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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 212903  
Subject: Re: Two Column/Rationalwalk Date: 10/10/2012 10:07 AM
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Here are my assumptions for Berkshire's future cost of float which I peg at -0.8%...
It is possible that I'm being way too conservative here but I've been burned with overly bullish float based valuation assumptions in the past.


I agree that the goal is to pick the number that's at the most conservative
end of the "probably right" range. Your -.8% sounds fine on that count.
I'm still comfy with my -1.4% since it's only 40% as good as the 9 year average,
but it's not defensible to the 100% confidence level.
There will be a $20 billion loss year some time, so it's just a matter
of trying to estimate how often that will happen.

One bullish note: I'm still amazed they turned an underwriting profit last year given the catastrophes seen.
That's a very big switch from 2002 which was a 1.2% cost of float with no megacats.
You don't have to be glassy-eyed optimist to suspect that Gen Re was a supertanker
that took a few years to turn, but is now definitely headed in the right direction.

Jim
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