Subject: Re: Swedroe on WEB
I would only add that Gen Re was a huge mistake. The stock Buffett issued has performed much, much better than the commodity insurance company he purchased, (And don't argue that the fixed income investments received funded additional acquisitions. They didn't. BRK never had to draw on them to make the acquisitions he did. The balance sheet - and his own words - say it was a huge mistake.)

But, if so, why are people so concerned about Berkshire after his passing?


Bloomstram makes a pretty convincing argument that GenRe was not a mistake, no matter what Buffett says about it.

No matter, if it was a mistake, then you might say there have been no great buys for 30 years, not 25, with the notable exceptions of BNSF and Apple (am I missing any?) Buffett WAS a great stock picker, and probably still is, but this has not been of much use to Berkshire shareholders for the laast 25-30 years of high valuations and a shrinking set of stocks that could move the needle, as Berkshire gets bigger and bigger.

So conclusion from this line of thinking is that whether or not Buffett is still a great stock picker, in the traditional sense, is of secondary importance. What is important is that he is great because he has set up a safe, reliable company that makes investments that are great because almost none of them lose much money. He has also benefited from safe leverage from the insurance companies' float, on top of safe leverage from future taxes on unrealized capital gains, effectively using the US Finance Department's money to the benefit of Berkshire shareholders. And he runs an honest company that keeps costs low (including his own pay) so that these safe leveraged investments provide maximum benefit to shareholders. And there is the occasional great investment like Apple (great because the returns have been great, and also because he smartly made it a BIG investment. So occasional great stock picking is a bonus, unless you avoiding losers and holding on to winners counts as great stock picking.

There are some concerns about Buffett's eventual passing not because we need the stock picker, but because we worry that the great company he has set up might be changed - maybe successors will sell the big safe slowly growing investments, or maybe they will be less successful at avoiding big losses. I am not too worried about this but maybe other investors are.

DTB