I presume you mean that Berkshire does not use insurance float to buy great equities; Berkshire's total float goes well beyond its insurance float, principally the deferred capital gains taxes and the railroad's and the utilities' deferred taxes as a result of some of their capital spending. If you count these, you might well argue that a large part of the Berkshire equity portfolio is funded by float.You're right, of course. The derivatives float would count that way as well.I didn't mention the distinction as I thought it just muddied the waters in a quick discussion of "float".For pure insurance float, Berkshire's portfolio allocation has quacked very much like the duck "all float to be held in cash and fixed income only" for the last 15 years.More so than many other insurers, in fact.It's not at all what I expected when I heard it mentioned, butit certainly seems to have been the practical reality since the Gen Re purchase,which was incidentally a massive proportional reallocation from equities to bonds.Essentially none of Berkshire's outperformance since then is attributable to good investments in equities funded by insurance float,and as a corollary Berkshire's insurance businesses (speaking of what'sneeded only, ignoring the vast assets merely held in the insurance subswhich are way beyond float and have nothing to do with insurance ops)have been hurt massively by the recent low returns on cash and fixed incomefor the simple reason that those are the only assets they've held against float liabilities.This too shall pass—real rates will rise—but unfortunately it probably won't be very soon.Jim
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