Uber-investor Warren Buffett‘s 2004 performance letter to Berkshire Hathaway, Inc‘s shareholders was published over the weekend. While citing such diverse characters as W.C. Fields and Jesus Christ, Mr. Buffett accepted blame for a drop in Berkshire’s 2004 earnings. Here is a prior post about Mr. Buffet’s letter from last year.
Mr. Buffett candidly admitted the following:

My hope was to make several multibillion dollar acquisitions that would add new and significant streams of earnings to the many we already have, But I struck out.

As a result, Berkshire’s change in book value increased only 10.5% in 2004, lagging behind that of the S&P 500-stock index’s 10.9% return, a performance that Mr. Buffett characterized as “lackluster.” However, it’s important to remember that Berkshire generated that return while remaining quite liquid — the company has $40 billion in cash reserves earning a small return, but putting the company in an enviable position to make acquisitions. Unfortunately, Mr. Buffett commented that there are currently “very few attractive securities to buy,” continuing a theme that was also used in last year’s letter.
Mr. Buffett’s currency investments allowed him to include the quote from W.C. Fields in his report. Inasmuch as Berkhire’s bets nearly doubled in 2004 to $21.4 billion, Mr. Buffet quoted Mr. Fields’ famous comment to a a beggar’s approach: “Sorry, son, all my money’s tied up in currency.”
Mr. Buffett also criticized U.S. policy makers for the growing current-account deficit and warned that net ownership of U.S. assets by foreign countries over the next decade will amount to about $11 trillion if account deficits continue at current levels. He did not explain why he thought that it was a bad idea for foreigners to overpay for U.S. assets.
Somewhat surprisingly, Mr. Buffett’s letter did not mention investigations by state and federal regulators into transactions between insurance clients and Berkshire’s General Re and other company reinsurance subsidiaries. Those investigations are examining whether some companies have used finite-risk insurance to hide financial obligations and make their results appear stronger than they actually are. You know, sort of like the criminalization of structured finance transactions of Enron fame.
Mr. Buffett also quoted Scripture in defending the independence of Berkshire’s board, which includes several Buffett family members and their friends, including Microsoft Corp.’s Bill Gates. Mr. Buffett contends that the board members’ substantial holdings in their own companies’ stock aligned them with the interests of other shareholders, and then cited Matthew 6:21, in which Jesus is quoted as saying “For where your treasure is, there will your heart be also.” Mr. Buffett concluded that “measured by the biblical standard, the Berkshire board is a model.”