Invite ye felawes and frendes desirous in gold to enter the gates of Shrewd'm, for they will thanke ye later.
- Manlobbi
Halls of Shrewd'm / US Policy
No. of Recommendations: 2
Never thought I'd see it go above 1.6, when was the last time price to book hit this multiple, it must have been pre 2007/8.
No. of Recommendations: 1
if book is around $260 when the report comes out it is 1.56x
No. of Recommendations: 5
If I have it right:
Book: $242.48 = 1.676 P/Book
Peak Book: $248.64= 1.633 P/PeakBook
Expected book: Let's estimate on the higher end and say $262 = 1.55
For the first time in a while, I'm hoping for a sale on hamburgers.
It's probably front running expected Q4 book, but even then we're on the very high end of its modern range.
No. of Recommendations: 1
No. of Recommendations: 0
Anyone else?
I have similar past experiences with the dot com bust and GFC that others have been discussing. I happen to feel like there is a high probability we see lower valuations for BRK in the coming months. That’s based on the fact that we are trading at something like the top 1-2% of P/B valuations for all trading days since 2012.
As a result, I currently have covered calls sold against approximately 2/3 of my BRK holdings with expirations in March and June. If I were to be called away on all of them the average all in price realized will be about $394. I’m willing to live with that price as I think it will likely be in the top decile of all P/B valuations between now and end of Q2 as far as my estimates are concerned. I’m guaranteed to be wrong with my estimate and the market will likely make a fool of me. All of my covered calls are in tax free accounts so re-establishing my position should not be overly painful.
If I’m lucky and am able to keep some of the premiums then I’ll have made a bit of the price exuberance a little more permanent in my account balances.
Jeff
No. of Recommendations: 0
I sold some shares in the past few months and have started to sell covered calls to makeup the price deficit of the sold shares.
No. of Recommendations: 17
Currently feeling like I'm on the 95th floor in an elevator on a 100 storey building.
https://www.longtermtrends.net/market-cap-to-gdp-t...
Considering some sale options to move to a greater cash position. There is nothing wrong with cash.
But I wouldn't rush to use that chart to guide the way. It's pretty informative (amazingly so given how simple it is), but only for those who own the broad cap-weight US market or something that statistically resembles it. If that doesn't describe your portfolio, it's probably not the best guide.
If your portfolio is dominated by Berkshire, that's what you need to look at.
Berkshire is more richly valued than usual, but it's not at the level of extremity of the broad market. 1.633 is a pretty impressive multiple of last known book, but we all know that multiple will change a fair bit in the next few days when the statements come out. Maybe something around 1.57 if the price is flat this week?? Using that number, to the extent that P/B is a fair metric of value, the stock has been more expensive than that 5.7% of the time since 2008, around 3 weeks per year on average. I think that's high enough that I don't expect much from the next 6-12 months price wise, but not enough to warrant running for the hills.
Like others, I have written some covered calls, but I am a compulsive tinkerer so that's mostly to keep me from doing something dumb(er).
The problem with selling high and buying back lower is this: the selling high is pretty easy. The buying back is very hard. Nobody knows how low it will go during the next downslope, so when do you pull the trigger and get back in? After a 5% drop? 10%? 20%? 50%? Given the uncertainty, I find I'm always back in again after only a modest drop, meaning the whole exercise left me richer but not by a meaningful amount. I guess you could wait for a drop to the modern era average multiple? Using most recent book that's 1.40 in the last decade, using peak-to-date book it's 1.38. In an untaxed account, selling know and buying then would get you a one time return of 10%, minus however much the value of a share rises in the time it takes to reach that valuation level. Not exactly a life changer.
Jim
No. of Recommendations: 1
Agree Jim.
I have a position in Meta and was thinking about trimming that tbh. It's had somewhat of a run up.
No. of Recommendations: 3
"The problem with selling high and buying back lower is this: the selling high is pretty easy. The buying back is very hard. Nobody knows how low it will go during the next downslope, so when do you pull the trigger and get back in? After a 5% drop? 10%? 20%? 50%? Given the uncertainty, I find I'm always back in again after only a modest drop, meaning the whole exercise left me richer but not by a meaningful amount. I guess you could wait for a drop to the modern era average multiple? Using most recent book that's 1.40 in the last decade, using peak-to-date book it's 1.38. In an untaxed account, selling know and buying then would get you a one time return of 10%, minus however much the value of a share rises in the time it takes to reach that valuation level. Not exactly a life changer."
Yeah that's the thing. I live overseas and I'm married to a non American so I can actually buy and sell in her name without tax consequences. I've always been reluctant to play this game because I have be honest- I'm just not that smart and I don't want to miss out on additional price gains. But I sure am tempted after big runups, especially now as it feels the market is getting rather exhausted. And those 5-10% gains would still be pretty good if the position is big enough and you're not paying taxes.
