Subject: Re: Tom Russo on BRK's OXY Bet
(1) For example, a spike in oil prices would raise fuel costs at two of Buffett's biggest businesses, Berkshire Hathaway Energy and the BNSF Railway. However, the increases will now be partially offset by Occidental selling its oil for a higher price and collecting bigger profits ' especially as Berkshire owns enough of the fossil-fuel company to account for a proportional share of its earnings as its own.


I think that someone who says Buffett would be buying an oil company as a hedge, not just as an investment standing on its own merits, does not demonstrate much understanding of how Buffett thinks and acts. And to think that the accounting treatment of Occidental's earnings (equity accounting, beyond a 20% ownership) would be an additional motivation for Buffett, shows even less understanding of Buffett. Buffett wants a stream of reliable future earnings, ideally reinvested in the business, or, probably, in the case of the oil and gas industry, distributed back to Berkshire, not some accounting treatment that makes the profits look bigger on the earnings sheet.


(2) Russo described Berkshire staking a claim to Occidental's "huge pool of oil" as a shrewd and unorthodox move. He compared it to Buffett's investment of "float," or the money left over after premiums are collected and claims are paid out by his insurance companies.

I'm not seeing the link between float and oil. Float is other people's money that you can use as your own. Oil is nothing like that. But I didn't listen to the whole interview, so perhaps there is some parallel I'm missing. But given (1), I'm not very motivated to dig in further to find out what (2) might mean.

regards,
dtb