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Arthur Clarke's avatar

Ravi, we share very similar experiences. At Chicago I was exposed to the early days of Modern Port Folio theory. But my real investment training came through an accidental learning, also at Chicago, in about 1974 of ‘a fellow in Omaha’ who had made a lot of money. I didn’t buy BKHT until early ‘79 at 196; this purchase sent me on a learning curve that will continue to the end of my life.

We both now have accrued very substantial deferred taxes, what Warren would call ‘float’. Berkshire’s financial anchor is now enormous. Already in the ‘80s Warren was reminding shareholders that success forges its own anchor. But with our float, if Berkshire only matches an index return, our after-tax return will safely exceed an index return.

One option you might have, if you have non-Berkshire assets in your tax account--we don’t--and you are charitably inclined and have a donor-advised fund, is to transfer appreciated Berkshire shares to the DAF and repurchase the shares in your tax account. This allows you to be charitable, while raising the cost basis of you repurchased Berkshire shares to current market. I figured this out several decades ago. You then have the option of selling those higher-cost-basis shares and reinvesting in an index. Like you I see no need to do this under current management for quite a while. But doing the DAF-repurchase transaction gives you a source of higher-cost basis cash.

Keep writing useful pieces. I’m sure they are instructive to younger investors.

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Cardude's avatar

We are in almost the exact same situation. So we have maybe another 20 years or so of “known management” before things get more risky you think? I was also going to pass much of my Berkshire holding onto heirs so they get the step up, thinking they could liquidate it if needed over the years for living expenses or for reinvestment into an index.

What index are you considering as a possible replacement for Berkshire if not the SP500?

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