While studying today with some friends, we discussed this letter. We basically came to the conclusion that being optimistic is a crucial character trait to be born with, especially when it comes to business & investing. Despite mentioning his poor investment decision in ConocoPhillips (among others), look at what else he writes about: “Charlie and I are equally enthusiastic about our utility business, which had record earnings last year and is poised for future gains” “As we view GEICO’s current opportunities, Tony and I feel like two hungry mosquitoes in a nudist camp. Juicy targets are everywhere. First, and most important, our new business in auto insurance is now exploding. Americans are focused on saving money as never before, and they are flocking to GEICO. In January 2009, we set a monthly record – by a wide margin – for growth in policyholders. That record will last exactly 28 days: As we go to press, it’s clear February’s gain will be even better.” Contrast this tone with the headlines on Bloomberg’s web site, the most depressing financial news website available… after RGE Monitor, of course. It’s so trivial to me why this guy has been unstoppable: he just doesn’t give a shit what people think of him, he knows he’s a damn good businessman, and he genuinely cares about seeing his acquisitions work out and become the best companies in their respective industries. Now, if I can only align myself with people who are just as optimistic as him. I hear you find many of these wonderful people on the Forbes list 
I agree. Optimism is a very important ingredient to be a become successful entrepeneur and it does seem to come naturally to some people and not to others.
…better be an optimistic comment or two in that annual letter to shareholders. Net income fell 96%.
Buffet has consistnetly dissed quants and disciplines not focused solely on business values…i’m a believer.
Your attitude equals your altitude.
ValueAddict Wrote: ------------------------------------------------------- > EMHdenied Wrote: > -------------------------------------------------- > ----- > > VOBA Wrote: > > > -------------------------------------------------- > > > ----- > > > I think they should also show market value of > > BRK > > > vs. S&P 500 performance for the year. It > > doesn’t > > > make sense to me why they would use their > book > > > value to compare with the market value of the > > > index. > > > > > > > > > http://finance.yahoo.com/echarts?s=BRK-A#chart7:sy > > > > > > > > > mbol=brk-a;range=20071231,20081231;compare=^gspc;i > > > > > > > > > ndicator=volume;charttype=line;crosshair=on;ohlcva > > > > > > lues=0;logscale=off;source=undefined > > > > > > I don’t know if I’d call that “beating the > > piss” > > > out of the S&P. > > > > It makes a ton of sense to me. > > Buffett doesn’t bow to Mr. Market. Mr. Markets > bows to Buffett. > > Read the owners manual. He measures the rate at > which he can grow the per share value of his > business (approximated by BV). My point is not whether Buffett should measure his success using growth in BV, but rather his choice of comparison as a market value index (apples to oranges.) Why not use the BV growth in S&P as comparison? Better yet, he should show two performance charts: market to market, and book value to book value.
I agree with making comparisons comparable. It’s like comparing the market value of one house based on recent sales to the tax-assessment value of another.
Hm both very valid points. In the owners manual he addresses a number of short-comings in using BVPS as a reliable estimate of instrinsic value. Over longer periods of time BVPS more closely approximates the rate of growth of Berkshire. He chose the S&P as a proxy for some reason - which I am trying to reverse engineer at the moment. I think part of the issue is his constant focus on achieving a “Fair” price for Berkshire shareholders. His view on shareholders are: 1. he favors transparency and candor in order to facilitate a “Fair” price that mimics the change in BV 2. he aims to educate shareholders and potential shareholders so that one is not disadvantaged by another I ran a cursory analysis on how well the growth in BVPS mimics the change in MV or Berkshires share price. Over the short-term, large deviations do occur. However, Buffett measures progress over a long term horizon. So what I did was take a 3 and 5 year CAGRs for both the MV change in BRK stock and the BVPS change. I found that the difference is negligible. I used yahoo for historical prices so the study isn’t exact (SORRY). It only goes back to 91. Difference between 3 year and 5 year CAGRs and MV of BRK stock were 4.76% and 5.68% ex 2008. Thats my 2 cents.