Subject: Re: Berkshire's strange market behavior...
Any thoughts appreciated.

I think the key is that Berkshire just chugs along. The businesses are not particularly cyclical. The stock market performance is pretty comparable to the business performance. For example, today's P/B is the same as October 1999 or October 2000 or spring 2005 or October 2008 or five years ago. There are squiggles, but you've been able to count on your inflation + 8%/year, maybe only 7% in future.

The S&P 500, by comparison, is wildly variable. Earnings are more cyclical, and valuation levels wander all over the place. It has seen a very long trend of getting more and more expensive, which surely has to end at some point. You'd think a broad swath of firms would be the more stable and predictable choice, but...nope.

The most interesting exercise is to pick any sensible valuation metric for Berkshire, and see how little it has changed overall in the last 20 years.

Then try the same thing with the S&P 500. The difference seems stark to me: the market results of the two have tied solely because the S&P 500 has become so much more highly valued. At constant valuation multiples on a blend of prudent metrics, the business result aren't really even close.

I like boring. I think this is my best-ever old post:
http://www.datahelper.com/mi/s...

"Virtually all of us came to the party because of the historical high returns. The returns aren't all that high any more, and haven't been since 1998...
We were tempted in the door by rumours of a wild party, got inside to find nothing but bowling going on. We were definitely deceived. But then we found out we really liked bowling."


Jim