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Old 10-17-2008, 03:21 PM   #21
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I don't buy into charts. It's value or nothing for me. By any standard stocks are cheep, the key is to buy an ETF that pays out a dividend to keep the risk down and enable further purchases if this bear drags on.
CNBC is saying that earnings are running an average of -9.1% over last year. earlier this year the estimate was for 17% growth. how exactly are stocks cheap as earnings keep coming down?

the two largest SP500 sectors of financials and commodities have been destroyed and their earnings growth is a joke going forward. tech and the other sectors better step up
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Old 10-17-2008, 03:31 PM   #22
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so he clearly remembers the 70's.
'I feel like an oversexed teenager in a Cathouse.' (Warren was less politically correct back then). When asked whether there were good stocks to buy after the 73/74 debacle.

I probably am mis quoting - but I think I'm close to the sentiment he expressed.

heh heh heh - Full auto, rebalancing their little electronic hearts out, - buy those stocks - go you little Vanguard computers go - buy, buy buy!

- sure glad they don't get emotional. . Target Retirement 2015 - SEC yield and party on into 16th year of ER.
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Old 10-17-2008, 03:50 PM   #23
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CNBC is saying that earnings are running an average of -9.1% over last year. earlier this year the estimate was for 17% growth. how exactly are stocks cheap as earnings keep coming down?

the two largest SP500 sectors of financials and commodities have been destroyed and their earnings growth is a joke going forward. tech and the other sectors better step up
Don't be fooled by commodities. Even though the stocks are down the earnings are still high. Stocks are down based on growth, but many commodities are in high demand. As I stated there may be a flat trend but in five years time those who don't average in now will be sorry. Regarding banks, Canadian banks are still making money as they make most of their cash from inside the country and they have a monopoly...I don't own any US stocks.

Regarding financial earnings for US banks...moving forward they will have better growth than you think because all their bad debt will be gone...they will raise the spreads on loans and increase bank charges like Canadian banks. Canadian banks will be the model and you will be surprised on the earnings growth. There will be a huge consolidation within the US banking sector on the Canadian model.
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Old 10-17-2008, 05:51 PM   #24
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and stock prices fell almost 90% from the 1929 high to the low in 1932 and the Dow fell 50% in 1973 - 1974
True, but the Dow also increased 500% in the 5 years before the 1929 crash. We've seen no such run up this time. The government also did precisely all the wrong things . . . tightened monetary policy, raised taxes, increased tariffs, etc. The government response to this crisis couldn't be more different than 1929.

As for the 1973 bear market decline of 50%, we're already off 40% from last October's peak.
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Old 10-17-2008, 06:39 PM   #25
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I think there is a reasonable case we can see a further drop down to the S&P 800 based on S&P earnings of $70-75 and market PE in the 10-12 level.

However, Warren was no where near this bullish on stocks back in 2002, or 2003 or back in 1994-5 before the start of the bull market. Personally, I see less risk in seeing my portfolio drop another 20% than missing the 50% move we are likely to see in the next few years. I also suspect we wouldn't see a nice gradually increase but a rather a series of sharp jumps.

I believe part of the reason Warren is doing this is because a higher stock market in good for Berkshire. However, I believe the primary reason is that Warren sees a huge lack of leadership in the financial world, and while he gives the impression of hands off manager, he is actually a strong leader.
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Old 10-17-2008, 06:58 PM   #26
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Don't be fooled by commodities. Even though the stocks are down the earnings are still high. Stocks are down based on growth, but many commodities are in high demand. As I stated there may be a flat trend but in five years time those who don't average in now will be sorry. Regarding banks, Canadian banks are still making money as they make most of their cash from inside the country and they have a monopoly...I don't own any US stocks.

Regarding financial earnings for US banks...moving forward they will have better growth than you think because all their bad debt will be gone...they will raise the spreads on loans and increase bank charges like Canadian banks. Canadian banks will be the model and you will be surprised on the earnings growth. There will be a huge consolidation within the US banking sector on the Canadian model.
take a look at the chart for Citi for 1987 - 1994. dead money.

commodity earnings are high because 2Q it was still the peak prices. for some reason most commodity companies aren't giving forward guidance for the 4th quarter.
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Old 10-17-2008, 08:31 PM   #27
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we'll call this Prechter vs Buffet

Bob Prechter is predicting the Dow will bottom around 3000 in the next year or two. no prediction yet on the recovery.

Both have been right more times than they have been wrong, let the battle begin
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Old 10-17-2008, 08:35 PM   #28
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we'll call this Prechter vs Buffet

Bob Prechter is predicting the Dow will bottom around 3000 in the next year or two. no prediction yet on the recovery.

