Buffett's Berkshire To Reap $37 Billion Benefit From Trump Tax Cuts

For the most glaring example of Trump tax cuts benefiting the rich, look no further than Warren Buffett.

According to an analysis by Barclays analyst Jay Gelb, Buffett's Berkshire will be among the greatest beneficiaries of US corporate tax reform. The bank calculates that Berkshire Hathaway’s 4Q book value could see a huge boost of as much as $37 billion (12% increase from 3Q 17 level) resulting from the US corporate tax reform due to a decline in its deferred tax liability (DTL). The one-time increase will result from Berkshire lowering its tax liability on appreciated investments.

We would view this magnitude of book value increase as favorable for BRK shares since it is generally valued based on price-to-book value. Based on substantial net unrealized equity investment gains during 2017 and a lowered US corporate tax rate, we estimate Berkshire’s DTL could be $37bn lower (with a corresponding increase to its book value) than it would have been without tax reform.

While Barclays concedes that while a reduction in Berkshire's deferred tax liability would be a non-cash item, it notes that as of 3Q 17 Berkshire had $109bn of cash and equivalents, of which the bank views approximately $90bn as being immediately deployable for acquisitions not including potential additional debt capacity.

If Berkshire is able to acquire a large business in an all-cash deal, we would typically expect a transaction to be immediately accretive to Berkshire’s EPS.

In other words, look for Berkshire to aggressively start purchasing companies in the coming months.

Furthermore, Barclays expect the company’s operating earning power - the money made by subsidiaries such as Burlington Northern and Geico -to rise by around 12% in 2018 and beyond as a result of a reduced corporate US tax rate.

Barclays also points out that as of YE16, Berkshire also had around $12bn of undistributed earnings of its foreign subsidiaries. And while the company would need to maintain some of this cash to support its business, "Berkshire could repatriate a portion of it for deployment in acquisitions and/or new investments." Who knows, we could see even see Berkshire buying back its own stock some time in the not too distant future...

Finally, as Bloomberg notes, Berkshire has long been seen as a major beneficiary of a lower U.S. corporate tax rate, helping to drive the company’s Class A shares up 22% last year. They closed above $300,000 for the first time on Jan. 4. Putting this in context, Barclays' current price target for Berkshire is $357,000 per A share, which means that - you guessed it - Warren Buffett is about to become even richer.


Beam Me Up Scotty LetThemEatRand Mon, 01/08/2018 - 13:27 Permalink

" Haven't you heard?  Warren says he wants to pay more taxes.  I think he just hasn't gotten around to doing it yet.  "

He can get his checkbook out and VOLUNTARILY pay more taxes.  That ISN'T against the law.  But of course, he just wants people underneath him on the ladder to pay more taxes, not him.

He could certainly pay his employees all alot more too.  Why is his secretarty only making a few hundred grand?  She and everyone else that works for that old peice of shit should be making no less than $1 million per year.

In reply to by LetThemEatRand

Parrotile peddling-fiction Mon, 01/08/2018 - 17:46 Permalink

Which might tie in with this - https://www.zerohedge.com/news/2018-01-08/america-debating-bloody-nose-….

This might be worth re-visiting too - https://www.zerohedge.com/news/2018-01-07/robots-have-replaced-humans-2…

Have NO doubt that the "key players" had plenty of advance warning, from the people who REALLY "pull the strings", not the front-men (for public "entertainment").

In reply to by peddling-fiction

MK ULTRA Alpha IH8OBAMA Mon, 01/08/2018 - 17:00 Permalink

The reason Buffett is making a statement on taxes is to undermine Make America Great Again. Buffett is an inside trader, nothing brilliant about that and I doubt the total tax cut will be $37 billion for Buffett, he is counting the corporations his firm is invested in, it is not Buffett's personal tax cut being used to damage the plan for an economic boom in this country. More FAKE NEWS.

In reply to by IH8OBAMA

LetThemEatRand Mon, 01/08/2018 - 13:20 Permalink

I think Reagan called it a rising tide for all boats.  Bullshit then, bullshit now.  Maybe after another 40 years of failed trickle down economics theory people will figure out that it doesn't help the middle class, and that without a middle class we are effectively becoming China.  Nah.

Beam Me Up Scotty Juggernaut x2 Mon, 01/08/2018 - 13:36 Permalink

" Bullshit then, bullshit now.  Maybe after another 40 years of failed trickle down economics theory people will figure out that it doesn't help the middle class, "

How did the last 8 years go, under Obama, when the debt doubled from 10 trillion to 20 trillion dollars and the Stawk market went from S&P 666 to whatever it was when he left office.  Was that trickle UP economics?  Because the people that owned stocks during Obama made a killing.  Most middle class people don't own any stocks.  I'd say they got fucked then too.

In reply to by Juggernaut x2

LetThemEatRand Beam Me Up Scotty Mon, 01/08/2018 - 13:39 Permalink

I didn't say otherwise.  Obama sure did talk about helping the middle class, but he was as bad or worse than Reagan where it came to actually doing it.  I think I finally fully opened my eyes about the uni-party when I saw W, McCain and Obama all sit down for reporters before the 2008 election, and indicate they were all in agreement with the banker bailout.

In reply to by Beam Me Up Scotty

Beam Me Up Scotty LetThemEatRand Mon, 01/08/2018 - 13:43 Permalink

I know you didn't and you aren't an Obama supporter either.  I only wanted to point that out because, the democrats all like to say shit exactly like that---to cast blame on republicans or anyone who believes in smaller government.  "Trickle down economics"  "tax cuts for the rich".  When in all actuallity, the same thing happened under Obama, just a stealth form of it.  The Fed printing money to short the VIX and keep the Stawk market pumped did nothing more than line the .01% pockets----every bit as much as tax cuts do.

In reply to by LetThemEatRand

LetThemEatRand Beam Me Up Scotty Mon, 01/08/2018 - 13:49 Permalink

I watched the new Dave Chappelle special on Neflix a couple of nights ago.  A good chunk of it was an ode to Obama.  He even suggested that he was successful personally because Obama was in office.   The vast majority of people really don't get it.  It reminds me of the argument after Trump came in that his own Red Team Congress was to blame for him not getting anything done, taking the "other Team's fault" argument to a new level (Obama supporters routinely blame Republicans in Congress for everything he didn't do).  Now they can even get away with blaming the President's own team, and people buy it.

In reply to by Beam Me Up Scotty

Beam Me Up Scotty LetThemEatRand Mon, 01/08/2018 - 14:15 Permalink

Opposite sides of the same coin never meant more than it does today, in terms of the democrats and the republicans.  They both worship government, not freedom and liberty.  Freedom to them means freedom to shop or take one vacation a year (if you are lucky).  And if the government actually "grew" revenue, it would just spend it all and more.  There is never a "this is enough" moment when it comes to spending.

In reply to by LetThemEatRand

Singelguy LetThemEatRand Mon, 01/08/2018 - 19:49 Permalink

The sad part is that there is truth to the allegation that members of the Republican party are working against Trump. They are the members of the establishment who didn’t vote for him and fought against his nomination because he wasn’t one of “them”. They liked things just the way they were and were getting rich in the process, and they knew that Trump would rock their boats. 

In reply to by LetThemEatRand