Warren Buffett's annual letter to Berkshire-Hathaway shareholders

Warren Buffet released his annual letter to Berkshire-Hathaway shareholders for 2008 yesterday. I have only glanced at it, but as expected it has more than its fair share of insight into finance, investing, the economy, and economic policy.

Classic Warren Buffett humor (related to the insurance business of all things):

The best anecdote I've heard during the current presidential campaign came from Mitt Romney, who asked his wife, Ann, "When we were young, did you ever in your wildest dreams think I might be president?" To which she replied, "Honey, you weren't in my wildest dreams."

Or his view of commercial aviation:

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

One thing to keep in mind about B-H as a business is that, as Warren says in his letter, "we will need large and sensible acquisitions to get the growth in operating earnings we wish." Although B-H has some amount of organic business growth, and reinvests some amount of its cashflow within the company, its operations simply do not throw off sufficient increase in business value to fuel robust earnings growth for all of B-H. And since B-H does not pay a dividend and earning a high yield on liquid assets is difficult, B-H needs to exchange a lot of its cash for business value outside of the company. I suspect that in 2008 he will do a fair amount of cherrypicking and acquire the remains of a number of financial firms.

-- Jack Krupansky