Random gleanings from the world of business, investments and economics: February 29- March 4, 2016
“We’ve long felt that the only value of stock forecasters is to make fortune tellers look good.” -Warren Buffett 1992 Berkshire Hathaway Chairman’s Letter
It arrived on Saturday: the 2015 Berkshire Hathaway Chairman’s Letter.
New material from the Oracle of Omaha!
Every February, shareholders of Berkshire Hathaway look forward to Warren Buffett’s Annual Chairman’s Letter. The letter arrives on the last Saturday of the month.
Saturday’s was Warren Buffett’s 51st letter as head of Berkshire Hathaway.
His letters provide real-time insight into the thinking of one of Wall Street’s most iconic investment minds.
Most of this year’s letter is a serious discussion of Berkshire’s holdings; what went right for Berkshire in 2015, and what went wrong. We looked for pithy quotes that may someday be taught as gospel in business school. The closest we found was wisdom he attributes to Charlie Munger (his vice-chairman), “If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior”.
As in previous letters, he promotes Berkshire businesses.
Heinz merged with Kraft in 2015. Mr. Buffett observes that the new company can now supply both the ketchup and the wieners.
Says Mr. Buffett, “Add a Coke and you will be enjoying my favorite meal. We will have the Oscar Mayer Wienermobile at the annual meeting – bring your kids.”
GEICO is one of his oldest holdings. In this year’s letter he praises the little gecko for saving people money on their insurance, then says, “of course there’s always a grouch in the crowd. One of my friends says he is glad that only a few animals can talk, since the ones that do speak seem unable to discuss any subject but insurance.”
For the first time ever, Berkshire Hathaway is broadcasting the annual shareholder meeting live via webcast (April 30). Acknowledging his advanced age – Warren Buffett is 85, and Charlie Munger is 92 – Mr. Buffett suggests shareholders would want to “look in occasionally to make sure we hadn’t drifted off into la-la land”.
During the meeting, on stage, as always, he and Charlie will eat and drink Coke, fudge and peanut brittle (made by Berkshire companies), “enough to satisfy the weekly caloric needs of an NFL lineman. Long ago we discovered a fundamental truth: There’s nothing like eating carrots and broccoli when you’re really hungry – and want to stay that way.”
Warren Buffett is active in politics, and frankly he isn’t popular with conservatives because of his opinions about estate tax, health care and social issues. But in this year’s letter he said a few things that cut through politics and perhaps should be taught in business schools. If you’ll indulge a long quote…
“It’s an election year, and candidates can’t stop speaking about our country’s problems (which of course only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong.
The babies being born in America today are the luckiest crop in history.
American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries.
Some commentators bemoan our current 2% per year growth in real GDP…2% of overall growth produces about 1.2% of per capita growth…in a single generation of, say, 25 years…the gain will produce a staggering $19,000 increase in real GDP per capita for the next generation.
Today’s politicians need not shed tears for tomorrow’s children.
Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communications or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.
For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous.
“And, yes, America’s kids will live far better than their parents did.”
Encouraging words. You can access the letter here
The Week Ahead
Tuesday: ISM Manufacturing Index, Construction Spending
Wednesday: EIA Petroleum Status Report
Thursday: Jobless Claims, Productivity and Costs, Factory Orders
Friday: Employment Situation, International Trade
2015 reports are winding down…
Tuesday: Autozone, Dick’s Sporting Goods, Dollar Tree, Medtronics
Wednesday: Abercrombie, Brown Forman, Costco
Thursday: H&R Block, Kroger
Friday: Big Lots, Piedmont Natural Gas