Buffet has structured his business to give him permanent advantage. The core of Berkshire Hathaway is the insurance business, GEICO and Berkshire Reinsurance. These companies are very profitable and generate steady cash inflow. His cash is cheaper compared other investors who get leverage using financial sector and must hedge against loss. This is important when times are tough, money is tight and stock valuations are low. When other investors must sell something they own or take expensive loan to buy what they want, Buffet is drowning in cash and looking ways to spend it.
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>One reason we were attracted to the P/C business was its financial characteristics: P/C insurers receive
premiums upfront and pay claims later. In extreme cases, such as claims arising from exposure to asbestos,
payments can stretch over many decades. This collect-now, pay-later model leaves P/C companies holding large
sums – money we call “float” – that will eventually go to others. Meanwhile, insurers get to invest this float for
their own benefit. Though individual policies and claims come and go, the amount of float an insurer holds
usually remains fairly stable in relation to premium volume. Consequently, as our business grows, so does our
float. .... We recently wrote a huge policy that increased float to more than $100 billion
They have $100 billion float. That's incredible.