Now Barron Calls Berkshire Undervalued!

Was reading Barron's article: Finally, Berkshire Looks Undervalued

The following passages caught my attention.

• The selloff reflects concern about Berkshire's equity portfolio, valued at $76 billion on Sept. 30, plus a sizable bet involving put options on $37 billion of equity indexes, including the Standard & Poor's 500 and foreign markets. The derivatives bet, while ultimately likely to be profitable, looks like a rare mistake by Berkshire CEO Warren Buffett, who couldn't be reached for comment on this story.
• If the stock market rallies in 2009, Berkshire probably will see record profits. Its operating profits this year could be about $5,400 per Class A share, excluding losses on equity and junk-bond derivatives that may cause a fourth-quarter loss. One big investor says earnings could hit $7,000 a share by 2010, a modest 13 times the current stock price.
• The puts give their buyers the right to make Berkshire buy the indexes at a set price, based on the indexes' level on the day the options were sold, mostly from 2005 through 2007. The puts, whose current value is difficult to determine, don't jibe with Buffett's frequent criticism of derivatives as "financial weapons of mass destruction."
• BUFFETT PROBABLY FIGURED he was getting a great deal by pocketing $4.8 billion in premiums for writing at-the-money puts on some $37 billion of equity indexes with maturities from 2019 to 2027. The puts are only exercisable at maturity, and don't require Berkshire to post collateral whenever the markets fall and their value rises. Who knew that stocks would keep sinking?

$37 billion of equity indexes that matures from 2019 to 2027.

We are now only 2008!

The puts are only exercisable at maturity and don't require Berkshire to post collateral whenever the markets fall and their value rises!

From now till 2019.. I wonder if the markets will be in a loooooong doom? Is that even possible?

A Wanderer highlighted this link to me: http://www.michaelcovel.com/2008/11/20/danger-will-robinson/

See point 3!

• 3. When do stocks stop falling? When one of the big guys, preferably the bull’s poster boy Mr. Buffett, collapses. Buffett going down would be a signal for panic, which would lead to an eventual selling climax. He wasn’t predicting this, it was just his temperature gauge on what needs to happen for pain to subside. He did note Buffett’s derivative exposure.

LOL!

Bull's poster boy?!

Buffett collapses?!

ROFLMAO!

You really got to give it A1 for originality!