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It's Yen-denominated debt-- mostly useful to Berkshire so they can make Yen-denominated investments without currency risk. It's at less than 1% a year, which co

It's Yen-denominated debt-- mostly useful to Berkshire so they can make Yen-denominated investments without currency risk. It's at less than 1% a year, which costs virtually nothing given the options it opens up for Berkshire. And you'll note that that debt makes up less than 1% of its total cash position, it's really just there so Berkshire can buy something quickly in Yen if an opportunity shows up.

algo_trader 6y ago
oh man. nothing you have said make any kind of sense. if they have yen-denominated debt, then they have added currency risk if it is 1% of their cash position, they can just use some cash and buy yens and have those yens available. if they have hedged the bond currency risk, then they might as well have hedged it after buying yens in the open market if it's 1% interest, it is still probably more than the interest they earn on their cash position. just saying... (MAYBE, maybe, its a tax issue)
- CapriciousCptl 6y ago
  You're coming at this from a "hedging" perspective-- Instead, think in terms of what the bond gives him-- a lot of Yen. That's opportunities to invest. The increased "risk" in this sense is miniscule-- since the cost of the oppurtunity is less than 1% Yen a year, even a 200% rise in Yen/USD only actually costs Berkshire 2%. And, my bet is Buffett knows of some companies he could deploy that Yen in right now to cover the interest anyway. He's just lying in wait for better oppurtunities. Now, there could be some other thing going on-- but taxes-wise in general U.S. companies issue US-denominated bonds to repatriate funds so I'm sure where you're going with that. My bet would be if it's not just for the opportunity, it may for their re-insurance reserves.
  - whatok 6y ago
    This doesn't make any sense. Issuers don't need to pre-fund acquisitions before making offers so BRK wouldn't need any JPY before acting and in the event of an acquisition closing, they would easily be able to issuer in any currency on earth. Don't know the name well at all but BRK issued in JPY last year as well so I'm guessing they have some recurring JPY liabilities.
    - CapriciousCptl 6y ago
      What doesn't make sense to you? They're "buying" Yen and paying extraordinarily low long-term rates. Berkshire can't get USD that cheaply. If they had a cash crunch, they could exchange the Yen for USD. If things are well, they can buy Yen-denominated companies with an enormously low cost of capital and without factoring in the exchange rate.

algo_trader 6y ago

oh man. nothing you have said make any kind of sense. if they have yen-denominated debt, then they have added currency risk if it is 1% of their cash position, they can just use some cash and buy yens and have those yens available. if they have hedged the bond currency risk, then they might as well have hedged it after buying yens in the open market if it's 1% interest, it is still probably more than the interest they earn on their cash position. just saying... (MAYBE, maybe, its a tax issue)

CapriciousCptl 6y ago
You're coming at this from a "hedging" perspective-- Instead, think in terms of what the bond gives him-- a lot of Yen. That's opportunities to invest. The increased "risk" in this sense is miniscule-- since the cost of the oppurtunity is less than 1% Yen a year, even a 200% rise in Yen/USD only actually costs Berkshire 2%. And, my bet is Buffett knows of some companies he could deploy that Yen in right now to cover the interest anyway. He's just lying in wait for better oppurtunities. Now, there could be some other thing going on-- but taxes-wise in general U.S. companies issue US-denominated bonds to repatriate funds so I'm sure where you're going with that. My bet would be if it's not just for the opportunity, it may for their re-insurance reserves.
- whatok 6y ago
  This doesn't make any sense. Issuers don't need to pre-fund acquisitions before making offers so BRK wouldn't need any JPY before acting and in the event of an acquisition closing, they would easily be able to issuer in any currency on earth. Don't know the name well at all but BRK issued in JPY last year as well so I'm guessing they have some recurring JPY liabilities.
  - CapriciousCptl 6y ago
    What doesn't make sense to you? They're "buying" Yen and paying extraordinarily low long-term rates. Berkshire can't get USD that cheaply. If they had a cash crunch, they could exchange the Yen for USD. If things are well, they can buy Yen-denominated companies with an enormously low cost of capital and without factoring in the exchange rate.