On Friday, Warren Buffet released his annual ‘Letter to Shareholders‘. Given that the man has returned 21% per annum since 1965 (versus a 10% gain for the S&P), it is worth a read. He makes a number of observations, some that will bring a smile to readers of this blog,
i) On the government – ‘We made one large sale last year. In 2002 and 2003 Berkshire bought 1.3% of PetroChina for $488 million, a price that valued the entire business at about $37 billion. Charlie and I then felt that the company was worth about $100 billion. In the second half of last year, the market value of the company rose to $275 billion..so we sold our holdings for $4 billion. A footnote: We paid the IRS tax of $1.2 billion on our PetroChina gain. This sum paid all costs of the U.S. government – defense, social security, you name it – for about four hours.’
ii) On the US 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. Inevitably, that causes America to ship about $2 billion of IOUs and assets daily to the rest of the world.’
iii) 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. Our trade equation guarantees massive foreign investment in the U.S. When we force-feed $2 billion daily to the rest of the world, they must invest in something here. Why should we complain when they choose stocks over bonds.”
iv) On Free Trade – ‘In developing a sensible trade policy, the U.S. should not single out countries to punish or industries to protect. Nor should we take actions likely to evoke retaliatory behavior that will reduce America’s exports, true trade that benefits both our country and the rest of the world.’ Go read the rest. Especially the Mitt Romney joke.