BRK MELT UP ahead ? potential drivers:

[ValueMaven]

Very, very interesting analysis!!

Sincerely,
ValueMaven

[rb]

I think a lot of these discussions about the tax bill impact on BV are flawed.

One reason why BRKs P/B is >1 is that the deferred tax liabilities (DTLs) are recorded at face value but there's basically no chance that they would be incurred tomorrow, or if ever. For this reason PV of DTLs<FV of DTLs. The tax bill will reduce the FV of DTLs and increase BV by the same amount. But the same logic will imply that there should be some compression in P/B. You shouldn't get the same bump in MV as you do in BV because PV<FV.

[LongTermView]

I think a lot of these discussions about the tax bill impact on BV are flawed.

One reason why BRKs P/B is >1 is that the deferred tax liabilities (DTLs) are recorded at face value but there's basically no chance that they would be incurred tomorrow, or if ever. For this reason PV of DTLs<FV of DTLs. The tax bill will reduce the FV of DTLs and increase BV by the same amount. But the same logic will imply that there should be some compression in P/B. You shouldn't get the same bump in MV as you do in BV because PV<FV.

I agree. While the tax changes increase both book value and intrinsic value, the higher percentage increase goes to book value which is just a crude proxy.

[bizaro86]

I think it's reasonable to expect market value as a multiple of intrinsic value to go up though, simply because the BRK investor base (including WEB) have been talking about P/B for so long.

[sleepydragon]

I am just thinking PNC may be in the similar situation.
PNC has a huge holding in blackrock, I think 20 billion.
The tax bill shall lower their deferred capital gain tax.
Plus PNC also get benefit of lower income tax rate, future higher interest rate, and participation of the passive index market (blackrock)

[scorpioncapital]

Let's think about this logically. Suddenly these companies have a lot more money, paying less tax. But this could have been done ages ago. Seems to me there is too much money swirling around chasing assets or returned to shareholders via dividends and buybacks. What's it called when too much money is chasing fewer assets or money is indirectly helicoptered to people who own stocks?

[Valuehalla]

Scorpioncapital, there is just one word for you to call it, the word is :   "AMEN"

[gfp]

I suspect he was going for “inflation”

[Valuehalla]

Securities are a good haven for heavy inflation.

See the the result in the great depression, most intensive December 2001 in Argentine, with collaps & riots etc."

Here is what the MERVAL did than:

https://de.wikipedia.org/wiki/MERVAL#/media/File:MERVAL.png

[scorpioncapital]

Securities are a good haven for heavy inflation.

See the the result in the great depression, most intensive December 2001 in Argentine, with collaps & riots etc."

Here is what the MERVAL did than:

https://de.wikipedia.org/wiki/MERVAL#/media/File:MERVAL.png

You can read Buffett's article , something along the lines of 'how inflation swindles the equity investor'. His thesis is that securities are not a good haven for inflation in the general sense. Only a select sub-group of all securities offer decent protection and it is the job of the intelligent investor to study his/her portfolio and think about whether the securities held offer this protection or are going to be below average.