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... of late: Since a while it seems Berkshire is moving often exactly opposite to the market in general:

- The market falls => BRK is one of the few companies whose stock price rises - - - as e.g. this moment (10:30 in New York: S&P -0.5%, Nasdaq -1%, BRK +1%). Berkshire fans probably tend to think "Flight to Safety", but:

- The Market rises => BRK falls.

Purely from memory (so not a hard fact and I might stand corrected) this is what I often see since several weeks. Why?

Purely from memory (so not a hard fact and I might stand corrected) this is what I often see since several weeks. Why?

Speculation:

The last couple of weeks have seen unusually frequent sloshing back and forth between speculative and defensive moods. Berkshire is seen as quintessentially defensive, so the few people who trade stocks will buy it when the mood swings that way. More often it is money going into an ETF representing the mood of the moment, most of which are cap weighted, so Berkshire gets pulled along with whatever index or sub-index or sector the fund tracks.

The more surprising thing is the longer term: Berkshire's market price return has been essentially market tracking over quite long periods, but in particular almost all of the last 2.8 years. No sloshing there. As above, it seems nobody buys individual stocks any more : )

Jim

Berkshire's market price return has been essentially market tracking over quite long periods, but in particular almost all of the last 2.8 years.

The last 10 years actually.

https://testfol.io/?s=cHMFi7L0wmo

2004-01-02 - 2025-01-07
                         CAGR                MaxDD                       Sortino   
BRK-B     $80,792.01     10.45%    10.45%    -53.86%   20.93%    0.50      0.75
SPY       $78,638.06     10.31%    10.31%    -55.20%   18.73%    0.53      0.75

The “market”/SPY is 80% influenced by a handful of stocks. Maybe look at RSP to compare to correlations vs brk?

The “market”/SPY is 80% influenced by a handful of stocks. Maybe look at RSP to compare to correlations vs brk?

It's a very good rule of thumb, but very oddly, Berkshire has tracked SPY more closely since around March 2022 : )
Berkshire appears to be treated (in this stretch) as one of the big and desirable

Shorter term, you're probably right
But who cares about short term!

Jim

Berkshire's market price return has been essentially market tracking over quite long periods, but in particular almost all of the last 2.8 years.

The last 10 years actually.

The link/plot indicates data from Jan.2,2004 to Jan.7,2025 - so 21 years?

I have a question for the group. Why has the mix of businesses in BRK tracked the different mix of businesses in the SPY so well for so long?

Berkshire is dominated by insurance, BNSF, BHE, the stock portfolio, a mix of businesses (MSR)that generally mirror the US economy, and a surprisingly constant percent of cash until very recently. Not a particularly fast growth mix. The S&P 500 carries no cash and has been dominated in recent years by the "Mag 7" type businesses that are fast growing,now very large,and throw off lots of cash - the balance being businesses that make up the US economy. Except for Apple, BRK hasn't participated in the Mag 7 unless you balance the BYD investment against Tesla. These appear to be different mixes - yet the market values them the same. Why?

I no longer follow the details of BRK in the depth I did in earlier years. Nor do I still keep the detailed records I once did. I no longer need them to make simple Buy, Sell, or Hold decisions. So I can't offer any particular insights re the foregoing. I do note that BRK tends to zig when the market zags except in market crashes when everything is correlated. There must be counter-balancing factors between BRK and the SPY that tend to even out the results over time. But I don't have data.

BRK seems a lot safer than the SPY. So the higher risk SPY should deliver higher rewards over two decades shouldn't it? Yet BRK keeps up.

Any thoughts appreciated.

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/search.phtml?nofool=y...

"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

Offhand, one might reasonably expect owning one share of Berkshire to get you at least around $2k/month of price gains in the next three years.
(assumes typical/conservative trend of value growth, and selling at a typical/conservative multiple of value)
Multiply your number of shares times that number and see if it's enough.
If so, there's not much reason to work harder.

Any idea what this number looks like today? At the same $2k/month I'm meeting my current needs but not saving much for future ValueOrGoHome.

Offhand, one might reasonably expect owning one share of Berkshire to get you at least around $2k/month of price gains in the next three years.
(assumes typical/conservative trend of value growth, and selling at a typical/conservative multiple of value)
Multiply your number of shares times that number and see if it's enough.
If so, there's not much reason to work harder.
...
Any idea what this number looks like today? At the same $2k/month I'm meeting my current needs but not saving much for future ValueOrGoHome.

Two answers.

If starting on a typical valuation day around now, it's pretty easy.
In the last ~20 years the average P/B has been about 1.4. Book has risen about inflation + 8%/year. Let's figure about inflation + 7% for the future.
Book is currently $437580. 1.4 times that is a "normal" price for now of about $612600.
If book rises inflation + 7% in the next year, and the price is 1.4 times that, the price will be about $655500 in a year, a rise of inflation + $42883, or inflation + $3570/month.
(note that's after inflation, not the $2k nominal from that old post)

However, unfortunately for near term prospects for price rises, today's market price is not $612600, it's $663000.
So: three years of book growth at inflation + 7%/year would put book at $536000.
1.4 times that would give a rough expected market price of about $750500 in today's money. That's a forward three year price rise of inflation + $2430 per month.
That same set of figures equates to three years of inflation + 4.22%/year CAGR from today's price.

Since people like to compare them, 5 year TIPS yields are inflation + 2.06% at the moment. 10-year at 2.32%. My wild speculation is that those will do materially better than the S&P 500 for many time frames ending in the next 10 years.

Jim

I've been a long-time lurker here, also from way back in the TMF era.
Jim, thanks for all the insights you've provided over the many years.

I have a question about TIPS ladders. It would seem that TIPS would be suitable for bundling them up in some kind of mutual fund, and that having them as a fund would be the easiest way to get them to work in an IRA. But from what all I can find, the few TIPS funds out there are not ladders, not with any kind of predictable, let alone fixed, maturities. Am I missing something? I'd want staggered maturities and roughly equal weights.
(the context is that I'm very heavy in BRK/B and think this is a good time to do some diversifying.)

There is a website that creates ladders for you with existing TIPs.
https://www.tipsladder.com/

Also there is a set of ETFs that have TIPs that mature at given times although lightly traded.
https://www.ishares.com/us/strategies/bond-etfs/bu...

It is pretty easy to buy individual TIPS on the secondary market.


I've been a long-time lurker here, also from way back in the TMF era.
Jim, thanks for all the insights you've provided over the many years.

I have a question about TIPS ladders. It would seem that TIPS would be suitable for bundling them up in some kind of mutual fund, and that having them as a fund would be the easiest way to get them to work in an IRA. But from what all I can find, the few TIPS funds out there are not ladders, not with any kind of predictable, let alone fixed, maturities. Am I missing something? I'd want staggered maturities and roughly equal weights.
(the context is that I'm very heavy in BRK/B and think this is a good time to do some diversifying.)

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