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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (33829)	3/17/2009 10:02:28 AM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78958

I think the only way to discuss this as speculative or not is to build a risk/reward model. It is very similar to insurance that is a major Berkshire business. Is insurance "speculative"? My answer would be that it depends on assumptions used. If one assumes very few hurricanes in Florida or takes very low premiums, then it is speculative. If the model is conservative and premiums high, then it is not. Insurance is not a Graham investment either, so looking at him for answer is not an option (pardon the pun :P). One can either exclude whole classes of investments based on the fact that Graham did not do it, or to figure out what are potential risks and rewards. Buffett put position is actually rather simple case, since there are only couple of variables to consider. In retrospect it is possible to call Buffett investments in banks more speculative than the put position, since they depend on short term government actions that can kill (or at least severely dilute) existing shareholders without any recourse. But the right thing to do would be to build a model for bank shareholders. ;)