What Buffett’s Annual Letter Really Says

Berkshire Hathaway has had incredible success over the past 50 years. Warren Buffet’s annual letter about business and life is a wonderful read. In the letter he reveals facts about the his company’s returns. It is at that moment when things begin to get twisted by the media. Just read the attached link from Yahoo Finance. Reuters makes it sound like last year’s return and the period from 2009 to 2015 demand answers from Buffett. Really? Yes, 2015 was down (-)12.5%, probably due to his Phillips 66 acquisition – oil! The S&P (all US large cap stocks) was up 1.41% while the Global Market Index (created by Jim Picerno of Capital Spectator) was down (-)1.41%. GMI represents the broad playing field that the capital markets represent based upon the liquid securities on the listed exchanges- stocks, bonds, real estate, and commodities throughout the world.

For the 2009 to 2015 period, Buffett was up 105%, GMI 62.95%, and the S&P 113.52% (NOT the 163% reported in the article). Yes, Buffett was a tad behind the S&P for the period, but, he was 40% higher than the global markets!

What are we trying to say here? Be careful not to read too much into the headlines. Make sure you fact check. And, use an appropriate benchmark to compare your own portfolio against. You might not be doing as bad as it might appear on your account statements.