Even Warren Buffett Has 'Issues'

Aren’t we all having issues with the current “Recession”. Now Warren Buffett and Berkshire Hathaway Inc (BRK.A.) are having theirs. Berkshire Hathaway has had big losses in its stock portfolio with losses in Wells Fargo & Co. (WFC) and American Express Co. (AXP). Besides stock losses the next problem is the rating of the company itself. The irony is that one of his companies ( Moody's) is the one lowering the rating on Berkshire Hathaway.

Rating companies came under sharp criticism for issuing high ratings prior to the Mortgage meltdown. Too many of the CLOs, CMOs and CDOs ( collateral debt obligations, collateral mortgage obligations, collateral debt obligations) that were given high ratings have been proven to virtually worthless.

Moody’s yesterday lowered the long-term issuer rating of Berkshire to Aa2 from its top Aaa rating.The problem with downgrades is that they can impact borrowing costs, and hurt its ability to charge maximum rates for insurance policies written by its subsidiaries.

Surely Buffett is a long term investor, the true Buy and Hold. Time will tell how all of this sorts out. Has Buffett lost his magic touch?

Comments

[User 305589:]

useless article, sorry to say, but it could have been as well posted on any crap message board. content is ZERO

Apr 09 11:26 AM

[weiwentg:]

The comment above is a little harsh, but the fact is that none of the downgrades of Berkshire have anything to do with Buffett's investing acumen. He's still good. In Berkshire, he's put together an insurance conglomerate that is still going strong. I don't think his equity investments did markedly worse than the S&P and they're only a portion of Berkshire's holdings.

Apr 09 12:08 PM

[No Eye Deer:]

This is a serious downturn. To expect even good companies and investments not to be affected is a bit unrealistic.


Lost his magic touch.

Ask me in ten years.

Apr 09 12:43 PM

[William Cowie:]

BRK's "issues" stem from valuations which will change (again). Despite admitted blunders, his LONG TERM return is still over 20% per year. The companies he invested in are solid and, as the economy recovers, their earnings will rise and they will grow. Again. People like this seem to equate Buffett's IQ with the Dow.

So, when stock prices go up again, as they will do sooner or later, Buffett will suddenly become brilliant. Again.

Apr 09 12:52 PM

[Gedankonomist:]

Buffett is overrated. If he had any common sense he would have dumped all his stock and bought gold/silver in 2002. Instead of being where he is now, his so-called "hedge fund" would be 3 times it's worth as in 2002.

Apr 10 03:28 PM

[dybydx:]

Gedankonomist,

Most investors believe in "buy low, sell high", a true value investor buy low and never sell. In the pure value buying principle, the underlying investment will continue to generate positive cashflow (and thus pay dividend) indefinitely.

In essense, a value investor buy stock like you would buy a perpetuity bond. You dont ever expect the principal to be paid back. However, you expect strong periodic payouts.

Those that try to "buy low, SELL HIGH" or "time the market" are just speculators and arbitrageurs.

Apr 13 03:03 PM