This years Berkshire Hathaway Letter to Shareholders (PDF) is a fascinating reads, filled with all sorts of gems:

“Selecting the S&P 500 as our bogey was an easy choice because our shareholders, at virtually no cost, can match its performance by holding an index fund. Why should they pay us for merely duplicating that result?

A more difficult decision for us was how to measure the progress of Berkshire versus the S&P. There are good arguments for simply using the change in our stock price. Over an extended period of time, in fact, that is the best test. But year-to-year market prices can be extraordinarily erratic. Even evaluations covering as long as a decade can be greatly distorted by foolishly high or low prices at the beginning or end of the measurement period. Steve Ballmer, of Microsoft, and Jeff Immelt, of GE, can tell you about that problem, suffering as they do from the nosebleed prices at which their stocks traded when they were handed the managerial baton.”

I have never been a Buffett cheerleader — he supped at Uncle Sam’s teat during the crisis — but I have always appreciated his blunt forthrightness. Its hard to imagine many other CEOs writing words to this effect:

“The big minus is that our performance advantage has shrunk dramatically as our size has grown, an unpleasant trend that is certain to continue. To be sure, Berkshire has many outstanding businesses and a cadre of truly great managers, operating within an unusual corporate culture that lets them maximize their talents. Charlie and I believe these factors will continue to produce better-than-average results over time. But huge sums forge their own anchor and our future advantage, if any, will be a small fraction of our historical edge.

And it gets better from there. There is no love lost between Berkshire (like Google) and Wall Street:

“We make no attempt to woo Wall Street. Investors who buy and sell based upon media or analyst commentary are not for us. Instead we want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it’s one that follows policies with which they concur. If Charlie and I were to go into a small venture with a few partners, we would seek individuals in sync with us, knowing that common goals and a shared destiny make for a happy business “marriage” between owners and managers. Scaling up to giant size doesn’t change that truth.”

And lastly, this:

“At 86 and 79, Charlie and I remain lucky beyond our dreams. We were born in America; had terrific parents who saw that we got good educations; have enjoyed wonderful families and great health; and came equipped with a “business” gene that allows us to prosper in a manner hugely disproportionate to that experienced by many people who contribute as much or more to our society’s well-being. Moreover, we have long had jobs that we love, in which we are helped in countless ways by talented and cheerful associates. Indeed, over the years, our work has become ever more fascinating; no wonder we tap-dance to work. If pushed, we would gladly pay substantial sums to have our jobs (but don’t tell the Comp Committee).”

Good Sunday reading . . .


UPDATE February 28, 20120 11:15 am

A few of you have emailed to say you cannot open the PDF. Perhaps its the traffic, as the letter was released today. I’ll see if I can embed the letter.


Done! Embedded version here

Category: Corporate Management, Earnings, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “Berkshire Hathaway Letter to Shareholders”

  1. SINGER says:

    “We make no attempt to woo Wall Street. Investors who buy and sell based upon media or analyst commentary are not for us. Instead we want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it’s one that follows policies with which they concur.

    …However, we did make an attempt to surreptitiously manipulate the silver market, but since we got caught we owned up and dumped our position….

  2. Buffett tried to corner the silver market? Maybe you are thinking about the Hunt Brothers– not Buffett !

    UPDATE: Damn !

    You were right
    Buffett’s Silver Streak,9171,138593,00.html

  3. franklin411 says:

    Warren is awesome. I don’t begrudge anyone the right to become insanely rich. I frankly even understand greed as a natural human trait that ought to be policed, but that is at least logical. I won’t tolerate hypocrisy, however.

    He has always been a straight shooter. I remember Warren’s brief stint as Gov. Schwarzenegger’s economic guru. He told it like it was–he said that Prop 13 was a huge tax cut for corporations and a huge tax burden on middle class homeowners. Buffet pointed out that the tax on his multi-million dollar mansion in California was less than the tax most middle-class homeowners pay on their homes. The only way for California to get its fiscal house in order was to restore some sanity to the tax code, so that every person is taxed fairly under the law.

    What was his reward for speaking the truth?

    Gov. Terminator fired him. Instead, Arnie said that we could have huge tax cuts in California without having to cut spending and services. He would audit the state’s books and find tens of billions of dollars of “waste.”

    Well, it has been 7 years since this all went down. How’s that audit coming, Herr Governator?

  4. @Barry

    I think it was the early 00s that it was reported Uncle Warren was buying the shiny stuff.


    You need to keep in mind that as he was advising the governator his gas holdings stood to make money from the state. Don’t believe that these billionaires help out of the goodness of their hearts. It is about access

  5. TakBak04 says:

    Barry Ritholtz Says:
    February 28th, 2010 at 11:55 am

    Buffett tried to corner the silver market? Maybe you are thinking about the Hunt Brothers– not Buffett !

