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Berkshire Hathaway 2019 Lessons

Berkshire Hathaway 2019 Lessons

And here we have a new Berskhire Hathaway 2019 report, but first let’s start out with the returns for the last 10 years: (02/2019)
Berkshire Hathaway: +229%
IWM: +215%
SPY: +201%
VT: +102%
GLD: +30%
EEM: +29%
BND: +3%

Warren Buffet, one of the world’s most famous investor had one of his worst years ever in 2018. Buffett’s Kraft Heinz bet dragged down Berkshire Hathaway in 2018: Conglomerate swung to a $25.4bn loss in Q4 due to an unexpected write-down at Heinz & unrealized investment losses.

The company owns $173 billion of stocks, so a bad quarter for the stock market, can usually reflect pretty bad on the company numbers. Of course the market already recover in the beginning of this year, so the loss could be much less now.

Lesson on Debt

As you know there are basically two ways of funding a business (and life in general): equity and debt. Warren doesn’t like excessive debt, and it makes clear as he can.

“We use debt sparingly. Many managers, it should be noted, will disagree with this policy, arguing that significant debt juices the returns for equity owners. And these more venturesome CEOs will be right most of the time.
At rare and unpredictable intervals, however, credit vanishes and debt becomes financially fatal. A
Russian roulette equation – usually win, occasionally die

A lesson in personal finance: If you don’t want to “occasionally die”, don’t leverage too much. Or any at all.

Cash, cash and more cash

Berkshire Hathaway has now +100 Billion in cash. That’s really impressive. It owns $85 Billion in T-Bills, which can be measured against all US primary dealers that own $23.5 Billion in T-Bills.

One consequence of all that cheap money from major central banks, such as the FED, lead to unintended (?) consequences: It’s very difficult to buy businesses at a good price point. Thus the accumulating of money. How can a value investor go against its instincts and buy when things are expensive?

On the other hand, will this kind of money parked in T-Bills hurt the overall performance of the Berkshire stock?

Buffett has some ideas: “It is likely that — over time — Berkshire will be a significant repurchaser of its shares

The company bought back $418 million of its own shares during the final three months of 2018, bringing its total for the year to just over $1.3 billion. Good timming on buying shares since the last quarter the stock market experienced a downturn, followed by a strong rebound in the beginning of this year.

Buy when there is blood in the streets, they say.

We continue, nevertheless, to hope for an elephant-sized acquisition,” Warren wrote. “Even at our ages of 88 and 95 — I’m the young one — that prospect is what causes my heart and Charlie’s to beat faster. (Just writing about the possibility of a huge purchase has caused my pulse rate to soar.)

Confidence in the Economy

Since Warren Buffett made his first investment, America has had seven Republicans and seven Democrats in the White House. Also had several scary economic times, including a rapid inflationary period, wars, oil collapse, a housing collapse, and more.

Over the next 77 years, however, the major source of our gains will almost certainly be provided by The American Tailwind. We are lucky — gloriously lucky — to have that force at our back.

Gold bad. Stocks good.

People are worried about the America’s growing debt. Some argue that investing in Gold could be a protection against future problems that could arise from borrowing so much money. Buffett disagrees.

He makes a comparison between putting your money into gold vs stocks back in 1942. And the results are overwhelming: the total return would have been less than 1% of what they would have achieved by simply investing in the S&P 500.

Read more:

  • 48 Lessons From Warren Buffett and Charlie Munger (GrowtoRetire) +1200 Views
  • Lessons From the Oracle: Warren Buffett’s Shareholder Letter (GrowtoRetire) +3000 Views

About GTRetire

GTRetire is the founder of GrowtoRetire, a blog about financial independence and early retirement. Click here to learn more about starting a blog! Also, this post may contain affiliate links, please read the disclaimer for more info.

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