Berkshire 2030

[longterminvestor]

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. 

[woodstove]

Interesting post LTI.  Well, just thinking laterally -- Apple could acquire BH and thereby achieve a big stock buyback.  Would that resolve the deferred tax liability?

[no_free_lunch]

Berkshire has a number of wholly owned subsidiaries that are not publicly listed. if they were they would trade relative to earnings not book value. As such it may not be fair to compare them other conglomerates.

Another way to look at it, imagine if Berk had bought apple outright. They would list it at book, purchase price, and you would only see gains to book. However I suspect the stock price of apple has outgrown the book value increase of the same company.  So by owning the equity shares their "book" has gone up more than if they had owned the same company consolidated on their balance sheet.  Hence why buffet believes true book is some multiple of the reported value.

I am just echoing above a discussion I read here years ago.  Essentially it is complicated and not all book values are the same.