BPL 1962a

bpl/1961a/1-in/bpl-1961a-letter.txt

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+1960 Letter
+
+BUFFETT PARTNERSHIP, LTD.
+
+810 KIEWIT PLAZA
+
+OMAHA 31, NEBRASKA
+
+July, 1961
+
+TO MY PARTNERS:
+
+In the past, partners have commented that a once-a-year letter was “a long time between drinks,” and
+that a semi-annual letter would be a good idea. It really shouldn’t be too difficult to find something to say twice
+a year; at least it isn’t this year. Hence, this letter which will be continued in future years.
+
+During the first half of 1961, the overall gain of the Dow-Jones Industrial Average was about 13%,
+including dividends. Although this is the type of period when we should have the most difficulty in exceeding
+this standard, all partnerships that operated throughout the six months did moderately better then the Average.
+Partnerships formed during 1961 either equaled or exceeded results of the Average from the time of formation,
+depending primarily on how long they were in operation.
+
+Let me, however, emphasize two points. First, one year is far too short a period to form any kind of an
+opinion as to investment performance, and measurements based upon six months become even more unreliable.
+One factor that has caused some reluctance on my part to write semi-annual letters is the fear that partners may
+begin to think in terms of short-term performance which can be most misleading. My own thinking is much
+more geared to five year performance, preferably with tests of relative results in both strong and weak markets.
+
+The second point I want everyone to understand is that if we continue in a market which advances at the
+pace of the first half of 1961, not only do I doubt that we will continue to exceed the results of the DJIA, but it is
+very likely that our performance will fall behind the Average.
+
+Our holdings, which I always believe to be on the conservative side compared to general portfolios, tend
+to grow more conservative as the general market level rises. At all times, I attempt to have a portion of our
+portfolio in securities as least partially insulated from the behavior of the market, and this portion should
+increase as the market rises. However appetizing results for even the amateur cook (and perhaps particularly the
+amateur), we find that more of our portfolio is not on the stove.
+
+We have also begun open market acquisition of a potentially major commitment which I, of course,
+hope does nothing marketwise for at least a year. Such a commitment may be a deterrent to short range
+performance, but it gives strong promise of superior results over a several year period combined with substantial
+defensive characteristics.
+
+Progress has been made toward combining all partners at yearend. I have talked with all partners joining
+during this past year or so about this goal, and have also gone over the plans with representative partners of all
+earlier partnerships
+
+Some of the provisions will be:
+
+(A) A merger of all partnerships, based on market value at yearend, with provisions for proper
+allocation among partners of future tax liability due to unrealized gains at yearend. The merger itself will be tax-
+free, and will result in no acceleration of realization of profits;
+14
+
+(B) A division of profits between the limited partners and general partner, with the first 6% per year to
+partners based upon beginning capital at market, and any excess divided one-fourth to the general partner and
+three-fourths to all partners proportional to their capital. Any deficiencies in earnings below the 6% would be
+carried forward against future earnings, but would not be carried back. Presently, there are three profit
+arrangements which have been optional to incoming partners:
+
+[TABLE]
+Arrangement & Interest & Provision Excess to General Partner & Excess to Limited Partners
+(1) 6% 1/3 2/3
+(2) 4% 1/4 3/4
+(3) None 1/6 5/6
+[/TABLE]
+
+In the event of profits, the new division will obviously have to be better for limited partners than the first two
+arrangements. Regarding the third, the new arrangement will be superior up to 18% per year; but above this rate
+the limited partners would do better under the present agreement. About 80% of total partnership assets have
+selected the first two arrangements, and I am hopeful, should we average better than 18% yearly, partners
+presently under the third arrangement will not feel short-changed under the new agreement;
+
+(C) In the event of losses, there will be no carry back against amounts previously credited to me as
+general partner. Although there will be a carry-forward against future excess earnings. However, my wife and I
+will have the largest single investment in the new partnership, probably about one-sixth of total partnership
+assets, and thereby a greater dollar stake in losses than any other partner of family group, I am inserting a
+provision in the partnership agreement which will prohibit the purchase by me or my family of any marketable
+securities. In other words, the new partnership will represent my entire investment operation in marketable
+securities, so that my results will have to be directly proportional to yours, subject to the advantage I obtain if
+we do better than 6%;
+
+(D) A provision for monthly payments at the rate of 6% yearly, based on beginning of the year capital
+valued at market. Partners not wishing to withdraw money currently can have this credited back to them
+automatically as an advance payment, drawing 6%, to purchase an additional equity interest in the partnership at
+yearend. This will solve one stumbling block that has heretofore existed in the path of consolidation, since many
+partners desire regular withdrawals and others wish to plow everything back;
+
+(E) The right to borrow during the year, up to 20% of the value of your partnership interest, at 6%, such
+loans to be liquidated at yearend or earlier. This will add a degree of liquidity to an investment which can now
+only be disposed of at yearend. It is not intended that anything but relatively permanent funds be invested in the
+partnership, and we have no desire to turn it into a bank. Rather, I expect this to be a relatively unused provision,
+which is available when something unexpected turns up and a wait until yearend to liquidate part of all of a
+partner’s interest would cause hardship;
+
+(F) An arrangement whereby any relatively small tax adjustment, made in later years on the
+partnership’s return will be assessed directly to me. This way, we will not be faced with the problem of asking
+eighty people, or more, to amend their earlier return over some small matter. As it stands now, a small change,
+such as a decision that a dividend received by the partnership has 63% a return of capital instead of 68%, could
+cause a multitude of paper work. To prevent this, any change amounting to less than $1,000 of tax will be
+charged directly to me.
+
+We have submitted the proposed agreement to Washington for a ruling that the merger would be tax-
+free, and that the partnership would be treated as a partnership under the tax laws. While all of this is a lot of
+work, it will make things enormously easier in the future. You might save this letter as a reference to read in
+conjunction with the agreement which you will receive later in the year.
+
+The minimum investment for new partners is currently $25,000, but, of course, this does not apply to
+present partners. Our method of operation will enable the partners to add or withdraw amounts of any size (in
+round $100) at yearend. Estimated total assets of the partnership will be in the neighborhood of $4 million,
+which enables us to consider investments such as the one mentioned earlier in this letter, which we would have
+had to pass several years ago.
+
+This has turned out to be more of a production than my annual letter. If you have any questions,
+particularly regarding anything that isn’t clear in my discussion of the new partnership agreement, be sure to let
+me know. If there are a large number of questions, I will write a supplemental letter to all partners giving the
+questions that arise and the answers to them.
+
+Warren E. Buffett
+
+Vlb
+
+July 22, 1961

