Berkshire Hathaway Cash Flow

This is an attempt to establish the importance of insurance float in any attempt to Value Berkshire Hathaway; we will use Buffett’s two column approach to attempt to understand the company’s current value.

2007 Investment year results

In the 2007 investment year Losch Investment Management Company's accounts with over $1 million showed an average gain of 19.92%. Accounts with less than $1 million gained on average 23.15%. There are a few smaller accounts that engage in (gasp) short term trading (mostly in Berkshire Hathaway) and they have beaten the long term buy-hold approach for the last few years.

Investment results 4th Quarter 2007

In addition to the cash they will receive from investment gains in 2007, Berkshire Hathaway will see a big cash infusion from a jump in the float of its insurance businesses because of the Equitas transaction. Add the $6.9 billion from Equitas to an after tax profit in the area of $14 billion, and Berkshire Hathaway’s cash flow in 2007 will be in the black by something like.

Greenspan on Inflation

In a world of paper currencies were a countries money supply is always a political issue, the politicians always want easy money. Greenspan notes that in his 17 years at the head of the FED he did not receive one phone call from a President or congressman requesting that he raise interest rates. Whereas there was constant pressure from politicians of all shapes and sizes to lower rates.

Berkshire Hathaway's 3rd Quarter 2007

In the Second Quarter Berkshire Hathaway’s after tax net was $3.1 billion, so the PetroChina sales may well push Third Quarter bottom line to over $4.5 billion. This compares to last years $2.77 billion for the quarter, so the quarter to quarter comparison may exceed plus 60%.

Operating income of Berkshire Hathaway 2007

I, as investment manager, presented here are three tables comparing the value of Berkshire Hathaway with some of Warren Buffett’s recent purchases. Also, included for the sake of comparisons are some of the stocks of Berkshire Hathaway’s long term holdings.

Berkshire Hathaway as a Hedge Fund

The main reason we have such a large position in Berkshire Hathaway is for protection in a down market so at least for the moment our hedge fund is working. One big advantage of using Berkshire Hathaway is that it can also outperform when the market is going up, as it did in 2006.

Leveraged Buyouts

How curious that so many in the financial community should remain blissfully oblivious to live grenades scattered around the high-yield playing field. Amid all the asset bubbles that we've seen in recent years – emerging markets in 1997, Internet and telecoms stocks in 2000, perhaps emerging markets or commercial real estate again today – the current inflated pricing of high-yield loans will eventually earn quite an imposing tombstone in the graveyard of other great past manias.

Stability is Unstable

Hyman Minsky an economist popular in the 1970s postulated, "stability is unstable" this economic paradox exists, Minsky explained because long periods of stability lure investors, bankers, and businessmen into taking on progressively more risk. While our economic system is good at correcting past mistakes it is even better at inventing new engines of instability.

Weak Dollar

The dollar, as measured by the FED’s Major Currency Index closed yesterday at 78.99 this is the lowest close in the history of the index, which dates back to 1972. There had been support on the charts around 80 that had lasted for 20 years. In 1991 the index bottomed at 82.52, in 1995 at 79.21 (which was the all time low until yesterday. The most recent test of this level was in 2005 when the index bottomed at 79.27.

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