"Berkshire's valuation level seems to be a pinch above its modest post-crunch average"

Jim, is it possible that Berkshire's valuation in the next decade will be higher than that in the last decade because of differences in earnings attributed to the cash level (assuming that interest rates in the next decade are higher than in the last decade)?

For instance, at an interest rate of 5%, $130 billion earns $6.5 billion, which is not an insignificant amount. In the last decade, the cash position was not yielding anything close to this amount.

If this amount of $6.5 billion, very crudely, adds 12% to the look through earnings, is it likely that the valuation level increases by 12%?

I think you said that the mean P/B of Berkshire in the last decade (or roughly similar time period) was 1.35. If you add 12% to it, we get a P/B of 1.51.

Of course, one is welcome to plug in their own assumptions regarding the likely interest rates going forward, cash position of Berkshire, etc.

Berkshire Hathaway FAQ

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