David, two posts you may find interesting regarding BRK’s P/E.
messages.yahoo.com
messages.yahoo.com
These are from one of those guys who believes BRK’s float has mystical powers (I’m putting words in his mouth there). His argument is that BRK has and will continue to have huge amounts of extremely low cost float. As you probably know, other insurance cos generally have much higher costs of float than BRK. All float is not created equal. This point is critical to understanding why BRK’s float really is different. Historically, there have been years where the cost of BRK’s float at certain BRK subs has been at or near Zero, Zip, Nada! Zero cost float is the closest thing there is in real life to the proverbial money tree.
The thought of Buffett harvesting “free” money from his tree, then using his investment genius to invest it, is indeed mystical to many BRK owners. The word alchemy comes to my mind. Adding reality to the mysticism is the extremely tax efficient way in which the “free” money is harvested and reinvested. Almost none of the money falls into Uncle Sam’s lap.
In the Q3/99 report, Buffett announced that BRK would add ~$3 Billion in float to its coffers in Q1/01. The mystical tree is growing larger. The trunk is getting broader, branches are becoming more numerous, allowing it to bear more and more sweet fruit.
Regards,
Jacques |
