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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Author: mungofitch 🐝🐝🐝 GOLD
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Number: of 84346 
Subject: Re: Price and BV history
Date: 01/23/25 4:11 PM
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I think it's great context for understanding how book and price to book have evolved over time.

I think it's reasonable, within error bars, to think that the multiples seen in the last 10 or 20 years are probably not a bad guess of what you might see in the next five.

I think the log-real-book trend line is an amazing thing to behold and ponder...for the past.

But one warning about this sort of work...

I would be very much opposed to the dangerous notion that the relationship between current price and the trend line has any predictive value at all, despite what has happened in the past.

The linearity of log real book since 1998 is truly amazing, but there is no reason to think that it will continue like that. However, there IS a pretty good reason to think that price will continue to bear some sort of relationship to current book or recent peak book: because book is a not-too-terrible yardstick for value. This sensible relationship can hold whether book rises faster or slower than the old trend line in future, which a long-baseline trend line won't handle.

If the growth rate of real book suddenly halves and stays at that new lower rate, following PB will still get you useful valuation information, but following price to trend line would soon have you buying at overvalued levels thinking they were cheap.

Jim
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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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