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bpl/1961b/1-in/bpl-1961b-letter.txt

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+1961 Letter
+
+BUFFETT PARTNERSHIP, LTD.
+
+810 KIEWIT PLAZA
+
+OMAHA 31, NEBRASKA
+
+January 24, 1962
+
+Our Performance in 1961
+
+I have consistently told partners that it is my expectation and hope (it's always hard to tell which is which) that
+we will do relatively well compared to the general market in down or static markets, but that we may not look so
+good in advancing markets. In strongly advancing markets I expect to have real difficulty keeping up with the
+general market.
+
+Although 1961 was certainly a good year for the general market, and in addition, a very good year for us on both
+an absolute and relative basis, the expectations in the previous paragraph remain unchanged.
+
+During 1961, the general market as measured by the Dow-Jones Industrial Average (hereinafter called the
+“Dow”) showed an over-all gain of 22.2% including dividends received through ownership of the Dow. The
+gain for all partnerships operating throughout the entire year, after all expenses of operation, but before
+payments to limited partners or accrual to the general partner, averaged 45.9%. The details of this gain by
+partnership are shown in the appendix along with results for the partnerships started during the year.
+
+We have now completed five full years of partnership operation, and the results of these five years are shown
+below on a year-by-year basis and also on a cumulative or compounded basis. These results are stated on the
+basis described in the preceding paragraph; after expenses, but before division of gains among partners or
+payments to partners.
+
+[TABLE]
+Year & Partnerships Operating Entire Year & Partnership Gain & Dow-Jones Industrials Gain*
+1957 3 10.4% -8.4%
+1958 5 40.9% 38.5%
+1959 6 25.9% 19.9%
+1960 7 22.8% -6.3%
+1961 7 45.9% 22.2%
+[/TABLE]
+
+* Including dividends received through ownership of the Dow.
+
+On a compounded basis, the cumulative results have been:
+
+[TABLE]
+Year & Partnership Gain & Dow-Jones Industrials Gain
+1957 10.4% -8.4%
+1957-58 55.6% 26.9%
+1057-59 95.9% 52.2%
+1957-60 140.6% 42.6%
+1957-61 251.0% 74.3%
+[/TABLE]
+
+These results do not measure the gain to the limited partner, which of course, is the figure in which you are most
+interested. Because of the varying partnership arrangements that have existed in the past, I have used the over-
+all net gain (based on market values at the beginning and end of the year) to the partnership as being the fairest
+measure of over-all performance.
+
+On a pro-forma basis adjusted to the division of gains entailed in our present Buffett Partnership, Ltd.
+agreement, the results would have been:
+
+[TABLE]
+Year & Limited Partners’ Gain & Dow Gain
+1957 9.3% -8.4%
+1958 32.2% 38.5%
+1959 20.9% 19.9%
+1960 18.6% -6.3%
+1961 35.9% 22.2%
+[/TABLE]
+
+COMPOUNDED
+
+[TABLE]
+Year & Limited Partners’ Gain & Dow Gain
+1957 9.3% -8.4%
+1957-58 44.5% 26.9%
+1957-59 74.7% 52.2%
+1957-60 107.2% 42.6%
+1957-61 181.6% 74.3%
+[/TABLE]
+
+A Word About Par
+
+The outstanding item of importance in my selection of partners, as well as in my subsequent relations with them,
+has been the determination that we use the same yardstick. If my performance is poor, I expect partners to
+withdraw, and indeed, I should look for a new source of investment for my own funds. If performance is good, I
+am assured of doing splendidly, a state of affairs to which I am sure I can adjust.
+
+The rub, then, is in being sure that we all have the same ideas of what is good and what is poor. I believe in
+establishing yardsticks prior to the act; retrospectively, almost anything can be made to look good in relation to
+something or other.
+
+I have continuously used the Dow-Jones Industrial Average as our measure of par. It is my feeling that three
+years is a very minimal test of performance, and the best test consists of a period at least that long where the
+terminal level of the Dow is reasonably close to the initial level.
+
+While the Dow is not perfect (nor is anything else) as a measure of performance, it has the advantage of being
+widely known, has a long period of continuity, and reflects with reasonable accuracy the experience of investors
+generally with the market. I have no objection to any other method of measurement of general market
+performance being used, such as other stock market averages, leading diversified mutual stock funds, bank
+common trust funds, etc.
+
+You may feel I have established an unduly short yardstick in that it perhaps appears quite simple to do better
+than an unmanaged index of 30 leading common stocks. Actually, this index has generally proven to be a
+reasonably tough competitor. Arthur Wiesenberger’s classic book on investment companies lists performance
+for the 15 years 1946-60, for all leading mutual funds. There is presently over $20 billion invested in mutual
+funds, so the experience of these funds represents, collectively, the experience of many million investors. My
+own belief, though the figures are not obtainable, is that portfolios of most leading investment counsel
+organizations and bank trust departments have achieved results similar to these mutual funds.
+
+Wiesenberger lists 70 funds in his “Charts & Statistics” with continuous records since 1946. I have excluded 32
+of these funds for various reasons since they were balanced funds (therefore not participating fully in the general
+market rise), specialized industry funds, etc. Of the 32 excluded because I felt a comparison would not be fair,
+31 did poorer than the Dow, so they were certainly not excluded to slant the conclusions below.
+
+Of the remaining 38 mutual funds whose method of operation I felt was such as to make a comparison with the
+Dow reasonable, 32 did poorer than the Dow, and 6 did better. The 6 doing better at the end of 1960 had assets
+of about $1 billion, and the 32 doing poorer had assets of about $6-1/2 billion. None of the six that were superior
+beat the Dow by more than a few percentage points a year.
+
+Below I present the year-by-year results for our period of operation (excluding 1961 for which I don't have exact
+data, although rough figures indicate no variance from the 1957-60 figures) for the two largest common stock
+open-end investment companies (mutual funds) and the two largest closed-end investment companies:
+
+[TABLE]
+Year & Mass Inv Trust & Investors Stock & Lehman & Tri-Cont & Dow & Limited Partners
+1957 -12.0% -12.4% -11.4% -2.4% -8.4% 9.3%
+1958 44.1% 47.6% 40.8% 33.2% 38.5% 32.2%
+1959 8.2% 10.3% 8.1% 8.4% 19.9% 20.9%
