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Warren Buffett calls insurance Berkshire Hathaway's most important sector

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Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#21

Post by [deleted] »

Nokinside wrote: post #19
tptacek wrote: post #10

Search for any recent year and "berkshire letter", then, in the PDF, search for "insurance", and you'll see Buffett saying something similar going back as far as you can find Berkshire shareholder letters.

The real genius of Buffet is not the ability to make series of good investments, it's how he has structured his business. Berkshire makes steady amount of money (float and profit) from insurance business. They have always cheap money to invest, even in bad times when money is expensive. When there is downturn and buying opportunities arise, other investors must sell something good, arrange expensive financing, or dil…

[deleted]

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#22

Post by jbdubwub »

valuearb wrote: post #13
tptacek wrote: post #11

Earlier quoted context omitted.

Berkshire entered insurance in 1967; were their best years prior to that?

Buffett's best years were the Buffett Partnerships, from 1956 to 1969 (iirc), where his returns averaged 40% per year. Berkshire has benefitted from insurance float for a long time, but it's a minor benefit. Float can't be invested in the stock market, it's extremely restricted in it's usage, and it's only been helpful because of the incredibly disciplined way Berkshire runs it's insurance companies. Proof is it neve…

That's not proof at all. 60 years ago markets were much less efficient than they are today, and Buffett Partnerships was incredibly small compared to the size Berkshire is now.

Buffett has said it ad nauseum- the anchor around his neck is the size. Beating the market with what $200 billion to invest? That's leagues different from beating it with $10 million.

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#23

Post by jbdubwub »

valuearb wrote: post #6
Animats wrote: post #2

That's how he made his money, with GEICO. And there's so much that can be done with the "float".

Berkshire Hathaway didn't purchase shares in GEICO until the mid to late 70s (he was already worth hundreds of millions) and didn't buy it outright until 1995 (when he was a multibillionaire). Before purchasing GEICO, Buffett averaged a 40% annualized return in his investment partnerships over 13 years, then averaged a 25% annualized return in Berkshire Hathaway for two and half decades. He was already the greatest i…

Even if Berkshire didn't produce an underwriting profit, it'd still be very successful because of the returns they make on their float. There's a line obviously you can't cross but even if they had a combined ratio of like 1.05 they'd be fine. I like their discipline though.

Berkshire has always had a huge insurance component. They bought NICO in the late 60s and built the business to a large part around that.

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#25

Post by Jtsummers »

tptacek wrote: post #20
Jtsummers wrote: post #15

Earlier quoted context omitted.

Nevada residents don't pay income taxes. They pay sales and property taxes (primarily). The majority of the income in the state, however, comes through sales taxes. Almost certainly not all from residents. Nevada itself is subsidized by outsiders visiting the state. The people of Nevada lose more money in what they choose not to tax the casinos that whatever they may have directly or indirectly put into Musk's factor…

So you're saying the taxpayers fund things through an even more regressive process than income taxes.

Well, there is that. But also a large percentage of the sales tax (which includes hotels and such) comes from tourists, not residents.

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#26

Post by valuearb »

Jtsummers wrote: post #15
valuearb wrote: post #12

Earlier quoted context omitted.

"We do not want our million plus customers that do not have solar to be buying solar at 10.5 cents when we can turn it out for them at 4.5 cents or buy it for them at 4.5 cents,” Buffett told CNBC Monday morning during a wide-ranging interview. “So we do not want the non-solar customers, of whom there are over a million, to be subsidizing the 17,000 solar customers.” The real shark was Musk, who was just mad that he…

Nevada residents don't pay income taxes. They pay sales and property taxes (primarily). The majority of the income in the state, however, comes through sales taxes. Almost certainly not all from residents. Nevada itself is subsidized by outsiders visiting the state. The people of Nevada lose more money in what they choose not to tax the casinos that whatever they may have directly or indirectly put into Musk's factor…

This is like saying the thief who stole my car didn’t hurt me cause I’m only working part time and can easily work more hours to buy another.

The money gifted Musk could have gone to schools. Higher taxes on casinos and tourists isn’t free, it means fewer casinos and tourists. And it also can go to schools.

Giving billionaires handouts is terrible public policy.

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#27

Post by kchoudhu »

valuearb wrote: post #12
kchoudhu wrote: post #3

There's also his ownership stake in NVEnergy, which exploits Nevada's citizenry using a government sanctioned monopoly. Solar died in Nevada in no small part due to Buffet's lobbying; don't be fooled by the aww-shucks demeanour, the dude is a shark.

"We do not want our million plus customers that do not have solar to be buying solar at 10.5 cents when we can turn it out for them at 4.5 cents or buy it for them at 4.5 cents,” Buffett told CNBC Monday morning during a wide-ranging interview. “So we do not want the non-solar customers, of whom there are over a million, to be subsidizing the 17,000 solar customers.” The real shark was Musk, who was just mad that he…

Where have I heard this line of reasoning before? Oh yeah!

"We don't want healthy people to subsidize sick people."

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#28

Post by kchoudhu »

rayiner wrote: post #16
kchoudhu wrote: post #3

There's also his ownership stake in NVEnergy, which exploits Nevada's citizenry using a government sanctioned monopoly. Solar died in Nevada in no small part due to Buffet's lobbying; don't be fooled by the aww-shucks demeanour, the dude is a shark.

It’s a regulated public utility, like almost every electric distribution company. Nevada’s electric rates, which are subject to government review and approval, are below the national average. What’s exploitive about it?

Obviously there's excess rent to be had, otherwise Buffet wouldn't have entered the fray.

I would like to see that excess returned to customers.

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#29

Post by mathattack »

Nokinside wrote: post #19
tptacek wrote: post #10

Search for any recent year and "berkshire letter", then, in the PDF, search for "insurance", and you'll see Buffett saying something similar going back as far as you can find Berkshire shareholder letters.

The real genius of Buffet is not the ability to make series of good investments, it's how he has structured his business. Berkshire makes steady amount of money (float and profit) from insurance business. They have always cheap money to invest, even in bad times when money is expensive. When there is downturn and buying opportunities arise, other investors must sell something good, arrange expensive financing, or dil…

It's actually both. He's also able to buy whole business cheaper than what they'd go for in an auction. And he gets access to deals that allow him to leverage his brand name. (Example: Goldman Sachs https://qz.com/67052/heres-how-warren-buffett-made-3-1-billi...)

Re: Warren Buffett calls insurance Berkshire Hathaway's most important sector

#30

Post by kchoudhu »

Jtsummers wrote: post #25
tptacek wrote: post #20

Earlier quoted context omitted.

So you're saying the taxpayers fund things through an even more regressive process than income taxes.

Well, there is that. But also a large percentage of the sales tax (which includes hotels and such) comes from tourists, not residents.

People trotted that one out a few days ago when trying to justify spending $80MM on a ball park in Summerlin: we didn't pay for it, the tourists did!

Guys, you realize that that $80MM could have been used to make the CCSD not the butt of national education jokes, right?

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