2007 Shareholder Letter

Date: February 26, 2008 Author: Warren Buffett Company: Berkshire Hathaway

Overview

2007 net worth increased $12.3 billion or 11.0% (S&P 5.5%), with per-share book value reaching $78,008 — a 21.1% compound annual return over 43 years.

Key Points

The Housing Bubble Warning

"You may recall a 2003 Silicon Valley bumper sticker that implored, 'Please, God, Just One More Bubble.' Unfortunately, this wish was promptly granted..."

Everyone believed house prices would rise forever. Lenders ignored income and cash equity. The "weakened lending practices" led to problems at major financial institutions.

The Swimming Naked Analogy

"You only learn who has been swimming naked when the tide goes out -- and what we are witnessing at some of our largest financial institutions is an ugly sight."

Wells Fargo CEO's Warning

John Stumpf: "It is interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine."

New Acquisitions Performing Well

Iscar (manufacturing, led by Jacob Harpaz) — "as impressive a manufacturing operation as I've seen"
TTI (electronic components, led by Paul Andrews) — "performed magnificently"

Housing-Related Weakness

Few businesses with problems were linked to housing: brick, carpet, real estate brokerage — "minor and temporary."

Famous Quotes

"This wish was promptly granted, as just about all Americans came to believe that house prices would forever rise."