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New US tax law brings Buffett’s firm $38.2 billion

NEW YORK Berkshire Hathaway, the holding company of US billionaire investor Warren Buffett, received a stunning US$29 billion (S$38.2 billion) last year from the United States government, thanks to a new tax law that massively lowered corporate tax rates.

In his much-anticipated annual letter to shareholders, Mr Buffett explained that the company's net gain of US$65.3 billion last year was only partly due to his employees' efforts.

"Only $36 billion came from Berkshire's operations," he wrote. "The remaining $29 billion was delivered to us in December when Congress rewrote the US Tax Code."

Still, Mr Buffett assured stockholders, "The $65 billion gain is nonetheless real - rest assured of that."

The new law, greatly touted by President Donald Trump, lowered the tax rate paid by US corporations from 35 per cent to 21 per cent, allowing many to undertake major new outlays and others to book significant fiscal gains.

Berkshire Hathaway wholly owns dozens of companies - from Dairy Queen to Duracell - and holds significant shares in large and diverse corporations including American Express, Apple, Bank of America, Charter Communications, Coca-Cola, Delta Air Lines, General Motors, Goldman Sachs, Moody's, Wells Fargo and Southwest Airlines.

Mr Buffett's newsletters are read with intense interest on Wall Street and beyond.

Known as the "Oracle of Omaha" - after his birthplace in the Mid-western state of Nebraska - he is one of the world's most successful investors and one of its richest men. Now 87, he has been investing since he first bought stock at the age of 11.

His latest newsletter reports that Berkshire's net earnings rose last year from US$24.07 billion to US$44.94 billion.

In the letter, he added: "2017 was far from standard: A large portion of our gain did not come from anything we accomplished at Berkshire."

The year also saw the company's war chest swell to US$116 billion in cash and US Treasury bills, financial manna that Buffett wants to use to make significant new acquisitions.

He said the company "will have opportunities to make very large purchases" going forward, with emphasis on those available at "a sensible purchase price".

He estimated the chances of a "mega-catastrophe" this year - one causing losses of at least US$400 billion - at two per cent.

"No one, of course, knows the correct probability," he added.

Mr Buffett concluded with a little advice to fellow investors: "Though markets are generally rational, they occasionally do crazy things.

"Seizing the opportunities then offered does not require great intelligence... (or) a degree in economics," but rather "an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals," he added.

Forbes magazine estimates Buffett's personal worth at US$87 billion.- AFP

BUSINESS & FINANCE