Subject: Re: FT: Berkshire lucky or good?
Looks like someone has done identity theft of the name MungoFitch. Or is he the real thing?

It seems unlikely someone else could sound quite that convincingly like me : )
Play that broken record!

Jim

For those who can't read it due to subscription issues

The gist of the columns in question is, generally, "my hypothesis has long been that Berkshire cannot outperform the wider market for any significant period of time. At $768bn in market cap, and with exposure to a wide variety of economic sectors, it is the market, roughly speaking."

My predictable comment, with added emphasis on the core point

re Berkshire's performance relative to the S&P: The biggest flaw in the article is confusing price with value. Yes, the price return in recent years is about a tie...is that just a transient swing in market prices? How has the value done?
Berkshire's book per share, despite its flaws, remains a pretty good yardstick of value. It is up inflation + 8.801% in the last 10 years and inflation + 8.264% in the last 20 years. The best metric for the value generation of the S&P is the rise in smoothed real earnings, plus dividend yield. S&P smoothed real earnings are up inflation + 4.614%/year in the last 10 years and inflation + 3.837%/year in the last 20 years. Add average dividend yields of 1.884% and 1.962% respectively, and you get 10 and 20 year real total value generation of 6.498%/year and 5.799% for the S&P 500. So, in terms of value, Berkshire has been outperforming the S&P by 2.303%/year over 10 years and 2.465%/year over 20 years.
So why are the market total returns so similar? The S&P has been getting more expensive (multiple of smooth earnings has risen 1.30%/year in the last 20 years), and Berkshire has been getting cheaper (multiple of book has fallen 0.63%/year in the same period). If either of those trends in valuation multiples ends, as surely they must, or reverses, then Berkshire might look a fair bit better. Its collection of business units, though diverse and eccentric, has been rising in value substantially faster than the average firm, despite the drag from that comforting cash pile.
Price and value are different things. You would not feel wise if in 1999 you had concluded that Pets.com was a better long run investment than Berkshire (or almost anything else) just because the price had risen more lately. Though the gap is smaller, why make the same mistake again?