Faith in rising prices bred reckless lending
“[Believing prices would rise] made a borrower’s income and cash equity seem unimportant to lenders, who shoveled out money, confident that HPA – house price appreciation – would cure all problems.”
Business
Falling tides reveal who swam naked
“You only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight.”
Size rules out repeating past gains
“Berkshire’s past record can’t be duplicated or even approached. Our base of assets and earnings is now far too large for us to make outsized gains in the future.”
Managers who work for love, not money
“Many sold us their businesses for large sums and run th em because they love doing so, not because they need the money.”
At Berkshire a deal is a deal
“During the past year, many large deals have been renegotiated or killed entirely. With the Pritzkers, as with Berkshire, a deal is a deal.”
Part of a diamond beats a whole rhinestone
“It’s better to have a part interest in the Hope Diamond than to own all of a rhinestone.”
Great businesses depend on an enduring moat
“A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business ‘castle’ that is earning high returns.”
A constantly rebuilt moat is no moat
“Though capitalism’s ‘creative destruction’ is highly beneficial for society, it precludes investment certainty. A moat that must be continuously rebuilt will eventually be no moat at all.”
A star surgeon's moat leaves with him
“A medical partnership led by your area’s premier brain surgeon may enjoy outsized and growing earnings, but that tells little about its future. The pa rtnership’s moat will go when the surgeon goes.”
Lasting advantage in a stable industry
“Long-term competitive advantage in a stable industry is what we seek in a business. If [such an advantage] comes with rapid organic growth, great. But even without organic growth, such a business is rewarding.”
Earnings can be invested where they weren't earned
“There’s no rule that you have to invest money where you’ve earned it.”
Rising earnings, virtually no capital requirements
“It’s far better to have an ever-increasing stream of earnings with virtually no major capital requirements.”
The worst business grows without earning
“The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then ea rns little or no money.”
Airline growth as a bottomless pit
“The airline industry’s demand for ca pital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it.”
Start-ups are not Berkshire's game
“Start-ups are not our game.”
Judging stocks like businesses owned outright
“I should emphasize that we do not measure the progress of our in vestments by what their market prices do during any given year. Rather, we evaluate their performance by the two methods we apply to the businesses we own.”
Trading earnings volatility for long-run net worth
“You will recall that in our catastrophe insurance business, we are always ready to trade increased volatility in reported earnings in the short run for greater gains in net worth in the long run.”
Foreign buying of US businesses is our doing
“There’s been much talk recently of sovereign wealth funds and how they are buyi ng large pieces of American businesses. This is our doing, not some nefarious plot by foreign governments.”
A weak dollar is not OPEC's fault
“Our country’s weakening currency is not the fault of OPEC, China, etc. Other developed countries rely on imported oil and compete against Chinese imports just as we do.”
Trade policy should not single out countries
“In developing a sensible trade policy, the U.S. should not single out countries to punish or industries to protect.”
Current trade imbalances are unsustainable
“Our legislators should recognize, however, that the current imbalances are unsustainable and should therefore adopt policies that will materially reduce them s ooner rather than later.”
Markets can be ridiculously inefficient
“(Yes, Virginia, you can occasionally fi nd markets that are ridiculously ine fficient – or at least you can find them anywhere except at the finance departments of some leading business schools.)”
Beware helpers who sell fantasies for fees
“Beware the glib helper who fills your head with fantasies while he fills his pockets with fees.”
Why CEOs pick high investment assumptions
“What is no puzzle, however, is why CEOs opt for a high investment assumption: It lets them report higher earnings.”
Why politicians flinch from pension tax pain
“Because th e fuse on [public pension promises] is long, politicians flinch from inflicting tax pain, given that problems will only become apparent long after these officials have departed.”
Tap-dancing to work every day
“Every day is exciting to us; no wonder we tap-dance to work.”