    UPDATE: Damn !

    You were right
    Buffett’s Silver Streak,9171,138593,00.html


    BR…Thank you for the PDF of Buffet’s thing to his investors. I read it and found it fascinating. He sounded like such a concerned person for his “Investors” and had good “homilies” about his life experience and how he and his fellow Buffet Fund co-CEO…”CHARLES” are keeping themselves accountable to their group.

    But, it started to seem a little cloying…a little to congratulatory..but still…I thought…Buffet must be one of the Good Guys because he is so contrasted with “Lord Blankfiend” …that we really should respect what he says.

    Then I saw Singer’s Post here…and I thought…”Sheesh…that Singer Poster has it all WRONG…he’s confused Buffet with Soros!” I’ve read some of “Singer’s” posts here and couldn’t understand how he’d flub it up and confuse Buffet with Soros….

    Now…I see you have found that one of your usual posters “Singer” was correct and that Buffet did indeed try to “corner” some part of Silver Market.

    Oh My…..Can one trust ANYONE THESE DAYS?

    The post from CNN was truly an “eye opener.” Buffet is such a charming guy…but I always remember an old saying from a “Country Lawyer” here in North Carolina… “When someone speaks charming words to you and your instinct is to believe him…be sure your hand is firmly placed on your back pocket where you hold your wallet.”

    Good Advice! Although…Warren has been pretty good so far for his Berkshire Folks….I lost a lot of money in a very old “Balanced Mutual Fund” that crashed and burned taking many Pension Funds across American down with it. It was so old …it had moss growing on it…but it performed and performed and I was up so good in that thing…until it was revealed that it had put all it’s money into the banks that failed through the years and was NOT the “balanced/safe fund” diversified that it was touted to be. My Bad…but eventually the “Too Big Too Fail” (which Buffet actually says about “BH Fund” as so Big it’s Ginormous)…..yet he doesn’t see it failing while he cautions about the Banks that were too Big to Fail.

    Something strikes me as hypocrisy, here. But…maybe Warren and Charlie can Beat ALL the Odds …….. There really is something wonderful, cozy, warm and comforting about Buffet. He doesn’t have the “sharp edges” that Bill Gross has in his monthly newsletters. For some reason…I would trust Bill Gross over Buffet.. But, I am a small investor and what does it matter…….except it’s CURIOUSITY…and I do need to monitor even my small little pot of coins that I worked hard for.


  6. TakBak04 says:

    For further reference…from the article that BR referenced:

    Buffett’s Silver Streak

    Buffett’s silver spree caught almost everyone off guard. After all, the man made his personal billions–$25 billion at last count–by buying and holding undervalued stocks. But silver doesn’t even pay a dividend and, worse, costs money to store. So why on earth did Buffett use Berkshire to acquire 4,000 tons of silver–a cache weighing more than 10 Boeing 747s–at a cost of $650 million between July 25 and Jan. 12? Until then, Buffett hadn’t owned an ounce in 30 years.

    For starters, silver prices were down last summer. That made the metal a value play, something Buffett is good at. In fact, Buffett says in a statement that he saw a huge imbalance between the amount of silver available and the demand for it to make things like jewelry, photographic supplies, electronic components, mirrors and batteries. So he began buying because “equilibrium between supply and demand was only likely to be established by a somewhat higher price.” Translation: It looked like a good deal.

    More than most tycoons, Buffett is forthcoming, and there is no reason to doubt his word. But there’s also a bigger picture that’s worth a look. At Berkshire’s annual meeting last year, Buffett warned that the stock market was presenting few bargains and that investors should expect dramatically lower returns. Just last fall he bought $2 billion of–gasp!–long-term Treasury bonds, an investment that betrays some concern about stocks. Now he turns around and buys enough silver to make the Hunts jealous. Could it be that Buffett has soured on the stock market?

    Read more:,9171,138593,00.html#ixzz0gsjiO5kW

  7. philipat says:

    He seems to be selling down his stake in Moody’s? Is that because he knows a broken model when he sees one? I still don’t see much discussion about addressing the problems at the Ratings Agencies in the context of financial reform. Their Lobbyists must be working overtime with a nice budget?

  8. TakBak04 says:

    Not only the Ratings Agencies but the Banks and Wall St. Actors who were responsible along with the Global Interests.

    Bush told us to “Go Shop” after “9/11.”

    Obama told us to “Go Buy Stocks” after the Financial meltdown…

    Where is there any accountability after all these disasters that have hurt our National Economy and Millions of Americans Salaries, Pensions, Retirements and Livlihoods?


    No one seems to ever be able to answer that question except to say: “We must look forward and not back into the past.”

    How does that make any sense?