[nrao123]

Not sure why you believe float is over-rated. Buffet himself has said that a $1 in float is equal to a $1 of value. BH's market cap is about $300 BN & their float is about $90BN which means Buffett considers the float to be about ~25-33% of the total value of BH.

Another measure of Mr. Buffett’s firepower: Berkshire Hathaway’s insurance float, paid in premiums that can be invested until claims have to be paid. Float was about $89 billion on March 31 2016, compared to about $88 billion at the end of 2015. http://blogs.wsj.com/cfo/2016/05/09/at-berkshire-hathaway-ca...

[valuearb]

Well, I might be wrong, let's get that out of way first.

Second, market cap is actually $420B, but Buffett was talking about value, and BRK value is much higher, certainly over $500B.

But this is the way I see it. Berkshire could easily sell $90B in ten year bonds for some low rate, let's say for 4%. Those bonds are better than float in some ways? one is it's easier to use more if the proceeds to buy long term investments, much of float has to be tied up in safe and liquid investments approved by regulators such as short term bonds. So the long term returns should be higher using borrowing vs. float.

The counter is that float is free, often better than free the way Berkshire insurance ops are run. Let's assume BRK averages being paid 1% a year to hold the float, that makes the cost advantage to float 5% a year. If he can earn 2% more a year because of the fewer restrictions on what he uses borrowing for over float, the net difference per year would 3%, or less than $3B a year, or less than 1% a year in additional investment returns.

Now that's a significant benefit but far from a huge edge. It also might easily be less than that. One reason I might be wrong is "why not both?" If float doesn't preclude debt, then the float benefits stand alone, and could easily be worth $6B-$9B a year, and that's a pretty big benefit (2-3% a year).

But I don't believe both can be done because all that float requires WEB to hold dry powder against unforeseen mega-losses. If he maxes out BRK borrowing and his insurance subs suffer massive losses, he can only raise money through a horribly priced secondary or forced asset sakes and he'd never allow himself to be backed into that corner.

[rokhayakebe]

What is a "float?"

[valuearb]

Part of the money insurance customers pay the insurance company for insurance. They are required to hold reasonable amounts in safe investments to pay out claims with, and the insurer gets to earn interest or investment gains on it. The longer term the insurance commitment the more aggressively the insurer can invest part of it, because it won't be "owed" for years,