Buffett says 'terrible mistake' for long-term investors to be in bonds

Warren Buffett’s optimism may get tested this year

Those increases, however, masked declines in operating profit, which Buffett considers a better gauge of overall performance, and which fell 18 percent previous year to $14.46 billion.

The new law cut the corporate income tax rate to 21% from 35%, a change that has seen boosting the earnings of scores of USA companies.

With the exception of insurance, companies owned by Berkshire Hathaway increased their pre-tax profit by $950 million to $20 billion for the year, of which nearly half came from railway operator BNSF and Berkshire Hathaway Energy.

In his annual letter to shareholders, the billionaire investor wrote: "Berkshire's gain in net worth during 2017 was $65.3bn".

In his annual letter to shareholders Saturday, Buffett mixed investment advice with details of how Berkshire's many businesses performed.

The rest was a gift from the new USA tax code. He admitted that the struggle in finding a "sensible purchase price" had "proved a barrier to virtually all deals" past year.

"There is simply no telling how far stocks can fall in a short period", Buffett said.

The company's often-impressive pace of acquisitions had slowed a year ago, he noted, when the prices asked for businesses 'hit an all-time high, ' amid what he called 'a purchasing frenzy'.

He noted that Berkshire didn't go on a buying "frenzy" and acquire a bunch of companies a year ago, mostly because there were no desirable options that came at a "sensible" purchase price. "If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it's a bit like telling your ripening teenager to be sure to have a normal sex life". That was almost double the previous year's $24.1 billion, or $9.76 per B share, because of the effects of the tax law. Over the past 53 years, Berkshire has grown its per-share book value at a 19.1% rate compounded annually, better than the 9.9% gain for the S&P 500 stock index, including dividends. Equity holdings include Apple, Wells Fargo and Coca-Cola. Operating profit, however, fell 18 percent to $14.46 billion, hurt by a rare loss from insurance underwriting. Berkshire's "A" shares also became the first stock ever to reach a price of $300,000.

Buffett says investors shouldn't assume that bonds are less risky than stocks. That ended past year, and Buffett - who bet slow, steady gains by the S^and^P 500 would beat out hedge funds over the decade - won with flying colors.

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