+1960 -0.9% -0.1% 2.6% 2.8% -6.3% 18.6%
+[/TABLE]
+
+(From Moody’s Banks & Finance Manual, 1961)
+
+COMPOUNDED (Gains From the Previous Table)
+
+[TABLE]
+Year & Mass Inv Trust & Investors Stock & Lehman & Tri-Cont & Dow & Limited Partners
+1957 -12.0% -12.4% -11.4% -2.4% -8.4% 9.3%
+1957-58 26.8% 29.3% 24.7% 30.0% 26.9% 44.5%
+1957-59 37.2% 42.6% 34.8% 40.9% 52.2% 74.7%
+1957-60 36.0% 42.5% 38.3% 44.8% 42.6% 107.2%
+[/TABLE]
+
+Massachusetts Investors Trust has net assets of about $1.8 billion; Investors Stock Fund about $1 billion; Tri
+-Continental Corporation about $ .5 billion; and Lehman Corporation about $350 million; or a total of over $3.5
+billion.
+
+I do not present the above tabulations and information with the idea of indicting investment companies. My own
+record of investing such huge sums of money, with restrictions on the degree of activity I might take in
+companies where we had investments, would be no better, if as good. I present this data to indicate the Dow as
+an investment competitor is no pushover, and the great bulk of investment funds in the country are going to have
+difficulty in bettering, or perhaps even matching, its performance.
+
+Our portfolio is very different from that of the Dow. Our method of operation is substantially different from that
+of mutual funds.
+
+However, most partners, as all alternative to their investment in the partnership, would probably have their funds
+invested in a media producing results comparable to the Dow, therefore, I feel it is a fair test of performance.
+
+Our Method of Operation
+
+Our avenues of investment break down into three categories. These categories have different behavior
+characteristics, and the way our money is divided among them will have an important effect on our results,
+relative to the Dow in any given year. The actual percentage division among categories is to some degree
+planned, but to a great extent, accidental, based upon availability factors.
+
+The first section consists of generally undervalued securities (hereinafter called "generals") where we have
+nothing to say about corporate policies and no timetable as to when the undervaluation may correct itself. Over
+the years, this has been our largest category of investment, and more money has been made here than in either of
+the other categories. We usually have fairly large positions (5% to 10% of our total assets) in each of five or six
+generals, with smaller positions in another ten or fifteen.
+
+Sometimes these work out very fast; many times they take years. It is difficult at the time of purchase to know
+any specific reason why they should appreciate in price. However, because of this lack of glamour or anything
+pending which might create immediate favorable market action, they are available at very cheap prices. A lot of
+value can be obtained for the price paid. This substantial excess of value creates a comfortable margin of safety
+in each transaction. This individual margin of safety, coupled with a diversity of commitments creates a most
+attractive package of safety and appreciation potential. Over the years our timing of purchases has been
+considerably better than our timing of sales. We do not go into these generals with the idea of getting the last
+nickel, but are usually quite content selling out at some intermediate level between our purchase price and what
+we regard as fair value to a private owner.
+
+The generals tend to behave market-wise very much in sympathy with the Dow. Just because something is cheap
+does not mean it is not going to go down. During abrupt downward movements in the market, this segment may
+very well go down percentage-wise just as much as the Dow. Over a period of years, I believe the generals will
+outperform the Dow, and during sharply advancing years like 1961, this is the section of our portfolio that turns
+in the best results. It is, of course, also the most vulnerable in a declining market.
+
+Our second category consists of “work-outs.” These are securities whose financial results depend on corporate
+action rather than supply and demand factors created by buyers and sellers of securities. In other words, they are
+securities with a timetable where we can predict, within reasonable error limits, when we will get how much and
+what might upset the applecart. Corporate events such as mergers, liquidations, reorganizations, spin-offs, etc.,
+lead to work-outs. An important source in recent years has been sell-outs by oil producers to major integrated oil
+companies.
+
+This category will produce reasonably stable earnings from year to year, to a large extent irrespective of the
+course of the Dow. Obviously, if we operate throughout a year with a large portion of our portfolio in work-
+outs, we will look extremely good if it turns out to be a declining year for the Dow or quite bad if it is a strongly
+advancing year. Over the years, work-outs have provided our second largest category. At any given time, we
+may be in ten to fifteen of these; some just beginning and others in the late stage of their development. I believe
+in using borrowed money to offset a portion of our work-out portfolio since there is a high degree of safety in
+this category in terms of both eventual results and intermediate market behavior. Results, excluding the benefits
+derived from the use of borrowed money, usually fall in the 10% to 20% range. My self-imposed limit regarding
+borrowing is 25% of partnership net worth. Oftentimes we owe no money and when we do borrow, it is only as
+an offset against work-outs.
+
+The final category is "control" situations where we either control the company or take a very large position and
+attempt to influence policies of the company. Such operations should definitely be measured on the basis of
+several years. In a given year, they may produce nothing as it is usually to our advantage to have the stock be
+stagnant market-wise for a long period while we are acquiring it. These situations, too, have relatively little in
+common with the behavior of the Dow. Sometimes, of course, we buy into a general with the thought in mind
+that it might develop into a control situation. If the price remains low enough for a long period, this might very
+well happen. If it moves up before we have a substantial percentage of the company's stock, we sell at higher
+levels and complete a successful general operation. We are presently acquiring stock in what may turn out to be
+control situations several years hence.
+
+Dempster Mill Manufacturing Company
+
+We are presently involved in the control of Dempster Mill Manufacturing Company of Beatrice, Nebraska. Our
