Minnesota Insurance

A week before Warren Buffett, the world’s largest investors, annually publishes its chairman in his letter to Berkshire Hathaway Inc. The biggest part of the answer to his remark that the market is not overvalued. Wow! What a relief for America’s investors thought, command prompt, the Dow Jones Industrial Average daily in recent weeks - with a total volume of more than 300 points.

In fact, if you read the letter, you find that Buffett is at least as ambiguous as Fed Chairman Alan Greenspan on market prospects. A year ago, wrote Buffett, Charlie Munger and his (her teeth and brain Sidekick) “explains that we do not believe the market overvalued if 1) interest rates remained where they were or fell, and 2) the USA business to continue to earn the remarkable return on equity, she recorded “. If these two conditions, said he, “there is no reason to believe that stocks, as is generally overvalued.”

But what are the chances that high returns on capital - the sparkling gains in the past three years - is to continue? I am not very optimistic, and Buffett is not a game of chance.

So when he thinks that the market is overvalued, why he made the remark early in his letter: “We are not satisfied with our prospects because of the entrance. High prices for both businesses and stocks. This does not mean that prices of the two cases - we have absolutely no opinion on this matter. ”

“No opinion”: This is the Buffett we know and love talk. In his letter of the President 1992, he wrote that he had “long regarded as the sole shareholder value, it is Prognostikern, card storage look good. After this excellent philosophy, investors should ignore the market. ( “What concerns me,” he said, “the stock market is not available. It is therefore only as a reference, to see if someone offers to do all ridiculous.”) But it can not resist, comments.

But what makes Buffett on the market is much more important than what he says about it. Regular readers learned by the President in his letter that “we have net sales during the year amounted to about 5 per cent at the beginning of our portfolio.” Thus, while Buffett does not believe that the market is overvalued, it was a seller of stocks.

Instead, Buffett was buying silver - 111.2 million ounces, now worth about $ 600 million - and zero-coupon U.S. Treasury Bonds. Its zeros at the end of the year was valued at $ 4.6 billion, for a pretax profit of $ 599 million. Buffett also found another, smaller “position unconventional” in derivative contracts of 14 million barrels of oil valued at approximately $ 200 million.

These investments do not seem typical of a man comfortable with an eye on the stock market. Is it tries we remain optimistic, so that more gullible buyers for the shares it intends to unload? It might perhaps not as clever. Or could it?

Buffett has some purchases in the last year. But before we have them, it is important to understand the structure of Berkshire. It is a holding company that owns, instead of activity. Its portfolio includes both business and the great flea market from the reserve to large enterprises.

During the latter category, Berkshire owns 11 percent of American Express Co. (worth $ 4.8 billion at current prices), 8 percent of Coca-Cola Co. (worth $ 15 billion, its largest holding), 3 Percent of the Walt Disney Co. ($ 2.3 billion), 9 percent of mortgages Freddie Mac Maker ($ 2.9 billion), 9 percent of Gillette Co. ($ 5.6 billion), 17 percent of Washington Post Co. ($ 800 million) and 8 percent of Wells Fargo & Co., the bank established in California ($ 2.2 billion).

Dont nothing more this year on the list McDonald’s Corp. last year, according to the letter, Berkshire 4.3 per cent in possession of the company with a value of approximately $ 1.3 billion. Buffett also said he sold shares of Freddie Mac, Disney and Wells Fargo.

Acquisitions 1997, in the first category: Companies hundred per cent of companies such as Geico Corp. magnificent, See’s Candy Shop Inc (large lollipop chocolate!), The Buffalo News and Flight Safety International Inc., trains pilots.