Buffett’s Annual Letter to Shareholders

Dear Friends,

Attached is Buffett’s Annual Letter to Shareholders for 2016.  If you’re going to read one piece of financial literature every year, I think this should be it. It provides a clear and unbiased look into the state of our economy, and also provides fascinating insight into the inner workings of Berkshire Hathaway, and the reasoning behind all of the investment decisions they make.   This recent installment does not disappoint.  I picked out a few highlights below.  We hope you enjoy it.

“As Charlie says, it’s great to have a manager with a 160 IQ – unless he thinks it’s 180.”

“You need not be an economist to understand how well our system has worked.  Just look around you.  See the 75 million owner occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent filled universities, you name it – they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776.  Starting from scratch, American has amassed wealth totaling $90 trillion.

This economic creation will deliver increasing wealth to our progeny far into the future.  Yes, the buildup of wealth will be interrupted for short periods from time to time.  It will not, however, be stopped…Babies born in America today are the luckiest crop in history.”

“We like to make hay while the sun sets, knowing that it will surely rise again.”

“…Moreover, the years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks…During such scary periods, you should never forget two things:  First, widespread fear is your friend as an investor, because it serves up bargain purchases.  Second, personal fear is your enemy.  It will also be unwarranted.  Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively financed American businesses will almost certainly do well.”

As always, please call us if you have any questions on this or anything else.