The last Saturday in February marks a special day for Berkshire Hathaway fans: the release of Warren Buffett’s annual letter to Berkshire Hathaway shareholders.
Some of the headlines that stem from it will have focused on buyback illiteracy, Berkshire’s results, his age, whether he’s lost his edge, and what he thinks of “the market.”
No surprise. He’s still bullish on the USA and sees Berkshire as a bet on America (the S&P 500 index gets more of its earnings and sales abroad), all with cost-free insurance float as a nice lever1Float is the insurance premium kept while claims wait to be paid out. “Our insurance float increased during 2022 from $147 billion to $164 billion. With disciplined underwriting, these funds have a decent chance of being cost-free over time..
I read it and digitally underlined and pondered what resonated with me, things I believe can be applied to grandparents, stock pickers, programmers, garners, or whatever your stage of life and flavor of interests.
“The disposition of money unmasks humans.” Money makes us more of who we are. This seems like an adage across time and cultures.
“Charlie and I are not stock-pickers; we are business-pickers.” Stocks are more than pieces of paper; they represent an ownership interest in a business. Buying stocks in small chunks is a great way to teach children about ownership, and how businesses are valued and prices are quoted. Everything can be thought of as a lemonade stand of sorts.
A few big things drive the bulk of the results in life so it’s important to get the big things right. “(in 58 years)…our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years.” He goes on with a beautiful gardening metaphor: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders.”
On share buybacks: “When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).” Presented without further comment other than lol.
The last is a gem of a quote from Charlie Munger, his steadfast partner: “If you don’t see the world the way it is, it’s like judging something through a distorted lens.”
Markets, nature, and time, all viewed with regular lens cleaning and maintenance, are great teachers of Truth.