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If a $50 billion tender is done at a 20% discount to intrinsic value, are we not getting the same benefit of an acquisition with the same characteristics? Yup, give or take.But again, don't forget that $50bn of value is leaving the building when you do it.The gain is only the gap between what you get and what you give up.If you buy back 10% of shares at a 20% discount to fair value, then it increases value per share by about 2%.If you buy back 10% of shares at a 30% discount to fair value, then it increases value per share by about 3%.Those are not gigantic figures for the improvement in value.Even a buyback of $50bn (twice the total in the last few years) is not at all transformative.Another difference is that there is a dispersion of results you get with fresh acquisitions.There will be the occasional home run, which can help a lot. No buyback is a home run--it's by definition more of the same thing.Berkshire is quite good at avoiding big losses, so the range of outcomes is quite truncated to the downside.The wagers placed by head office are usually very good wagers in terms of the range of outcomes...some breakeven, some pleasant, some outstanding enough to make a difference to the firm overall.Plus, I think that refreshing the portfolio of businesses is important.If the average elephant has a life expectancy (of its business moat) of 20 years the day your buy it,you need a brand new one from time to time, not just a bigger ownership share in the same old herd.For example, there is no obvious case to be made that a share of Coke is worth any more than it was a decade ago.Why would I want to increase my ownership in that?Alas, we seem to be living in the zombie afterlife of the Greenspan Put.Traditionally, having a big wad of cash has been a very useful thing once in a while. So much so that it was worth preparing for a rainy day.Everybody else got wet, and you got rained on with money.But cash is easy to come by now, even in dire stretches like March.FWIW, I have a fun little model that predicts Berkshire's price 3 years in advance.It's based on my valuation metric, and the recent rate of change of the valuation metric.(the market likes any stock better when it has been visibly gaining value at a good rate lately).The prediction for three years ago works out to a mere $320000 today, so we're ahead of the game.It predicts a price three years from now of about $427000 in today's money. (a return of inflation + 7.93%/year).That fine as an investment return for me.But it's fine mainly because I expect head office to hit it, because I expect them to aim for more when setting a hurdle rate.What's fine for me is not as suitable as a choice for them.Jim
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