⚠ The Low-Rate TrapLow threat

Berkshire Hathaway (BRK.B) — threat to the moat

Free money earns little when safe yields are near zero.

Float is only as valuable as what it can be invested in, and there are long stretches when that is not much. When interest rates sit near zero — as they did for most of the decade after 2008 — the bonds and cash that back an insurer's reserves earn almost nothing, and the 'free leverage' of float throws off far less than its size suggests. Berkshire felt this keenly, holding scores of billions in low-yielding cash and short-term Treasuries because it would not reach for yield by taking foolish risks.

Float investment income after tax, 2025 against 2026 ($B)$3.37BQ2 25$3.06BQ2 26$6.26BH1 25$5.74BH1 26Berkshire Form 10-Q, June 2026: down 9.1% and 8.3% on lower interest rates
The rate windfall is already reversing as Treasury-bill yields fall.

The recent return of higher rates has, for now, turned that headwind into a tailwind: Berkshire's enormous cash and bond holdings suddenly earn a real return again, and much of the record jump in interest income comes precisely from float invested at four or five percent instead of near zero. But rates are not Berkshire's to control, and a return to a zero-rate world would quietly sap the earning power of the whole float engine.

This is a headwind, not a threat to the moat. Even in lean-rate years the float still costs less than nothing and can be steered into equities and whole businesses that earn more than bonds. But a long-term owner should understand that the value of free leverage rises and falls with the yield the world offers on safe money, and that some of the engine's recent strength is a gift of higher rates that could be taken back — after-tax investment income on the float went from $6.5 billion in 2022 to $13.7 billion in 2024, and is already falling back: $12.5 billion in 2025 and 8.3% lower in the first half of 2026, which the 10-Q puts down to lower interest rates.123

References
  1. ReportedBut a long-term owner should understand that the value of free leverage rises and falls with the yield the world offers on safe money, and that some of the engine's recent strength is a gift of higher rates that could be taken back — after-tax investment income on the float went from $6.5 billion in 2022 to $13.7 billion in 2024, and is already falling back: $12.5 billion in 2025 and 8.3% lower in the first half of 2026, which the 10-Q puts down to lower interest rates.
    Berkshire Hathaway Form 10-K, FY2024 - float $171 billion (2024), $169 billion (2023) and $164 billion (2022); after-tax earnings by line 2022-2024 (insurance investment income $13,670M in 2024, net earnings $88,995M, investment gains $41,558M); $2.9 billion of share repurchases in 2024 and $9.2 billion in 2023; about 392,400 employees — FY2022-FY2024 · publ. February 2025 · source ↗
  2. ReportedBut a long-term owner should understand that the value of free leverage rises and falls with the yield the world offers on safe money, and that some of the engine's recent strength is a gift of higher rates that could be taken back — after-tax investment income on the float went from $6.5 billion in 2022 to $13.7 billion in 2024, and is already falling back: $12.5 billion in 2025 and 8.3% lower in the first half of 2026, which the 10-Q puts down to lower interest rates.
    Berkshire Hathaway Form 10-K, FY2025 - float $176 billion; after-tax earnings 2023-2025 (underwriting $7,258M, insurance investment income $12,513M, BNSF $5,476M, BHE $3,979M, manufacturing, service and retailing $13,647M in 2025; net earnings $66,968M incl. $30,737M investment gains and an $8,255M Kraft Heinz/Occidental impairment); revenues $371,444M; segment revenues (insurance $104,212M incl. premiums earned $88,902M and investment income $15,310M, BNSF $23,533M, BHE $26,297M, manufacturing $78,487M, service and retailing $42,647M, McLane $50,998M, Pilot $42,198M); pre-tax underwriting GEICO $6,824M, Primary $785M, Reinsurance $1,851M; GEICO combined ratio 84.7% (81.5%, 90.7%) and loss ratio 72.3%; capex $20,927M and D&A by segment; identifiable assets and goodwill by segment; 65% of equity fair value in five companies; equity securities $297.8B ($271.6B); BNSF volumes by business group; no share repurchases in 2025; no cash dividend since 1967; about 387,800 employees — FY2023-FY2025 · publ. March 2026 · source ↗
  3. ReportedBut a long-term owner should understand that the value of free leverage rises and falls with the yield the world offers on safe money, and that some of the engine's recent strength is a gift of higher rates that could be taken back — after-tax investment income on the float went from $6.5 billion in 2022 to $13.7 billion in 2024, and is already falling back: $12.5 billion in 2025 and 8.3% lower in the first half of 2026, which the 10-Q puts down to lower interest rates.
    Berkshire Hathaway Form 10-Q, quarter ended 30 June 2026 - after-tax earnings (underwriting $1,731M vs $1,992M, insurance investment income $3,059M vs $3,367M, BNSF $1,558M vs $1,466M, BHE $891M vs $702M, manufacturing, service and retailing $4,470M vs $3,601M, investment gains $12,684M, net earnings $25,667M); GEICO pre-tax underwriting $994M vs $1,821M, combined ratio 91.2% vs 83.5%; Reinsurance $913M vs $650M; float $177.5B; insurance and other cash and Treasury Bills net $359.2B; consolidated cash $35,096M + $324,905M + $5,513M; equity securities $323.8B; H1 purchases of equities $39.4B and sales $27.8B; acquisitions of businesses net of cash $9.7B; $4.8B of treasury stock acquired in H1, most in Q2; OxyChem about $9.4B on 2 January; Taylor Morrison agreed 31 May at $72.50 a share, about $6.8B, closed 24 July; notes payable of insurance and other $43.3B; shareholders' equity $747.9B; BNSF revenue $6,601M vs $5,769M, fuel $1,173M vs $698M; BHE revenue $6,735M vs $6,418M; investment income down 9.1% on lower interest rates — Q2 2026 · publ. August 2026 · source ↗
Sources
Generated September 23, 2026