Buffett warns investors that safe-looking bonds can be risky

Buffett reveals $29B windfall for Berkshire thanks to tax cuts

Investor Warren Buffett says Wall Street's lust for deals has prompted CEOs to act like oversexed teenagers and overpay for acquisitions, so it has been hard to find deals for Berkshire Hathaway.

The "Oracle of Omaha's" famed annual letter to Berkshire shareholders has become a favourite in the investor calendar but it has attracted heightened interest this year amid rumours that the 87-year-old would unveil plans to step down.

Buffett's letter, which past year clocked in at 28 pages as opposed to modern-day tweets that now max out at 280 characters, is substantive and insightful, but written in his folksy, easy-to-understand style.

Here's what to watch for in the latest letter from Buffett, 87, which is set for release online Saturday at 8 a.m.at Berkshire's home page http://www.berkshirehathaway.com/.

Shanahan said it also would have been nice to read Buffett's thoughts on why he is selling off Berkshire's IBM investment but maintaining big stakes in Wells Fargo and US Bancorp.

But he said the prices asked for businesses previous year "hit an all-time high", and Berkshire will be looking for those available at "a sensible purchase price".

Buffett said investors shouldn't assume that bonds are less risky than stocks. "Nevertheless we think this move (to elevate Abel and Jain) should allay concerns over succession planning at Berkshire".

Buffett went on to extol Berkshire's investing methods.

Buffett also said that while Berkshire's insurance holdings would take a $2 billion after-tax hit from losses caused by hurricanes a year ago in Florida, Texas and Puerto Rico, other reinsurance companies did far worse. All that cash earning little to nothing is a drag on the conglomerate's earnings power. And just how did TCJA, as Berkshire abbreviates it, do so much for the company? Will Buffett, who loathes using free cash to pay cash dividends, opt to give some of the money back to shareholders? Earlier this month, stocks suffered their first 10 percent pullback since early 2016.

Berkshire Hathaway's fourth-quarter profit more than quadrupled as it received a $29 billion boost from the new tax law that easily offset any weakness in the company's businesses.

As for other Berkshire operations, Buffett this year is refraining from going through them on an individual basis. Berkshire estimates about $3B in losses from those events.

Two men are widely considered the frontrunners: Greg Abel, CEO of Berkshire Hathaway Energy Company, and Ajit Jain, executive vice president of Berkshire Hathaway's National Indemnity Company insurance subsidiary.

The problem is scant details have been disclosed, leaving Wall Street to wonder if the goal is to band together to negotiate lower drug and medical care prices or "more drastically disrupt" the employee benefits market.



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