+first stock was purchased as a generally undervalued security five years ago. A block later became available, and
+I went on the Board about four years ago. In August 1961, we obtained majority control, which is indicative of
+the fact that many of our operations are not exactly of the "overnight" variety.
+
+Presently we own 70% of the stock of Dempster with another 10% held by a few associates. With only 150 or so
+other stockholders, a market on the stock is virtually non-existent, and in any case, would have no meaning for a
+controlling block. Our own actions in such a market could drastically affect the quoted price.
+
+Therefore, it is necessary for me to estimate the value at yearend of our controlling interest. This is of particular
+importance since, in effect, new partners are buying in based upon this price, and old partners are selling a
+portion of their interest based upon the same price. The estimated value should not be what we hope it would be
+worth, or what it might be worth to an eager buyer, etc., but what I would estimate our interest would bring if
+sold under current conditions in a reasonably short period of time. Our efforts will be devoted toward increasing
+this value, and we feel there are decent prospects of doing this.
+
+Dempster is a manufacturer of farm implements and water systems with sales in 1961 of about $9 million.
+Operations have produced only nominal profits in relation to invested capital during recent years. This reflected
+a poor management situation, along with a fairly tough industry situation. Presently, consolidated net worth
+(book value) is about $4.5 million, or $75 per share, consolidated working capital about $50 per share, and at
+yearend we valued our interest at $35 per share. While I claim no oracular vision in a matter such as this, I feel
+this is a fair valuation to both new and old partners. Certainly, if even moderate earning power can be restored, a
+higher valuation will be justified, and even if it cannot, Dempster should work out at a higher figure. Our
+controlling interest was acquired at an average price of about $28, and this holding currently represents 21% of
+partnership net assets based on the $35 value.
+
+Of course, this section of our portfolio is not going to be worth more money merely because General Motors,
+U.S. Steel, etc., sell higher. In a raging bull market, operations in control situations will seem like a very
+difficult way to make money, compared to just buying the general market. However, I am more conscious of the
+dangers presented at current market levels than the opportunities. Control situations, along with work-outs,
+provide a means of insulating a portion of our portfolio from these dangers.
+
+The Question of Conservatism
+
+The above description of our various areas of operation may provide some clues as to how conservatively our
+portfolio is invested. Many people some years back thought they were behaving in the most conservative
+manner by purchasing medium or long-term municipal or government bonds. This policy has produced
+substantial market depreciation in many cases, and most certainly has failed to maintain or increase real buying
+power.
+
+Conscious, perhaps overly conscious, of inflation, many people now feel that they are behaving in a
+conservative manner by buying blue chip securities almost regardless of price-earnings ratios, dividend yields,
+etc. Without the benefit of hindsight as ill the bond example, I feel this course of action is fraught with danger.
+There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy
+and capricious public will put on earnings.
+
+You will not be right simply because a large number of people momentarily agree with you. You will not be
+right simply because important people agree with you. In many quarters the simultaneous occurrence of the two
+above factors is enough to make a course of action meet the test of conservatism.
+
+You will be right, over the course of many transactions, if your hypotheses are correct, your facts are correct,
+and your reasoning is correct. True conservatism is only possible through knowledge and reason.
+
+I might add that in no way does the fact that our portfolio is not conventional prove that we are more
+conservative or less conservative than standard methods of investing. This can only be determined by examining
+the methods or examining the results.
+
+I feel the most objective test as to just how conservative our manner of investing is arises through evaluation of
+performance in down markets. Preferably these should involve a substantial decline in the Dow. Our
+performance in the rather mild declines of 1957 and 1960 would confirm my hypothesis that we invest in an
+extremely conservative manner. I would welcome any partner’s suggesting objective tests as to conservatism to
+see how we stack up. We have never suffered a realized loss of more than 0.5% of 1% of total net assets, and
+our ratio of total dollars of realized gains to total realized losses is something like 100 to 1. Of course; this
+reflects the fact that on balance we have been operating in an up market. However, there have been many
+opportunities for loss transactions even in markets such as these (you may have found out about a few of these
+yourselves) so I think the above facts have some significance.
+
+The Question of Size
+
+Aside from the question as to what happens upon my death (which with a metaphysical twist, is a subject of
+keen interest to me), I am probably asked most often: "What affect is the rapid growth of partnership funds
+going to have upon performance?”
+
+Larger funds tug in two directions. From the standpoint of "passive" investments, where we do not attempt by
+the size of our investment to influence corporate policies, larger sums hurt results. For the mutual fund or trust
+department investing in securities with very broad markets, the effect of large sums should be to penalize results
+only very slightly. Buying 10,000 shares of General Motors is only slightly more costly (on the basis of
+mathematical expectancy) than buying 1,000 or 100 shares.
+
+In some of the securities in which we deal (but not all by any means) buying 10,000 shares is much more
+difficult than buying 100 and is sometimes impossible. Therefore, for a portion of our portfolio, larger sums are
+definitely disadvantageous. For a larger portion of the portfolio, I would say increased sums are only slightly
+disadvantageous. This category includes most of our work-outs and some generals.
+
+However, in the case of control situations increased funds are a definite advantage. A "Sanborn Map" cannot be
+accomplished without the wherewithal. My definite belief is that the opportunities increase in this field as the
