Notes and Quotes from 2008 Berkshire Hathaway Shareholder Letter

Took some quotes from the 2008 annual shareholder letter as I read. I know I said to take your time reading the letter but I usually read things twice. The first is a speed read, the second being with a nice cup of coffee and a notebook. Here are the speed reading notes.

By year end, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.
The watchword throughout the country became the creed I saw on restaurant walls when I was young: “In God we trust; all others pay cash.”
In poker terms, the Treasury and the Fed have gone “all in.”
We’re certain (Warren and Charlie Munger), for example, that the economy will be in shambles throughout 2009 – and, for that matter, probably well beyond – but that conclusion does not tell us whether the stock market will rise or fall.
Our insurance operation, the core business of Berkshire, is an economic powerhouse.
When investing, pessimism is your friend, euphoria the enemy.
Long ago, Ben Graham taught me that “Price is what you pay; value is what you get.” Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.
As we view GEICO’s current opportunities, Tony (referring to Tony Nicely, GEICO’s main man)and I feel like two hungry mosquitoes in a nudist camp. Juicy targets are everywhere.
Ben Franklin once said, “It’s difficult for an empty sack to stand upright.” That’s no worry for General Re clients.
Referring to Ajit Jain, manager of the reinsurance division “Ajit came to Berkshire in 1986. Very quickly, I realized that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home.
Of course, I knew the answer before writing. There isn’t anyone like Ajit.”
On irresponsible lending, “It was Scarlett O’Hara all over again: “I’ll think about it tomorrow.” The consequences of this behavior are now reverberating through every corner of our economy.”
Why Berkshire’s Clayton Homes is experiencing less headaches “Just as important is what our borrowers did not do. They did not count on making their loan payments by means of refinancing. They did not sign up for “teaser” rates that upon reset were outsized relative to their income. And they did not assume that they could always sell their home at a profit if their mortgage payments became onerous. Jimmy Stewart would have loved these folks.”
People’s homes – “Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition.”
If merely looking up past financial data would tell you what the future holds, the Forbes 400 would consist of librarians
Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas.
A final post-script on BHAC: Who, you may wonder, runs this operation? While I help set policy, all of the heavy lifting is done by Ajit and his crew. Sure, they were already generating $24 billion of float along with hundreds of millions of underwriting profit annually. But how busy can that keep a 31-person group? Charlie and I decided it was high time for them to start doing a full day’s work. (This one made me laugh)
I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price.
The tennis crowd would call my mistakes “unforced errors.”
Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long.
Derivatives are dangerous. They have dramatically increased the leverage and risks in our financial system. They have made it almost impossible for investors to understand and analyze our largest commercial banks and investment banks.
On Derivatives: Upon leaving, our feelings about the business mirrored a line in a country song: “I liked you better before I got to know you so well.”…When I read the pages of “disclosure” in 10-Ks of companies that are entangled with these instruments, all I end up knowing is that I don’t know what is going on in their portfolios (and then I reach for some aspirin).
Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.
At age 78, I’ve concluded that speed afoot is a ridiculously overrated talent