Wednesday, February 18, 2009

Buffett's float liability ---$59 billion

Here's are just a couple of nuggets from Berkshire's 2007 annual report, that people seem to overlook:

Qouting John Stumpf of Wells Fargo:

John Stumpf, CEO of Wells Fargo, aptly dissected the recent behavior of many lenders: “It is interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine.”

It looks like Wells Fargo is losing money the old fashioned way! And he has cost Buffett $7 billion since the annual report was written!

Berkshire's "float":

Insurance float – money we temporarily hold in our insurance operations that does not belong to us – funds $59 billion of our investments. This float is “free” as long as insurance underwriting breaks even, meaning that the premiums we receive equal the losses and expenses we incur. Of course, insurance underwriting is volatile, swinging erratically between profits and losses. Over our entire history, however, we’ve been profitable, and I expect we will average breakeven results or better in the future. If we do that, our investments can be viewed as an unencumbered source of value for Berkshire shareholders.

Until they're not! Especially with investments like WFC!

Warren Buffett always said he didn't mind paying taxes. At least he won't have to pay taxes and the gains he has given back!

Rahm Emanuel didn't pay rent for five years, and didn't pay taxes on the same because, he said it was just "allowable hospitality."

Buffett's "allowable hospitality" with Stumpf helped Buffett avoid over a billion in taxes by not selling the stock, but it cost shareholders $7 billion!

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