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Even The Wizard Of Omaha Isn’t Immune From The Downturn

by @ 12:14 pm on February 28, 2009. Filed under Business, Credit Crisis, Economics

Warren Buffett’s Berkshire Hathaway reports some disappointing results:

OMAHA, Neb. (AP) — Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK A) has reported a 62 percent drop in its 2008 net income because investment and derivative losses of nearly $7.5 billion weighed on the results.

Billionaire Buffett details his worst year leading Berkshire in a shareholder letter issued Saturday.

Berkshire reported $4.99 billion net income, or $3,224 per share, in 2008. That’s down from $13.21 billion, or $8,548, in 2007.

Buffett says the Omaha-based company’s book value — assets minus liabilities — declined 9.6 percent to $70,530 per share in 2008.

Berkshire’s book value declined only one other time under Buffett, and that was a 6.2 percent decline in 2001.

Perhaps that performance explains these moves by Buffet in recent months:

Struggling. I’m struggling this morning with some of the things that Warren Buffett is doing with his cash these days. I am struggling because he is selling America, selling Johnson & Johnson (NYSE: JNJ) (Cramer’s Take) and Procter & Gamble (NYSE: PG) (Cramer’s Take), selling ConocoPhillips (NYSE: COP) (Cramer’s Take) and selling U.S. Bancorp (NYSE: USB) (Cramer’s Take).

What’s more American than these stocks? These are not small trimmings. He sold more than half of his 52 million shares of Johnson & Johnson and he sold it at a 20-year low relative to its yield. That doesn’t sound like “Buy America.” That sounds like “Sell America.” Yet, on Oct. 16, 2008, with the Dow Jones Industrial Average at 9000 and the S&P 500 at 950, Buffett penned a now-famous op-ed submission to The New York Times saying it was time to buy America. Those who bought America that day are feeling … well, downright un-American. Or at least they’re feeling poorer.


No, these are sales by Buffett. The “out” Buffett always has is that he buys for the long term. I have no problem with that if you are really rich because you aren’t worrying about losing your house or putting food on the table or putting a kid through school. I have argued mightily that it isn’t a fair time frame for the hundreds of millions of Americans — lotsa people — who aren’t rich. However, as long as Buffett was buying and not selling, or as long as he was at least holding, you couldn’t knock him.

But now it turns out he’s putting a terminal value on something we thought we were to hold forever.

That’s from CNBC’s Jim Cramer, who also discusses Buffet’s moves here:

So, what’s Buffet’s game ?

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