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Warren Buffett's 2011 Letter to Investors

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posted on Feb, 27 2012 @ 05:04 PM

Buffett said even though stocks aren't as cheap as they were during the depths of the recession in 2008, they're still a more attractive long-term option than bonds, gold, cash or anything else.

"Equities are still cheap relative to any other asset class," Buffett said. In his letter, he devoted two pages to explaining why he prefers owning a piece of a productive business instead of bonds or gold.

Houses are another attractive investment at current prices, Buffett said. He added he might buy a couple hundred thousand homes if only he could figure out a way to manage them effectively. He said he isn't very handy.

Buffett conceded in his letter released Saturday that he was dead wrong to predict the housing market would recover by now. He said Monday that he believes conditions will improve in 2012.

Buffett said Europe's debt problems remain a concern, and he doesn't think those countries have solved their problem yet.

"The basic problem is they gave up their right to print their own money," he said.

There is so much double-speak in here that it's hard to digest it all.

Here is the whole letter:

So to start off:

1) Buffett says he doesn't like the long-term options for the precious metal markets...

Yet, on February 23, 2012...

Cookson Group plc reached an agreement to sell its US Precious Metals business, an operation that forms part of its Precious Metals division, to Richline Group Inc., an unit of Berkshire Hathaway Inc.

I do think he is correct in saying that for an investment over a certain amount (a couple billion) that productive businesses would be more profitable overall than a couple billion in gold. But that is obvious. People don't invest in precious metals to make money... they do it to protect their investment and to protect against a currency drop.

No investment company would ever tell a customer to buy a billion dollars in gold...

I do like the investment he made though... with the purchasing of a gold refining company.

You can only own so much gold... but you can keep refining what others want to buy forever (or until it is all out of circulation).

Seems like a good way to profit from the metal markets without having to actually enter them.

2) Buffett says that you should invest in the housing market. Now, not only has he said that 3 times in the past and been wrong, but this time he is dead-set on himself being right.

Where's the conflict of interest here?

Berkshire owns Clayton Homes... the largest manufactured home builder and financier in the USA. A company that went from producing 140,000 homes in 2006, to 56,000 in 2011. The only thing keeping the company still profitable is their mortgage financing contracts.

Great time to invest in housing indeed...

3) Buffett has made the decision to get out of the derivatives market. Now, I COMPLETELY agree that the derivatives market should just go the way of the Do-Do Bird...

But, from an investment stand-point, and by a company that actually owns shares of two banks, it makes no sense.

It makes so little sense that last year Goldman Sachs bought securities back from the Berkshire company for around $12.8 billion.

And on that note, why in the hell would you invest in a company based in the derivatives market if you don't like the derivatives market?

I am expecting a huge derivatives market crash coming soon (before the start of 2013)... maybe he knows something I don't.

And for the grand finally, at the shareholder annual meeting... he will be taking on challengers in a paper-tossing competition.

At the meeting, I will take on all comers in making 35-foot tosses of the World-Herald to a Clayton porch. Any challenger whose paper lands closer to the doorstep than mine will receive a dilly bar. I’ve asked Dairy Queen to supply several for the contest, though I doubt that any will be needed. We will have a large stack of papers. Grab one. Fold it (no rubber bands). Take your best shot. Make my day.

Lastly is when he says that the problem in Europe and Greece is that they gave up the right to print their own money...

Yeah, welcome to 1913 America.

And what makes any of this sad is that I love me some Warren Buffett. I watch a lot of what he says, and most of the time he is pretty accurate on his assessments.

I just saw so much wrong in the letter that I had to vent on here and point it all out.

And to quote Mr. B one last time...

"Remember: Anyone who says money can’t buy happiness simply hasn’t shopped at our meeting."

/rant over

posted on Feb, 27 2012 @ 05:40 PM
After the Hunt brothers cornered the silver market in the late 70's Silver continued to slide till 2002. Buffet got on the silver bandwagon a little early buying 129.7 million ounces of silver between July 1997 and January 1998.

He may be a little early speculating about the housing market, most bubble bursts are followed by flat prices for several years after the market bottoms. Are stocks going to skip the summer rally again this year?

posted on Feb, 27 2012 @ 10:35 PM
reply to post by YouAreLiedTo

"The basic problem is they gave up their right to print their own money," he said.

Yes sir.

The Globalist were so hell bent on having an EU framed after the US that they overlooked the issues of such consequences.

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