When the Oracle of Omaha Speaks . . .
By Larry Doyle on March 2, 2009 at 7:30 AM in American Consumers, Banking Institutions, Commerce, Current Affairs, Deficit, Economic Stimulus, Economy, Employment, Equity Markets, Fannie Mae, Freddie Mac, Global Finance, Housing & Housing Crisis, Sense on Cents (Larry Doyle blog), Unemployment, Wall Street
Warren Buffett’s annual letter to shareholders is always a highly anticipated event by market participants. Given the fact that Berkshire is effectively a diversified holdings company, Buffett has a unique perspective into a wide array of businesses. He also has the wisdom of investing over many years and through many challenging markets.
Well, if misery loves company, it has a solid partner in the person of Warren Buffett because 2008 was Berkshire Hathaway’s worst year ever. In reviewing Buffett’s letter, allow me to offer some highlights. For those who have an even passing interest in the markets and investing, reading this letter is akin to attending an opera by Pavarotti.
I beg your indulgence as I attempt to be the opening act and provide an overview of the “Oracle of Omaha’s” thoughts on the markets and economy:
1. Berkshire’s 4th quarter 2008 generated net income of $117 million, a mere 96% decline vs 2007!!
2. The results suffered primarily due to significant exposure to insurance companies, Coca-Cola, and American Express.
3. The stock, down 32% for all of 2008, marginally outperformed the major indices. The stock is down 19% for 2009, in line with the market.
4. In regard to the economy, Buffett forecasts it will be in a shambles throughout 2009 — and for that matter probably well beyond.
5. “The U.S. Treasury bubble of late 2008 may be regarded as almost equally extraordinary” to the internet bubble of the 1990’s and the housing bubble of the 2000’s.”
6. He is humble enough to highlight some investment mistakes made in Conoco Phillips and Irish banks.
7. Buffett repeats his railing on derivatives as too complex so that auditors can’t audit and regulators can’t regulate. He specifically calls out the Office of Federal Housing Enterprise Oversight for its failure to properly regulate Freddie Mac and Fannie Mae.
I do know at one point that Berkshire held a major stake in at least one, if not both, of these agencies as he highlighted them as the closest thing to a monopoly in American business. I am gathering he liquidated those holdings or otherwise the press would have made more of it.
8. Buffett also points out the impending problems in municipal finance with major concerns on the funding of pension obligations by municipalities. In speaking with a professional in this space, he highlighted the exact same point. Municipalities will have to pay higher rates to borrow money and municipal insurers will be hit with increased charges.
Read all of what the oracle has to say along with a whole host of other info as Berkshire Hathaway Reports Worst Year Ever.
LD
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Thanks, LD. I heard about the letter. I’m honkered down–no debt. I know we’ll come out the other side. I just wonder what it’ll look like. Until the greed, lust for power, dishonesty and maybe criminality is flushed out we may survive this but will not thrive.
May be Danny Boyle will make a movie called “Capitalist Pig M/Billionaires” on the excesses, the greed, the deception and the criminal..
Small wonder the US now finds itself bailing out banks and insurance corps, and doing nothing about credit card loansharking.
I agree. Most Americans seem to believe Uncle Sam is Santa Claus. The responsibility for this problem is shared among all of us. It is easy to blame greedy people on Wall Street, but the same kind of mentality is what keeps people watching shows like “Just Make a Deal” and Oprah’s “favorites” giveaway shows. It isn’t unrelated that people’s houses are filled with unused crap they have bought on endless trips to WalMart and the mall and have paid for with credit cards; or that people felt they were “entitled” to a house even though they couldn’t afford one.
We are a country of children with the childish sense that we are entitled to have our every need gratified immediately and that being entertained it the highest goal in life. Pain and discomfort are to be avoided at all costs. We pay entertainers more than teachers, so of course kids don’t feel they need to stay in school to become educated–that’s boring and work.
Those are the values we have instilled. We even went through an election that proved celebrity trumps the need to question authority or to search for the truth. So, it follows that this is not a problem that can be fixed by the government, because until most Americans realize they are the government and the source of our problems no amount of bailout money is ever going to be enough….Time to grow up, take responsibility and make a few sacrifices for the good of the country….
ACPD …bravo. Thank you Larry you are speaking truth, unlike our MSM that wants to investigate how Michelle keeps her arms tone(probably from sweeping our money into large toilets).and how Obama likes Coke more than Pepsi(both will kill you).
(facetious alert)We shouldn’t worry about all this. Apparently the USA has won the lottery! They just gave AIG another 30 billion. Must have needed more spa treatments. Those executives have worked so hard at loosing money. Obama is going to sign another bill for 410 billion with 1,000’s of pet projects! Plus, they’re working very hard on setting up yet another bill with 700 billion more precious tax dollars to spend. Woohoo we’re rich!
American’s can’t complain though, so we should bend over and just take it. We’re doing it to ourselves. Maybe, maybe 50,000 people out of 300 million show up at the tea parties? All spread out, 100 here. 1,000 there. All Republicans.
Those tea parties are for people from all parties that want the government to stop all this wasteful spending. Those darn Republicans, how dare they think we should be standing together as our forefathers did. Don’t they know we can’t stand together as Americans first and foremost? Democrats and Republicans hate each other. No, it’s much more important that we define ourselves as a Democrat or a Republican first. Long before we define ourselves as Americans! Yes, I can see how that would give the government cause for concern.
Thank you for all you put together for us.
If Buffet is worried, I am terrified!
Larry, can I ask a question? A friend is stockpiling quarters and 50 cent pieces. I have two questions:
1. Is hording cash a reasonable recation to what is going on? Ot is it stupid?
2. If one does want cash on hand, it is better to have it in metal than in paper bills?
Trying to figure this one out for myself.
Tricia,
While I do think it is vey prudent to work toward minimizing expenses I do not believe anybody needs to harde hard currency or coins at this juncture.
If youa re concerned about savings at institutions that you believe are troubled:
1. move the cash to perhaps another bank or credit union
2. make sure your savings are below the FDIC limit…
I knwo these are trying times but do not make imprudent moves based on irrational judgments.
Thank you LD. Yes, I was surprised the Corp Media picked up and mentioned one blurb as I heard on Headline News this AM.
…Buffet blames reckless lending for this situation…….WOW….where was the honesty BEFORE the elction when John McCain was saying this and his solutions. Buffet stayed silent.
I won’t have slipless night because Buffets worry. He should ask Obama to bail him out. because he was ” his” men. One thing I can’t understand. Nobody is standing-up against the credit card and loansharks. We should stop paying the bills of those credit card companies who are worst then the “MAFFIA”, ever is or was.
Buffet supported BO during the campaign, so he needed to not tell the American people that truth until now.
If you want to read an excellent, well written book, “Snowball” Buffet’s authorized biography is it. I’m more than halfway through it’s 800 pages and I can’t wait to get back to it.
Yes, Buffet is a liberal and has been since his youth. What is interesting is that his father was a four term conservative congressman during WW2. Buffet didn’t change parties until his father’s death out of respect. It also said he was always fascinated by politicians who were like “movie stars” with charisma.