I've always had a vague and idle suspicion that the "real" reason Berkshire Hathaway never repurchased its own stock during the company's 1965-1998 "glory years" was that Buffett thought he could do better retaining and investing Berkshire's cash. In other words, while...
...Berkshire's stock may have been undervalued, Buffett believed other things were more undervalued. Now that Berkshire is buying back stock, we can infer that he no longer believes that. But is it also possible to calculate an indifference point? In other words, what expected...
...return-on-cash assumption would make Buffett indifferent between buying back stock and keeping the cash to invest? Incidentally, I've always thought the subject of Buffett's expected return on Berkshire's cash—which I'm pretty sure was an actual number, used to help...
...determine compensation for the operating CEOs—was an under-appreciated subject among Berkshire watchers, and one of the company's best kept secrets. I would love to know for instance what Buffett charged Chuck Huggins for retaining capital at See's Candies circa 1982 or so.
