I have a tremendous amount of respect for Warren Buffet as a businessman (even though I’m not personally thrilled at a lot of the companies or industries he invests in). Besides coining my favourite quote about the entire sub-prime Wall Street fiasco, I think his shareholder letters are a study in clear, concise communication to people with honesty, integrity and directness.
His latest shareholder annual shareholder letter is a study in how to plainly deliver bad financial news and still find a silver lining (like the others they’ve been writing).
Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas.
And I personally think, you have to have quite the stones to make a comment like this and admit a mistake of this magnitude :
… I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year. I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars.