Client Letter Jan 2003
"Berkshire Hathaway Growth in intrinsic Value" "Buffett’s $45,000 offer in 2000 was an important marker for intrinsic value, because we know that his figure must have represented a substantial discount to the intrinsic value of the stock at the time it was made. This is an attempt to adjust that price for the growth of the last three years.""I would consider a year in which we declined 15% and the Average 30% to be much superior to a year when both we and the Average advanced 20%." – Warren Buffett
Client Letter March 2003
Surprisingly Carnival survived this in pretty good shape per share earnings dropped to $1.58 per share 2001 from $1.61 in 2000, but recovered to $1.73 in 2002. This increase in earnings came in face of a 3.7% decline in total revenues."Building A Perfect Moat"
Client Letter May 2003
"Notes from Omaha" Saturday May 3, 2003 the Annual General Meeting of Berkshire Hathaway.
"The Power of Float" If the present trend continues Berkshire’s after tax income this year would equal $6.9 billion up from $407 million in 1992. This means for the last 11 years Berkshire’s after-tax earnings have grown at an average annual rate of 29%.
"Costco's Float" For instance, the companies total reported earnings for the period was $481.5 million; this is about the same as the net increase in cash as shown on the Balance Sheet ($483.9 million). Total cash on hand at the end of the period was $1.289 billion or about the same as the companies total debt level.
"Market Comment" The second Quarter has ended on a positive note with the composite of all Losch Management accounts up 12.21 % for the first Half, .vs. a gain of 10.7% for the S&P. For the last three years our composite has shown a positive return of 15.82% per year, compared to a negative 12.50% per year for the S&P.
"A Different Drummer" Bogle says that during the greatest bull market in history the average equity fund investor has received just 2.7% per year return. In other words after taxes and inflation the average Joe that had his money in mutual funds for the last eighteen years is probably in the hole. This is indeed something to ponder. At first it does not seem possible, but mindless pursuit of performance gets the crowd to always buy last years winners and we all know how that turns out.
"Which Index Fund" There are hundreds (maybe thousands) of index funds and they are all basically sector funds. Some of these indexes will return something close to the returns of the S&P 500 during the twentieth Century, some will do better, some will do worse, but if you know which is which, you are a lot smarter than I am.
"Secular Bear Market" In 1966 the market entered a secular correction phase that may or may not prove similar to today’s market. The market did not move straight down to its eventual low and recover steadily from that low. .From 1966 to 1982 the Dow was stuck in a trading range between 577 and 1000. This may not sound so bad but for those of us that were participating, it was a series of dull, slow, bull markets that always petered out at around one thousand on the Dow. These bull markets were separated by grinding gut-wrenching bear markets.
"The Trade Deficit is Not Debt " It has always been my view that trade deficit is more a refection of the worlds desire to hold dollars than it is anything else. The current account (trade and services) is in deficit because there is a Capital account surplus, not the other way around.
Client Letter December 2003
"Hedged Fun" "The one unbroken rule on Wall Street is that easy equity and cheap leverage inevitably attract those species most dangerous to investment capital: mediocre talent with no comprehension of the limits of their talent, and intelligent people who are ethically