Mon, Feb 26, 2018 page14

• Berkshire nets US$29bn from tax bill

  ‘PURCHASING FRENZY’: Berkshire Hathaway’s pace of acquisitions last year slowed amid ‘all-time high’ prices asked by businesses, Warren Buffett said in his annual letter

  • AFP, NEW YORK
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  Berkshire Hathaway Inc, the holding company of US billionaire investor Warren Buffett, last year received a stunning US$29 billion from the US government, thanks to a new tax law that massively lowered corporate tax rates.

  In his much-anticipated annual letter to shareholders, Buffett said that the company’s net gain of US$65.3 billion last year was only partly due to his employees’ efforts.

  “Only $36 billion came from Berkshire’s operations,” he wrote. “The remaining US$29 billion was delivered to us in December when Congress rewrote the US Tax Code.”

  Still, Buffett assured stockholders that “the US$65 billion gain is nonetheless real.”

  The new law, greatly touted by US President Donald Trump, lowered the tax rate paid by US corporations from 35 to 21 percent, allowing many to undertake major new outlays and others to book significant fiscal gains.

  Berkshire wholly owns dozens of companies, and holds significant shares in large and diverse corporations, while Buffett’s newsletters are read with intense interest on Wall Street and beyond.

  Known as the “Oracle of Omaha” — after his birthplace in the Midwestern state of Nebraska — Buffett is one of the world’s most successful investors and one of its richest men. Now 87, he has been investing since he first bought stock at the age of 11.

  His latest newsletter reports that Berkshire’s net earnings last year rose from US$24.07 billion to US$44.94 billion. The year also saw the company’s war chest swell to US$116 billion in cash and US Treasury bills, financial manna that Buffett wants to use to make significant new acquisitions.

  Berkshire’s often-impressive pace of acquisitions had slowed last year, he said in the letter, when the prices asked for businesses “hit an all-time high,” amid what he called “a purchasing frenzy.”

  “Price seemed almost irrelevant to an army of optimistic purchasers,” Buffett wrote.

  Still, the company “will have opportunities to make very large purchases” going forward, with emphasis on those available at “a sensible purchase price,” he said.

  Buffett said Berkshire would stick with a “simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.”

  Buffett also said that while Berkshire’s insurance holdings would take a US$2 billion after-tax hit from losses caused by hurricanes last year in Florida, Texas and Puerto Rico, other reinsurance companies did far worse.

  He estimated the chances of a “mega-catastrophe” this year — one causing losses of at least US$400 billion — at 2 percent.

  “No one, of course, knows the correct probability,” he added.

  Buffett concluded with a little advice to fellow investors: “Though markets are generally rational, they occasionally do crazy things.”

  “Seizing the opportunities then offered does not require great intelligence... [or] a degree in economics,” but rather “an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals,” he added.
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