Buffett's Best Bits About Brutal Bear of '08

He's arguably the world's greatest investor so when he puts out a 23 page round-up of his investing successes and mistakes of 2008 along with an outlook for 2009, everyone wants to hear it. Knowing that many of you are quite busy and don't have time to pore through a 23-page investment letter while you're trying to live your own life, *I* did it for you and have pulled out the best Buffettisms and nuggets.  See how much I adore you???

Let's start with the fact that he's got to be the only CEO on the planet who says how much the company LOST in the FIRST SENTENCE.

--BRK had a *decrease* (and yes, he put that part in italics so people are sure to see it) in net worth in '08 of $11.5 billion. Buffett goes by book value, which incorporates capital gains and losses---and here's the important part--- *unrealized or not*, meaning if there's a mere chance investors might see a later loss, he puts it in just so they're not surprised.

--If you're going by the more common measure of earnings, BRK actually made money: $3224.00 per share vs $8548.00 per share in 2007.

Let's get to the best quotes.

--In discussing how tough the '08 investment environment was:

"By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game."

"As the year progressed, a series of life-threatening problems within many of the world's great financial institutions was unveiled.  This led to a dysfunctional credit market that in important respects soon turned non-functional.  The watchword throughout the country became the creed I saw on restaurant walls when I was young: "in God we trust; all others pay cash."

--On the TARP

"Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.  These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects.  Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation.  Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests.  Weaning these entities from the public teat will be a political challenge.  They won't leave willingly."

--On the *need* for TARP

"Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown."

--On 2009

"...neither Charlie Munger, my partner in running Berkshire, nor I can predict the winning and losing years in advance. (In our usual opinionated view, we don't think anyone else can either.)  We're certain, for example, that the economy will be in a shambles througout 2009--and, for that matter, probably well beyond-- but that conclusion does not tell us whether the stock market will rise or fall."

--On his mistakes

"During 2008 I did some dumb things in investments.  I made at least one major mistake of commission and several lesser ones that also hurt.... Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action."

--On too-rosy financial models 'predicting' the future

"CEO's who have concocted their own valuations for esoteric financial instruments have seldom erred on the side of conservatism.  That club of optimists is one that Charlie and I have no desire to join."

--On attending the annual meeting schedule in Omaha in May (***WHICH FOX BUSINESS WILL COVER EXTENSIVELY!!)

 "If you decide to leave during the day's question periods, please do so while Charlie is talking."

   Gang, what strikes me with this letter every year is how *different* it is from every other shareholder letter I've ever read. There are no glossy photos, no fancy charts, it's just black and white with stark honesty salted throughout it. I've never seen another shareholder letter where the CEO states he/she has "done some dumb things."

If you've got the time, you should take a look at it.

http://www.berkshirehathaway.com/letters/2008ltr.pdf

See you Monday!

--Liz