Buffett restated his optimism about the future of this country, pushed back against those opposed to share buybacks and said despite his mantra of holding investments “forever,” he would not commit to a never-ending time frame for any securities he has bought.
Related: BET LIKE BUFFETT
Hedge Funds Are Bad
Buffett devoted almost 18% (5 pages of the 28 page letter) to the high fees and questionable results hedge funds offer. He said investors wasted more than $100 billion over the last decade on expensive advice.
More generally he reiterated his support for passive long-term investing and indicated proof would come Dec. 31 when he wins a $1 million bet with an asset manager that low-cost index funds would out earn hedge funds over a 10-year span.
“The bottom line,” Buffett wrote is, “when trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.”
Immigrants Are Good
In a section of the letter dedicated to “America’s economic dynamism” Buffett praises the country’s miraculous achievements noting that “from a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.”
Without mentioning politics or President Donald Trump, Buffett added that one “need not be an economist to understand how well our system has worked.” He goes on to praise the 75 million owner-occupied homes, bountiful farmland, 260 million vehicles, hyper-productive factories, great medical centers, talent-filled universities and amassed wealth of $90 trillion.
The Future Is Bright
Stocks, Buffett says, will keep going up. He puts it this way: "The years ahead will occasionally deliver major market declines — even panics — that will affect virtually all stocks." To this Buffett quickly added, "Yes, the buildup of wealth will be interrupted for short periods from time to time. It will not, however, be stopped."
Buffett’s goal, he said, is to deliver significant earnings growth over time. “Every decade or so,” he said, “dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.”
Keeping It Focused On Average Investors
Despite his well-known folksy style, the Oracle of Omaha kept the letter focused mostly on money and how to amass it for the average person. He did not mention a potential successor for when he eventually steps down as CEO and, as noted above, stayed away from overtly political statements – this despite his criticism of Donald Trump during the campaign.
Buffett’s advice continues to mirror advice offered in his 2013 shareholder letter that investors should put 10% into short-term government bonds and 90% in a low-cost S&P index fund (mutual or ETF).
You could, of course, just buy stock in Berkshire Hathaway which has beat the total return of the S&P 500 over the past 10 years 9.1% to 7.3%.