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Politics : Ask Michael Burke

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To: re3 who wrote (69723)	10/28/1999 8:29:00 PM
From: Freedom Fighter	Read Replies (1) of 132070

Ike, I think we are in good shape with our purchases below 2000. The way I see it we are getting a group of excellent companies at a price that makes sense and the value added services of Warren for free. (which has historically been extrmely valuable) General RE traded at 2x book (give or take) for many years. Geico traded at well over 2x book for many years. I think both those valuations were reasonable and there is reason to believe they will both become much better companies under BRK. (geico probably already has) The 100% owned companies are an extraordinary group and worth well over 2x book. The "super cat" business generally writes insurance at a profit making it very valuable. Warren still tends to attract very good deals that others simply cannot get. The equity portfolio is more reasonably priced than it has been. Warren is still sitting on a nuclear arsenal of bonds and cash that he inherited from General Re that will be redeployed over time (the sooner the better) into higher return alternatives. So a bear market is actually very good for BRK's intrinsic value because as the cash and bonds are redeployed the future returns from investment will be higher. The stock traded at between 1 and 2 times (closer to 2) book value for many years when it was mostly just an equity portfolio. It is clearly an insurance operation now. Perhaps the best in the world. Even if Warren wasn't at the helm it would be extremely valuable. At its present price of slightly north of 2x book I am confident we will do well over time. In this environment it's a gift. I mean it's still trading at "old era" valuations! (g) Wayne

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