- The S&P 500 benefits from a cap-weighted core principle by which growing companies automatically increase in weight; Berkshire's stocks and subsidiaries happen to reflect the same principle.
- The core principle is a two-edged sword, operating in reverse when leading stocks are overpriced and have a large correction; we may now be in such a correction.
- The pin popping the bubble, rising rates, increase the discount factor for future earnings of growth companies and will hit speculative companies without present earnings the hardest.
- Berkshire did well in the 2000 dot.com crash and should be helped by the fact that the market sees Apple as a business and hasn't included its runup in Berkshire's market price.
- Long-term retirement investors in the S&P index probably shouldn't sell because the fundamentals look okay; Berkshire and a few value stocks should also do well.
For further details see:
Buffett's Berkshire And The S&P 500 Share A Two-Edged Sword: Big Winners Overpower Losers