Lots of good thoughts there adjusted earnings. I actually agree with most of them. It's impossible to prove, but I think that if Buffett would have just steadily repurchased stock starting in 2012 instead of making all the investments that they did then per share IV would be higher than it is today. I also think that might be true of a much longer period maybe back to 1998 or so, but it's impossible to prove. Agreed as well that they could have done better in 2009.
I would say that in tracking performance I prefer to look through the cycle, not trough to peak (or close to peak at least). It makes perfect sense that Berkshire would outperform through the cycle but might underperform trough to peak, which is roughly what it has done. Since it's perceived as non-cyclical the relative valuation should be higher at the bottom and lower at the top. Another way to say it is that a good chunk of the return of the S&P since the bottom in 2009 is due to valuation expansion. That isn't quite true for BRK.
Back to cash deployment that adjusted and swedish point out, I wrote that saying that this assumes all earnings are paid out. I honestly think the biggest risk is that Buffett likes to empire build and keeps a bunch of cash waiting for a deal that never happens, in line with what you guys are saying. I hope I'm wrong and that they'll buy back a ton of stock this year. If they use all fcf to buy back stock they really should hit something like a 10% IRR with lots of certainty. If they just keep a bunch of excess then obviously that would take the IRR down a bit, but hopefully not by more than 1-2% annualized.
And to Jurgis, I think that's right. I've had a couple people mention that the valuation is too low. Like I mention earlier, if you discount it at 9% you get ~$235 in value and something higher obviously if you discount at 8%, which is what I'd guess a market return is. I personally think that BRK will continue to trade in the range of where it is to maybe up 10%, which is roughly the ratio of where it has traded relative to perceived intrinsic value over the last maybe 5 years. I don't think the discount will close, but I think it would be hard for the valuation to go lower by 20% and stay there, so I think you lock in through the cycle returns around the rate that IV increases.
I appreciate all of the thoughts and feedback by you guys!