Only buy back shares when they are selling at a discount to intrinsic value, and intrinsic value is not the precise figure, it’s a guess. Sometimes people try to buy back stocks just to pop up the stock performance in the short run. But who knows what the motivations are? There is only one motivation for Buffett. If he knows he could buy the business at a discount, it would be beneficial for shareholders. And he thinks if anybody wants to buy back stock, he/she should tell the partners before that.
The last time, around 10 – 11 years ago, he made the announcement to buy back stocks, but then the price rose quickly so he couldn’t do that anymore. For this time, the market is weak; Buffett thought he could buy back a lot of stocks. The limit of the price to buy back is 10% more than the book value. “When we buy our own stock back, we intensify our interest in a whole bunch of American companies.” Berkshire’s (BRK.A)(BRK.B) shareholders will earn a greater percentage of BNSF, GEICO, etc. if Berkshire buys back shares. The pie won’t be bigger but there wouldn’t be as many slices. For the level of cash in the consolidated statement, Buffett doesn’t want to go below $20 billion. There is no limit in time; there is no limit in dollars. But there is limit in terms of valuation and the level of cash that should be maintained.
A lot of people who sold their businesses to Buffett assumed they would still work very hard for him after selling their businesses. Of course, everything doesn’t work perfectly in life. Buffett said if he wouldn’t be about to dump something because it was subpar. If it was a disaster, he had to get out of it.
Buffett doesn’t buy into the idea of U.S. is getting into another recession or 50% of it getting into a recession again. He looked at the fundamentals of more than 70 businesses in Berkshire Hathaway. They are not galloping, but he saw no downturn, except for home construction. The recovery for home construction will happen when we can create the balance of house demand and supply after reducing the housing inventory. We need to get the balance between the household and houses. When we can get back to the balance, we can start to see an overall economic recovery.
Bank of America (BAC) made a lot of mistakes before as other financial institutions, including famous Fannie Mae and Freddie Mac. The new management has to correct the mistakes that previous management made. That would take a lot of time. But that doesn’t bother Buffett; it is just part of business. GEICO got into trouble in the mid-70s; American Express (AMEX) got trouble in the mid-60s, and those two have been the greatest investments Buffett has ever had. Bank of America will get over the troubles just like GEICO and American Express, but they have to go through a lot of pains, and it takes a lot of time, not just three months or six months.
A dollar when Buffett was born is worth 6 cents now. So America has a lot of inflation. If anybody told his dad back then in 1930, he would think the world was going to an end. But over the same period of time, the real GDP of the U.S. has gone up 6 to 1. So inflation is going along with the booming economy. So is China.
The most likely thing in Europe is that in the end they are going to decide to print money. When politicians face almost insolvable problems and it looks like they can solve them by printing money, they would be likely to print money. Their banks were encouraged to load up on sovereign debts because there are no capital requirements against them. The level of leverage is getting higher, as they would like to have more EPS. They thought it was all good debt because all the debtors belonged to this union. And now they find out it wasn’t true. However, Buffett thinks it is not the end of the world. Europe won’t go away. It would be stronger 10 years from now for sure.
Source: http://www.gurufocus.com
The last time, around 10 – 11 years ago, he made the announcement to buy back stocks, but then the price rose quickly so he couldn’t do that anymore. For this time, the market is weak; Buffett thought he could buy back a lot of stocks. The limit of the price to buy back is 10% more than the book value. “When we buy our own stock back, we intensify our interest in a whole bunch of American companies.” Berkshire’s (BRK.A)(BRK.B) shareholders will earn a greater percentage of BNSF, GEICO, etc. if Berkshire buys back shares. The pie won’t be bigger but there wouldn’t be as many slices. For the level of cash in the consolidated statement, Buffett doesn’t want to go below $20 billion. There is no limit in time; there is no limit in dollars. But there is limit in terms of valuation and the level of cash that should be maintained.
A lot of people who sold their businesses to Buffett assumed they would still work very hard for him after selling their businesses. Of course, everything doesn’t work perfectly in life. Buffett said if he wouldn’t be about to dump something because it was subpar. If it was a disaster, he had to get out of it.
Buffett doesn’t buy into the idea of U.S. is getting into another recession or 50% of it getting into a recession again. He looked at the fundamentals of more than 70 businesses in Berkshire Hathaway. They are not galloping, but he saw no downturn, except for home construction. The recovery for home construction will happen when we can create the balance of house demand and supply after reducing the housing inventory. We need to get the balance between the household and houses. When we can get back to the balance, we can start to see an overall economic recovery.
Bank of America (BAC) made a lot of mistakes before as other financial institutions, including famous Fannie Mae and Freddie Mac. The new management has to correct the mistakes that previous management made. That would take a lot of time. But that doesn’t bother Buffett; it is just part of business. GEICO got into trouble in the mid-70s; American Express (AMEX) got trouble in the mid-60s, and those two have been the greatest investments Buffett has ever had. Bank of America will get over the troubles just like GEICO and American Express, but they have to go through a lot of pains, and it takes a lot of time, not just three months or six months.
A dollar when Buffett was born is worth 6 cents now. So America has a lot of inflation. If anybody told his dad back then in 1930, he would think the world was going to an end. But over the same period of time, the real GDP of the U.S. has gone up 6 to 1. So inflation is going along with the booming economy. So is China.
The most likely thing in Europe is that in the end they are going to decide to print money. When politicians face almost insolvable problems and it looks like they can solve them by printing money, they would be likely to print money. Their banks were encouraged to load up on sovereign debts because there are no capital requirements against them. The level of leverage is getting higher, as they would like to have more EPS. They thought it was all good debt because all the debtors belonged to this union. And now they find out it wasn’t true. However, Buffett thinks it is not the end of the world. Europe won’t go away. It would be stronger 10 years from now for sure.
Source: http://www.gurufocus.com
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