If you read one piece of investment analysis this year- This is the one I’d suggest:
It’s Warren Buffett’s annual shareholder’s letter.
It features easy to understand, plain spoken analysis and advice on today’s financial markets.
The letter is both sobering and refreshing in candor.
It should be required reading for anyone who invests or is a student of our investment system.
BTW: Buffett doesn’t hesitate to take himself to task for investing mistakes this past year.
Isn’t that one reason he’s so respected?
OMAHA, Neb. (AP) – Billionaire Warren Buffett has devoted nearly five pages of his letter to Berkshire Hathaway shareholders to explaining the role derivatives played in the company’s nearly $7.5 billion investment losses last year.
Buffett said in the letter released Saturday morning he initiated all of Berkshire’s 251 different derivative contracts because he believes they were mispriced in Berkshire’s favor.
Berkshire has received $8.1 billion in payments for derivatives which can be invested until the contracts expire years from now.
But Berkshire has to estimate the value of its derivatives every quarter. Buffett says he supports that mark-to-market accounting, but the formula used to estimate that value can produce absurd results for long-term contracts.
Here’s what the Wall Street Journal says about Buffett’s latest market tome:
“It’s hardly shocking that Mr. Buffett would believe the economy, gripped by fear, “will be in shambles throughout 2009.” What he tacked onto that assessment — “and, for that matter, probably well beyond” — is troubling for the lack of any near-term optimism. But it’s also not a surprise. (The great investor notes that his assessment of the economy “does not tell us whether the stock market will rise or fall.” Some of his readers might hope for the market to just remain flat for now.)”