Subject: Re: IV
Jim,

Thanks for the constructive comments, as always.
* Rather than using 10 year average insurance operating earnings, I suggest using 10 year (or whatever) average of the underwriting profit as a *percentage* of the size of the insurance business rather than an absolute number.

Makes sense, I'll try that out.

* In that last part, you seem to be evaluating cash-vs-other as a percentage of market cap to get a view of the capital structure. This isn't really very meaningful.

This is an idea I got from Buffett's interview with Becky back in 2020:

CNBC 2/24/20 WARREN BUFFETT: We own-- if you think about it, we’re 80-some-percent in equities. We may show $230 or $240 billion in equities, and that looks like we’re, against our market cap, we’re 40%. But we own 100% of these other businesses. Those are equities, too. I mean, we own a railroad. And we-- we own insurance companies. And those are-- those are equities. So, we’re about 80% in-- roughly in equities and about 20% in cash. And I’d rather-- I’d rather have that 20% in other good businesses. But, that is to some extent a curse of size. And it’s to some extent the fact that, it’s very hard. If interest rates stay at this level, we’ll wish we’d-- for the next 10 or 20 years, we’ll wish we’d been 125% in equities. I mean, it-- you know, equities are so much cheaper than bonds, long bonds, that-- you know, some-- something will change in a major way. I just don’t know what. And I want to be prepared for anything obviously.

I added a column to my spreadsheet back then and extrapolate: if Berkshire was 80/20 then, now they are...and it comes to about 66/34. It was just a very rough way of thinking about the size of the cash pile.