REUTERS - Berkshire Hathaway released its annual letter to shareholders on Saturday, with its usual mix of blunt talk and homespun aphorisms from Chief Executive Warren Buffett.
Following are highlights of the letter. For the full letter, click here: http://www.berkshirehathaway.com/letters/2011ltr.pdf
ON SUCCESSION:
"Your Board is equally enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire. (We have two superb back-up candidates as well.)
"When a transfer of responsibility is required, it will be seamless, and Berkshire's prospects will remain bright."
ON AMERICA:
"We welcome projects abroad, but expect the overwhelming majority of Berkshire's future capital commitments to be in America. In 2012, these expenditures will again set a record."
ON BAD INVESTMENTS:
"A few years back, I spent about $2 billion buying several bond issues of Energy Future Holdings, an electric utility operation serving portions of Texas. That was a mistake - a big mistake."
"However things turn out, I totally miscalculated the gain/loss probabilities when I purchased the bonds. In tennis parlance, this was a major unforced error by your chairman."
ON GOOD INVESTMENTS:
"The banking industry is back on its feet, and Wells Fargo is prospering."
"As was the case with Coca-Cola in 1988 and the railroads in 2006, I was late to the IBM party. I have been reading the company's annual report for more than 50 years, but it wasn't until a Saturday in March last year that my thinking crystallized. As Thoreau said, 'It's not what you look at that matters, it's what you see.'"
ON HOUSING:
"Last year, I told you that 'a housing recovery will probably begin within a year or so.' I was dead wrong."
"Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while 'doubling-up' may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure."
"This hugely important sector of the economy, which includes not only construction but everything that feeds off of it, remains in a depression of its own."
"As is well-known, the U.S. went off the rails in its home-ownership and mortgage-lending policies, and for these mistakes our economy is now paying a huge price. All of us participated in the destructive behavior - government, lenders, borrowers, the media, rating agencies, you name it."
ON OPERATING BUSINESSES:
"Unless the economy weakens in 2012, each of our fabulous five should again set a record, with aggregate earnings comfortably topping $10 billion."
Regarding the digital gecko that represents insurer Geico in TV ads: "Our lizard has another endearing quality: Unlike human spokesmen or spokeswomen who expensively represent other insurance companies, our little fellow has no agent."
(Reporting By Ben Berkowitz; Editing by Eric Beech)
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