Warren Buffet's Letter to Shareholders

I just finished reading an Warren Buffet's letter to shareholders that is issued in the Annual report of Berkshire Hathaway, the company which is majority owned by Warren Buffet.

It was a very enlightening read, especially when you are trying to learn how and where to invest. The great thing about Buffet's letters is that you get to see how he thinks, so that you can use that thinking for your own investments. The letter was a great read, and you too can read it here.

Buffet did have quite a few interesting comments that I wanted to showcase, just so you don't think he is a boring, financial guy.


"As we view GEICO’s current opportunities, Tony and I feel like two hungry mosquitoes in a nudist camp. Juicy targets are everywhere." -- GEICO is owned by Berkshire Hathaway

"Ben Franklin once said, “It’s difficult for an empty sack to stand upright.” That’s no worry for General Re clients." -- General Re is owned by Berkshire Hathaway

"Ajit came to Berkshire in 1986. Very quickly, I realized that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home." - commenting on a manager of one of his companies

"... the need for meaningful down payments was frequently ignored. Sometimes fakery was involved. (“That certainly looks like a $2,000 cat to me” says the salesman who will receive a $3,000 commission if the loan goes through.)" -- Buffet commenting on the pre-fab housing bubble in the 90s

"Lenders happily made loans that borrowers couldn’t repay out of their incomes, and borrowers just as happily signed up to meet those payments. Both parties counted on “house-price appreciation” to make this otherwise impossible arrangement work. It was Scarlett O’Hara all over again: “I’ll think about it tomorrow.” -- comment on the current real estate problems in the US

"Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refinancing possibilities. And the home purchased ought to fit the income of the purchaser."

"Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition." -- Amen!

"... we are one of only seven AAA corporations in the country – our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one."

"The tennis crowd would call my mistakes “unforced errors.” -- commenting on his purchase of two Irish banks that lost over 90% of their value

"We never want to count on the kindness of strangers in order to meet tomorrow’s obligations. When forced to choose, I will not trade even a night’s sleep for the chance of extra profits."

"... our feelings about [derivatives] mirrored a line in a country song: “I liked you better before I got to know you so well.”

"From this irritating reality comes The First Law of Corporate Survival for ambitious CEOs who pile on leverage and run large and unfathomable derivatives books: Modest incompetence simply won’t do; it’s mindboggling screw-ups that are required." -- when you mess up, mess up badly enough, so the government HAS to help you