Author Topic: berkshire - cheap?  (Read 60638 times)

Cigarbutt

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Re: berkshire - cheap?
« Reply #310 on: December 08, 2018, 10:01:35 AM »
If one looks at the last 20 to 25 years, the comment about the relative balance between cash and bonds held versus reserves is relevant as the ratio has remained quite stable (although Mr. Buffett did modify the balance to some extent in 2001-2 and 2008-11). But this balance did not seem to apply earlier when it looks like Mr. Buffett did use float for equity investment leverage (even if, in some years, like the early 80's, the float could be quite costly). Why?

If one looks at relative "excess" or alpha return from the equity portfolio held or BRK itself versus the market over the last 10-year segments going back to the early days, the "excess" has progressively come down and some of this convergence is due to size but Mr. Buffett, in the last 20 to 25 years, has refrained from using float as leverage in a big way to help maintain the excess returns. Why?

From a risk-based capital and regulatory point of view, it appears that there was ample room to do so although not in an unlimited way.