Mr. Buffett Goes to Bentonville

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Aug 06, 2002
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Warren Buffett, billionaire investor icon and chairman of Berkshire Hathaway, understands that it takes investments to make (keep) a business. In the case of keeping Wal-Mart as an insurance customer, it would seem that a $125 million loan is the current asking price.


To offset the high cost of escalating insurance prices, Wal-Mart and others have established internal insurance companies. To reduce exposure, Wal-Mart has sold some of its risk to reinsurers such General Reinsurance and National Indemnity, each a Berkshire Hathaway company.


According to a report from Bloomberg, Berkshire Hathaway’s agreement to lend is the first time an insurer has participated in making a loan to Wal-Mart. “The retailer, which has a market value of $205 billion, requires banks to participate in its credit lines and loans in order to get more lucrative investment banking assignments, Wal- Mart Treasurer Jay Fitzsimmons has said in the past. The same thing may now be occurring with its insurers, people familiar with the borrowing agreement say.”


Moderator’s Comment: What do you make of Berkshire
Hathaway’s loan to Wal-Mart?


Wal-Mart may not require slotting allowances but the cost
of doing business with the retailer can be painful for those without the cash
to keep up. Now that we’ve seen Wal-Mart flex its muscles with Berkshire Hathaway
and Microsoft, we’re beginning to wonder if there is any company that can afford
to just say no to the company that Sam built. [George
Anderson – Moderator
]

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