Highlights from Warren Buffett’s 2018 letter

Another good one drops from Warren Buffett and the Berkshire Hathaway team.

In America, equity investors have the wind at their back.

We’ve learned a great deal here at Helytimes from studying Buffett’s writings.  Here’s a writeup on the 2017 letter and on the 2016 letter and from a book of quotes from his letter.

A highlight from this year, worth noting:

The $65 billion gain is nonetheless real – rest assured of that. But only $36 billion came from Berkshire’s operations. The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code.

Did not know about the stake in Pilot Flying J:

How did Warren Buffett get so rich?  Some answers he will tell you.

  • By gathering money, eventually including the enormous pools of money (“float”) collected by insurance companies like GEICO
  • Using the money to buy shares of businesses with a durable competitive advantage (here’s a critical take on what that can mean)
  • Never selling anything so that he’s never taxed on the gains and the results compound and compound.

For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic.

(Also he just seems to have an intuitive and unusually focused mind for business:

As a teenager, he took odd jobs, from washing cars to delivering newspapers, using his savings to purchase several pinball machines that he placed in local businesses.

Also he did some arbitrage things I don’t understand.)

In this letter, he discusses the result of a bet he made that an unmanaged index fund would beat selected hedge funds over a ten year period:

I made the bet for two reasons: (1) to leverage my outlay of $318,250 into a disproportionately larger sum that – if things turned out as I expected – would be distributed in early 2018 to Girls Inc. of Omaha; and (2) to publicize my conviction that my pick – a virtually cost-free investment in an unmanaged S&P 500 index fund – would, over time, deliver better results than those achieved by most investment professionals, however well-regarded and incentivized those “helpers” may be.

Addressing this question is of enormous importance. American investors pay staggering sums annually to advisors, often incurring several layers of consequential costs. In the aggregate, do these investors get their money’s worth? Indeed, again in the aggregate, do investors get anything for their outlays?

More:

A final lesson from our bet: Stick with big, “easy” decisions and eschew activity. During the ten-year bet, the 200-plus hedge-fund managers that were involved almost certainly made tens of thousands of buy and sell decisions. Most of those managers undoubtedly thought hard about their decisions, each of which they believed would prove advantageous. In the process of investing, they studied 10-Ks, interviewed managements, read trade journals and conferred with Wall Street analysts. 13 Protégé and I, meanwhile, leaning neither on research, insights nor brilliance, made only one investment decision during the ten years. We simply decided to sell our bond investment at a price of more than 100 times earnings (95.7 sale price/.88 yield), those being “earnings” that could not increase during the ensuing five years. We made the sale in order to move our money into a single security – Berkshire – that, in turn, owned a diversified group of solid businesses. Fueled by retained earnings, Berkshire’s growth in value was unlikely to be less than 8% annually, even if we were to experience a so-so economy.

Fewer good jokes this year, in our opinion, but also fewer dire warnings.


Daytona

Happened to catch the end of the Daytona 500 – super dramatic!  That is Austin Dillon’s dad.  Dawned on me that a reason men love sports is the emotions are so intense inhibitions break down and they can express love and tenderness for each other.  (War too?)

source: Al Chang for the US Army, 1950.

(Talking cis-straight men here, friends and fathers and sons and comrades and teammates, gay male affection a different topic)


Reviews of different milks (ongoing series)

2/5 udders.  Weak, watery milk.  Love the labeling, and “Forager Project” is powerful branding for these times.  But I taste no evidence that God intended for us to milk the cashew.   

A surprising 4/5 udders to filmjölk!  I despise yoghurt, from its name to its texture to its sour bite it repulses me, but a shot of siggi’s filmjölk in the morning has been invigorating and probably good for my guts.

Would love to find some chestnut milk, which Charles C. Mann describes as “ambrosial”!


A Confederate General from Big Sur by Richard Brautigan

It was during the second day of the Battle of the Wilderness.  A. P. Hill’s brave but exhausted confederate troops had been hit at daybreak by Union General Hancock’s II Corps of 30,000 men.  A. P. Hill’s troops were shattered by the attack and fell back in defeat and confusion along the Orange Plank Road.

Twenty-eight-year-old Colonel William Poague, the South’s fine artillery man, waited with sixteen guns in one of the few clearings in the Wilderness, Widow Tapp’s farm.  Colonel Poague had his guns loaded with antipersonnel ammunition and opened fire as soon as A. P. Hill’s men had barely fled the Orange Plank Road.

The Union assault funneled itself right into a vision of scupltured artillery fire, and the Union troops suddenly found pieces of flying marble breaking their centers and breaking their edges.  At the instant of contact, history transformed their bodies into statues.  They didn’t like it, and the assault began to back up along the Orange Plank Road.  What a nice name for a road.

On title alone this book had me.  I’d never read Brautigan, cult hero of the age when the Army was giving LSD to draftees.  This one came out in 1964.

Most of the book tells the story of the narrator living rough in Big Sur with Lee Mellon, who is convinced he’s descended from a Confederate general.

I met Mellon five years ago in San Francisco.  It was spring.  He had just “hitch-hiked” up from Big Sur.  Along the way a rich queer stopped and picked Lee Mellon up in a sports car.  The rich queer offered Lee Mellon ten dollars to commit an act of oral outrage.

Lee Mellon said all right and they stopped at some lonely place where there were trees leading back into the mountains, joining up with a forest way back in there, and then the forest went over the top of the mountains.

“After you,” Lee Mellon said, and they walked back into the trees, the rich queer leading the way.  Lee Mellon picked up a rock and bashed the rich queer in the head with it.

