6 ms·
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 incr
by 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 agoThis 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 agoWhat 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.