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Warren Buffett

Warren Buffett Shares Optimistic Message in Annual Letter to Stockholders

February 28, 2009 02:45 PM
by findingDulcinea Staff
Billionaire investor Warren Buffett sees compelling investment opportunities, and believes that America’s best days lie ahead.

Buffett Releases Stockholder Letter

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Warren Buffett’s 2008 Annual Letter to Stockholders of his Berkshire Hathaway was released today on the company’s Web site. The annual letter includes the report of a 9.6 percent drop in the book value per share of the company, only the second loss in the 44 years Buffett has led it.

The letter includes an analysis of each of Berkshire’s businesses, and the good and bad investment decisions made in recent years. Buffett’s two clunkers in 2008 were a large investment in ConocoPhillips near the peak of the oil market, and investments in two Irish banks that have been marked down almost 90 percent.

Yet Buffett claims to be unfazed. In his view, “the investment world has gone from underpricing risk to overpricing it.” He says the yields on high quality municipal and corporate bonds would have been “unthinkable” a few years ago.

Buffett describes the spiral of paralyzing fear and declining business activity in 2008 that “led to a dysfunctional credit market that in important respects soon turned non-functional.” He describes the credit environment by referencing the familiar sign seen on the walls of restaurants: “In God we trust, all others pay cash.”

The letter generally supports the actions  of the U.S. government to counteract the crisis, but glumly notes that “one likely consequence is an onslaught of inflation.” Referring to the many industries and local governments that have turned to the federal government for a bailout, he predicts that “weaning these entities from the political teat will be a political challenge. They won’t leave willingly.”

And yet despite the current dire situation and challenges ahead, Buffett remains optimistic. He writes, “though the past has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.”

Opinion: “Buffett-isms”

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