Berkshire Board on TMF?

My own take on intrinsic value is that book value, which is relatively easily determined, is a good enough simulacrum for it. Book value is a snapshot in time, what the company was worth at the time the company posted it in its periodic reporting. It's also largely useless as a snapshot. You do want a history of the company's book value over the prior period of time that's useful to you. Companies like MorningStar do those calculations over 3, 5, and 10 years into the past, which gives a good idea of the company's historical performance--growing, shrinking, or staying pretty much the same.

With those data, you can decide whether to buy or not (I never short; it's too risky for my blood) based on the market price's relationship to book value.

Regarding those look-back periods, it's a rule of thumb that whatever period you have for your time series, you can predict with a measure of reliability into the future only one-third of the past time frame--a three year history means you can predict with some reliability only one year into the future. Keep in mind here, though, that statistics used this way are probability assessments, not exact or precise determinations. As that great American philosopher said, predicting is hard, especially about the future.

Separately, the market's current apparent craziness isn't all that unusual or worrisome; this sort of volatility is a relatively common occurrence. Just keep your powder dry--hold back some money as cash, and maintain an entirely separate pile of cash or cash equivalents equal to 6 months to a year of household expenses.

Eric Hines