Warren Buffett, America's most celebrated investor, has used his annual letter to shareholders to scold investors swept up by the fairytale of the internet and technology bubble.

Mr Buffett, whose Berkshire Hathaway insurance and investment company has often won high returns from his focus on old-fashioned value, did not spare the feelings of investors suffering from the fall of technology stocks.

"They know that overstaying the festivities . . . will eventually bring on pumpkins and mice," Mr Buffett wrote, comparing them with Cinderella. "But they nevertheless hate to miss a single minute of what is one helluva party."

He also sounded a rallying cry for the old economy: "I will tell you now that we have embraced the 21st century by entering such cutting edge industries as brick, carpet, insulation and paint," Mr Buffett wrote.

"Try to control your enthusiasm." In the letter at the weekend that accompanied his insurance and investment company's earnings, he said: "Nothing sedates rationality like large doses of effortless money."

The 70-year-old investing guru could be forgiven for lecturing. After suffering a difficult 1999, Mr Buffett rebounded smartly in 2000.

Berkshire's net profits rose 113 per cent to $3.3bn while earnings per share more than doubled from $1,025 to $2,185. The results marked not only a turnaround for Mr Buffett, but the symbolic end to speculative hysteria over Internet and technology shares.

When Mr Buffett issued his letter a year ago, Berkshire's stock had slumped to a one-year low of $41,800 as investors pushed aside the old-fashioned value investments that Mr Buffett made famous in favour of flashy internet startups and dot.coms.

Since then, the Nasdaq technology-based index has fallen by more than half from its high while Berkshire's stock has soared to $71,500 on the strength of investments in proven, old-economy companies.

In his most recent letter, Mr Buffett warned investors to expect modest returns from the stock market, stating that "the long-term prospect for equities in general is far from exciting".