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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (424)	6/20/1998 9:14:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Berkshire and General RE Warren Buffett announced the purchase of General RE for 22 billion last night. A quick look at the deal leads me to believe that it's a great idea. He's buying it with stock. This makes it immediately accretive to earnings and book value since General RE is cheaper than Berkshire from a price to earnings and price to book value perspective. I'm not sure how the market will react to the deal though. Using stock for the purchase is an indication that he believes BRK is overpriced. A view I share. I consider it a very big plus though (I am a shareholder since 1988). It increases BRKs intrinsic value significantly in my view. Warren also inherits 18+ billion of bonds and 4+ billion of stock that are the investments of Gen RE. I am sure that 22+ billion in Warren's hand will be a big positive for both companies. The combination also readjusts the BRK portfolio in a way that is closer to 60-40 stock- bond/cash split. This represents a significant war chest in the event of a significant stock market downturn. He is now sitting on a nuclear arsenal of buying power. 30+ billion of cash and bonds. It also reduces the downside of his book value in a big decline since prior to this the mix was heavily titled towards equities that are somewhat pricey. So summing it up, I consider it a gigantic defensive and offensive move that significantly increases the value of his business while reducing his risk in an outrageously overpriced market!!!!! Net, I love this deal! I love this company! The man is a super genius! Who else can score big in the present while playing defense in the present and positioning himself for super offense in the future! WOW! members.aol.com

To: porcupine --''''> who wrote (424)	6/21/1998 11:45:00 AM
From: porcupine --''''>	Respond to of 1722

"ORACLE OF OMAHA IS STICKING TO HIS KNITTING" By BETH PISKORA ------------------------------------------------------------------------ With his $22 billion purchase of General Re, the nation's largest reinsurance company, Warren Buffett returns to the two subjects he knows best: insurance and value investing. Buffett has always liked the insurance business, since it is a good source of generating funds that can be used for investing. But in the past two years, Buffett has complained that he can't find any good value investments in the equity markets, and has been accruing a larger cash position instead. Berkshire Hathaway also took some unusual positions in 1997, including a large stake in silver, derivatives contracts for 14 million barrels of oil, and Treasury bonds. More recently, Buffett has been rumored to be buying inflation-indexed bonds, although he has not confirmed it. By purchasing General Re, Berkshire Hathaway not only expands its presence in the world insurance business, it also generates $24 billion in investable assets for Buffett, often thought of as the world's savviest investor, to play with. "If I was complaining about having too much money to play with before, what the hell am I going to do with $24 billion more?" asked Buffett in front of a group of reporters yesterday. As usual, his answer was not revealing. "As Charlie ^Munger, vice chairman of Berkshire Hathaway_ and I have said before, right now we don't have lots of great ideas," he said. "We don't even have lots of good ideas. We are not doing this deal because we need the cash in the till now to seize opportunites that we could not otherwise seize. We are doing this deal under the belief that 5, 10, 20 years from now, there will be opportunities we want to seize. The General Re funds will come in as useful then." He further disclosed that General Re's $24 billion in investment assets are split - $5 billion in common equities and the balance in fixed-dollar investments, mostly municipal bonds. Berkshire has more than 50 percent of its assets in equities. "Over time, we will make changes," said Buffett. "Whatever is the investment strategy at Berkshire Hathaway will be the same investment strategy for General Re." Beth Piskora (c) New York Post 1998.