OMAHA, Nebraska — In a year marked by unprecedented financial success for Berkshire Hathaway, Warren Buffett, the legendary investor and CEO, has issued a stark warning to Washington: spend wisely, take care of the less fortunate, and avoid fiscal recklessness. This message came as Berkshire Hathaway reported record-breaking profits and a staggering cash reserve of $334.2 billion, underscoring the conglomerate’s dominance in the global market.
Buffett, often referred to as the “Oracle of Omaha,” used his annual shareholder letter to reflect on the company’s 60-year journey under his leadership, while also addressing the broader economic and political landscape. At 94, Buffett acknowledged his advancing age and the inevitable transition of power to his successor, Greg Abel, but his words carried the weight of decades of experience and a deep concern for the future of the American economy.
Record Profits and a Mountain of Cash
Berkshire Hathaway’s annual report revealed a 27% increase in operating profit, reaching 47.44billionfortheyear.Quarterlyoperatingprofitalsosoaredby7147.44billionfortheyear.Quarterlyoperatingprofitalsosoaredby7114.53 billion, another record for the company. Net income for the year totaled $89 billion, bolstered by gains from Berkshire’s investments in blue-chip stocks like Apple and American Express.
Despite these impressive figures, Buffett expressed caution about the current market environment. “Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities,” he wrote. This sentiment was reflected in Berkshire’s decision to sell more stocks than it bought for the ninth consecutive quarter, leading to a cash pile that has nearly doubled over the past year.
The company’s cash reserves now stand at $334.2 billion, a figure that has raised eyebrows among investors and analysts alike. While some have questioned whether Berkshire is holding too much cash, Buffett reassured shareholders that the company remains committed to investing in equities, particularly U.S. stocks. “Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities,” he wrote.
A Warning to Washington: Fiscal Folly and the American Miracle
Buffett’s letter was not just a celebration of Berkshire’s success; it was also a call to action for policymakers in Washington. He warned against “fiscal folly,” urging lawmakers to maintain a stable currency and avoid reckless spending. “Paper money can see its value evaporate if fiscal folly prevails,” he wrote. “In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge.”
Buffett’s concern about fiscal responsibility is not new, but it comes at a time when the U.S. is grappling with soaring fiscal deficits and debates over tax cuts. The 94-year-old investor, who has long been a proponent of progressive taxation, emphasized the importance of taking care of those who are less fortunate. “Take care of the many who, for no fault of their own, get the short straws in life. They deserve better,” he wrote.
Buffett also reflected on the “American miracle,” the remarkable economic progress the country has made since its founding. He credited this success to the ability of Americans to save and invest wisely, but warned that this progress could be undermined by fiscal mismanagement. “The American process has not always been pretty,” he wrote, acknowledging the presence of “scoundrels and promoters” who exploit others. However, he maintained that the U.S. economy has delivered “a quantity and quality of output beyond the dreams of any colonist.”
The Transition to Greg Abel: A New Era for Berkshire
As Buffett approaches his 95th birthday, the question of succession at Berkshire Hathaway looms large. In his letter, Buffett assured shareholders that the company is in good hands with Greg Abel, who has been groomed to take over as CEO. “It won’t be long” before Abel takes the reins, Buffett said, praising his successor’s ability to deploy capital effectively.
Abel, who currently serves as Berkshire’s vice chairman, has been instrumental in the company’s recent successes, particularly in the energy and utility sectors. Buffett expressed confidence that Abel will continue to steer Berkshire in the right direction, even as the company faces new challenges in an increasingly complex global market.
Investments in Japan and the Search for Opportunities
While Berkshire has struggled to find major acquisition targets in recent years, Buffett highlighted the company’s growing investments in Japan. Berkshire has increased its stakes in five major Japanese trading houses—Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo—to a combined $23.5 billion. Buffett indicated that Berkshire is likely to further increase its ownership in these companies, which have agreed to let Berkshire’s stakes exceed the previously agreed 10% threshold.
“Over time, you will likely see Berkshire’s ownership of all five increase somewhat,” Buffett wrote. He added that the future leaders of Berkshire “will be holding this Japanese position for many decades,” signaling a long-term commitment to these investments.
Buffett’s focus on Japan reflects his broader strategy of seeking value in international markets, particularly as U.S. stock valuations remain high. “Some of the best investment opportunities he’s found in recent years have been outside the United States,” noted Bill Smead, chief investment officer at Smead Capital Management.
The Challenges Ahead: Weakness in Operating Companies and Insurance Losses
Despite Berkshire’s overall strong performance, Buffett acknowledged that 53% of the 189 companies it owns reported lower earnings in 2024. This weakness in operating companies has raised concerns about the broader economy. Edward Jones analyst Jim Shanahan noted that Berkshire’s results “kind of look soft to me, and it makes me concerned about how strong the economy might really be right now.”
Berkshire also expects to record at least a $1.3 billion loss in the first quarter of 2025 due to insurance claims related to the devastating California wildfires. This highlights the risks associated with Berkshire’s massive insurance operations, which include Geico and other subsidiaries.
A Shorter Annual Meeting and Reflections on Aging
In what may be a nod to his age, Buffett announced that this year’s annual shareholder meeting, typically a marathon event, will be shorter than usual. The meeting, which attracts tens of thousands of attendees, will run from 8 a.m. to 1 p.m., several hours less than in previous years. Buffett also humorously acknowledged his use of a cane, saying it helps him avoid “falling flat on my face.”
Buffett’s reflections on aging were both poignant and lighthearted. He shared that he regularly talks with his 91-year-old sister Bertie, discussing “the joys of old age” and the “relative merits of our canes.” Despite his age, Buffett remains actively engaged in running Berkshire, though he has scaled back some of his activities. “I was still having fun and able to do a few things reasonably well, while other activities had been eliminated or greatly minimized,” he told Fortune magazine last month.
Conclusion: A Legacy of Wisdom and Responsibility
Warren Buffett’s annual letter to shareholders is always a highly anticipated event, offering insights into the mind of one of the world’s greatest investors. This year’s letter was no exception, blending reflections on Berkshire’s past successes with warnings about the future. Buffett’s call for fiscal responsibility and compassion for the less fortunate resonates at a time when the U.S. faces significant economic and political challenges.
As Buffett prepares to pass the torch to Greg Abel, his legacy as a steward of capitalism and a champion of ethical business practices remains secure. His message to Washington—spend wisely, take care of the vulnerable, and avoid fiscal folly—is a reminder that the health of the economy depends not just on market forces, but on the wisdom and vigilance of those in power.
In the end, Buffett’s letter is not just a report on Berkshire Hathaway’s financial performance; it is a testament to the enduring power of responsible capitalism and the importance of looking out for those who get the “short straws in life.” As the world watches the transition at Berkshire, one thing is clear: Warren Buffett’s influence will be felt for generations to come.