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> profits made from the myriad of wholly owned businesses such as insurance, railroads and utilities Genuinely curious where you would rather that capital be a

> profits made from the myriad of wholly owned businesses such as insurance, railroads and utilities Genuinely curious where you would rather that capital be allocated?

monero-xmr 3y ago
Why not have the government seize all of it to pay a few days of deficit spending
- sickofparadox 3y ago
  I thought the goal was to efficiently allocate the money, not waste it as fast as possible?
oofta-boofta 3y ago
[dead]
raesene9 3y ago
I'm not GP but, in theory, if a corporation can't find any opportunities for use of capital greater than holding it in safe/cash-like instruments and sees no possibility of those opportunities emerging in the short-medium term, it should be distributed to shareholders, who may well have use for it (even if those shareholders are just intending to put it into cash-like instruments themselves). The counter arguments that I've seen (there may well be others) are either that it does see those opportunities, but not at this precise moment in time, so is keeping the cash for later. At the level of $156b, this seems a bit unlikely but hey maybe they have some great ideas in the pipeline. The alternative is that they don't but aren't distributing it to shareholders, because of the tax implications of that distribution (and in general many corporations seem to favour buybacks rather than dividends for tax reasons), and they have some hope that those tax implications will change in the future (or their share price will fall, allowing for better buybacks), allowing them to then distribute the money in a way that benefits the shareholders more.
- explaininjs 3y ago
  As an employee I'd much prefer my company to hold onto a rainy day // R&D fund than play stock market games.
- RationalDino 3y ago
  Don't forget, reinsurance is a GIANT part of Berkshire Hathaway's business. If the right major disaster hits, they need a lot of liquid assets to pay it out. As https://www.reuters.com/article/us-berkshire-buffett-insurance/buffett-says-berkshire-can-handle-400-billion-mega-catastrophe-idUSKCN1G80RA https://www.reuters.com/article/us-berkshire-buffett-insuran... says, Buffett gives a 2%/year probability to a $400 billion mega-catastrophe that is likely to wipe out a good chunk of the insurance industry. If that happens, Berkshire Hathaway will be able to pay its share of the claims. Add that to your thinking. Does maintaining a $150 billion reserve sound so crazy now?
  - raesene9 3y ago
    I'd be extremely surprised if the parent company (berkshire hathaway) had structured their companies in a way that left them liable to re-insurance risk :) They may own re-insurance companies, but that doesn't make them liable for losses in those companies. My understanding of berkshire's business model was that they're heavily diversified, so that they're not as vulnerable to catastrophic loss from a single company/industry.
    - RationalDino 3y ago
      Yes, but the float in those insurance companies is invested by Berkshire Hathaway. So when people report on BH, they often quote the float as a pile of cash that Buffett is sitting on. I tried to verify this by looking at the financial report that it is based on. Which may be found at https://www.berkshirehathaway.com/qtrly/3rdqtr23.pdf https://www.berkshirehathaway.com/qtrly/3rdqtr23.pdf. Unfortunately the $157 billion figure quoted in the title does not appear anywhere in the report. But page 37 quotes the float as being approximately $167 billion at September 30, 2023. So I suspect that they are quoting the float, and have a typo. Though they might be doing a calculation off of some other numbers. My claim about how they think about it can be verified on page 32. "Our management views our insurance business as possessing two distinct activities – underwriting and investing. Underwriting decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett, and Berkshire’s corporate investment managers. Accordingly, we evaluate the economic performance of underwriting operations without any allocation of investment income or investment gains and losses. We consider investment income as an integral component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating. We believe that such gains and losses are not meaningful in understanding the quarterly or annual operating results of our insurance businesses."
TheOtherHobbes 3y ago
BH could always buy Twitter.
burkaman 3y ago
I'm guessing they would rather it be allocated to anything at all, rather than sitting in a "cash pile".
- phocion 3y ago
  I mean, it's not like there is a literal $150B pile of cash sitting in a vault anywhere. In practice "sitting in cash" means holding short-term Treasury bills / bonds, i.e. effectively loaning that money to the government to pay for public expenses.
devnullbrain 3y ago
Would you rather have $10 or 10% of the rights to $100 in a safe?

