Buffett speaks!
David Berman, February 29, 2008 at 5:38 PM EST
Warren Buffett's annual letter to shareholdersas chairman of Berkshire Hathaway Inc. is a treat for investors – lots and lots of investors, judging from the difficulty some of them had accessing the letter from Berkshire's Web site Friday afternoon after markets closed. Who knows what has happened to the toner levels of printers around the world
It was worth the effort: The plain-speaking Mr. Buffett weighed in on everything from the housing market to the U.S. dollar to the central reason why he will always keep most of his assets parked in the United States.
On housing: "As house prices fall, a huge amount of financial folly is being exposed. 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."
On insurance: "It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008. Prices are down, and exposures inexorably rise. Even if the U.S. has its third consecutive catastrophe-light year, industry profit margins will probably shrink by four percentage points or so. If the winds roar or the earth trembles, results could be far worse."
On the dollar: "The U.S. dollar weakened further in 2007 against major currencies, and it's no mystery why: Americans like buying products made elsewhere more than the rest of the world likes buying products made in the U.S."
On sovereign wealth funds: "There's been much talk recently of sovereign wealth funds and how they are buying large pieces of American businesses. This is our doing, not some nefarious plot by foreign governments."
On currency bets: "At Berkshire we held only one direct currency position during 2007. That was in – hold your breath – the Brazilian real. Not long ago, swapping dollars for reals would have been unthinkable. After all, during the past century five versions of Brazilian currency have, in effect, turned into confetti."
On foreign exposure and the lure of the U.S.: "At Berkshire, we will attempt to further increase our stream of direct and indirect foreign earnings. Even if we are successful, however, our assets and earnings will always be concentrated in the U.S. Despite our country's many imperfections and unrelenting problems of one sort or another, America's rule of law, market-responsive economic system, and belief in meritocracy are almost certain to produce ever-growing prosperity for its citizens."
Rohit Sehgal
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