The Bottom Line    All the major events of the last year are now playing into Berkshire Hathaway's strengths: premiums written by Berkshire's insurance subsidiaries should increase rapidly in 2002. Barring a major catastrophe, profits should follow in 2003.

Client Letter March 2002

"Stupid FED Tricks"   'What if" questions for the FED. What if there had been a recession in 1994? What if there had been no drop interest rates in October 1998? "The whole idea that we can hire some politicians to turn a knob here and change a little policy there, and presto, no more human grief, is not just naive it is dangerous, but that is what we are dealing with here. The notion that economic cycles are bad because they cause pain, and that we can fix this by adjusting a few monetary levers, has always been a foolish notion."

Client Letter April 2002

"Red Wire - Green Wire"   "The market organism also changes constantly because the emotional status of the participants changes. People react to events in ways that are both rational and emotional. So a change in the market price may be caused by new information about the stock or it may just as easily be caused by the level of fear or greed prevalent among the participants."

Berkshire Hathaway Annual Meeting    Links to the best Internet postings of annual meeting—notes and pictures from Omaha.

Client Letter June 2002

"Owner Earnings, Cash Flow and Berkshire Hathaway"  "I have no clear idea how to value the float when computing intrinsic value, but I am fairly confident of two things, 1. money is going to keep pouring into Omaha, and 2. I am not sure that any future attempt to value Berkshire based solely on reported earnings will be satisfactory for me."

A Greenspan Put Floats Charlie's Ducks    "The 'Greenspan Put' kept the rain falling, and the water kept rising. All the ducks thought they were getting smarter and smarter. The gap between what the ducks thought and reality became so wide that it fostered acts of superhuman stupidity. One example is all that is necessary to understand the enormity of this gap. Bernie Ebbers borrowed $400 million to buy stock in his company. That's 400 with six zero's...for an equity position that is probably worth about $45.00 in today's market. What the hell was running though his duck brain? Clearly the water in the pond was going to keep going up forever. Sadly I fear this duck will soon receive the world's largest margin call from a bankruptcy court."

Client Letter August 2002

"The Bear Market"  The truth is, it has been fairly easy to beat the market. Over the course of this bear market, all you had to do, was to be willing to move in the opposite direction of the big money, and listen to Warren and Charlie.

Client Letter September 2002

"Behavioral Economics And Educated Capital Markets"  While Conventional economic theory says the economy and the markets are always rational. Professor Kaheman and Professor Smith, say “not necessarily.”

Client Letter October 2002

"Omaha Cash Flow"  An attempt to rearrange the numbers published in Berkshire Hathaway’s Annual Reports for the last ten years. The numbers are the same but hopefully they are presented here in a fashion that provides some new insight into value of the company.

Client Letter November 2002

"Bond Bubble"   About bubbles, the money supply, shorting Treasury Bonds, and the direction of the economy for the rest of 2002. "So is flight to fixed income a rational refection of the economic conditions we can expect in the near future, or is it just Mr. Market scared to death by what he sees in the rear view mirror."

Client Letter December 2002

"Asbestos Reserves"   Buffett’s Management style is firmly grounded in things like large margins of safety, and the acceptance of short term pain in exchange of long term gain. For insurance companies this is a very different management imperative that GE’s belief that the road to heaven is paved with smooth and ascending earnings reports.