> profits made from the myriad of wholly owned businesses such as insurance, railroads and utilities Genuinely curious where you would rather that capital be allocated?

monero-xmr 3y ago

Why not have the government seize all of it to pay a few days of deficit spending

sickofparadox 3y ago
I thought the goal was to efficiently allocate the money, not waste it as fast as possible?

oofta-boofta 3y ago

[dead]

raesene9 3y ago

I'm not GP but, in theory, if a corporation can't find any opportunities for use of capital greater than holding it in safe/cash-like instruments and sees no possibility of those opportunities emerging in the short-medium term, it should be distributed to shareholders, who may well have use for it (even if those shareholders are just intending to put it into cash-like instruments themselves). The counter arguments that I've seen (there may well be others) are either that it does see those opportunities, but not at this precise moment in time, so is keeping the cash for later. At the level of $156b, this seems a bit unlikely but hey maybe they have some great ideas in the pipeline. The alternative is that they don't but aren't distributing it to shareholders, because of the tax implications of that distribution (and in general many corporations seem to favour buybacks rather than dividends for tax reasons), and they have some hope that those tax implications will change in the future (or their share price will fall, allowing for better buybacks), allowing them to then distribute the money in a way that benefits the shareholders more.

explaininjs 3y ago
As an employee I'd much prefer my company to hold onto a rainy day // R&D fund than play stock market games.
RationalDino 3y ago
Don't forget, reinsurance is a GIANT part of Berkshire Hathaway's business. If the right major disaster hits, they need a lot of liquid assets to pay it out. As https://www.reuters.com/article/us-berkshire-buffett-insurance/buffett-says-berkshire-can-handle-400-billion-mega-catastrophe-idUSKCN1G80RA https://www.reuters.com/article/us-berkshire-buffett-insuran... says, Buffett gives a 2%/year probability to a $400 billion mega-catastrophe that is likely to wipe out a good chunk of the insurance industry. If that happens, Berkshire Hathaway will be able to pay its share of the claims. Add that to your thinking. Does maintaining a $150 billion reserve sound so crazy now?
- raesene9 3y ago
  I'd be extremely surprised if the parent company (berkshire hathaway) had structured their companies in a way that left them liable to re-insurance risk :) They may own re-insurance companies, but that doesn't make them liable for losses in those companies. My understanding of berkshire's business model was that they're heavily diversified, so that they're not as vulnerable to catastrophic loss from a single company/industry.
  - RationalDino 3y ago
    Yes, but the float in those insurance companies is invested by Berkshire Hathaway. So when people report on BH, they often quote the float as a pile of cash that Buffett is sitting on. I tried to verify this by looking at the financial report that it is based on. Which may be found at https://www.berkshirehathaway.com/qtrly/3rdqtr23.pdf https://www.berkshirehathaway.com/qtrly/3rdqtr23.pdf. Unfortunately the $157 billion figure quoted in the title does not appear anywhere in the report. But page 37 quotes the float as being approximately $167 billion at September 30, 2023. So I suspect that they are quoting the float, and have a typo. Though they might be doing a calculation off of some other numbers. My claim about how they think about it can be verified on page 32. "Our management views our insurance business as possessing two distinct activities – underwriting and investing. Underwriting decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett, and Berkshire’s corporate investment managers. Accordingly, we evaluate the economic performance of underwriting operations without any allocation of investment income or investment gains and losses. We consider investment income as an integral component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating. We believe that such gains and losses are not meaningful in understanding the quarterly or annual operating results of our insurance businesses."

TheOtherHobbes 3y ago

BH could always buy Twitter.

burkaman 3y ago

I'm guessing they would rather it be allocated to anything at all, rather than sitting in a "cash pile".

phocion 3y ago
I mean, it's not like there is a literal $150B pile of cash sitting in a vault anywhere. In practice "sitting in cash" means holding short-term Treasury bills / bonds, i.e. effectively loaning that money to the government to pay for public expenses.

devnullbrain 3y ago

Would you rather have $10 or 10% of the rights to $100 in a safe?