Some old timers of COBF may have discussed this and I know Chris Bloomstran discusses a little in his letter; I have been thinking quite a lot about Differed Taxes (21% - maybe going to 35%) on the stocks - specifically Apple. Relevant to the 2030 Berkshire equation.
Apple goes from $35B to $135B - that's a gain of $100B. Pause....we are talking about $100,000,000,000....incredible value creation in 5years. Just to put that in perspective, that's the entire value of: IBM ($106B), Caterpillar ($104B), American Express ($102B), Goldman Sachs ($100B), GE ($97B).
OK, back to the post, $100B Gain in Assets and the offset on Liabilities is 21% Tax Differed on Gain for eventual sale at $21B.
My point, if we are valuing Berk on Price/Book - can we "adjust" the differed tax liability amount essentially boasting the book value on basis that there will not be a sale in these holdings?
Here are some positions that I would consider perma-holds:
American Express...Cost:$1.287B.........Market Val:$19.124B.........UNREALIZED GAIN:$17.837B
Apple....................Cost:$35.287B.......Market Val:$134.163B.......UNREALIZED GAIN:$98.876B
Bank of America.....Cost:$12.560B.......Market Val:$32,586B.........UNREALIZED GAIN:$20.026B
Coca Cola..............Cost:$1.299B.........Market Val:$19.396B.........UNREALIZED GAIN:$18.097B
Moody's.................Cost:$248M...........Market Val:$6.579B...........UNREALIZED GAIN:$6.331B
Visa.......................Cost:$349M..........Market Val:$2.017B...........UNREALIZED GAIN:$1.668B
TOTAL UNREALIZED GAIN:$162.835B @ 21% = $34.195B Differed Tax
With differed tax at $67B as of Q3, we could call the gains in the above 6 names 50% of the differed tax....that hopefully never gets paid. Isnt there an adjustment for this? At very least cant we allocated the $35B and call it "Float"?
I could be missing something here - and I am sure someone has thought about this. Just wanted to share something I was noodling on. Hope all is well - looking forward to new site layout.