Berkshire Municipal Bond Stake Doubles

[Granitepost]

Bloomberg reports that BRK has doubled its stake in Municipal Bonds to $4.05 Billion by March 31 due to the high yields offered on them because of the massive underpricing of risk in Q3 of 2009 and Q1 of 2009.  The timing seems to have been good as the yield on Municipal Bonds subsequently fell.  See: "Berkshire Doubled Municipal Bond Stake on ‘Unthinkable’ Yields" at http://www.bloomberg.com/apps/news?pid=20601213&sid=acObar._Pgdg .

[Mungerville]

Similar to ORH's municipal bond portfolio in size but ORH's shareholders' equity is much lower than Berkshire's AND ORH's muni bonds are guaranteed by Berkshire.  So, in simple terms, ORH has more better.

[benhacker]

ORH has more better.

 

Mungerville, you say a lot of great stuff... but truer words have rarely been uttered. ;-)  I'm going to order the shirt!

[Mandeep]

It's so weird.

 

It's funny how he didn't drastically put more money in WFC or USB last quarter as one would have expected.

He upped his stake by what, less than 5% or something?

 

Isn't it weird? lol

 

 

[bookie71]

I believe that I read somewhere that there is a percentage that he doesn't dare exceed or he becomes a bank holding company and comes under a lot of regulations

[arbitragr]

Bonds (munis, corporates) were on pretty high yields last quarter, like 20%+. Whilst their risk was quite low aswell.

Additionally, I think with the bond markets WEB can just deploy way more capital than he can in the equities markets, the aforementioned bank holding rules being just one of the restrictions placed upon him.

[basl1]

To Buffet all investments are bonds paying a certain amount. All must compare with thee standard 20 year bond. These were paying next to nothing. A 20% guaranteed is better than most companies

 

[bookie71]

Just think how much these bonds will be worth when taxes are raised to pay for health care, TARP, et al.

[oldye]

Its all relative, to you or I having 20 billion in cash is plenty of firepower.  Berkshire needs to keep holding cash,  I'm pretty sure if another Constellation type deal popped up he'd be comfortable bringing it down to 15, maybe even 10 billion.  Millions of lives depend on Buffett's allocating skills.