+funds increase. This is due to the sharp fall-off in competition as the ante mounts plus the important positive
+correlation that exists between increased size of company and lack of concentrated ownership of that company's
+stock.
+
+Which is more important -- the decreasing prospects of profitability in passive investments or the increasing
+prospects in control investments? I can't give a definite answer to this since to a great extent it depends on the
+type of market in which we are operating. My present opinion is that there is no reason to think these should not
+be offsetting factors; if my opinion should change, you will be told. I can say, most assuredly, that our results in
+1960 and 1961 would not have been better if we had been operating with the much smaller sums of 1956 and
+1957.
+
+And a Prediction
+
+Regular readers (I may be flattering myself) will feel I have left the tracks when I start talking about predictions.
+This is one thing from which I have always shied away and I still do in the normal sense.
+
+I am certainly not going to predict what general business or the stock market are going to do in the next year or
+two since I don't have the faintest idea.
+
+I think you can be quite sure that over the next ten years there are going to be a few years when the general
+market is plus 20% or 25%, a few when it is minus on the same order, and a majority when it is in between. I
+haven't any notion as to the sequence in which these will occur, nor do I think it is of any great importance for
+the long-term investor.
+
+Over any long period of years, I think it likely that the Dow will probably produce something like 5% to 7% per
+year compounded from a combination of dividends and market value gain. Despite the experience of recent
+years, anyone expecting substantially better than that from the general market probably faces disappointment.
+
+Our job is to pile up yearly advantages over the performance of the Dow without worrying too much about
+whether the absolute results in a given year are a plus or a minus. I would consider a year in which we were
+down 15% and the Dow declined 25% to be much superior to a year when both the partnership and the Dow
+advanced 20%. I have stressed this point in talking with partners and have watched them nod their heads with
+varying degrees of enthusiasm. It is most important to me that you fully understand my reasoning in this regard
+and agree with me not only in your cerebral regions, but also down in the pit of your stomach.
+
+For the reasons outlined in my method of operation, our best years relative to the Dow are likely to be in
+declining or static markets. Therefore, the advantage we seek will probably come in sharply varying amounts.
+There are bound to be years when we are surpassed by the Dow, but if over a long period we can average ten
+percentage points per year better than it, I will feel the results have been satisfactory.
+
+Specifically, if the market should be down 35% or 40% in a year (and I feel this has a high probability of
+occurring one year in the next ten--no one knows which one), we should be down only 15% or 20%. If it is more
+or less unchanged during the year, we would hope to be up about ten percentage points. If it is up 20% or more,
+we would struggle to be up as much. The consequence of performance such as this over a period of years would
+mean that if the Dow produces a 5% to 7% per year overall gain compounded, I would hope our results might be
+15% to 17% per year.
+
+The above expectations may sound somewhat rash, and there is no question but that they may appear very much
+so when viewed from the vantage point of 1965 or 1970. It may turn out that I am completely wrong. However,
+I feel the partners are certainly entitled to know what I am thinking in this regard even though the nature of the
+business is such as to introduce a high probability of error in such expectations. In anyone year, the variations
+may be quite substantial. This happened in 1961, but fortunately the variation was on the pleasant side. They
+won't all be!
+
+Miscellaneous
+
+We are now installed in an office at 810 Kiewit Plaza with a first-class secretary, Beth Henley, and an associate
+with considerable experience in my type of securities, Bill Scott. My father is sharing office space with us (he
+also shares the expenses) and doing a brokerage business in securities. None of our brokerage is done through
+him so we have no "vicuna coat" situation.
+Overall, I expect our overhead, excluding interest on borrowings and Nebraska Intangibles Tax, to run less than
+0.5 of 1% of net assets. We should get our money's worth from this expenditure, and you are most cordially
+invited to drop in and see how the money is being spent.
+
+With over 90 partners and probably 40 or so securities, you can understand that it is quite a welcome relief to
+me to shake loose from some of the details.
+
+We presently have partners residing in locations from California to Vermont, and net assets at the beginning of
+1962 amounted to $ 7,178,500.00. Susie and I have an interest in the partnership amounting to $1,025,000.00,
+and other relatives of mine have a combined interest totaling $782,600.00. The minimum for new partners last
+year was $25,000, but I am giving some thought to increasing it this year.
+
+Peat, Marwick, Mitchell & Company did an excellent job of expediting the audit, providing tax figures much
+earlier than in the past. They assure me this performance can be continued.
+
+Let me hear from you regarding questions you may have on any aspects of this letter, your audit, status of your
+partnership interest, etc. that may puzzle you.
+
+Cordially Warren E. Buffett.
+
+APPENDIX
+
+Partnerships Operating Throughout 1961
+
+[TABLE]
+Partnership & 1/1/61 Capital at Market & Overall Gain in 1961* & Percentage Gain
+Buffett-Associates $486,874.27 $225,387.80 46.3%
+Buffett-Fund $351,839.29 $159,696.93 45.4%
+Dacee $235,480.31 $116,504.47 49.5%
+Emdee $140,005.24 $67,387.28 48.1%
+Glenoff $78,482.70 $39,693.80 50.5%
+Mo-Buff $325,844.71 $149,163.71 45.8%
+Underwood $582,256.82 $251,951.26 43.3%
+Total $2,200,783.34 $1,009,785.25 45.9%
+[/TABLE]
+
+Partnerships Started in 1961
+
+[TABLE]
+Partnership & Paid-in & Date Paid-in & Overall Gain in 1961 & Percentage Gain
+Ann-Investments 100,100 (1-30-61) 35,367.93 35.3%
+Buffett-TD 250,100 1961 70,294.08 28.1% 
+Buffett-TD-March $200,100 3-8-61 n/a n/a
+Buffett-TD-May $50,000 5-31-61 n/a n/a
+Buffett-Holland 125,100 (5-17-61) 16,703.76 13.3%
+[/TABLE]
+
+* Gain in net assets at market values plus payments to limited partners during year.

