cardude
Full time employment: Posting here.
- Joined
- Feb 21, 2006
- Messages
- 599
Doesn't seem that weird to me, and it's been the subject of some discussion in our family
No, I said wierd, and that's a completly different thing. Gotta use that spell checker........
You've dealt with this volatility before, so otherwise what's changed?
It's more of a "I can't make a mistake now" thing. When I was working (owned a small business) the money was always flowing in (good timing, not much skill) and so my mistakes could be covered up. Now the lack of money flowing in has me pretty much locked up mentally.
Is it a change in risk profile, or is it more of a desire not to have to work so hard to take care of the portfolio?
I don't know, but I'm finding out that Berkshire (and my business) were kind of my one trick ponies and I'm feeling a little like the tide has gone out and I don't have any clothes on. Know what I mean? I just don't know what I'm doing out of my little Berkshire circle.
What? My plan was to come up with a group of bond funds/ stock index funds to put my non Berkshire stuff in, and when I sold some Berkshire off (at the right price) I could replenish cash or fund those funds. Those would be my only choices so I don't get distracted away from my circle. I'm easily distracted it seems.Looks like you just wrote yourself an asset allocation plan…
I've been told it's not wise to hold that in a non tax advantaged account. I have very little (4.5%) tax advantage accounts, so that's a challenge, right?… and you could maybe add Vanguard's Wellesley to it.
Did I mention that Tilson thinks Berkshire is still 30% undervalued? Admittedly he's a Berkshire cheerleader, but unlike Cramer or TMF he has a lot of shareholders to answer to. So would you buy more, sit on what you have, or sell?
I like the book plus float valuation method for a quick look, and that's about 180B now after quarter 2. It's trading at around 158B now, so that's about 12% undervalued now, although it usually trades a little higher than BV plus float at some point during the year (last 10 years around 110% average) so it could be around 20% undervalued right now. No, I would not buy any at these levels because that's not enough room for error, and it's volatile enough where I think you can buy it cheaper if you wait. I'm also not selling at this point either.
Plenty of room before you have to sweat liquidating losing stocks in a bear market.
I'm still unsure how much cash to keep. I have 16.5 in taxable cash that will fund me for 7.5 years or 6.5 years if wife quits working. I think that's too much to leave sitting around earning nothing, and if I had a good AA including bond funds I would like to do something with that. And yes, I'm funding some of the spending from the liquidation of the value account, but I still need to come up with a plan for all that cash. I don't really feel like I can buy MORE Berkshire at this point at 48%, so I need an alternate place for the cash.
I am eligible, but it is not factored in. I don't think it will be there in 20 years, or if it is there I doubt it will look like it does now so I'm leaving it out. If SS is there, then that will be a nice surprise.Better still, are you/spouse going to someday collect Social Security or other pensions? Are they factored into your asset allocation?
Am I adding these numbers correctly to come up with 8.6% of your total portfolio value? If these assets are annoying you too then they could be the next to be liquidated for spending cash.
Yeah, most are too small to jack with IMO. A distraction. None of them have any gains to speak of at this point. In fact, nothing I have has gains other than Berkshire, and I have lots of losses from the "value" fund to use up. I don't have to "use up" all those losses this year do I? Can't remember how that works. I need a tax loss harvest strategy also.
If you moved the 18.3% "deep value" account and the other 8.6% into Wellesley, then how much of the Berkshire and the angel assets would you need to maintain a 4% SWR or less? In the highly unlikely case that Berkshire went to zero, what would your SWR be?
If Berkshire and angel went to 0 then I would be at 5%. What are the probabilities? Not high for Berkshire, but probably high for the angels (I'm not doing any more of those btw-- not enough money to diversify properly and not enough good ideas). If brk fell by 50% and angels fell to zero I would be at 3.38%, with wife working and all rentals holding. The angel deals I did when I was working and had a higher risk tolerance. I can't sell them so we shall see. Very risky, but fun.
One approach would be to assume that your spouse stopped working and half of your rentals were vacant. Figure out your spending and how much you'd need to support a 4% SWR, then put that amount into Wellesley/cash and put the rest into whatever asset classes you want-- like Berkshire & angel investments. The portfolio is sort of a "dumbbell" distribution with "low-volatility" assets at one end of the bar and "high-volatility" assets at the other end.
Interesting. Should I use Wellesley since it is not tax efficient or a tax free bond fund as others have suggested since this is all in a taxable account? If I did that I would need to reduce the Berkshire by about 70% and it would end up being 14% of the total portfolio, so I guess that's doable. So put everything into Wellesley? No bond or stock funds or international and all that other stuff? I'm such a fund moron............
If you're uncomfortable shedding Berkshire now, what about converting to "B" shares and selling out-of-the-money call options? Pick a price at which you think Berkshire is more than fairly valued, write a contract, and collect the premium. If the price goes up above your strike price then you lose the shares and "solve" your asset allocation problem while making a little extra money on the side. If they stay flat you make a little extra money. If they go down, you weren't going to sell the shares anyway. But call options offer a way to set a sell-stop while keeping your emotions out of the process. They're new and they don't have a lot of volume yet so pricing is probably inefficient, but the Gates Foundation is doing a wonderful job of raising the "B" share daily volume. As volume rises it's not unthinkable that Berkshire could end up in the S&P500 in the next 5-10 years, and their options pricing will become more efficient.
Oooo, now that's interesting. What are the premiums? How do I do that? Have you done it? I'm not uncomfortable selling the shares, but just don't like the price yet so this might work. What if I write the call then change my mind and want (or need) to sell before it hits that price? Have I locked up the shares in other words?