Going forward I think there is a different scenario than what is constantly being mentioned here. What if the price of BRK, with a decent amount of volatility, slowly but surely works its way up to 1.75-2.0 BV and stays in that range? In time the earnings will easily support it. Those waiting for the magical 1.4X BV to reappear may need a black swan event which is always possible.


One of the black swan events is just a moderate to major market correction, say 30% off current stock prices, which would very likely bring Berkshire down from a market cap of $1.1t to, say, $800b. With $300b in cash available, he could set up a Dutch auction and buy back close to 40% of shares, solving the problem of the anchor that the cash represents, and returning Berkshire to a $500b market cap where there are more acquisition targets of the appropriate size. Then he could massively increase the repurchases going forward, in an attempt to shrink and not expand the size of the company.

In retrospect, it is a shame he didn't do this 15 years ago, when prices were much lower, and as you say, the repurchases have always been done with some reluctance. This has gone from the intial complete refusal to repurchase ("it would be taking advantage of outgoing shareholders") to a grudging acceptance that it made sense, but only at very low multiples to book (initial 1.1x, then 1.2x, and now more like 1.4-1.5x book. Maybe Buffett will be like Moses, condemned to never enter the land of milk and honey, and it will be his successor who keeps the basic insurance conglomerate model but fixes the size problem.

dtb