Subject: Re: Getting Defensive?
I've seen a few posts here talking about BRK's stock price getting a bit lofty...
Any good suggestions?

The valuation level is a bit higher than usual in the last 15 years, enough that the most likely outcome for the price change in the next year isn't great.
But that doesn't mean it's a bad thing to have in your portfolio. A person can live through a flat spot. And if you're OK with that, there's nothing to do. Laziness is fine.

I don't have anything else that I find has more attractive returns in the short to medium term that I would put nearly as much money into, so the main obvious alternative is cash.
One year T-bills are yielding 4.87%, six month is at 5.25%, my broker is paying me 4.83% on my cash balance. All of those are above what I expect for monetary inflation in the next year, so they mean a positive real return.
My sundry pretentious Berkshire price forecasting models are predicting slightly negative real returns in the next year on average, median model inflation-2.0%. So sure, it might be possible to make a case for selling some stock and moving to cash. (no, not doing that).

I'm doing a little fancy option stuff too, but that's mainly just to keep my fingers busy, the ultimate financial outcome won't have a meaningful impact either way.


Here's some back of the envelope.
Mr Buffett was buying Berkshire B shares at an average price of $357.22 in September.
With an inflation adjustment, that's like $357.71 in today's money.
The value of a share goes up at a rate of inflation + 7%/year, so if the intervening time has been typical, the value is up another 2.7% or so since September, so maybe he might be a buyer at $367.60 today?
The price right now is $392.70 per B, only 6.8% above our notional buyback threshold. Looked at that way, we certainly aren't looking at overvaluation sufficient that action is really required. Sometimes a stock price moves that much in a day.

Jim