In the 1990's and early 2000's First Union for instance was getting a 25% plus return on equity and it basically headed higher for years and years. So that meant great returns...right?

Eddie Crutchfield (klutzfield we labeled him) was the cigarette smoking CEO who said, "With the accounting we use we can pay 5 times book for community banks and make it work out." That was because they flushed equity, past and future costs too, with each acquisition.

I would caution anyone ever usinging returns on equity of any sort to understand this simply statistic is often meaningless. It is meaningless for multitudes of reasons, buybacks can flush equity fast when the stock is selling well above book for any number of reason, logical or not; write-downs of assets too can run up returns on equity.

Finally if you are a business like Berkshire and much of your business value is equities that don't pay much out in dividends, then your return on equity is going to be mostly an illogical valuation point.

First Union, the ever progressing return on equity bank of the late 1990's early 2000's, had stagnant book value. Wonder why?