Subject: Re: Valuation
Berkshire's value, a two-column valuation method (There are variations on two-column methods) will break Berkshire's valuation into two major parts, operating earnings and investments.

Perhaps a third column should be added for cash (cash equivalent)surplus to what is required for underwriting. If the thesis is correct that WB is holding surplus cash to be deployed during a crisis when asset prices have plummeted below asset values, the cash should have a much greater value than its nominal value. I am wondering if this is causing the stock to trade at a high P/B value compared to previous times.

As an example. Today there may be no company available at a reasonable price. Say, in three years time, BRK may be able to buy value at a 25% discount to the actual value. The time value of holding the cash for 3 years is covered by the short term interest rate, therefore the nominal value of the cash on hand is 1.33 times face value.

Of course, the current high P/B may just be due to investors exuberance.

Aussi