The master has spoken in his freshly released letter to shareholders and as usual, it is filled with brilliance, hypocrisy and more brilliance. You can read the full letter here. I will keep my personal thoughts on the letter short and sweet, but a few things stood out to me:
Buffett appears to attempt to distance himself from the notion of “too big to fail” and implies that the firm is not dependent on the “kindness of strangers”:
“We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback
position at Berkshire. Instead, we will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity.”
These are interesting comments now that we know Buffett in fact played a role in orchestrating the bank bailouts (see here for his letter to Hank Paulson). Of course, Buffett had a substantial amount at stake if the banks were allowed to implode. As Barry Ritholtz has previously shown, Buffett did indeed rely on the kindness of strangers. He claims to have been a supplier of capital, but this was nothing more than doubling down on bad bets that he had made with the hope that the government would ultimately step in. Of course, we all know they did. I don’t know how he can make such comments when it is so obvious that he directly benefited from the bank bailouts and played an instrumental role in orchestrating them? It’s disingenuous at best.
A few other things that jumped out:
- His discussion on risk management (p. 16) should be required reading for every CEO and money manager in America.
- He is still extraordinarily funny.
- He sounds very optimistic about the state of the housing market.
- He sells his company and the idea behind Berkshire better than any CEO on the planet.
For more reading please see his annual letters from the Buffett Partnership days.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.