Each year, Warren Buffett writes a letter to the shareholders of Berkshire Hathaway, a letter that is now as famous for his down-home wit and wisdom about investment and the foibles of Wall Street as it is for his report on Berkshire’s year. Here follows selected excerpts from his latest letter of his thoughts about bail-outs, bank bosses, risk management, real estate markets, M&A advisors, tap-dancing to work and more.
On Wall Street Bail-Outs
It has not been shareholders who have botched the operations of some of our country’s largest financial institutions. Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascos of the last two years. To say these owners have been “bailed-out” is to make a mockery of the term.
On Wall Street Pay
The CEOs and directors of the failed companies..have largely gone unscathed…It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.
On Risk Management
A CEO must not delegate risk control. It’s simply too important. At Berkshire, I both initiate and monitor every derivatives contract on our books, with the exception of operations-related contracts at a few of our subsidiaries… If Berkshire ever gets in trouble, it will be my fault. It will not be because of misjudgments made by a Risk Committee or Chief Risk Officer.
On Bank Governance
A board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control. If he’s incapable of handling that job, he should look for other employment. And if he fails at it – with the government thereupon required to step in with funds or guarantees – the financial consequences for him and his board should be severe. For More Click Here
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“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
Warren Buffett
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Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
Warren Buffet
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Chains of habit are too light to be felt until they are too heavy to be broken.
Warren Buffett
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“Risk comes from not knowing what you’re doing.”
Warren Buffett
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“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks”
Warren Buffett
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“Risk is a part of God’s game, alike for men and nations.”
Warren Buffett
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It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
Warren Buffett
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Warren Buffett is rolling the dice in a failing U.S. market, but history shows that there is major opportunity in time of crisis. This is a big time deal, Warren’s company Brekshire Hathaway takes 100% ownership of rail road operator Burlington Northern by forking over a little sum of money; only $34 billion, its nothing to a boss.
You may not be ready to bet on the U.S. economic recovery, but according to Forbes Warren Buffett sure is.
The billionaire made a splash Tuesday when his investment firm, Berkshire Hathaway, announced a deal to take over railroad operator Burlington Northern Santa Fe. The cash-and-stock deal is worth $100 a share for the 77.4% of the company Berkshire didn’t already own, for a price tag near $34 billion.
Buffett called the deal an “all-in wager on the economic future of the United States,” but his enthusiasm couldn’t give Wall Street a lift Tuesday morning. The Dow Jones industrial average was down 71 points to 9,718 in the first 10 minutes of trading, the S&P 5007 points to 1,035 and the Nasdaq12 points to 2,038. Burlington Northern shares shot up 28.2%.
For the second-richest man in America, the Burlington Northern buy is just the latest investment in a high-profile American company. Buffett poured billions into preferred shares of General Electric and Goldman Sachs in late 2008–bets that looked questionable as the market continued to slide, but have paid off in a big way.
Elsewhere in corporate news Tuesday, Johnson & Johnson said it will try to save up to $900 million next year by cutting jobs and scaling back its management structure. The health care and consumer products giant said it will reduce its workforce by up to 7% in a move that could impact more than 8,000 workers. Shares were flat in early trading.
The Federal Reserve begins a two-day meeting in Washington Tuesday, but few expect any action on interest rates. Still, the closing statement at Wednesday’s meeting will be carefully parsed for any clues of future changes or slowdowns in the numerous liquidity facilities being run by the central bank.
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“Chains of habit are too light to be felt until they are too heavy to be broken.”
Warren Buffett
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