Years ago I was invited to attend one of Berkshire Hathaway’s annual shareholder meetings with a friend who owned 100 “A” shares of the company. You can do the math.

It was an amazing meeting. Thousands of raving fans were there. They had every right to rave. Many of them bought into the company at the beginning. It has made in excess of 20 percent returns on their investment every year for 44 years! No wonder they were happy.

Now Mr. Buffett has enough capital to go after “elephants”:

Charlie [Munger] and I have again donned our safari outfits and resumed our search for elephants.

Buffett just bought half of Heinz in a deal valued at $23 billion. And he’s still looking around for more.

He likes GEICO, his funding tool for his acquisitions over the years. I’m a policyholder. What the little gecko says is true, at last in my case: I saved about $300 a year when I switched. I’m happy. So is Buffett:

The credit for GEICO’s extraordinary performance goes to Tony Nicely and his 27,000 associates. And to that cast, we should add our Gecko. Neither rain nor storm nor gloom of night can stop him; the little lizard just soldiers on, telling Americans how they can save big money by going to GEICO.com. When I count my blessings, I count GEICO twice.

He likes to buy companies that are growing:

Berkshire’s yearend employment totaled a record 288,462, up 17,604 from last year. Our headquarters crew, however, remained unchanged at 24. No sense going crazy.

He prepared his investors for lower returns, however, as the Fed’s low interest rates are starting to his bond portfolio:

earnings are now benefitting from “legacy” bond portfolios that deliver much higher yields than will be available when funds are reinvested during the next few years – and perhaps for many years beyond that. Today’s bond portfolios are, in effect, wasting assets. Earnings of insurers will be hurt in a significant way as bonds mature and are rolled over.

Bonds are “wasting assets.” I find that to be profound thinking that few in the financial mention. A bond is simply the guarantee of the future delivery of paper dollars. If those dollars are worth less in the future, then the only way to make up for the difference is through interest paid on them in the meantime. But if interest rates are less than inflation, bonds will be losing purchasing power. Thus, they are a “wasting asset.” Thanks for clarifying that for us. Mr. Buffett.

One final quote. He riffs on the possibility of how a mega-catastrophe would Berkshire:

If the industry should experience a $250 billion loss from some mega-catastrophe –  a loss about triple anything it has ever experienced – Berkshire as a whole would likely record a significant profit for the year because it has so many streams of earnings. All other major insurers and reinsurers would meanwhile be far in the red, with some facing insolvency.

To Buffett that no doubt would look like a buying opportunity. He likes to buy at the bottom. His record shows it.

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