Following his six decades tradition, last night Warren Buffett published his Letter to Shareholders, full of wisdom and anecdotes, besides relevant data on the conglomerate’s performance as a whole and of its components. Since it is a must-read for investors worldwide, we publish it in its entirety.
Enjoy the read.
Additionally, his comments, along with those of his lifetime partner, Charles T. Munger, are worth reading. Here is a selection of a few:
“Berkshire directors want the company to delight its customers, to develop and reward the talents of its 360,000 associates, to behave honorably with lenders, and to be regarded as a good citizen of the many cities and states in which we operate. We value these four important constituencies”.
“…bonds are not the place to be these days. Can you believe that the income recently available from a 10-year U.S. Treasury bond – the yield was 0.93% at yearend – had fallen 94% from the 15.8% yield available in September 1981? In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies, or retirees – face a bleak future.
“Some insurers, as well as other bond investors, may try to juice the pathetic returns now available by shifting their purchases to obligations backed by shaky borrowers. Risky loans, however, are not the answer to inadequate interest rates. Three decades ago, the once-mighty savings and loan industry destroyed itself, partly by ignoring that maxim.”
Special Purpose Acquisition Companies “I call it fee-driven buying. In other words, they’re not buying because it’s a good investment. They’re buying it because the adviser gets a fee. And of course, the more of that you get, the sillier your civilization is getting” “SPACs generally have to spend their money in two years, If you put a gun to my head and said you have to buy a business in two years, I’d buy one, but it wouldn’t be much of one.
“I hate the bitcoin success. And I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth . . . So I think I should say modestly that I think the whole development is disgusting and contrary to the interest of civilization.”
“Berkshire now enjoys $138 billion of insurance “float” – funds that do not belong to us but are nevertheless ours to deploy, whether in bonds, stocks, or cash equivalents such as U.S. Treasury bills. Float has some similarities to bank deposits: cash flows in and out daily to insurers, with the total they hold changing very little. The massive sum held by Berkshire is likely to remain near its present level for many years and, on a cumulative basis, has been costless to us. That happy result, of course, could change – but, over time, I like our odds.”
“We see very substantial inflation, and it’s very interesting. We’re raising prices, people are raising prices to us, and it’s being accepted; we weren’t expecting it. This has been a very unusual recession. Right now, business really is very good in a great many segments of the economy. It just won’t stop, people have money in their pocket, and they’ll pay the higher prices.”