4 ms·

Your quote might be correct, but I think Berkshire Hathaway is anything but a boring bank. Do you read Buffet's yearly letters? They're great. http://www.berk

Your quote might be correct, but I think Berkshire Hathaway is anything but a boring bank. Do you read Buffet's yearly letters? They're great. http://www.berkshirehathaway.com/letters/2014ltr.pdf http://www.berkshirehathaway.com/letters/2014ltr.pdf

coliveira 11y ago
What makes Buffet a financial genius is exactly the fact that he likes boring companies, as he himself acknowledges. So, there is certainly a lot to be learned from Berkshire Hathaway, but while it is not a traditional bank or insurer, it is most certainly a company that only invests in boring, profitable businesses.
- tim333 11y ago
  They have the occasional less boring ones. Netjets fractional jet ownership and BYD electric and other cars for example.
nickpsecurity 11y ago
Thanks for posting it. That was the report on a business I actually enjoyed reading. It has personality and good advice embedded in it. If I was a shareholder, this particular quote would have me feeling quite assured: "Indeed, we are far more conservative in avoiding risk than most large insurers. For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe – a loss about triple anything it has ever experienced – Berkshire as a whole would likely record a significant profit for the year because of its many streams of earnings. We would also remain awash in cash and be looking for large opportunities in a market that might well have gone into shock. Meanwhile, other major insurers and reinsurers would be far in the red, if not facing insolvency." Smart.
- hartator 11y ago
  Not if the government will buy you out if you are facing insolvency. Taking more risks is actually the right thing to do in this environment.
  - mercer 11y ago
    I suppose that depends entirely on what you consider to be 'the right thing to do'.
  - nickpsecurity 11y ago
    Good point. You can bet that popped into my mind when I was reading it: some of my own friends who saw it coming lost everything because they pulled their clients out of the bad investments. Which got bailed out and became the good investments. (sighs)
  - maxerickson 11y ago
    The government buyout was not a great deal for AIG shareholders: https://en.wikipedia.org/wiki/American_International_Group#Liquidity_crisis_and_government_bailout https://en.wikipedia.org/wiki/American_International_Group#L... The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company It might be good for executives and other employees to take excess risks, but it probably isn't good for shareholders, they generally lose a substantial amount of their investment in an emergency bailout, most of it in a bankruptcy.
    - rodgerd 11y ago
      > The government buyout was not a great deal for AIG shareholders: Good. The legitimate use of taxpayer money in propping up for-profit organisations should be to prevent a broader social problem, not to guarantee the ROI of investors.
  - nostrademons 11y ago
    FWIW, we actually saw this in the last financial crisis, where Berkshire Hathaway funded a $2B bailout of Goldman Sachs that he exited for a healthy profit. A bailout is basically just redirecting the assets of the healthy part of the economy towards a part of the economy that has lost confidence, oftentimes at a profit (the government profited from the TARP bailout). The government does this using its power to tax. Berkshire does it through the power of Americans' insatiable demand for candy, sugar-water, freight transport, and peace of mind. Having large cash reserves just lets it participate in these deals where you would otherwise need a state-sized actor, much like how the Rothschilds owned much of 19th-century Europe.

coliveira 11y ago

What makes Buffet a financial genius is exactly the fact that he likes boring companies, as he himself acknowledges. So, there is certainly a lot to be learned from Berkshire Hathaway, but while it is not a traditional bank or insurer, it is most certainly a company that only invests in boring, profitable businesses.

tim333 11y ago
They have the occasional less boring ones. Netjets fractional jet ownership and BYD electric and other cars for example.

nickpsecurity 11y ago

Thanks for posting it. That was the report on a business I actually enjoyed reading. It has personality and good advice embedded in it. If I was a shareholder, this particular quote would have me feeling quite assured: "Indeed, we are far more conservative in avoiding risk than most large insurers. For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe – a loss about triple anything it has ever experienced – Berkshire as a whole would likely record a significant profit for the year because of its many streams of earnings. We would also remain awash in cash and be looking for large opportunities in a market that might well have gone into shock. Meanwhile, other major insurers and reinsurers would be far in the red, if not facing insolvency." Smart.

hartator 11y ago
Not if the government will buy you out if you are facing insolvency. Taking more risks is actually the right thing to do in this environment.
- mercer 11y ago
  I suppose that depends entirely on what you consider to be 'the right thing to do'.
- nickpsecurity 11y ago
  Good point. You can bet that popped into my mind when I was reading it: some of my own friends who saw it coming lost everything because they pulled their clients out of the bad investments. Which got bailed out and became the good investments. (sighs)
- maxerickson 11y ago
  The government buyout was not a great deal for AIG shareholders: https://en.wikipedia.org/wiki/American_International_Group#Liquidity_crisis_and_government_bailout https://en.wikipedia.org/wiki/American_International_Group#L... The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company It might be good for executives and other employees to take excess risks, but it probably isn't good for shareholders, they generally lose a substantial amount of their investment in an emergency bailout, most of it in a bankruptcy.
  - rodgerd 11y ago
    > The government buyout was not a great deal for AIG shareholders: Good. The legitimate use of taxpayer money in propping up for-profit organisations should be to prevent a broader social problem, not to guarantee the ROI of investors.
- nostrademons 11y ago
  FWIW, we actually saw this in the last financial crisis, where Berkshire Hathaway funded a $2B bailout of Goldman Sachs that he exited for a healthy profit. A bailout is basically just redirecting the assets of the healthy part of the economy towards a part of the economy that has lost confidence, oftentimes at a profit (the government profited from the TARP bailout). The government does this using its power to tax. Berkshire does it through the power of Americans' insatiable demand for candy, sugar-water, freight transport, and peace of mind. Having large cash reserves just lets it participate in these deals where you would otherwise need a state-sized actor, much like how the Rothschilds owned much of 19th-century Europe.