The annual report of Berkshire Hathaway, Inc. offers some of the best business reading available. It is as plain and unadorned as any other report of such a large company. The content is everything.

Berkshire has averaged 21.1% annual gains from 1965-2007 compared to a 10.3% gain for the S&P 500 with dividends included. Even Warren Buffet acknowledges that such a return in the future is practically impossible given the size of the business. Berkshire consists of 76 operating companies, and is one of the largest employers in the state of Georgia.

Warren points out in the report that the stock market in the 20th Century grew from a Dow of 66 to 11,497. That huge gain represents 5.3% if compounded annually. To continue that same gain for our current century the Dow will have to rise to 2,000,000. So far we are less than 2,000 points toward that goal.

If you forecast a 10% growth (2% in dividends and 8% appreciation in equities) you are forecasting a Dow of 24,000,000 by 2100.

The message is clear- be resonable in your forecast of returns.

Berkshire (BRK.B) closed today at $4,364.50 per share.

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