Warren Buffett posted his annual letter to Berkshire Hathaway shareholders this weekend. At least three points about the letter struck me as worth mentioning.
First, Mr. Buffett writes: "(A largely unnoted fact: Large numbers of people who have 'lost' their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost. In these cases, the evicted homeowner was the winner, and the victim was the lender.)"
This strikes me as a bit much. The lenders — who included arms of Wells Fargo, General Electric, and Bank of America, companies in which Berkshire Hathaway had or has sizeable positions — knew what they were getting into. The fact that they may have lost money by some definition on some mortgage loans doesn't make them "victims." People make investment decisions that wind up in losses all the time. That doesn't mean they are all "victims." Maybe that was the point Mr. Buffett was trying to make with his parenthetical statement, but it comes off as just spin to make the banks he owns look better.
Second, Mr. Buffett boasts about his gas pipeline business:
Our pipelines transport 8% of the country's natural gas. ... When MidAmerican purchased Northern Natural Gas pipeline in 2002, that company's performance as a pipeline was rated dead last, 43 out of 43, by the leading authority in the field. In the most recent report, Northern Natural was ranked second. The top spot was held by our other pipeline, Kern River.
This is interesting in the context of President Obama's rejection of the Keystone XL oil pipeline from Canada. A Forbes article pointed out that Berkshire Hathaway's Burlington, Northern, and Santa Fe Railroad might be used as an alternative means to transport the oil. A post at the American Enterprise Institute cited a San Francisco Chronicle article reporting that Mr. Obama rejected the pipeline in response to a protest by Susie Tompkins Buell, a major Democratic campaign donor. Anyway, Mr. Buffett's pipelines seem to be okay with President Obama, even if the proposed Keystone pipeline isn't. And the more scarce oil is, the more attractive natural gas becomes as an alternative.
Third, Mr. Buffett announces in a backhanded way that the Berkshire board has chosen his successor. But he doesn't name the successor, only giving clues to trigger a kind of cutesy guessing game: "Your Board is equally enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire. (We have two superb back-up candidates as well.)" Might the identity of this successor rise to the level of information sufficiently material to the business that it should be disclosed to shareholders?