Warren and Charlie wants shareholders to understand Berkshire
Good afternoon. David Winters. Mountain Lakes, New Jersey. Thank you again for hosting the Berkshire weekend. It’s just great.
Interest rates are the lowest they’ve been in, I think, two generations. Equity values, in aggregate, are still high. Berkshire has meaningful free cash flow, a short-duration bond portfolio, and you’re a buyer of low-multiple, high-quality private businesses, and a few stocks.
Assuming that the stimulative (sic) economic policies to deal with the recession eventually cause interest rates to go up and, maybe, equity values to come down, Berkshire seems very well positioned to benefit. Would you comment?
And also, are there any concerns on both of your parts about investors inadequately understanding the conglomerate structure of Berkshire and, therefore, improperly pricing the shares?
Well, to answer the second question first, we hope the latter wouldn’t be true, because we do our best to explain it. I mean I used 14,000 words in the last annual report, which caused certain members of my family to ask whether I was getting paid by the word.
The… we want you to understand Berkshire, and I hope that comes through. That’s why we have these kind of meetings. That’s why we spend a lot of time writing an annual report. We try to tell you what we would like if the position was reversed… if our positions were reversed.
And we think that the information in the annual report, if read by somebody that… they have to have some understanding of business and accounting, but if they don’t, you know, nothing is going to help, really, in terms of helping them with the business.
But we think if they have some understanding of it, we have given them the information that Charlie and I would need in order to come up with our rough ideas of a valuation of Berkshire, and we hope we get across what it’s all about.
You know, there are a lot of companies in Berkshire, but it’s not important that you understand the nuances of every single one.
Looking at what happens in aggregate, in many cases, will be sufficient.
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