Author Topic: BRK MELT UP ahead ? potential drivers:  (Read 9476 times)

ValueMaven

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #10 on: December 20, 2017, 05:14:09 PM »
Very, very interesting analysis!!

Sincerely,
ValueMaven


rb

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #11 on: December 20, 2017, 09:38:58 PM »
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

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #12 on: December 20, 2017, 10:10:20 PM »
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

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #13 on: December 21, 2017, 03:46:38 PM »
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

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #14 on: December 21, 2017, 08:48:21 PM »
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

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #15 on: December 22, 2017, 04:47:03 AM »
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

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #16 on: December 22, 2017, 02:08:16 PM »
Scorpioncapital, there is just one word for you to call it, the word is :   "AMEN"
« Last Edit: December 22, 2017, 02:57:28 PM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

globalfinancepartners

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #17 on: December 22, 2017, 02:10:28 PM »
I suspect he was going for “inflation”

Valuehalla

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #18 on: December 22, 2017, 03:08:57 PM »
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



BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

scorpioncapital

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Re: BRK MELT UP ahead ? potential drivers:
« Reply #19 on: December 22, 2017, 03:31:04 PM »
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.