Although he didn’t mention it in this letter, Warren Buffett has repeatedly mentioned that he likes to keep a minimum of $20 billion in cash on hand to be placed in Berkshire’s coffers. The reason why he does this is because he wants Berkshire to be protected in the event of an extraordinarily rare catastrophe loss. Berkshire is susceptible to deep earthquakes in California, hurricanes in the southeast, and those extremely rare earthquakes in the Midwest. For instance, Berkshire provides much insurance coverage along the New Madrid Fault, which last went off in February 1812 and destroyed St. Louis in under thirty seconds. It was so deep that the writings of the time suggested that the Mississippi River flowed backwards.
Well, there are three theories regarding the New Madrid Fault: one is that it is now dormant and won’t erupt again. Another is that it only ought to erupt in … Read the rest of this article!