Warren Buffett Wins $224 Million Bet With Florida

Dec. 29 (Bloomberg) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. won a $224 million bet with Florida after the state sidestepped major damage from hurricanes this year.

Florida's option agreement that would have compelled Buffett to buy $4 billion of bonds to finance storm recovery will expire Dec. 31, Dennis MacKee, a spokesman for the State Board of Administration, said in an interview today. The state earlier paid Buffett $224 million in return for his commitment to buy the debt if needed. The calm season meant Florida had no need to raise the money.

Florida turned to Omaha, Nebraska-based Berkshire to erase doubts about the state's ability to raise money after a hurricane. The state sells coverage to homeowners and private companies at below-market rates, and plans to fund cash shortfalls in the bond market. Finding investors could be a "very challenging task," Fitch Ratings said in March.

Read the whole story here.

Comments

[LeeCalif]

What deal did Paulson make on that infamous Sunday nite call.

Buffett may be rich but he doesn't see what's going to take him down.

[deshard]

Funny, I thought the bet would have been whether or not the Governor went through with his sham marriage to hid the fact that he's gay. (Never married, always tan and he and his "lady" are going to live in separate houses. C'mon, Charlie, come out already!)

[Sumocat]

This "bet" was on a commitment to buy interest-bearing bonds, giving Berkshire $224M upfront with the option to earn 6.5% on up to $4B over thirty years. Hardly the greatest investment, but better than what I'm earning (or losing in the current market). Pretty sure that means he would have "won" either way.

[nomadicexpat]

a 6.5% return on capital is not a win for buffett .. it may be better than you get, but that doesn't mean it is good. yields available out there now are significantly higher .. just look at what bank sub debt is paying

[DiogenesOfAlaska]

May I respectfully point out that in tracing your enlightened sense of investment and executive pay to this post, I finally arrived at the smoking gun?

You DO seem breathtakingly unaware of the fact that return is a compensation for risk taken.

Go back to school.

[Carolab]

Reminds me of the put options before 9 1 1.

[Quaoar]

Charlie Crist's picture appears yet he isn't mentioned in the article. He's been out of the news since his marriage. How's the beard, Chuck?

[kellygrrrl]

smart man!

[gparmar16]

Tom Brokaw's interview w/ Warren Buffett about his Tax Challenge to any corporate board member/management

http://www.youtube.com/watch?v=3z_UrOKtjHk

He pays 17.5%! compared to the rest of his staff (on average) over 30%.

[aweissnet]

Thank you, I watched that, and was very impressed.

[NotMcCain]

Not a "bet".

A gamble.

Glad he won.

[swift goat pet for truth]

Sounds more like a normal insurance policy

[instagladiator]

So Florida got greedy in hopes that Mama Nature would bless them with a disaster and it didn't turn out? Gee Gosh. Bully for Warren!! Thumbs-up, 5-stars and all of that. The idiots in Florida that accepted the bet are the dimwits!!

[Gasparilla]

It's no different than buying insurance on your home. Idiot.

[bola47]

if you lived in florida you would understand the need to be covered by hurricane insuance

[piquet]

When you pay 3k a year on a 40y/o 900sq. ft. house 20 miles from the beach you would understand why Florida needed the security.
But then again I'm enjoying 75 degree temps all week and even spent time at the beach reading a book...Where are you? And don't lie like everybody else does and say San Diego. Been there and judging by your insensitive snark you don't meet the "cool" meter to land a spot.

[surfcitysteven]

These southern states need the rest of the US the most when it comes to natural disasters. Yet they, through their senators have told the midwest to go to h ell and let the big 3 aoutomakers go belly up. Next time they get hit and ask for a handout, they should be told what they told Detroit. NO!

[JackND]

I've been saying that for some time.

The South needs to reap what it sows.

[winnie47]

Check your facts. Only one Florida senator voted no on the auto bill: our illustrious GOP buddy, Mel Martinez. Good ol' Mel will be retiring after this term in the senate to "spend more time with his family" (read: doesn't want to get his a** kicked in the next election). Florida is no longer a red state, and doesn't deserve to be lumped together with the crackers in Mississippi, Tennessee and Alabama. Lose the stereotype.

[swift goat pet for truth]

Not exactly true.

The Southern states are net takers in almost anything having to do with the Fed Govt.

The possible exception would be the bodies they supply to Bush insane war.

[Carolab]

Gee, how could Buffett predict the weather so well? What an "oracle"! HAARP, anyone?

[bluguy8]

you got that right

[Carolab]

Did you hear about the Chinese blaming HAARP for the earthquake?

[gorgol]

GIVE THE MONEY BACK WARREN...you have enough...the burden will be on Floridians...a state, like many, that's going bankrupt.....

[nomadicexpat]

he wrote an insurance contract, essentially charging a fee to assume a risk. why should he forego that fee, on behalf of his shareholders?

[sanywhere]

you got that right

[poster1122]

Would Florida have not taken his money if they did have a bad hurricane season? You want him to take enormous risk without any return? Who would do that?

That's like going to Vegas and putting your money on a bet, and being on the hook to lose it. But if you win, you give the money back. That's one way to guarantee that Florida never gets insured by anyone.

[kellygrrrl]

I'm not typically the defender of the rich -- but -- Buffet does give back - A LOT!

[Carolab]

The family foundations he and Gates set up (and Warren contributed a huge amount to the Gates Foundation) are set up as a giant tax shelter and a way to channel the money tax-free to the kids.

http://dealbreaker.com/2006/06/warren_buffetts_kids_profit_fr.php

[vjoseph]

Yeah, he is definitely a good man. Ruthless, but good

[OneEarthling]

>>The state sells coverage to homeowners and private companies at below-market rates, and plans to fund cash shortfalls in the bond market. Finding investors could be a "very challenging task," Fitch Ratings said in March.

[OneEarthling]

Post chopped...

Citizen's Insurance is not "below market". It is the highest premium, by law. Insurance of last resort.

[Merckx]

It takes money to make money. This is why wealthy people should be taxed more than low and moderate income people. Once you make more than you need to eat, shelter and clothe yourself it gets exponentially easier to make money.

[rhettisha]

Agreed. Ironically, Buffet probably agrees with you too.

[jsgaetano]

Buffet DEFINITELY agrees he and his wealthy peers should be taxed more. He's often said it's shocking he pays less taxes than some of the people who work for him.

[vjoseph]

Hmmm... no

[joeyfoto]

While it is nice that Mr. Buffet supports higher taxes on high earners, the fact remains that I would rather see Warren Buffet and Bill Gates keep their money than any government on earth. The billions they donate via the Bill & Melinda Gates Foundation have been more wisely invested in community than any government programs ever devised. Our government should study the methods employed by first-rate foundations. As it is, government money comes with more strings than a harp because government programs are managed (in the main) by people who could not successfully run a hot-dog stand. People who take government funding are frustrated by burdensome and meaningless paperwork that is the bureaucratic substitute for sound management. If government is going to solve more of our problems, we need better government. Higher taxes alone will not resolve this crisis.

[schatsie]

I am willing to bet that you cannot find ONE HEALTH INSURANCE Company that is as well run as Medicare..

I am willing to bet that you cannot find one Fortune 500 company whose books are as accountable and transparent as Medicare.

I am willing to bet that you cannot find one Fortune 500 company who is not fiddling the books for the income tax...

[vjoseph]

I agree with you to a certain extent, but I do believe some higher taxes can resolve part of this crisis