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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: JHP who wrote (81916)	6/24/2000 5:38:00 PM
From: Freedom Fighter	Respond to of 132070

JHP, The cash number is too high unless you consider equities equal to cash, but essentially the article captures the story. Thanks for pointing it out. You can't value BRK by looking at earnings or other standard valuation parameters. There's too huge a mix of businesses. The equity portfolio is worth some 38 billion, but only contributes the after tax dividends to the reported earnings. EPS would rise dramatically by switching to bonds, but it wouldn't make economic sense. Warren invests for total return - not just income. There's also the matter of huge investment programs now under way at Executive Jet and Geico. Both of these expansions are lowering reported earning in the short term. In Geico's case, the company doesn't generate $1 of profit for every $1 of advertising in the first year. However, renewals are so high, that ultimately, it creates value. Executive Jet requires enormous capital outlays (now under way in Europe) before you can start making money. So there are depreciation charges and other expenses associated with expansion that do not immediately generate matching revenues and earnings streams. That comes later. EJ is going to be a huge winner over the long term. I don't think the market quite comprehends this company yet. Wayne