 

At times reading this book felt like talking to a person who is on drugs when you yourself are not on drugs.  By the end of this short book it felt little tedious.  The semi-jokes seemed more like dodges.

Still, Brautigan has an infectious style.

Mallley says:

Like much of Brautigan’s work, Confederate General belongs, at least partly, to a broad category of American literature – stories dealing with a man going off alone (or two men going off together), away from the complex problems and frustrations of society into a simpler world closer to nature, whether in the woods, in the mountains, on the river, wherever.

For a more satisfying read on men going off away from the complex problems and frustrations of society in the same region, I might recommend:

or

but it’s short and alive.  The few short passages about the Civil War were my favorite.

We left with the muscatel and went up to the Ina Coolbrith Park on Vallejo Street. She was a poet contemporary of Mark Twain and Brett Harte during that great San Francisco literary renaissance of the 1860s.

Then Ina Coolbrith was an Oakland librarian for thirty-two years and first delivered books into the hands of the child Jack London.  She was born in 1841 and died in 1928: “Loved Laurel-Crowned Poet of California,” and she was the same woman whose husband took a shot at her with a rifle in 1861.  He missed.

“Here’s to General Augustus Mellon, Flower of Southern Chivalry and Lion of the Battlefield!” Lee Mellon said, taking the cap off four pounds of muscatel.

We drank the four pounds of muscatel in the Ina Coolbrith Park, looking down Vallejo Street to San Francisco Bay and how the sunny morning was upon it and a barge of railroad cars going across to Marin County.

“What a warrior,” Lee Mellon said, putting the last 1/3 ounce of muscatel, “the corner,” in his mouth.

As for Brautigan:

According to Michael Caines, writing in the Times Literary Supplement, the story that Brautigan left a suicide note that simply read: “Messy, isn’t it?” is apocryphal.


They’re at it again in Australia

 

Sent via our Australian department via the Washington Post.  It seems deputy PM Barnaby Joyce knocked up his staffer:

Joyce responded by calling his sometime ally the PM “inept.”

 


Skiing

There were no ski lifts from Schruns and no funiculars; but there were logging trails and cattle trails that led up different mountain valleys to the high mountain country.  You climbed on foot carrying your skis and higher up, where the snow was too deep, you climbed on seal skins that you attached to the bottoms of the skis.  At the tops of mountain valleys there were the big Alpine Club huts for summer climbers where you could sleep and leave payment for any wood you used.  In some you had to pack up your own wood, or if you were going on a long tour in the high mountains and the glaciers, you hired someone to pack wood and supplies up with you, and established a base.  The most famous of these high base huts were the Lindauer-Hütte, the Madlener-Hause and the Wiesbadener-Hütte.

So says Hemingway in A Moveable Feast, “Winters in Schruns”

Skiing was not the way it is now, the spiral fracture had not become common then, and no one could afford a broken leg.  There were no ski patrols.  Anything you ran down from, you had to climb up to first, and you could run down only as often as you could climb up.  That made you have legs that were fit to run down with.

And what did you eat, Hemingway?

We were always hungry and every meal time was a great event.  We drank light or dark beer and new wines and wines that were a year old sometimes.  The white wines were the best.  For other drinks there was wonderful kirsch made in the valley and Enzian Schnapps distilled from mountain gentian.  Sometimes for dinner there would be jugged hare with a rich red wine sauce, and sometimes venison with chestnut sauce.  We would drink red wine with these even though it was more expensive than white wine, and the very best cost twenty cents a liter.  Ordinary red wine was much cheaper and we packed it up in kegs to the Madlener-Haus.

What was the worst thing you remember?

The worst thing I remember of that avalanche winter was one man who was dug out.  He had squatted down and made a box with his arms in front of his head, as we had been taught to do, so that there would be air to breathe as the snow rose up over you.  It was a huge avalanche and it took a long time to dig everyone out, and this man was the last to be found.  He had not been dead long and his neck was worn through so that the tendons and the bones were visible.  He had been turning his head from side to side against the pressure of the snow.  In this avalanche there must have been some old, packed snow mixed in with the new light snow that had slipped.  We could not decide whether he had done it on purpose or if he had been out of his head.  But there was no problem because he was refused burial in consecrated ground by the local priest anyway; since there was no proof he was a Catholic.

What else do you remember?

I remember the smell of the pines and the sleeping on the mattresses of beech leaves in the woodcutters’ huts and the skiing through the forest following the tracks of hares and of foxes.  In the high mountains above the tree line I remember following the track of a fox until I came in sight of him and watching him stand with his forefoot raised and then go on carefully to sop and then pounce, and the whiteness and the clutter of a ptarmigan bursting out of the snow and flying away and over the ridge.

And, did you, btw, sleep with your wife’s best friend?

The last year in the mountains new people came deep into our lives and nothing was ever the same again.  The winter of the avalanches was like a happy and innocent winter in childhood compared to that winter and the murderous summer that was to follow.  Hadley and I had become too confident in each other and careless in our confidence and pride.  In the mechanics of how this was penetrated I have never tried to apportion the blame, except my own part, and that was clearer all my life.  The bulldozing of three people’s hearts to destroy one happiness and build another and the love and the good work and all that came out of it is not part of this book.  I wrote it and left it out.  It is a complicated, valuable, instructive story.  How it all ended, finally, has nothing to do with this either.  Any blame in that was mine to take and possess and understand.  The only one, Hadley, who had no possible blame, ever, came well out of it finally and married a much finer man that I ever was or could hope to be and is happy and deserves it and that was one good and lasting thing that came out of that year.

Google, show me Schruns:

 

 


Symbology

I’d like to ask Dr. Robert Langdon, Harvard professor of Symbology, about some of the things going on in this local street art.