No. of Recommendations: 2
"In an untaxed account, selling know and buying then would get you a one time return of 10%, minus however much the value of a share rises in the time it takes to reach that valuation level. Not exactly a life changer."
It's the 10%, minus any increase in rise in value (measured by book) prior to being able to pull the trigger, plus the money earned on the cash while you wait for the purchase. The return on cash can get you beyond the 10% return or otherwise mitigates the issue of rising book eating into the return (or turning the trade negative).
If Q4 book is the peak book for a spell, and you get a 10% return round trip at the six month mark, while having a 5% (before inflation) return on your cash, it's a 12.5% return. Still not life changing, but not nothing either.
No. of Recommendations: 11
"The problem with selling high and buying back lower is this: the selling high is pretty easy. The buying back is very hard. Nobody knows how low it will go during the next downslope, so when do you pull the trigger and get back in? After a 5% drop? 10%? 20%? 50%? Given the uncertainty, I find I'm always back in again after only a modest drop, meaning the whole exercise left me richer but not by a meaningful amount."
Yep. I agree.
Plus there is always the scenario where you sell after a runup like this, it goes up another 10% higher after you sell. Then the stock sits in a narrow range for a couple of years while the company performance raises the book value to a point where you buy back in and you would have been better off just holding.
I really do think that there will be opportunities to buy the stock in the future for a better price than it is now, the problem is, I don't know how far into the future that will be and I don't think I would wait until it went too much lower if I had all of that cash sitting around anyway. So by selling now and trying to buy back at lower prices I am trying for small gains while risking missing out on any further upside.
Buffett calls that picking up nickels in from of steamrollers.
No. of Recommendations: 1
I trimmed some of my more agressive positions last week, get some dry powder, loathe to trim BRKB....have moved trimmings to some divvy stocks in oil/gas/chems. against the eventual fed lowering rate...Have discussed some already on here eg XOM, DOW, OXY, COP, PSX.BAC , PFE
No. of Recommendations: 20
Buffett calls that picking up nickels in from of steamrollers.
Well, I believe that phrase is reserved for situations where something Very Bad happens once in a while. For example, shorting the VIX regularly (writing call options, say) will make money probably 99 times out of a hundred, but lose you 1000 times your usual bet that last time. Last, because you're unlikely to try that again.
If you buy back into Berkshire after a while at a similar price rather than making some improvement to your breakeven, it's not exactly a steamroller situation. More of a toe stub.
For example (not that I recommend this specifically) say you sold the stock today, and decided to buy it back next time it was trading at 1.4 times last known book. That's the average in the last decade, so it seems very close to certain that will be trading under that again some day. About half the time, if the range stays about the same.
The price today is a rather impressive $619000, maybe roughly 1.6 times a guess for known book next week. So, if it dropped to your target immediately, you'd make about 12.5%. Let's say value typically rises at around inflation + 7%/year. Ignoring the fact that known book rises only quarterly, you'd have a price improvement if it hits 1.4 times book within the 20 months or so, and presumably a small loss if it takes longer than that. To lose 10%, hardly a steamroller, you'd probably have to have waited ~3 years for your orbital re-entry.
Jim
No. of Recommendations: 1
ok, after 18 years of only accumulating Berkshire, i have sold today 2 pct of my berkshire holdings. If it goes over 420 will sell another 2pct and then sit on my hands to get back in.
No. of Recommendations: 0
For example, shorting the VIX regularly (writing call options, say) will make money probably 99 times out of a hundred, but lose you 1000 times your usual bet that last time. Last, because you're unlikely to try that again.
Anyone not recommending Jim's post?
No. of Recommendations: 15
For example, shorting the VIX regularly (writing call options, say) will make money probably 99 times out of a hundred, but lose you 1000 times your usual bet that last time. Last, because you're unlikely to try that again.Google "volmageddon xiv" and look at the images. XIV was the ETF following that strategy. Final day it was open, I think it was down about 94%.
<australian accent>
Hehe. That's not that a steamroller.
THIS is a steamroller.
</australian accent>
Jim
No. of Recommendations: 3
Final day it was open, I think it was down about 94%.
I was only following on paper with SVXY, but the backwardation strategy of S&P 500 VIX futures introduced on the old MI board some years ago would have gotten real money out a day or two before Volmageddon. *
From 1Q16 when the signal went green to then, it was around a 7-bagger. Of course, if you missed the sell signal, you broke even only a couple of months ago. If you held XIV, you had no such luck as the ETN folded.
I stopped following, but IIRC, the SVXY calculation changed such that the strategy will not work the same as when introduced.
Chip
* That's the only real-time MI signal I recall that was arguably more spectacular than Jim's bottom call in March 2009.
