What's going on?

Warren Buffett�s Berkshire Hathaway reported shrug-worthy results over the weekend.

What does this mean?

Buffett�s unrivaled reputation wasn�t born out of thin air: the value of his company�s stock has, on average, increased by twice as much as the US stock market every year for over 50 years. But Berkshire�s latest report hardly screamed success: the conglomerate�s all-important insurance and railroad businesses helped bring home record full-year operating earnings, sure, but hefty costs and slimming demand meant it ended the year in a slump. Berkshire�s $300-billion stock portfolio dropped off too. Now, Buffett often calls those slides meaningless given the firm�s long-term view, but the blip still dragged the firm to a nearly $23 billion loss last year.

Why should I care?

For markets: Money to burn.
Buffett�s annual letter ��a surprisingly short one this time round � pushed one big point of contention: stock buybacks. See, there�s a new tax on buybacks in the US, with some arguing the cash would be better spent on workers� pay or investing in the firm�s future. Buffett, though, defended their merits, saying they�re a smart way to use extra cash, especially when bought for fair prices. (Remember, buybacks reduce the number of shares available and give existing shareholders a bigger stake in the business and any profit.) Berkshire�s been a big fan of that tactic lately: with fewer promising acquisitions to spend money on, the firm bought back almost $8 billion of its shares last year.

The bigger picture: Gotta have faith.
Buffett sold more than $16 billion of stocks last quarter, dumping firms like TSMC, US Bancorp, and Bank of New York Mellon. That pulled its cash pile up to nearly $130 billion by the end of last year � but Buffett�s not completely pessimistic about markets. The Oracle of Omaha reminded investors to have faith in the US, saying there�s no reason to make a long-term bet against the world�s biggest economy.