Buffett Down, But Not for the Count

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Includes: BRK.A, BRK.B
by: Craig Brown

Moody's - a company whose parent is 20% owned by Berkshire Hathaway (NYSE:BRK.A), which is virtually a controlling interest - has now downgraded Berkshire, not one but two notches. Fitch took it down a notch last month and S&P has it in their sights. This shows no one is immune - well almost no one.

I just like the irony that a company in which Buffett has a significant stake downgraded his company two notches. I do not view this as a run for the exits for Berkshire. It too planned for this and will do well. Buffet simply has certain stocks he will not sell so he is having to share a bit of their pain. But he is nonetheless going to do very well, I think, on picking up scraps during this downturn. Not time to count him out.

Here is a Surprise!

Bloomberg summarized the minutes of the Fed March meeting quite nicely

Federal Reserve officials feared the U.S. economy might fall into a self-reinforcing cycle of rising unemployment and slumping business and consumer spending, making credit tighter in a weak financial system, minutes of the Federal Reserve’s March meeting show.

Mind you, this meeting was less than a month ago. I must admit I have been suffering under the same fear for several months and still am. I am a bit more optimistic at the moment - but just a bit. We will see. Nonetheless, for the Fed to have minutes that are this publicly negative is rare, very rare.

Let me add my own personal surprise to the mix. I have continued to call things as I see them and as I have said pretty much daily I do not see us at the bottom yet. I, on the other hand, do not see us significantly off the bottom but still not there yet. It is too soon to party, in other words. As the markets climbed at nearly a record pace in March and have not done too badly in April, I expected fewer people to pay attention to me. That has not happened. At the end of the day, however, I am either right or wrong.

Buiter on another Warpath

I will not even attempt to summarize this for you as it is late and I am tired. Buiter is a doom- and - gloomer probably worse than me. He now raises the risk of the U.S. government or the U.K. government defaulting on debt. To me, and even Buiter, not likely, but it is a possibility to consider. If our government gets too crazy on its spending spree (incurring debt to fix a problem caused by debt) this could be an issue.

More Real Estate Pain to Come - Especially on the CRE Front!

I reported last week on how prime mortgage delinquencies are now outnumbering subprime by number. This is a serious stat you need to understand as it represents very serious mortgage dollars potentially going into default and impacting the toxic assets we seem so keen to buy. But just as residential real estate seems close to a bottom, commercial takes off in losses big time. Not a surprise, but it is the next phase of this real estate downturn. On every front CRE seems to be sucking wind.

Unemployment Stats - What to Follow

The government says unemployment is now 8.5%, a very high figure by historical standards, and most projections I have read predict us peaking over 10%. That is the "official" rate. This rate ignores a lot of people ready, willing and able to work. A good argument exists for using a different measure, U-6, to measure unemployment. I never expect the government to do this, but it is a consideration in judging unemployment. U-6 by the way, shows unemployment over 15%. Somewhere in between 8.5% and 15% is probably the truth but the reality is that government stats are under shooting. Big surprise!

Disclosures: None.