arrow18 Comments
  1. Echo
    Feb 28 - 2:22 am

    Buffett’s quotes are classic! Regarding the demise of the American economy, I agree and find the comparisons to the fall of the Roman Empire to be just a tad overstated.

    Were there any mentions of the hundreds of millions BRK made off of derivatives last year? I guess they aren’t the ‘time bombs’ he thought they were in the past.

  2. larry macdonald
    Feb 28 - 7:59 am

    I liked the part where Buffett warns about flexibility in accounting rules. He even applies this warning to Berkshire Hathaway — which had net income rise from $8B in 2009 to $13B in 2010. This doesn’t mean much, Buffett said, because “Charlie and I could – quite legally – cause net income in any given period to be almost any number we would like.”

  3. Phil S
    Feb 28 - 9:03 am

    While I can agree that the short term, America’s capitalist system is better at unleashing human capital. But in the long term, the fiscal imbalance and the demographics are working against America.

    Clearly, US Governments at all levels need to learn to live within their means and guess who is holding all of their debt? The East.

    The statistics are also astounding. I had seen a BNN article saying that universities in China are graduating more engineers every single year than Canada has engineers, total. And they would all gladly accept 1/10th our compensation. I know that I’m not willing to work for 1/10th of my pay, so you have to ask yourself where this is all going? There isn’t a single job, whether vocational or professional, that somebody in India or China can’t do at 1/10th the pay.

    For me, I’m just hoping to squeak into retirement before this new world order finally kicks in and everything is outsourced to the East…

  4. Rob
    Feb 28 - 9:52 am

    @ECHO – he doesn’t mean EVERY derivative is a timebomb, he just felt (correctly, in fact) that the vast volumes of deriviatives, and the leverage that was associated with these complex instruments posed huge risks to the system. Buffett clearly understands the risks and potential obligations he is taking with the deriviatives he has entered and explains this quite concisely in the letter.

  5. Rob
    Feb 28 - 9:55 am

    @Phil – I am with you on this although I think what is happening in Wisconsin potentially shows the tipping point of the fiscal imbalance starting to reverse.

    This will either work and America begins to strengthen again, or it doesn’t and they print their way out of it and inflate teh obligations away. I don’t see any other alternatives.

    Sorry. I promise never to use the term “tipping point” again. Never.

  6. Michael James
    Feb 28 - 10:53 am

    Buffett’s letters are always a good read. I did like the explanation of how net income could be easily gamed.

    For those who hope to squeak into retirement before eastern countries take all our jobs, who do you think will pay for your retirement if this doomsday scenario plays out?

  7. Canadian Capitalist
    Feb 28 - 12:25 pm

    @Echo: Yes, as always, Buffett mentioned and explained the derivatives. He treats them as selling insurance and explains how he plans to make money off them. He also explains why the derivatives he is selling are not weapons of mass destruction: they are fully backed up by capital and have no collateral requirements.

    @Larry: Every time, I read Buffett’s letter, I realize how difficult a stock picker’s job is. They have to study the financial reports closely and to gain an edge they have to obtain insights that other investors reading the same statements are missing out.

    @Phil: I don’t disagree that America has significant problems. But it also has significant strengths. I don’t know much about China but I know India more intimately than most people. Though India has many advantages — low-cost, skilled man power, for instance — they also have significant problems. Corruption, inflation especially in food, overheated real estate, very poor infrastructure (this isn’t a problem in China) etc. These emerging markets have potential but also daunting challenges.

    @Rob: America’s current debt isn’t all that bad compared to their economy. It’s just that they can’t keep adding to it indefinitely at their current pace. The political will to act on it though seems to be lacking at least until now.

    @Michael: I agree. If all our jobs are exported, who is going to buy all the junk that powers the export economies?

  8. Phil S
    Feb 28 - 12:57 pm

    @CC. No doubt in the short term do I believe that America still has some room to run. The Euro experiment is a great concept but it now seems to be splitting apart at the seams. Also, history suggests that when the Asian tigers want to cool off their economies, it will be mismanaged and it will likely end in another catastrophe.

    So, I’m hoping that the West will be OK for the next 20 yrs until I retire. After that, the long term prospects look like the balance of power will shift to the East. First economic power, then military power will follow.

  9. Open source portfolio
    Feb 28 - 5:51 pm

    I understand why there are books written about quotes by Buffet. He’s a bright guy isn’t he :-)

  10. LeadingEdgeBoomer
    Mar 02 - 11:07 am

    I see that Berkshire Hathaway,s NetJets Inc has placed a huge order for jets with Bombardier, . Bombardier shares up quite a bit at today,s opening. Seeing as i own shares, a big thanks to Mr Buffet.

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  16. Yourstruly
    Mar 04 - 6:45 pm

    Another interesting annual letter would be from Baupost’s Seth Klarman… Tons of info on par to Buffetts

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