Could someone explain to me if peak book is a superior measure of value for Berkshire and if so why. I seem to recall various posts from Jim on this but can't recall the details.

The book value, as far as a useful took for investor, should ideally be independent to the quotation such that the price/book would fluctuate almost in linear proportion to the change in the quote. With GAAP accounting especially, though, the book value is greatly effected by the changing quotes. In particular the book is marked down with sudden severe declines in the constituent quotes, with Chicago-paradigm-efficiency! Of course, the book (true value) isn't really going down, but that is how we like to read it in the US.

So how do we stabilise the book value? Taking the last peak book value isn't a bad first stab - why? Because it has the useful feature in that - for the sake of measuring relative changes in the price/book ratio from quarter to quarter, we reach our goal above, with the book forced to be stable (for a while). The book value is staying fixed in this case, and our quote changes are fully recognised through to the changing price/book ratio, so we get to see the real change in the relative attractiveness of Berkshire as an investment. Call this goal 1.

But definitely one should not make the mistake that the absolute value of the book was any more valid when it was last at its peak, compared to what it is today. Call this goal 2.

Generally instead we want to normalise the book for normal market conditions, so it would be better to compare the book value to the average 2-year book value, or better still, look at the current on-trend book value by drawing an approximate line continuing from the last few years until today (averaging through the quarter to quarter squiggles). That gets close to 1, and very close to 2.

- Manlobbi

PS: It feels so good to type into this text-box. Others on forums/boards/twitter-like-boses elsewhere don't know what they're missing.