Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (84)	3/17/1998 9:25:00 PM
From: Freedom Fighter	Read Replies (1) of 1722

On Silver >Wayne: Today silver closed at around $5.83/oz. Where does this leave >BRK's stake? Frankly, I've always considered commodities a >speculation on short term swings in inflation and supply and demand >at the margin. >However, you make a good point about a commodity's intrinsic value >being its long term relation between the cost of production and the >level of unit demand and that sometimes a commodity can be bought for >less than that value. But, I still don't get it as a "long term" >holding. I doubt it is truly a long term holding. My own estimate is that stocks are currently discounted to somewhere between 7%-8% in aggregate if inflation, Return on Equity and PEs etc.. stay the same. My guess is that he has an intrinsic value in mind for silver. The difference between the current price and that value must yield (over some reasonable time) significantly more than stocks otherwise he would not be selling one and buying the other. Keep in mind it must be significant, because 7%-8% on pre-tax money is more than after tax money. In addition he clearly signaled a warning about corporate ROE over the long haul. If these historically high ROEs prove to be the exception, he clearly warns that stocks are overpriced. As to the current decline in silver, I am sure he did not even notice or care. I have read some wildly bullish commentary about silver recently related to outstanding lending and futures positions. It is much too complex for a discussion here. I can give you the location for it if there is any interest.

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