> Warren Buffett Blog: October 2016

Wednesday, October 19, 2016

Berkshire holding high cash levels

Warren Buffett has the kind of money problem most people would envy: a growing mountain of cash. Buffett compares investing to baseball, except that investing is a game where the hitter can stand at the plate indefinitely waiting for the right pitch.

“The stock market is a no-called-strike game. You don’t have to swing at everything. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’ ”

Nearly $73 billion piled up at Berkshire Hathaway by mid-summer, more than CEO Buffett’s conglomerate has ever held before. And the total continues growing every day Buffett doesn’t make a major investment because Berkshire’s 90-odd businesses generate roughly $1.5 billion in cash every month.

Buffett’s options include buying entire businesses, picking up a few million shares of stock or investing more in companies Berkshire already owns, such as BNSF railroad and the utilities of Berkshire Hathaway energy.

So far, Buffett appears to be mostly sitting on the cash since January, when Berkshire completed its biggest acquisition in its history, a $32.36 billion deal for aviation parts maker Precision Castparts.

Of course, not all of Berkshire’s cash is available because Buffett wants to keep at least $20 billion on hand at all times just in case Berkshire’s insurance companies have to pay a big claim or some other need arises.

Monday, October 17, 2016

I paid almost $1.9 Million income tax for 2015

Answering a question last night about his $916 million income tax loss carry-forward in 1995, Donald Trump stated that “Warren Buffett took a massive deduction.” Mr. Trump says he knows more about taxes than any other human. He has not seen my income tax returns. But I am happy to give him the facts.

My 2015 return shows adjusted gross income of $11,563,931. My deductions totaled $5,477,694, of which allowable charitable contributions were $3,469,179. All but $36,037 of the remainder was for state income taxes.

The total charitable contributions I made during the year were $2,858,057,970, of which more than $2.85 billion were not taken as deductions and never will be. Tax law properly limits charitable deductions.

My federal income tax for the year was $1,845,557. Returns for previous years are of a similar nature in respect to contributions, deductions and tax rates.

I have paid federal income tax every year since 1944, when I was 13. (Though, being a slow starter, I owed only $7 in tax that year.) I have copies of all 72 of my returns and none uses a carryforward.

Finally, I have been audited by the IRS multiple times and am currently being audited. I have no problem in releasing my tax information while under audit. Neither would Mr. Trump – at least he would have no legal problem. 

Wednesday, October 12, 2016

Wind Farms make sense from a tax perspective

I will do anything that is basically covered by the law to reduce Berkshire's tax rate. We get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit.

Monday, October 10, 2016

Warren Buffett first tax return ever had him owing $7 to the IRS

I have paid federal income tax every year since 1944, when I was 13. (Though, being a slow starter, I owed only $7 in tax that year.) I have copies of all 72 of my returns and none uses a carryforward.

Thursday, October 6, 2016

Know your limitations as an investor to succeed

You do not need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well

Keep things simple and don’t swing for the fences. When promised quick profits... respond with a quick 'no'.

Tuesday, October 4, 2016

Warren Buffett confirms speaking with Wells Fargo CEO John Stump

"It's dead wrong to imply I've spoken to the board directly. Going to the board implies I've gone around Stumpf, the guy who is under fire. I've talked to no one else on the board." 

Warren Buffett's office also confirmed that he talked with Wells Fargo CEO Stumpf once the scandal came to light. According to Buffett, the talk lasted only five minutes, where Buffett said Stumpf might be facing a larger problem than anticipated, and let him know that the fines levied against Wells Fargo were "not a metric to use in determining public reaction."