Subject: Re: The Berkshire Problem
2. You cannot sit on your duff forever. People get older and need to cash out. Even if you own through a corporation like BRK. Irrational (as defined by value investors) > solvent.

True, I can't sit on my duff forever.
But Berkshire can. This is a discussion of what makes sense for Berkshire's portfolio, not mine.
As a big profitable firm with a robust balance sheet, it is very likely to outlive us all.
Therefore Berkshire doesn't need the market ever to change its mind about the value of any of its holdings: the true intrinsic value is all that really matters. Wait for the coupons.
Mr Market might offer up opportunities for great sales or great purchases at some point, but those opportunities are not needed. No "rerating" is needed.


What about us mortals? Sure, personally I do rely on the ability to sell at some point.
The defence I use is simple: I never rely on the existence of a future optimist.
I never assume than any investment can be sold in future at a high valuation level, or even what these days would be considered average. Luck is not a strategy.
If I'm getting a ton of future earnings for each dollar put at risk today, I don't need any particular optimism or exuberance in the person I'm eventually going to sell to.
I rely on my guesses of future earnings being roughly right, which is certainly not always the case, but I can do quite well with a very modest exit multiple.


Denying reality has kept BRK out of high growth stocks, S&P 500 or any broad index does not have that problem.

I'm sure you're aware that value investing has nothing whatsoever to do with avoiding high growth stocks.
The value of any firm is the future profits, most of them in the quite distant future.
Value investing is nothing other than trying to buy that stream of future earnings for a low price.
A broad index does not have that goal, and so on any given day a lot of the money is invested in overvalued stuff, dragging on long run returns.
Some people are fine with that, others aren't. Berkshire doesn't ever consciously suffer from that disease, which is the reason the value grows more quickly.

Jim