Insights from Warren Buffett's Letters

25 years ago, Warren Buffett shared his thoughts on the stock markets. The more things change, the more they stay the same. History doesn't repeat, it rhymes. We can learn a lot from the past. My notes on Fortune article ⬇️⬇️ Those who fail to learn from the past are doomed to repeat it's mistakes. Buffett's thoughts throughout the article resonate over the years. For example, during the late 90s, investors "expected" returns of 22.6% for the next decade. Sound familiar? Those with over 20 years of experience expected 12.9% for the next decade. In contrast, Buffett predicted returns of 4% or less in real terms. Buffett points out "the markets behave in ways, often for long periods, that are not linked to value. Sooner or later though, value counts." He also provides a definition of investing, "Investing is laying out money to get more money back in the future-more money in real terms, after taking inflation into account." Buffett goes on to discuss the impact of interest rates, a point many new investors often ignore or don't fully understand. "Interest rates act on financial valuations the way gravity acts on matter: The higher the rate, the greater the downward pull." He also points out most investors tend to project the future by looking backward. He refers to looking through the rear-view mirror instead of focusing on the road ahead. My favorite quote comes toward the end: "The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors." All-in-all, fantastic article, with tons of fantastic learning, I highly encourage you to read it. Buffett ended his 1999 Fortune article with: “This talk of 17-year periods makes me think – incongruously, I admit – of 17-year locusts. What could a current brood of these critters, scheduled to take flight in 2016, expect to encounter?”

Warren Buffett started off his annual letter to Berkshire Hathaway shareholders on Saturday with a tribute to his long-time friend and business partner Charlie Munger, who passed on November 28, 2023. All in all, I think this was one of Buffett’s best annual letters of the past decade. He are 7 investing and life wisdoms from Buffett in the letter that would serve people well to remember: 1. “Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring.” 2. “At Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies – and simply sitting tight – can deliver wealth almost beyond measure.” 3. “People are not that easy to read. Sincerity and empathy can easily be faked.” 4. “Berkshire benefits from an unusual constancy and clarity of purpose. While we emphasize treating our employees, communities and suppliers well – who wouldn’t wish to do so? – our allegiance will always be to our country and our shareholders. We never forget that, though your money is comingled with ours, it does not belong to us.” 5. “Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.” 6. “One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital.” 7. “We did not predict the time of an economic paralysis but we were always prepared for one.”

A great piece by Warren E. Buffett from his 2016 annual report to Berkshire Hathaway Inc.'s shareholders, ending with a killer sentence. To the Shareholders of Berkshire Hathaway Inc.: Over the years, I’ve often been asked for investment advice. My regular recommendation has been a low-cost S&P 500 index fund. I believe, however, that none of the mega-rich individuals, institutions or pension funds has followed that same advice. Instead, these investors depart to listen to the siren song of a high-fee manager or a consultant. That professional, however, faces a problem. Can you imagine an investment consultant telling clients, year after year, to keep adding to an index fund replicating the S&P 500? That would be career suicide. The wealthy are accustomed to feeling that they should get something superior. In many aspects of life, wealth does command top-grade products or services. For that reason, the financial “elites” – wealthy individuals, pension funds, college endowments and the like – have great trouble signing up for a financial product or service that is available as well to people investing only a few thousand dollars. Much of the financial damage befell pension funds for public employees. Many of these funds are woefully underfunded, in part because they have suffered a double whammy: poor investment performance accompanied by huge fees. Human behavior won’t change. Wealthy individuals, pension funds, endowments and the like will continue to feel they deserve something “extra” in investment advice. Those advisors who cleverly play to this expectation will get very rich. The likely result from this parade of promises is predicted in an adage: “When a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.”