A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful).
American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor. (The Dow Jones Industrials advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and
many recessions. And don’t forget that shareholders received substantial dividends throughout the century as well.)
Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of “experts,” or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it. My own history provides a dramatic example: I made my first stock purchase in the spring of 1942 when the U.S. was suffering major losses throughout the Pacific war zone. Each day’s headlines told of more setbacks. Even so, there was no talk about uncertainty; every American I knew believed we would prevail.
The country’s success since that perilous time boggles the mind: On an inflation-adjusted basis, GDP per capita more than quadrupled between 1941 and 2012. Throughout that period, every tomorrow has been uncertain. America’s destiny, however, has always been clear: ever-increasing abundance.
If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.
Berkshire Hathaway shareholders letter
-
superfrank
- Posts: 2762
- Joined: Fri Aug 14, 2009 8:28 pm
bonds have done nearly as well without the risk/volatility...
http://www.zerohedge.com/news/2013-03-0 ... drawdown-4
http://www.zerohedge.com/news/2013-03-0 ... drawdown-4
...fixed income returns average 8.6% per annum for 33 years with a maximum 4% drawdown annually as opposed to stocks with a 8.9% per annum return and four 10%-plus annual drawdowns (and two 50% intra-period collapses within a decade).
-
superfrank
- Posts: 2762
- Joined: Fri Aug 14, 2009 8:28 pm
i guess for those who want a stable investment with steady returns and without the risk associated with equities, e.g. pension funds, old duffers etc.
British banks were once deemed a very safe bet, with good dividends, and look what happened to them! (and without bailouts those "investments", and many others, would have been worthless).
without governments taking over private sector debts, and without central bank support, BH would probably have returned not very much at all in the last 10 years - that guy in the letter is very right when he says, "investors and managers are in a game that is heavily stacked in their favor" (but probably not for the reasons he is thinking of!).
British banks were once deemed a very safe bet, with good dividends, and look what happened to them! (and without bailouts those "investments", and many others, would have been worthless).
without governments taking over private sector debts, and without central bank support, BH would probably have returned not very much at all in the last 10 years - that guy in the letter is very right when he says, "investors and managers are in a game that is heavily stacked in their favor" (but probably not for the reasons he is thinking of!).