America’s “best days lie ahead” says billionaire investor Warren Buffett. In his influential annual letter to Berkshire Hathaway shareholders the ‘sage of Omaha’ foresaw an optimistic future for the world’s largest economy.
He warned readers to discount “politicians and pundits (that) have constantly moaned about terrifying problems facing America”. Pointing out that “the prophets of doom have overlooked the all-important factor that is certain: human potential is far from exhausted and the American system for unleashing that potential . . . remains alive and effective.”
The 80-year-old Buffett also gave some perspective to present ‘uncertainty’. “Commentators today often talk of ‘great uncertainty’. But think back to December 6, 1941, October 18, 1987 and September 10, 2001.” His references to Pearl Harbor, a huge stock market crash and the terrorist attacks in America were followed by the observation “no matter how serene today may be, tomorrow is always uncertain. Don’t let that reality spook you.” In other words, if you’ve been in the market as long as he has you learn to keep a cool head and live with uncertainty rather than panicking every time something spooks the markets.
Moreover, Buffett appears ready act on his own advice – the majority of Berkshire Hathaway’s spending (an estimated $8bn) this year will be in the US. The investment company has $38bn cash in reserve, and Buffett claims this “elephant gun has been reloaded, and my trigger finger is itchy”.
Hathaway’s considerable resources, combined with Buffett’s devoted following, mean that it could well prove a self-fulfilling prophesy. US markets were buoyed by the letter, which fuelled hope of further Buffett-inspired mergers and acquisitions.
His firm had a good 2010, with book values rising 13%. Yet it underperformed its benchmark indicator, the S&P500, which was up 15%. The one sector to perform badly was housing. Buffett warned that US property would not recover for “a year or so”.
Buffett shows no sign of slowing down: “I love running Berkshire”, he says. However, many investors wonder when and how a succession would be handled, especially as vice-chairman Charlie Munger is a none-too-sprightly 87. He singled out several of the firm’s business managers for specific praise but gave little hint on which one might be a future chairman.