Subject: Re: Value Trend
The high and low prices during Q1 2000 were $57,800 and $40,800 respectively, and the beginning and ending BV/share were $87,987 and $37,013 respectively. That puts the low P/B during the quarter at 1.07 using the beginning BV/share and 1.10 using the ending BV/share.
At its low price for the quarter on March 10th BRKA stock was pretty clearly undervalued. I even recall Warren offering to buy back stock if
anyone wanted to send in their certificates. However the pink line suggests that BRKA was overvalued. Where do you think the discrepancy lies?

Good point.

The main thing is that I scaled the pink line to make it (on average) match observed prices mainly 2008 to date when valuation multiples have been much lower.
There was a time when 1.45 times book was a low valuation multiple, but in recent years that counts as above average.
What once looked low now looks not so bad. Using history to assess what counts as "cheap" is a tricky business.

A smaller secondary thing is that the lowest part of the price dip in Q1/2000 was quite a bit lower than the average price in Q1 or Q2 (which is what the blue line tracks).
The 2000-Q1 low was 18% lower than the 2000-Q1 average, and 27% lower than the 2000-Q2 average.

Also, do you think that it would help to go back to, say, 1995, just for perspective?

Frankly, no, since you ask : )
The growth rates and multiples were huge back then, and equities were more than book value.
Those factors no longer have anything to say about the valuation or prospects of Berkshire stock. It's not really the same business.
Consequently I don't really think it's meaningful to go back more than about 15 years for a baseline.
There seems to have been a big and permanent step downward step in valuation levels at the onset of the credit crunch, so for now it seems that "2008 to date" is what seems most useful as a definition of normal.

Usually you'd expect the valuation multiples to fall back as the business results moderate. But nope.
Oddly enough, value has risen faster and faster in the last decade than in the previous one, but valuation levels remain very modest by pre-2008 standards.
The ten year rate of change of smoothed real book has gone from inflation+6.1% in 2010 to inflation+7.9% ending in 2015 to inflation+9.4% ending in 2020.
Similar lately.
Those are inflation adjusted numbers, so the recent spike in inflation should if anything have caused the recent data to look bad.
Heck, we're probably due a few years of poorer growth rates in real observable value. Things have been suspiciously good lately.
I generally count on inflation + 7% over time, and hope for inflation + 8%.

Jim