bpl/1961b/inputs-bpl-1961b.txt

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bpl/1962a/1-in/bpl-1962a-letter.txt

@@ -0,0 +1,205 @@
+BUFFETT PARTNERSHIP, LTD.
+
+810 KIEWIT PLAZA
+
+OMAHA 31, NEBRASKA
+
+July 6, 1962
+
+A Reminder:
+
+In my letter of January 24, 1962 reporting on 1961, I inserted a section entitled. "And a Prediction." While I
+have no desire to inflict cruel and unusual punishment upon my readers, nevertheless, a reprinting of that
+section, in its entirety, may be worthwhile:
+
+And a Prediction
+
+Regular readers (I may be flattering myself) will feel I have left the tracks when I start talking about
+predictions. This is one thing from which I have always shied away and I still do in the normal sense.
+
+I am certainly not going to predict what general business or the stock market are going to do in the next
+year or two since I don't have the faintest idea.
+
+I think you can be quite sure that over the next ten years there are going to be a few years when the
+general market is plus 20% or 25%, a few when it is minus on the same order, and a majority when it is
+in between. I haven't any notion as to the sequence in which these will occur, nor do I think it is of any
+great importance for the long-term investor.
+
+Over any long period of years, I think it likely that the Dow will probably produce something like 5% to
+7% per year compounded from a combination of dividends and market value gain. Despite the
+experience of recent years, anyone expecting substantially better than that from the general market
+probably faces disappointment.
+
+Our job is to pile up yearly advantages over the performance of the Dow without worrying too much
+about whether the absolute results in a given year are a plus or a minus. I would consider a year in
+which we were down 15% and the Dow declined 25% to be much superior to a year when both the
+partnership and the Dow advanced 20%. I have stressed this point in talking with partners and have
+watched them nod their heads with varying degrees of enthusiasm.
+
+It is most important to me that you fully understand my reasoning in this regard and agree with me not
+only in your cerebral regions, but also down in the pit of your stomach.
+
+For the reasons outlined in my method of operation, our best years relative to the Dow are likely to be in
+declining or static markets. Therefore, the advantage we seek will probably come in sharply varying
+amounts. There are bound to be years when we are surpassed by the Dow, but if over a long period we
+can average ten percentage points per year better than it, I will feel the results have been satisfactory.
+
+Specifically, if the market should be down 35% or 40% in a year (and I feel this has a high probability
+of occurring one year in the next ten--no one knows which one), we should be down only 15% or 20%.
+If it is more or less unchanged during the year, we would hope to be up about ten percentage points. If it
+is up 20% or more, we would struggle to be up as much. The consequence of performance such as this
+over a period of years would mean that if the Dow produces a 5% to 7% per year over-all gain
+compounded, I would hope our results might be 15% to 17% per year.
+
+The above expectations may sound somewhat rash, and there is no question but that they may appear
+very much so when viewed from the vantage point of 1965 or 1970. It may turn out that I am
+completely wrong. However, I feel the partners are certainly entitled to know what I am thinking in this
+regard even though the nature of the business is such as to introduce a high probability of error in such
+expectations. In anyone year, the variations may be quite substantial. This happened in 1961, but
+fortunately the variation was on the pleasant side. They won't all be!
+
+The First Half of 1962:
+
+Between yearend 1961 and June 30, 1962 the Dow declined from 731.14 to 561.28. If one had owned the Dow
+during this period, dividends of approximately $11.00 would have been received so that overall a loss of 21.7%
+would have been the result of investing in the Dow. For the statistical minded, Appendix A gives the results of
+the Dow by years since formation of the predecessor partnerships.
+
+As stated above, a declining Dow gives us our chance to shine and pile up the percentage advantages which,
+coupled with only an average performance during advancing markets, will give us quite satisfactory long-term
+results. Our target is an approximately 1/2% decline for each 1% decline in the Dow and if achieved, means we
+have a considerably more conservative vehicle for investment in stocks than practically any alternative.
+
+As outlined in Appendix B, showing combined predecessor partnership results, during the first half of 1962 we
+had one of the best periods in our history, achieving a minus 7.5% result before payments to partners, compared
+to the minus 21.7% overall result on the Dow. This 14.2 percentage points advantage can be expected to widen
+during the second half if the decline in the general market continues, but will probably narrow should the market
+turn upward. Please keep in mind my continuing admonition that six-months' or even one-year's results are not
+to be taken too seriously. Short periods of measurement exaggerate chance fluctuations in performance. While
+circumstances contributed to an unusually good first half, there are bound to be periods when we do relatively
+poorly. The figures for our performance involve no change in the valuation of our controlling interest in
+Dempster Mill Manufacturing Company, although developments in recent months point toward a probable
+higher realization.
+
+Investment Companies during the First Half
+
+Past letters have stressed our belief that the Dow is no pushover as a yardstick for investment performance. To
+the extent that funds are invested in common stocks, whether the manner of investment be through investment
+companies, investment counselors, bank trust departments, or do-it-yourself, our belief is that the overwhelming
+majority will achieve results roughly comparable to the Dow. Our opinion is that the deviations from the Dow
+are much more likely to be toward a poorer performance than a superior one.
+
