Nice work but just for clarification is your 16-quarter weighted moving average equally weighted?

No, it's a WMA in the sense that chart people mean it. The most recent quarter is weight 16, the second most recent at weight 15, ramping down to weight 1 on the oldest quarter of the 16. So recent data counts the most, but doesn't totally dominate.

If you use equal weighting there is more time lag on average, and you can get meaningless discontinuities when an anomalous quarter shifts from being 16 to 17 quarters earlier.


A small note for those who like to be bullish: a bit of inflation as we saw recently increases the fair P/B ratio just a little. The reason is that still-productive fixed assets, depreciating or not, are rising in nominal output but not rising in nominal book value. The value of any contracts with revenues in fixed dollars falls, but I think Berkshire is smart enough not to have too many of those. The biggest exposure is probably any regulated rates which are not allowed to rise as fast as monetary inflation.

For those who like to be bearish, the big concern is the dire rate of increase of observable value among the operating subsidiaries. Both BHE and BNSF are doing poorly at the same time, and the problems may not be merely cyclical. Taking the whole group, rolling year net earnings on operating subsidiaries are up only 0.81%/year in the last 3 years, and under 4%/year in the last six years. Those figures include cyclical adjustment on underwriting profit so that volatility doesn't ruin the comparison.

Jim