Warren Buffett warns investors that safe-looking bonds can be risky

Rick Wilking  Reuters

But only $36bn came from Berkshire's operations. Unlike many tech conglomerates, which had parked their cash overseas, Berkshire Hathaway's cash was in America.

"Prices for decent, but far from spectacular, businesses hit an all-time high", he said.

Buffett said Berkshire would stick with a 'simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own'.

Most of Berkshire's 90-odd businesses reported improving profits in the quarter, but the company's key insurance units, which include Geico and several major reinsurance companies, reported a $491 million loss on policy underwriting. "We certainly have the resources to do so", he wrote.

Berkshire Hathaway didn't make many big acquisitions in 2017 because asking prices were so high.

It was also short on faulting excesses of Wall Street and Washington, and said nothing about Berkshire's plan to create a healthcare company with Amazon.com Inc AMZN.O and JPMorgan Chase & Co JPM.N . Even so-so businesses, he said, were attracting record prices, and for an army of yield-hungry investors, it seemed any price wasn't too much.

Berkshire Hathaway, the holding company of USA billionaire investor Warren Buffett, received a stunning $29 billion check previous year from the United States government, thanks to a new tax law that massively lowered corporate tax rates.

Book value per Class A share, which reflects assets minus liabilities and which Buffett considers a good yardstick for Berkshire's intrinsic worth, was $211,750 at the end of the year, up 13 percent from three months earlier.

" Buffett singled out newly designated vice chairmen Ajit Jain and Greg Abel, longtime operating company executives, Jain with the insurance business and Abel with the company's energy businesses".

Both are considered candidates to eventually replace Buffett, 87, as Berkshire's chief executive.

"Each has been with Berkshire for decades, and Berkshire's blood flows through their veins", Buffett wrote.

Some Berkshire stock investments are made by deputies Todd Combs and Ted Weschler, who Buffett said together manage about $25 billion, up from $21 billion a year ago.

In any upcoming day, week or even year, stocks will be riskier - far riskier - than short-term U.S. bonds, warns Warren Buffet, the Oracle of Omaha.

"Often, high-grade bonds in an investment portfolio increase its risk", he wrote.

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.

Berkshire said its revenue grew almost 1 percent in the quarter to $58.9 billion, up from $58.3 billion a year ago.

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