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Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

berkshirehathaway.com

31–40 of 324 posts

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#31
post #17

There's one particular passage I'd like to point out, on page 5: Our efforts to materially increase the normalized earnings of Berkshire will be aided – as they have been throughout our managerial tenure – by America’s economic dynamism. One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenu…

America is worth way more than $90 trillion. He's valuing it like a buyer :)

As a quick back-of-envelope check: American GDP in 2016 was $18.86 tn.

The son of a bitch wants it at a 4.7 trailing multiple, after a relatively slow-growth year. All that praise - and then a 4.8x multiple. Now I know how he butters up his acquisition targets :)

EDIT: I am getting downvoted, but I am keeping this. You guys don't realize that valuing companies is what he does all day, every day. That's literally his job. When he throws a figure like $90 trillion out for America, that is not casual or haphazard - it took him a few seconds to come up with that, and he did it on some basis. We get real insight into his thinking, especially when it comes following such lavish praise. In my opinion I am making a good contribution in pointing this out. We've just learned something.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#32
post #10

Earlier quoted context omitted.

Hedge funds make perfect sense for people who want to hedge their capital in specific ways. A hedge fund doesn't need to outperform the market to deliver tremendous value to their customers. Secondly, every trade has a counterparty. So somebody necessarily has to be at the loser's end of every trade. For every investment fund that makes oversize profits another fund loses money. It all evens out. That doesn't mean it…

> That doesn't mean it's entirely zero sum, though, because money still flows from bad businesses towards good businesses as a result. Buffet's point is that it's negative-sum. A gambler might win today, but lose tomorrow, and his counterparty will get the opposite, but the house wins on every transaction. While the players churn, the market makers and rent seekers will drain the system of money, in aggregate.

You're reading it incorrectly. Buffett is making the claim that people have "waste[d] more than $100 billion over the past decade" looking for superior investment returns. That's his claim, no more. And I agree.

There wouldn't be a stock market if everybody just invests in a fortune 500 index fund. The benefit to society of a functioning stock market is way more than $10B/yr.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#33
post #17

There's one particular passage I'd like to point out, on page 5: Our efforts to materially increase the normalized earnings of Berkshire will be aided – as they have been throughout our managerial tenure – by America’s economic dynamism. One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenu…

they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. This was a gain that was achieved not by starting from scratch but by stealing lands from indigenous people and forcing Africans to work that land. I'm not sure if you can describe the kidnapping, murder, rape and ultimately genocid…

The gains weren't just from those things - there was a lot of hard work involved. However, your point that it wasn't "from scratch" is a valid one and that jumped out at me too.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#34
post #17

There's one particular passage I'd like to point out, on page 5: Our efforts to materially increase the normalized earnings of Berkshire will be aided – as they have been throughout our managerial tenure – by America’s economic dynamism. One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenu…

they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. This was a gain that was achieved not by starting from scratch but by stealing lands from indigenous people and forcing Africans to work that land. I'm not sure if you can describe the kidnapping, murder, rape and ultimately genocid…

The areas that used slaves the most are now some of the poorest areas of the USA. Maybe slavery didn't have that big of an impact?

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#35
post #34

Earlier quoted context omitted.

they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. This was a gain that was achieved not by starting from scratch but by stealing lands from indigenous people and forcing Africans to work that land. I'm not sure if you can describe the kidnapping, murder, rape and ultimately genocid…

The areas that used slaves the most are now some of the poorest areas of the USA. Maybe slavery didn't have that big of an impact?

Yes I believe in Ken Burn's documentary he mentioned that even at the time the North's economy far dwarfed the South's. Especially in terms of technological advancement.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#36
post #34

Earlier quoted context omitted.

they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. This was a gain that was achieved not by starting from scratch but by stealing lands from indigenous people and forcing Africans to work that land. I'm not sure if you can describe the kidnapping, murder, rape and ultimately genocid…

The areas that used slaves the most are now some of the poorest areas of the USA. Maybe slavery didn't have that big of an impact?

Actually the opposite. Social and political institutions of the slave owning South had developed an entrenched extractive hierarchy not unlike the aristocracies of Eastern Europe at the time. The legacy of these oppressive institutions has lead enterprising Americans to seek their fortunes elsewhere throughout history.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#37
post #22

Earlier quoted context omitted.

Suppose you're a business with a lot of positive cash flow, but you also have a lot of exposure to the USD-MXN exchange rate. Maybe you have factories in Mexico but sell to the US, it doesn't matter. In that case you can pay a hedge fund to hedge your money so that if the exchange rate collapses you make enough money on the stock market to compensate, so your business will survive until the exchange rate climbs back.…

>If your business makes toilet paper you have it easy because no matter what happens demand for your product won't collapse overnight. Until people figure out the magic of bidets! https://www.amazon.com/Luxe-Bidet-Neo-120-Non-Electric/dp/B0...

You still need some paper right?

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#38
post #35
post #34

Earlier quoted context omitted.

The areas that used slaves the most are now some of the poorest areas of the USA. Maybe slavery didn't have that big of an impact?

Yes I believe in Ken Burn's documentary he mentioned that even at the time the North's economy far dwarfed the South's. Especially in terms of technological advancement.

[deleted]

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#39

Earlier quoted context omitted.

Yes. But why do you want that? Why the need to state this at the moment?

Life expectancy of 86 year old male is 5.4 years.

What is it for 86 year old male multi-billionaires?

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#40
post #17

There's one particular passage I'd like to point out, on page 5: Our efforts to materially increase the normalized earnings of Berkshire will be aided – as they have been throughout our managerial tenure – by America’s economic dynamism. One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenu…

they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. This was a gain that was achieved not by starting from scratch but by stealing lands from indigenous people and forcing Africans to work that land. I'm not sure if you can describe the kidnapping, murder, rape and ultimately genocid…

Slavery was less efficient than a market economy and a free labor pool. Consider the Irish who built the Erie Canal. They were paid mostly in rum and they died off so quickly the bosses didn't care because a fresh crop of Irish workers walked off the boat the following week.

Slaves had to be fed and housed and nominally cared for. After all, they cost money and you didn't want to throw away your investment.

The slavery economy, which is what the South fought to preserve in the American Civil War (let's face it: those who like to hide behind "states rights", it all comes back to "states rights to buy and have slaves"), was a last gasp to try to preserve what was left of feudalism. It was doomed before it began.

Please don't misconstrue this as being "pro slavery". Treating humans as property is an abomination. Even the Romans believed this and enshrined it into their legal codes even though they kept slaves.

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