The release of the annual report of the Berkshire Hathaway Company (NYSE: BRK-A) by Warren Buffett has resulted in a ton of online news about him and the company, and I'll have the news and links for you below.
A lot of the news centers on Buffett's disgust with the behavior of those in the mortgage industry, where he called it "financial folly," as to what was behind the crisis.
He also talks about problems in pension funds ahead, as well as what's behind the increasing influence of "sovereign wealth" funds.
Another issue is in the insurance industry, where he said Berkshire, along with other insurers, will partake in the slowdown that is already here, and profit margins in 2008 and beyond won't be what they've been the last couple years.
The Warren Buffett news across the web
Buffett: Don't bank on big returns
He chides investors who expect their portfolios to see double-digit growth, and says Berkshire's success has been so great that it is unlikely to see "outsized gains" in the future.
Buffett goes on to note that were stocks to return 10% annually throughout this century, the Dow would hit 24 million by year 2100. "If your adviser talks to you about double-digit returns from equities," he writes, "explain this math to him - not that it will faze him. ... Beware the glib helper who fills your head with fantasies while he fills his pockets with fees."
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The Oracle of Omaha seems to have made another sound investment. Careful hedging helped Swiss Re, the world's largest reinsurer, which Warren Buffett bought a 3.0% stake in last month, report far lower-than-expected write-downs in 2007 and early 2008, suggesting that fears about the company have been overplayed.
As record losses from Americal International Group sent stocks in the European insurance sector down an average of 2.8%, Swiss Re's shares soared 3.6%, or 2.85 Swiss francs ($3.54), to 82.80 Swiss francs ($80.01), in Zurich late on Friday, after it released its annual earnings.
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Buffett's Berkshire net dips 18%
Warren Buffett’s Berkshire Hathaway Inc said on Friday quarterly profit fell 18%, hurt by lower earnings from insurance underwriting and a decrease in investment gains.
“That party is over,” Buffett said. “It’s a certainty that insurance industry profit margins, including ours, will fall significantly in 2008. Prices are down.... Be prepared for lower insurance earnings during the next few years.”
Fourth-quarter profit fell to $2.95 billion, or $1,904 per Class A share, from $3.58 billion, or $2,323, a year earlier.
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US trade gap feeding sovereign wealth funds
Billionaire investor and chairman of Berkshire Hathaway Inc Warren Buffett has blamed US's overseas spending for the emergence of sovereign wealth funds and the huge investment flows into the US. He said these investments are solely fuelled by US spending overseas and cannot be seen as politically motivated.
``This is our doing, not some nefarious plot by foreign governments,'' Buffett said in his annual letter to shareholders released along with Berkshire's 2007 full-year and fourth-quarter financial results.
``Our trade equation guarantees massive foreign investment in the US. When we force-feed $2 billion daily to the rest of the world, they must invest in something here.''
US trade imbalance lures sovereign wealth funds, says Buffett
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With this comment, you wonder why Buffett is investing in insuring municipal bonds
“Whatever pension-cost surprises are in store for shareholders down the road, these jolts will be surpassed many times over by those experienced by taxpayers. Public pension promises are huge and, in many cases, funding is woefully inadequate. Because the fuse on this time bomb is long, politicians flinch from inflicting tax pain, given that problems will only become apparent long after these officials have departed. Promises involving very early retirement – sometimes to those in their low 40s – and generous cost-of-living adjustments are easy for these officials to make. In a world where people are living longer and inflation is certain, those promises will be anything but easy to keep.”
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Pension problems: Many outlooks too optimistic, Buffett says
Many corporate pension managers exaggerate the gains they expect in the future, Warren Buffett said Friday, projecting an average annual return of 8 percent that he said is impossible.
But the assumptions let chief executives of large corporations report higher earnings, said Buffett, chairman of Berkshire Hathaway Inc. of Omaha, in his annual report to shareholders. "And if they are wrong, as I believe they are, the chickens won't come home to roost until long after they retire."
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Buffett tells investors ‘the party is over’
"As house prices fall, a huge amount of financial folly is being exposed," Buffett wrote. "You only learn who has been swimming naked when the tide goes out — and what we are witnessing at some of our largest financial institutions is an ugly sight."
In last year’s letter Buffett warned against “weakened lending practices” in the mortgage market.
This year he wrote: “Just about all Americans came to believe that house prices would forever rise.
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Buffett has profitable year, looking outside US in 2008
Buffett said he is looking to invest more outside the United States, after paying $4 billion for a controlling stake in Israel's Iscar Metalworking Cos and buying stock of South Korean steelmaker Posco, French drugmaker Sanofi-Aventis SA and British retailer Tesco Plc (TSCO.L).
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Buffett identifies four potential successors
The legendary American stock picker Warren Buffett has identified four people suitable to succeed him as investment chief of his Nebraska-based business empire, filling one of the most sought after job vacancies in the financial world.
The 77-year-old billionaire revealed that his search for a sharp-witted successor has borne fruit with candidates identified who all already manage substantial investments. His present righthand man, Charlie Munger, is aged 84.
"The board knows the strengths of the four and would expect to hire one or more if the need arises," Buffett wrote. "The candidates are young to middle-aged, well-to-do to rich and all wish to work for Berkshire for reasons that go beyond compensation."
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Berkshire Hathaway annual report
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