Sunday, February 27, 2011

2010 Berkshire Hathaway Annual Letter

It is fitting that my 1000th post on the Share Investor Blog is about one of my favourite topics in terms of business, finance and investing.

Warren Buffett!

He has his 2010 Berkshire Hathaway Letter just out a few hours ago and it is essential reading for all investors, especially nutty Buffett fans like me.

Here is a taster to get you interested:

"Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential–a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War–remains alive and effective. We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead."

Apposite advice from an 80 year old at this time given the recent tragedy in Christchurch and the fact that a company that he is the largest shareholder in, Munich Re, will be underwriting the bulk of the losses from the massive Christchurch Earthquake via reinsurance.

My favourite part of the letter though is about debt and its influence on all of us. It is funny but also very wise.

The last word:

"The fundamental principle of auto racing is that to finish first, you must first finish. That dictum is equally applicable to business and guides our every action at Berkshire.


Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive.

Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade – and some relearned in 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people."


More About Warren Buffett

Everything Warren Buffett
Download the 2010 Berkshire Hathaway Annual Shareholders Letter
Download the 1977 - 2010 Warren Buffett Letter's to Berkshire Hathaway Shareholders

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c Share Investor 2011