BUFFETT’S LETTERS 1975

Such social inflation increased significantly both the propensity to sue and the possibility of collecting mammoth jury awards for events not previously considered statistically significant in the establishment of rates.

stock market fluctuations are of little importance to us—except as they may provide buying opportunities—but business performance is of major importance.

In 1975 the thirty largest banks in the United States earned an average of .5% on total assets. The Illinois National earned about four times that much.[2%] These same thirty largest banks carried down 7% of operating revenues to net income. Without counting any tax benefits from consolidation, Illinois National carried down 27%.

Gene Abegg opened the doors of the Illinois National Bank in 1931 with paid-in capital of $ 250,000. In 1932, its first full year of operation, it earned $ 8,782. No additional capital has been paid in, and we recommend reading its financial statements on pages 28-34 to see what a truly outstanding manager has built in 44 years at the helm.

The stamp business continues its precipitous decline with volume in the year ended February 28, 1976 amounting to only one-sixth that of the peak year ended February 28, 1970.

Overall[1965-1975], equity per share has compounded at an annual rate of slightly over 15%.

will produce a long term rate of return on equity capital exceeding that of American industry as a whole.