Yeah, we talk about Berkshire's use of leverage via float - below is the ratio of cash + fixed income to float from 2010 to 2013:

Cash+Fixed/Float
105%
92%
100%
94%
101%
99%
102%
109%
105%
111%
113%
109%
92%
111%

With hindsight, it seems they could have used some of that cash more productively.


Probably you mean 2010 to 2023?

If so, on the positive side, rates are a lot better for us today than before. From 2009 to 2022, with the exception of 3 years of moderate Treasury yields, we had rates close to zero, say 0.1% on average, with inflation averaging about 2%. 2017 to 2020 wasn't much better, with short-term treasury rates averaging about 1.2%. So in other words, that $66b growing to $170b cash pile was actually losing value, while Buffett waited for an elephant that never showed up.

Now, we have $170b presumably earning about 5.4% (the 1-month or 3-month treasury yield), minus say 15% in tax, so let's say 4.6%, against a backdrop of 3.5% inflation. At least it's not shrinking.

But yes, if half of that cash had been put in an index fund, starting in 2010 when there was $66b of float, it would be up 6 times (in nominal terms) rather than being roughly flat. That's a pretty big missed opportunity.

As it stands, 4.5% on $170b in float invested in short-term treasuries generates $7.6b in net income, no longer insignificant compared to the $37b in operating earnings last year. Yes, Jim would rightly nuance this rosy view by saying that 3.5% inflation takes most of those gains back away, but the present annual 1.1% real gain is still a lot better than the annual 2% real loss we had to live with for the previous last 13 years.

dtb