+To illustrate this point, we have continually measured the Dow and limited partners' results against the two
+largest open-end investment companies (mutual funds) following a program of common stock investment and
+the two largest closed-end investment companies. The tabulation in Appendix C shows the five -years' results,
+and you will note the figures are extraordinarily close to those of the Dow. These companies have total assets of
+about $3.5 billion.
+
+In the interest of getting this letter out promptly, we are mailing it before results are available for the closed-end
+companies. However, the two mutual funds both did poorer than the Dow, with Massachusetts Investors Trust
+having a minus 23% overall performance, and Investors Stock Fund realizing a minus 25.4%. This is not
+unusual as witness the lead article in the WALL STREET JOURNAL of June 13, 1962 headed "Funds vs.
+Market.” Of the 17 large common stock funds studied, everyone had a record poorer than the Dow from the
+peak on the Dow of 734, to the date of the article, although in some cases the margin of inferiority was minor.
+
+Particularly hard hit in the first half were the so-called “growth” funds which, almost without exception, were
+down considerably more than the Dow. The three large "growth" (the quotation marks are more applicable now)
+funds with the best record in the preceding few years, Fidelity Capital Fund, Putnam Growth Fund, and
+Wellington Equity Fund averaged an overall minus 32.3% for the first half. It is only fair to point out that
+because of their excellent records in 1959-61, their overall performance to date is still better than average, as it
+may well be in the future. Ironically, however, this earlier superior performance had caused such a rush of new
+investors to come to them that the poor performance this year was experienced by very many more holders than
+enjoyed the excellent performance of earlier years. This experience tends to confirm my hypothesis that
+investment performance must be judged over a period of time with such a period including both advancing and
+declining markets. There will continue to be both; a point perhaps better understood now than six months ago.
+
+In outlining the results of investment companies, I do so not because we operate in a manner comparable to
+them or because our investments are similar to theirs. It is done because such funds represent a public batting
+average of professional, highly-paid investment management handling a very significant $20 billion of
+securities. Such management, I believe, is typical of management handling even larger sums. As an alternative
+to an interest in the partnership, I believe it reasonable to assume that many partners would have investments
+managed similarly.
+
+Asset Values:
+
+The above calculations of results are before allocation to the General Partner and monthly payments to partners.
+Of course, whenever the overall results for the year are not plus 6% on a market value basis (with deficiencies
+carried forward) there is no allocation to the General Partner. Therefore, non-withdrawing partners have had a
+decrease in their market value equity during the first six months of 7.5% and partners who have withdrawn at
+the rate of 6% per annum have had a decrease in their market value equity during the first half of 10.5%. Should
+our results for the year be less than plus 6% (and unless there should be a material advance in the Dow, this is
+very probable) partners receiving monthly payments will have a decrease in their market value equity at
+December 31, 1962. This means that monthly payments at 6% on this new market equity next year will be on a
+proportionately reduced basis. For example, if our results were an overall minus 7% for the year, a partner
+receiving monthly payments who had a market value interest of $100,000 on January 1, 1962 would have an
+equity at December 31, 1962 of $87,000. This reduction would arise from the minus 7% result, or $7, 000 plus
+monthly payments of $500 for an additional $6,000. Thus, with $87,000 of market equity on January 1, 1963,
+monthly payments next year would be $435.00.
+
+None of the above, of course, has any applicability to advance payments received during 1962 which do not
+participate in profits or losses, but earn a straight 6%.
+
+APPENDIX A
+
+DOW-JONES INDUSTRIAL AVERAGE
+
+[TABLE]
+Year & Closing Dow & Change for Year & Dow Dividend Overall & Result from Dow & Percentage Result
+1956 499.47 -- -- -- --
+1957 435.69 -63.78 21.61 -42.17 -8.4%
+1958 583.65 147.96 20.00 167.96 38.5%
+1959 679.36 95.71 20.74 116.45 20.0%
+1960 615.89 63.47 21.36 42.11 -6.2%
+1961 731.14 115.25 22.61 137.86 22.4%
+6/30/62 561.28 169.86 11.00* -158.86 -21.7%
+[/TABLE]
+
+*Estimated
+
+APPENDIX B
+PARTNERSHIP PERFORMANCE
+
+[TABLE]
+Year & Partnership Result (1) & Limited Partners’ Results (2)
+1957 10.4% 9.3%
+1958 40.9% 32.2%
+1959 25.9% 20.9%
+1960 22.8% 18.6%
+1961 45.9% 35.9%
+6/30/62 -7.5% -7.5%
+[/TABLE]
+
+(1) For 1957-61 consists of combined results of all predecessor limited partnerships operating throughout entire
+year after all expenses but before distributions to partners or allocations to the general partners.
+(2) For 1957-61 computed on basis of preceding column of partnership results allowing for allocation to general
+partner based upon present partnership agreement.
+
+APPENDIX C
+
+YEARLY RESULTS
+
+[TABLE]
+Year & Mass. Inv. Trust (1) & Investors Stock (1) & Lehman (2) & Tri-Cont (2)
+1957 -11.4% -12.4% -11.4% -2.4%
+1958 42.7% 47.5% 40.8% 33.2%
+1959 9.0% 10.3% 8.1% 8.4%
+1960 -1.0% -0.6% 2.5% 2.8%
+1961 25.6% 24.9% 23.6% 22.5%
+6/30/92 23.0% -25.4% N.A. N.A.
+[/TABLE]
+
+(1) Computed from changes in asset value plus any distributions to holders of record during year.
+(2) From Moody's Bank & Finance Manual - 1962.
+
+CUMULATIVE RESULTS
+
+[TABLE]
+Years & Mass Inv Trust & Investors Stock & Lehman & Tri-Cont & Dow & Limited Partners
+1957 -11.4% -12.4% -11.4% -2.4% -8.4% 9.3%
+1957-58 26.4% 29.2% 24.7% 30.0% 26.9% 44.5%
+1957-59 37.8% 42.5% 34.8% 40.9% 52.3% 74.7%
+1957-60 36.4% 41.6% 38.2% 44.8% 42.9% 107.2
+1957-61 71.4% 76.9% 70.8% 77.4% 74.9% 181.6
+1957-6/30/62 31.9% 32.0% N.A. N.A. 37.0% 160.5%
+[/TABLE]
+

