An Old Argument Lives

The argument that internally generated capital is the cheapest kind has not gone away. Warren Buffett literally built his fortune on this premise at Berkshire Hathaway, which draws on immense cash flows from its old-line insurance businesses to fund faster-growing units like Geico Insurance, as well as frequent acquisitions.

The best-run conglomerates, such as Berkshire, General Electric Co. and United Technologies Corp. , do trade or have traded at premiums to the value of their individual holdings.

So plenty of firms, even amid press speculation that they are ripe for breakup, are resisting shrinking.

Bank of America Corp., the nation's largest bank holding company, says it has no plans to shed any of its disparate business lines. "We have a leading position in every business in which we compete," says a spokesman. "The franchise and the power of Bank of America and Merrill Lynch is exactly why we put these companies together."