The company lost $2.7 billion in the third quarter, although its earnings are notoriously volatile, with losses driven by fluctuations in derivatives and investments. Operating profit rose 20% during the quarter, and it has $109 billion in cash to play with. Definitely worth giving Buffett a pass, right? Well, maybe not. The blog The Rational Walk, a longtime Buffett watcher, dived into Berkshire’s latest earnings and found that the group’s cash cow, auto insurer Geico, is struggling. Granted, Geico had an amazing decade and thrived during the pandemic because people weren’t driving—easy money for an auto insurer. But it’s paying for it now, not just because people are driving again, but because car accidents are more expensive to fix because of inflation. Rival auto insurer Progressive PGR, +0.54% also says the impact of inflation isn’t just increasing the valuation of used vehicles — bad news when you have to pay to replace them — but also overall loss and repair costs. The rational walk The other point worth noting is that Geico is cutting costs — laying off workers and cutting back on advertising. Since the industry is incredibly competitive, reduced advertising may have affected current policies and could do so in the future. “While a few quarters of adversity don’t necessarily indicate a turning point in Geico’s long-term prospects, recent results compare unfavorably with Progressive. The reason I spent more time on Geico’s results is because it is clearly the most troubled business in Berkshire’s insurance group, and shareholders will want to keep a close eye on future developments,” the blogger says. The markets U.S. stock futures ES00, +0.14% NQ00, +0.46% were pointing to a third day of gains in what appears to be an act of buying goodwill ahead of the medium term. The most significant market action was in the cryptocurrency space, where bitcoin BTCUSD, -4.91% was amid issues in the token used by cryptocurrency exchange FTX. The hum As voters head to the polls, UK betting website Smarkets has given a 90% chance that the Republicans will take control of the House of Representatives and a 68% chance that the GOP will also control the Senate. Shares of Lyft LYFT, +2.91% fell in premarket trading after its number of active riders fell short of expectations and the midpoint of its revenue guidance also came in below estimates. TripAdvisor TRIP, +0.34% shares fell on a profit miss. Take-Two Interactive TTWO, -0.12% fell after declining booking prospects. After the close, Walt Disney DIS, +0.85% reports results. Shares of DuPont DD, -0.31% rose as the chemical company beat analysts’ estimates. Nvidia NVDA, +1.02% is building an alternative microchip for China to comply with U.S. export barriers. The $1.9 billion Powerball drawing has been delayed. The best of the web Where would you store billions of dollars worth of stolen bitcoins? Obviously, on a single board computer submerged in a popcorn container. UN climate summit is off to a bad start, campaigners say. The hedge-fund manager that exposed accounting fraud at Luckin Coffee LKNCY, +1.95% is now backing the Chinese chain. Top indicators These were the most active markets as of 6 a.m. east. The 60/40 model has had a horrible year as both stocks (the 60 part) and bonds have gone down. But it’s too early to throw in the towel, say analysts at asset manager Glenmede, whose model for the next decade predicts average annual gains of close to 7%. Michael Reynolds, vice president of investment strategy, said the firm’s model uses valuations and yields as the primary basis for projecting returns. “Glenmede’s empirical research has shown that while valuations are a poor market timing tool in the short term, they are one of the best determinants of long-term expected returns out there for investors,” he said via email. Stock valuations are based on a mix of normalized price-to-earnings, price-to-cash flow and price-to-book ratios, as well as dividend yields, which are then adjusted for the level of interest rates. The fixed income model is primarily driven by inflation expectations and the likely future path of the fed funds with associated premiums. Random readings The hot culinary trend… is to wear black gloves. These crypto enthusiasts bought an English football team, with disastrous results. The founder of Oculus, now owned by Meta Platforms, has created a virtual reality headset that will kill the user if they die in the game. Need to Know starts early and is updated right up to the kick-off bell, but sign up here to get it delivered once to your email. The email version will be sent at approximately 7:30 am. east. Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton
