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01-12-2012, 05:19 PM
(This post was last modified: 01-12-2012, 05:55 PM by cyclone.)
Hi all,
I've been thinking on this one
so the definition of 'wealth' in his context is pretty much the cashflow that you are getting on your stock investment?
thus the price fluctuation is purely there to give you opportunity to enter the great businesses
do correct me if I'm wrong
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One important reason is that he can't sell or is not willing to sell.
for the rest of us, our wealth changes greatly when price of stock increases. Ask Peter Lim.
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01-12-2012, 08:07 PM
(This post was last modified: 01-12-2012, 08:08 PM by sgd.)
His wealth is mostly from cashflow, most investors make money when stock prices go up, if he is in the same category then oracle of omaha is really no big deal so that's why he has to be different and to be different means you have to pick good managers.
There are loads of people who have a career from watching and analyzing him if he sells a stock news will spread people will take it as a sign of no confidence or just blindly follow to unload that stock will plunge and he also will take a hit so unless he really made a mistake to intentionally unload the stock or for some other reason he does it.
Also another small problem is he created very high standards for himself and for his future successor - is from years of delivering good returns and people have come to expect it.
Like apple, there is only 1 steve jobs and after he is gone look at what happen to his successors all are being measured with the same brush all are being expected no less to live up to or exceed their predecessor, Berkshire has my vote of going the same way once buffet adios.
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but think about this:
companies in the market earning the same level and "new money" comes in and just push the price high across the market, making everyone's portfolio go up substantially
isn't this just an illusion of wealth?
all this while, assume you own this businesses privately, you are making the same level of earnings
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but do you own the business wholly or substantially? if not, then it is different.
just like accounting, in general, owning 20 - 50% is an associated company. more than 50% is a subsidiary. less than 20%, it is just an investment. price up & down either goes to P&L or reserve, depending on the duration of the investment(short term or long term). but either way, the investment is part of the assets of the company, so price up or down increases/decreases the assets of the company, indirectly increases/decreases the equity(wealth) of the company if others remain the same.
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