Buffett to Americans: Be optimistic

OMAHA - Billionaire Warren Buffett wants Americans to be optimistic about the country's future but wary about borrowing money and the games public companies play with profit numbers they report.

Buffett, 80, said in his annual letter to Berkshire Hathaway shareholders yesterday that he still believes America's best days are ahead.

"Commentators today often talk of 'great uncertainty.' But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001," Buffett wrote, referring to the days before the Pearl Harbor attack, a stock market crash and terrorist attacks. "No matter how serene today may be, tomorrow is always uncertain. Don't let that reality spook you."

He said a housing recovery will likely begin within the next year, which would help the economy and several Berkshire subsidiaries, including ones that make carpets and bricks.

The letter was full of good news for Berkshire investors because nearly all of its businesses, except the ones linked to housing, performed well, said Glenn Tongue, a managing partner at T2Partners investment firm.

"I think his tone in this letter was more optimistic than usual - both about the economy and the business," Tongue said.

Buffett also devoted part of his message to educating investors on key business principles. Buffett said the financial crisis of 2008 confirmed the dangers of investing with borrowed money because even a short absence of credit can ruin a company.

"When leverage works, it magnifies your gains. Your spouse thinks you're clever, and your neighbors get envious. But leverage is addictive," Buffett said. "Once having profited from its wonders, very few people retreat to more conservative practices."

Buffett urged investors not to focus on the net income figures companies report because they are easily manipulated through accounting tricks or by selling investments.

He said that regardless of Berkshire's performance, it could easily and legally "cause net income in any given period to be almost any number we would like."