Berkshire Hathaway Inc. Class A NYSE: BRK.A

Berkshire Hathaway CEO Warren Buffett has reason to be upbeat about the economy. One reason is that his company, Berkshire Hathaway, benefits from Fed interest rate hikes. The company owns bonds, insurance companies and invests in large banks. Thus, BH profits in several ways.

“Since Berkshire currently has about $85 billion in cash invested primarily in short-term Treasuries, a [one percentage point] increase in short-term interest rates results in an additional income of $850 million per year for Berkshire,” Kass says. “Furthermore, Wells Fargo, one of Berkshire’s largest equity investments, will benefit from an increase in earnings as interest rates rise.”

Berkshire Hathaway CEO Warren Buffett Republicans will face difficulty passing tax reform before summer’s end. He believes getting the reform done fast will precede a big tax reform deal.  This, he says, will happen despite top legislators leading creation of the legislation. “I think they will end up going for something not as dramatic as they might even like to do because they simply don’t want to spend the time and the political capital getting it done,” the chairman and CEO of Berkshire Hathaway said on CNBC recently.

The President and House Republicans have been working to deliver a budget deficit friendly tax reform law. But Warren Buffett argues that a revenue neutral reform package presents challenges. He foresees a much smaller package. A deal that falls short of past tax overhauls. In the meantime, Republican legislators look to the President to lead on tax reform. Most Republicans agree the tax-code needs cleaning up, but it is just a matter of how. This is a different tune than in the Warren Buffett Berkshire Hathaway annual letter sounded upbeat in defense of the American economy. Berkshire Hathaway gained higher quarterly profit. But operating income dropped.

Warren Buffett told his investors in the Berkshire Hathaway annual letter that they can bet on the American economy.  He believes investors will do well if they stick with a long term plan in a group of conservatively financed American businesses. Of course, Warren Buffett counts his company among that stable. The Berkshire Hathaway annual letter praised the firm’s success. “American business — and consequently a basket of stocks — is virtually certain to be worth far more in the years ahead,” Buffett wrote. “Ever-present naysayers may prosper by marketing their gloomy forecasts. But heaven help them if they act on the nonsense they peddle.”

Fourth quarter results showed net income at $6.29 billion or $3,333 per share. A $1.1 billion increase in gains from investments and derivatives. Operating profit dropped to $4.38 billion from $4.67 billion. Analysts expected operating profit to go no lower than $2,716.60 per share. Profit dropped from $24.07 billion from $24.08 billion. Not much of a change. Operating profit gained 1 percent to reach $17.58 billion.

This happened despite a $32 billion shopping spree to buy an aircraft parts maker. Plus, the Berkshire Hathaway annual letter showed additional money invested in stocks like Apple, Coca-Cola and Kraft Heinz. In the case of Apple, BH made $1.6 billion.

Berkshire Hathaway CEO Warren Buffett Invested In Apple

According to Reuters: Berkshire became one of the top 10 Apple investors in 2016, taking a stake of more than 9 million shares in the first quarter and then accelerating purchases in the last three months of the year. “Buffett knows that people have become addicted to Apple products and he invests in these addictions.”

The Apple investment appears to reflect much of the $12 billion of stock that Buffett said he had bought between the Nov. 8 Presidential election and the end of January. Still, the company has nearly $86 billion in cash despite the spending. Insurance units increased 7 percent to nearly $1.5 billion. Underwriting gains offset losses at Geico.

Source: Kiplinger


Please enter your comment!
Please enter your name here