bpl/1962a/inputs-bpl-1962a.txt

@@ -0,0 +1,157 @@
+file 3-wavs/output-000.wav'
+file 3-wavs/output-001.wav'
+file 3-wavs/output-002.wav'
+file 3-wavs/output-003.wav'
+file 3-wavs/output-004.wav'
+file 3-wavs/output-005.wav'
+file 3-wavs/output-006.wav'
+file 3-wavs/output-007.wav'
+file 3-wavs/output-008.wav'
+file 3-wavs/output-009.wav'
+file 3-wavs/output-010.wav'
+file 3-wavs/output-011.wav'
+file 3-wavs/output-012.wav'
+file 3-wavs/output-013.wav'
+file 3-wavs/output-014.wav'
+file 3-wavs/output-015.wav'
+file 3-wavs/output-016.wav'
+file 3-wavs/output-017.wav'
+file 3-wavs/output-018.wav'
+file 3-wavs/output-019.wav'
+file 3-wavs/output-020.wav'
+file 3-wavs/output-021.wav'
+file 3-wavs/output-022.wav'
+file 3-wavs/output-023.wav'
+file 3-wavs/output-024.wav'
+file 3-wavs/output-025.wav'
+file 3-wavs/output-026.wav'
+file 3-wavs/output-027.wav'
+file 3-wavs/output-028.wav'
+file 3-wavs/output-029.wav'
+file 3-wavs/output-030.wav'
+file 3-wavs/output-031.wav'
+file 3-wavs/output-032.wav'
+file 3-wavs/output-033.wav'
+file 3-wavs/output-034.wav'
+file 3-wavs/output-035.wav'
+file 3-wavs/output-036.wav'
+file 3-wavs/output-037.wav'
+file 3-wavs/output-038.wav'
+file 3-wavs/output-039.wav'
+file 3-wavs/output-040.wav'
+file 3-wavs/output-041.wav'
+file 3-wavs/output-042.wav'
+file 3-wavs/output-043.wav'
+file 3-wavs/output-044.wav'
+file 3-wavs/output-045.wav'
+file 3-wavs/output-046.wav'
+file 3-wavs/output-047.wav'
+file 3-wavs/output-048.wav'
+file 3-wavs/output-049.wav'
+file 3-wavs/output-050.wav'
+file 3-wavs/output-051.wav'
+file 3-wavs/output-052.wav'
+file 3-wavs/output-053.wav'
+file 3-wavs/output-054.wav'
+file 3-wavs/output-055.wav'
+file 3-wavs/output-056.wav'
+file 3-wavs/output-057.wav'
+file 3-wavs/output-058.wav'
+file 3-wavs/output-059.wav'
+file 3-wavs/output-060.wav'
+file 3-wavs/output-061.wav'
+file 3-wavs/output-062.wav'
+file 3-wavs/output-063.wav'
+file 3-wavs/output-064.wav'
+file 3-wavs/output-065.wav'
+file 3-wavs/output-066.wav'
+file 3-wavs/output-067.wav'
+file 3-wavs/output-068.wav'
+file 3-wavs/output-069.wav'
+file 3-wavs/output-070.wav'
+file 3-wavs/output-071.wav'
+file 3-wavs/output-072.wav'
+file 3-wavs/output-073.wav'
+file 3-wavs/output-074.wav'
+file 3-wavs/output-075.wav'
+file 3-wavs/output-076.wav'
+file 3-wavs/output-077.wav'
+file 3-wavs/output-078.wav'
+file 3-wavs/output-079.wav'
+file 3-wavs/output-080.wav'
+file 3-wavs/output-081.wav'
+file 3-wavs/output-082.wav'
+file 3-wavs/output-083.wav'
+file 3-wavs/output-084.wav'
+file 3-wavs/output-085.wav'
+file 3-wavs/output-086.wav'
+file 3-wavs/output-087.wav'
+file 3-wavs/output-088.wav'
+file 3-wavs/output-089.wav'
+file 3-wavs/output-090.wav'
+file 3-wavs/output-091.wav'
+file 3-wavs/output-092.wav'
+file 3-wavs/output-093.wav'
+file 3-wavs/output-094.wav'
+file 3-wavs/output-095.wav'
+file 3-wavs/output-096.wav'
+file 3-wavs/output-097.wav'
+file 3-wavs/output-098.wav'
+file 3-wavs/output-099.wav'
+file 3-wavs/output-100.wav'
+file 3-wavs/output-101.wav'
+file 3-wavs/output-102.wav'
+file 3-wavs/output-103.wav'
+file 3-wavs/output-104.wav'
+file 3-wavs/output-105.wav'
+file 3-wavs/output-106.wav'
+file 3-wavs/output-107.wav'
+file 3-wavs/output-108.wav'
+file 3-wavs/output-109.wav'
+file 3-wavs/output-110.wav'
+file 3-wavs/output-111.wav'
+file 3-wavs/output-112.wav'
+file 3-wavs/output-113.wav'
+file 3-wavs/output-114.wav'
+file 3-wavs/output-115.wav'
+file 3-wavs/output-116.wav'
+file 3-wavs/output-117.wav'
+file 3-wavs/output-118.wav'
+file 3-wavs/output-119.wav'
+file 3-wavs/output-120.wav'
+file 3-wavs/output-121.wav'
+file 3-wavs/output-122.wav'
+file 3-wavs/output-123.wav'
+file 3-wavs/output-124.wav'
+file 3-wavs/output-125.wav'
+file 3-wavs/output-126.wav'
+file 3-wavs/output-127.wav'
+file 3-wavs/output-128.wav'
+file 3-wavs/output-129.wav'
+file 3-wavs/output-130.wav'
+file 3-wavs/output-131.wav'
+file 3-wavs/output-132.wav'
+file 3-wavs/output-133.wav'
+file 3-wavs/output-134.wav'
+file 3-wavs/output-135.wav'
+file 3-wavs/output-136.wav'
+file 3-wavs/output-137.wav'
+file 3-wavs/output-138.wav'
+file 3-wavs/output-139.wav'
+file 3-wavs/output-140.wav'
+file 3-wavs/output-141.wav'
+file 3-wavs/output-142.wav'
+file 3-wavs/output-143.wav'
+file 3-wavs/output-144.wav'
+file 3-wavs/output-145.wav'
+file 3-wavs/output-146.wav'
+file 3-wavs/output-147.wav'
+file 3-wavs/output-148.wav'
+file 3-wavs/output-149.wav'
+file 3-wavs/output-150.wav'
+file 3-wavs/output-151.wav'
+file 3-wavs/output-152.wav'
+file 3-wavs/output-153.wav'
+file 3-wavs/output-154.wav'
+file 3-wavs/output-155.wav'
+file 3-wavs/output-156.wav'

process.sh

@@ -4,8 +4,22 @@ series=$1
 year=$2
 real=$3
 
+check_and_exit() {
+    # Check the exit code
+    if [ $? -ne 0 ]; then
+        echo "Error: Command failed"
+        exit 1  # Terminate the script with a non-zero exit code
+    fi
+}
+
 python3 speak.py $series $year $real
+check_and_exit()
+
+rm -f $series/$year/3-wavs/$series-$year.wav
+rm -f $series/$year/$series-$year.wav
 python3 ffmpeg_inputs.py $series/$year "$series-$year"
+
 # ffmpeg -f concat -safe 0 -i $series/$year/inputs-$series-$year.txt -c copy $series/$year/$series-$year.wav
 ffmpeg -i $series/$year/$series-$year.wav $series/$year/$series-$year.mp3
-rm $series/$year/$series-$year.wav
+
+rm -f $series/$year/$series-$year.wav

speak.py

@@ -50,7 +50,8 @@ with open(fn) as f:
         elif (table_flag):
             if (not table_header_flag):
                 table_header_flag = True
-                table_headers = lines[i].strip().split(" & ")
+                table_headers = list(map(lambda x: x.replace(".", ""), lines[i].strip().split(" & ")))
+                lines[i] = ""
                 print(table_headers)
             elif (lines[i].strip() == "[/TABLE]"):
                 table_flag = False
@@ -59,11 +60,17 @@ with open(fn) as f:
             else:
                 # Process normal table row
                 table_row = lines[i].strip().split(" ")
+
+                if (len(table_row) != len(table_headers)):
+                    print((f"Line {i}: Malformed table, table body row had {len(table_row)} fields, "
+                           f"but table header row had {len(table_headers)} fields."))
+                    exit(1)
+
                 processed_row = [
                     f"{header} {value}"
                     for (header, value) in zip(table_headers, table_row)
                 ]
-                lines[i] = ", ".join(processed_row) + " ;"
+                lines[i] = "; ".join(processed_row) + " ;\n"
                 print(lines[i])
 
         for (orig,subst) in SUBSTITUTIONS.items():