Halls of Shrewd'm / US Policy❤
No. of Recommendations: 2
I think that BRK deployed less than $20B in 2008. So if the next GFC in 3(?) years $50B is used. What happens to the rest of the cash?
It seems to me that the cash is being held for another GFC doesn't seem correct.
Aussi
No. of Recommendations: 19
In the 2004/2006 timeframe when Warren was getting more cautious and letting cash accumulate, Berkshires market cap, if I recall, was about 1/6 it’s present market cap. Multiple that $20 Billion you referenced by 6…then add a number that represents Buffett later admitting he should have gone more “all in” —and I think you comfortably get something north of $200 Billion. For what you reference.
BTW, I don’t think this is part of some grand specific plan. I think it’s a Put with no expiry on the greater than very small chance of a systemic blowup… in an overpriced market, with a vast overweight on an overloved expensive Apple.
Getting 4% liquid, risk free is not a bad place to be overweight. The optionality it buys is enormous. You get maybe $15 billion a year 100% safe with a free, no expiry Armageddon put that could pay in the low $Trillions. What’s wrong with this at S&P 23X in a debt bubble?
No. of Recommendations: 18
I think that BRK deployed less than $20B in 2008. So if the next GFC in 3(?) years $50B is used. What happens to the rest of the cash?
Depending on your definition of the stretch of the credit bear, it was more than that.
Some capital commitments in the broad 2008 bear era, billions, from Mr Tilson's summary:
Mars/Wrigley 6.5
Auction rate securities 6.5
Goldman 5.0
Constelletion 5.7
Marmon 4.5
General stock purchases 3.3
Dow/Rohm&Hass 3.0
GE 3.0
Fed Home Loan discount notes 2.4
Tungaloy 1.0
Swiss Re unit 0.8
ING re unit 0.4
Other businesses 3.9
Total of above $46.0 billion *
Most folks agree it would have been more but for the fact that public market prices were *really* attractive for such a short time in early 2009.
The balance sheet is now 4.25 times as big as it was then, so that would be roughly equivalent to deploying $195bn these days. If we were to see a bear in the next year or two and that much came to be deployed, I wouldn't find it unreasonably hesitant.
Jim
* That excludes BNSF agreed in 2009, whose stock price I believe was at the ~$80 target level only because of the lingering effects of the bear.
Jim
No. of Recommendations: 8
The balance sheet is now 4.25 times as big as it was then, so that would be roughly equivalent to deploying $195bn these days.
Yes, the balance sheet is much bigger, however, has the mindset of the people making the decisions also change to allow a deployment of $200B when the world is crumbling. Obviously, I do not know but my guess is that a CEO in excess of 97 years old (it will not happen soon as it will take time to evolve) who would naturally be concerned about putting his successor in a perilous position, or a new CEO will struggle to fully take advantage of the situation. Perhaps there is a plan and a list that when current $100B market cap companies fall to $25B they will swoop in to purchase or help. However, I do not see $200B being deployed in a GFC type crisis.
Aussi
