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Using the float shares the solvency risk with borrowing, but they aren't paying 4% on the money.
by vajrabum 9y ago
Using the float shares the solvency risk with borrowing, but they aren't paying 4% on the money.
- kayhi 9y agoCorrect, they are paying essentially 0% interest in exchange for the policy risk. My interest is that the policy risk according to Berkshire actions is less than 4% debt they could likely attain (or better). In other words - they are recommending investors not to use leverage, but in a sense they do use it against policy risk. The trade off between debt and policy risk is interesting as both greatly increase returns by leverage.