'Terrible mistake' for long-term investors to be in bonds - Buffett


Buffett said that the company's search for new stand-alone businesses continues.

"In the next 53 years our shares (and others) will experience declines resembling those in the table".

In his letter to Berkshire shareholders, posted online Saturday, Buffett said he and Berkshire Vice Chairman Charlie Munger have held the same acquisition viewpoint for 50 years: "Both of us believe it is insane to risk what you have and need in order to obtain what you don't need".

Berkshire investment executive Todd Combs is "looking for the right CEO" to head the initiative that Berkshire is starting with Amazon and JPMorgan Chase, Buffett said.

Berkshire said its revenue grew almost 1 percent in the quarter to $58.9 billion, up from $58.3 billion a year ago.

His letter spends sometime explaining how his famous 10-year bet against hedge fund managers, that ended last year, panned out. The market pundit says that despite recent drought of acquisitions, Berkshire will have opportunities to make very large purchases.

Buffett is arguably the most important person in the U.S. banking industry. When they're sold, you pay tax on that. But "in every one of the nine years that followed, the fund-of-funds trailed the index fund".

"Often, high-grade bonds in an investment portfolio increase its risk", he wrote.

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They also increased the related deferred charge asset by $1.7 billion, after it re-estimated the amounts and timing of future claim payments under the AIG contract.

A lot of the letter is only relevant for Berkshire shareholders with segment performance, but there are also several excellent paragraphs that anyone can take something from.

Known as the "Oracle of Omaha" - after his birthplace in the Midwestern state of Nebraska - he is one of the world's most successful investors and one of its richest men. "The best chance to deploy money is when things are going down". While Buffett, 87, reiterated his view that equity investors in America will do well over the long haul, he also advised against buying stocks with borrowed money and highlighted how even his own company has seen its shares swoon on a few occasions over the past five decades.

Still you could have used that argument to bet against Mr Buffett and have gone for hedge funds in 2007 and yet even then he would have won posthumously, as presumably he intended.

The final lesson is that investors should "stick with big, "easy" decisions and eschew activity". Most undoubtedly thought hard about them ... The best three years for Berkshire Hathaway were 1976, 1979 and 1968, when it delivered annual growth of 129.3% (S&P500: +23.6%), 102.% (S&P 500: +18.2%), and 77.8% (S&P 500: +11.0%) each.

"We have got a huge competitive disadvantage in American businesses, far more important than any tax change, in terms of our health care costs ..."

There was notably less analysis of the firm's operating businesses in this year's letter, with Buffett pointing investors to the 10-K for more information.