Both have been right more times than they have been wrong, let the battle begin
I get the feeling you are shorting the market.
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Old 10-17-2008, 08:53 PM   #29
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we'll call this Prechter vs Buffet

Bob Prechter is predicting the Dow will bottom around 3000 in the next year or two. no prediction yet on the recovery.

Both have been right more times than they have been wrong, let the battle begin
Both could easily be right.
Buffet is not saying the market won't go down. He stated he has no idea where the market will be in a year, could be up, could be down more.
What he IS saying is that long term, now is a great time to be buying for the long term.
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Old 10-17-2008, 09:12 PM   #30
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Buffet generally does not buy the market. He buys specific stocks like JNJ (for Berkshire) and I would assume that is what he is doing with his private accounts which is what he was talking about. He repeatedly said he did not know where the market was going near term -- near term being probably (my guess) the next year. But farther out he's a bull and he likes to keep his stocks forever. Also he said that inflation was likely to kick up. He and Templeton guessed too high on inflation in the 80's but that didn't hurt their investment performance because they probably didn't bet the house on those guesses.

I'd be interested in his specific stock selections but I doubt we will hear about those since he probably will not have to file anything as this is for his private account and not a large percentage of an individual company's stock. I'd bet he bought JNJ though. It was in the 50's a few days ago and he bought some a few years ago for Bershire in the low 60's.
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Old 10-17-2008, 09:21 PM   #31
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it will be interesting to see what the consumer staples do. in the last 5-7 years the trend has been to repackage their products into single easy to use gadgets where you sell 1/10 the cleaning product for 10 times the price. if things get bad we'll see if people switch back to the cheaper versions that take a little more work
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Old 10-17-2008, 09:46 PM   #32
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Hey, no problem criticizing Buffett, he's been wrong before.

You guys who think he's doing the wrong thing should put your money where your mouth is-- go short the S&P500, go commodities, buy land, whatever. Over the next five years we'll compare your Schedules D to his Berkshire Hathaway annual reports and see how everyone did.

Nothing personal, but we're going to hold onto our Berkshire shares.
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Old 10-18-2008, 08:04 AM   #33
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A little off topic, but Buffet recently purchased preferred shares of GE and Goldman Sachs. Can anyone tell me why preferred shares and not common?
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Old 10-18-2008, 08:35 AM   #34
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Whether the market could drop a little further or not, I do think it would be hard to imagine cash outperforming stocks over the next 10 year cycle as Buffet suggests.

He has put a large chunk of money in a railroad. Hard to imagine him thinking we will be worse off by doing so and he hasn't made a large bet with Berskhire money in a while.

To me, most of his bets in recent years have been in effort to make some return better than just holding cash.

I will take WEB's advice and thought over the rest of Wall St any day of the week. I think he is a pretty decent person.
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Old 10-18-2008, 08:45 AM   #35
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A little off topic, but Buffet recently purchased preferred shares of GE and Goldman Sachs. Can anyone tell me why preferred shares and not common?

the preferred shares pay him 10% or so dividend

and the ones he bought were specially issued just for him
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Old 10-18-2008, 10:14 AM   #36
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the preferred shares pay him 10% or so dividend

and the ones he bought were specially issued just for him
-soooo even G.E. needs a little walking around money.

It's good to have friends.

heh heh heh -
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Old 10-18-2008, 10:16 AM   #37
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Hmmm...bummer....I like that 10% dividend perk.
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Old 10-18-2008, 11:32 AM   #38
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Hmmm...bummer....I like that 10% dividend perk.
I'm pretty sure the same favorable terms are available to anyone with a few billion to invest.

Preferred shares have a higher priority during bankruptcy proceedings and in some cases are convertible into common stock shares.

Preferred Stock
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Old 10-18-2008, 12:20 PM   #39
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Preferred shares have a higher priority during bankruptcy proceedings and in some cases are convertible into common stock shares.
In Buffett's case, he got 10% preferreds that are non-callable for 3 years. After 3 years they can be taken out at a 10% premium. He also got warrants to buy shares at a 13% discount to then prevailing market prices.

Nice deal if you can get it.
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Old 10-18-2008, 02:57 PM   #40
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I'm pretty sure the same favorable terms are available to anyone with a few billion to invest.

Preferred shares have a higher priority during bankruptcy proceedings and in some cases are convertible into common stock shares.

Preferred Stock
Go tell that to the Lehman or Wamu preferred holders.

There are plenty of preferred shares out there that Are yielding upwards of 10%
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