Fast Money Recap - Has Buffett Lost His Touch? (11/25/08)

Recap of CNBC's Fast Money program, Tuesday November 25.

A Sensible Plan: ConcoPhilips (COP), ExxonMobil (XOM), Chevron (CVX), Freeport McMoRan (FCX), Southern Copper (BTU)

The Dow has been rallying for three straight days for the first time since August on news the Federal Reserve will buy up $100 billion of debt and $500 billion of mortgage securities from Fannie Mae and Freddie Mac. The central bank and the Treasury are devoting $200 billion toward auto, tuition and credit card loans which will be backed by the federal Small Business Administration. Most of the Fast Money group approved of the plan, but Karen Finerman thinks the amount of aid is too small and is skeptical that the government will actually follow through with the plan. Macke doesn’t think throwing money at the problem will hurt the dollar. Guy Adami is worried about hyperinflation but said action in COP, XOM and CVX indicate the market fundamentals are back in play, but Macke and Finerman don’t think that this can be determined based on three good days. Pete Najarian notes Freeport and Southern Copper have risen far and fast and should be sold.

Cisco (CSCO) Takes a Holiday

The Street is worried that Cisco’s cost-saving 5 day vacation from December 29th to January 2 indicates falling demand, but Finerman and Najarian are not so worried. Najarian thinks the stock has potential and Finerman,who owns Cisco shares, says it could go lower but she still likes the company.

Hewlett-Packard (HPQ) Lower than the Dow

Hewlett-Packard took a hint on worries about slowing sales of computers and printer ink, and is underperforming the rest of the Dow. Najarian recommended buying Research in Motion (RIMM) instead, because the stock is oversold.

Rubin not to Blame

Although the Fast Money group has had some harsh words lately about Former Treasury Secretary and Citigroup advisor Bob Rubin, Charlie Gasparino says Rubin is not to blame, but most of Citi’s woes lay at the feet of former CEO Chuck Prince. While Rubin was a key advisor, he gave parameters for the risks eventually taken by the CEO and he wasn’t involved in actual decisions.

Huge Rally on the Horizon: S&P 500 (SPX)

The Fast Money group discussed a Financial Times article by hedge fund manager and former Morgan Stanley strategist Barton Biggs in which he predicted a huge global bear market rally based on the amount of negativity that is priced in and the fact that the market is oversold. Zack Karabell thinks that even if the recession should continue for 18 months, the market is sufficiently oversold and would buy. Guy Adami agrees and says the market wants to go 1,000 points higher. However, Finerman is skeptical, noting the thousand point move in the Dow the past few days and more negativity to come. Jeff Macke would short the S&P 500 with a stop above 860.

Has Buffett Lost His Touch? Berkshire Hathaway (BRK.A)

Many people are worried about Warren Buffett, whose company Berkshire Hathaway could theoretically lose $37 billion on options that depend on where the four major indices, including the S&P 500 trade between 2019 and 2027. The company received $5 billion to issue the options as a kind of risk insurance for investors who want to limit their losses. T2 Partners founder Whitney Tilson thinks Buffett made a smart move with these options. "If the market goes up 3 to 4 percent a year on average over the next 13 years Buffett doesn't pay out a single dollar. And he got paid $4.8 billion." Even if Buffett has to make payments, Tilson thinks Berkshire can handle it. “Berkshire's operating businesses are weathering the downturn well and remain enormously profitable.” In fact, Tilson thinks it may be time to buy Berkshire which is down 50%.

Comments

[Crank Monkey:]

Buffett isn't young and hungry any more. He's a really smart guy, but he's got nothing to prove, and Berkshire is a big and unwieldy vehicle. It's also a black box in many respects, because you know the inputs and the outputs but you don't know what's happening inside it.

2008 Nov 26 10:08 AM

[specialp:]

Yeah rewind this article to 1999, and you could have probably published the same thing. In fact the same words were coming out. I am not saying warren is a god or something, but he has a cool head. If everyone thinks about it, it was clear in 2000 we were in a dot com bubble, and no that is not hindsight talking. I thought so too then, but everyone was caught up on "oh this time something is different" Same with the housing bubble. Now people think that something is different on the other side that the market will never come back, and buffett is dumb.

The fact is that fundamentals are fundamentals, and as he says "be fearful when others are greedy and be greedy when others are fearful" Sounds really simple and it is! If you sold bubbles and bought on dips, EVERY time you will end up making money. How do you know a bubble? Hmm when houses are up 300% and there wasnt some earthquake that swallowed 2/3rd of all homes in the USA? When 23 year old kid buys 6 homes with no income or money down?! IT is all obvious! The fact is people are emotional and stupid. If you can sit back and watch like he does, you can make money like he does.

If you read the 2002 berkshire letter to shareholders from warren he EXACTLY knew what could happen with derivitaves. It is uncanny. So a long time bear would not be buying now if we were doomed forever.

2008 Nov 26 11:34 AM

[Did U Think...:]

Buffet never invested through a depression. He thinks prosperity is unending and without bounds. He thinks we get a little glitch here and then off to the races again. I say the credit boom is now bust and it will not be coming back soon. I guess only one of us will end up being right but look for people to start making fun of Warren soon.

2008 Nov 28 02:51 AM

[bobbobwhite:]

All great fortunes are always at risk due to the chances taken that got the fortune makers their great fortunes in the first place; ask Turner, Icahn and Redstone about that sometime. It wouldn't take too many floods, tsunamis and earthquakes to put Warren's Berkshire billions at high risk, if it all happened in a close time frame due to a global warming weather incident, as his very heavy insurance and reinsurance holdings will confirm. Chances are it won't happen, but you never know.

Also, BRK shares are down about 33%, not 50%, from about $150k to about $100k/sh. Doesn't take many mistakes like this to lose cred so double check next time.

2008 Nov 28 11:11 AM

[User 303490:]

It was down 50%. Tilson was referring to a day at which BRK.A sold as low as $75,000 +/-.

2008 Dec 01 07:34 PM