Warren Buffett acknowledged on Saturday that his Berkshire Hathaway Inc would probably lose money on some of the derivatives contracts that have prompted some to speculate that the world’s most famous investor has lost his touch.
At Berkshire’s annual shareholder meeting, Buffett offered a gloomy forecast for parts of the US economy and Berkshire itself, though he said massive federal efforts to stimulate activity could pay off at a possible cost of higher inflation.
“It has been a very extraordinary year,” Buffett said. “When the American public pulls back the way they have, the government does need to step in ... It is the right thing to do, but it won’t be a free ride.”
PHOTO: BLOOMBERG
The meeting attracted a record 35,000 people to the Qwest Center in downtown Omaha to see the world’s second-richest person, often considered the world’s greatest investor.
But it had a decidedly more serious and somber tone from years past as many investors expressed worries about the economy, Berkshire’s investments, and how long the 78-year-old Buffett plans to stay on the job.
Buffett said housing prices have yet to stabilize broadly, that retailers may be under pressure for a “considerable period of time,” and that he would not buy most US newspaper companies “at any price.”
He also said that in insurance, which comprises about half of Berkshire’s operations, the earnings power “was not as good last year as normal” and “won’t be as good this year.”
Buffett also said the four candidates to replace him as Berkshire’s chief investment officer failed to outperform the Standard & Poor’s 500 last year, but remained confident they could perform well over time. Berkshire still has three internal candidates to replace Buffett as chief executive.
Berkshire’s stock has fallen 39 percent since December 2007, and profit last year fell 62 percent from a year earlier. Buffett said he would not buy back Berkshire stock now, because its share price was not “demonstrably below” the company’s intrinsic value.
Buffett had transformed Berkshire since 1965 from a failing textile maker into a conglomerate with close to 80 businesses that sell such things as Geico car insurance, paint, ice cream and underwear. It also has tens of billions of dollars of investments.
Much of the worry about Berkshire has focused on Buffett’s use of derivatives in making long-term bets on the direction of stocks and junk bonds, and which have so far resulted in billions of dollars of paper losses.
While Buffett still expects the contracts tied to equity stock indexes to make money, he said “we have run into far more bankruptcies in the last year than is normal.”
He said he now expects the contracts tied to credit defaults will show a loss before investment income and perhaps after as well.
Buffett still distinguishes his derivatives from others such as credit default swaps, given that he collects billions of dollars of premiums upfront to invest and posts little collateral.
He called other derivatives “a danger to the system. There is no question about that.”
The more serious mood extended to the traditional movie made by Buffett’s daughter Susie, which dispensed with its usual humorous cartoon, though it showed Buffett attempting to teach Tiger Woods how to improve his golf game.
Buffett expressed confidence in Wells Fargo & Co, one of Berkshire’s biggest investments, saying it has “by far the best competitive position” of any large US bank.
DETERRENCE: With 1,000 indigenous Hsiung Feng II and III missiles and 400 Harpoon missiles, the nation would boast the highest anti-ship missile density in the world With Taiwan wrapping up mass production of Hsiung Feng II and III missiles by December and an influx of Harpoon missiles from the US, Taiwan would have the highest density of anti-ship missiles in the world, a source said yesterday. Taiwan is to wrap up mass production of the indigenous anti-ship missiles by the end of year, as the Chungshan Institute of Science and Technology has been meeting production targets ahead of schedule, a defense official with knowledge of the matter said. Combined with the 400 Harpoon anti-ship missiles Taiwan expects to receive from the US by 2028, the nation would have
North Korea yesterday fired about 10 ballistic missiles to the sea toward Japan, the South Korean Joint Chiefs of Staff (JCS) said, days after Pyongyang warned of “terrible consequences” over ongoing South Korea-US military drills. Pyongyang recently dashed hopes of a diplomatic thaw with Seoul, Washington’s security ally, describing its latest peace efforts as a “clumsy, deceptive farce.” Seoul’s military detected “around 10 ballistic missiles launched from the Sunan area in North Korea toward the East Sea [Sea of Japan] at around 1:20pm,” JCS said in a statement, referring to South Korea’s name for the body of water. The missiles
North Korea tested nuclear-capable rocket launchers, state media reported yesterday, a day after Seoul detected the launch of about 10 ballistic missiles. The test comes after South Korean and US forces launched their springtime military drills, due to run until Thursday. North Korean leader Kim Jong-un on Saturday oversaw the testing of the multiple rocket launcher system (MRLS), the Korean Central News Agency (KCNA) said. The test involved 12 600mm-caliber ultra-precision multiple rocket launchers and two artillery companies, it said. Kim said the drill gave Pyongyang’s enemies, within the 420km striking range, a sense of “uneasiness” and “a deep understanding
‘UNWAVERING FRIENDSHIP’: A representative of a Japanese group that co-organized a memorial, said he hopes Japanese never forget Taiwan’s kindness President William Lai (賴清德) yesterday marked the 15th anniversary of the Tohoku earthquake and tsunami, urging continued cooperation between Taiwan and Japan on disaster prevention and humanitarian assistance. Lai wrote on social media that Taiwan and Japan have always helped each other in the aftermath of major disasters. The magnitude 9 earthquake struck northeastern Japan on March 11, 2011, triggering a massive tsunami that claimed more than 19,000 lives, according to data from Japanese authorities. Following the disaster, Taiwan donated more than US$240 million in aid, making it one of the largest contributors of financial assistance to Japan. In addition to cash donations and
RSS