David Kirkpatrick

May 2, 2009

Oracle of Omaha still sees short-term bears

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 5:41 pm

From the report the annual Berkshire Hathaway meeting was a bit somber again this year. Operating profit fell another 12 percent over last year and Warren Buffett sees more short-term losses on the horizen.

From the link:

Berkshire’s stock has fallen 39 percent since December 2007, but Buffett said no stock buybacks are planned because Berkshire’s share price is not “demonstrably below” the company’s intrinsic value. Profit fell 62 percent last year.

Buffett offered a gloomy forecast for parts of the economy and Berkshire itself, saying some units are laying off workers as managers “look at the reality of the current situation.”

He also 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.”

November 7, 2008

Obama’s economic A-list

Obviously not all choices I’d make, but you have to admit it’s a murderer’s row of a lineup.

From the link:

President-Elect Barack Obama is signaling quick movement on the economy, with his advisers moments ago rolling out a list of economic bigs who will serve on his Transition Economic Advisory Board.

Obama and Joe Biden will meet with the group tomorrow and hold a press conference afterwards, Camp Obama announces.

The group includes a bunch of expected names. There’s Warren Buffett (who endorsed Obama) and Governor Jennifer Granholm, as well as some heavy-hitters from the Clinton universe, like Robert Rubin and Robert Reich.

Also serving: Harvard’s Lawrence Summers and former Federal Reserve chair Paul Volcker.

Obama’s press conference — which will take place tomorrow at 2:30 P.M. ET — is likely to be a media zoo, both because it will offer clues to Obama’s first moves on the economy and because it’s his first presser as President-Elect.

September 25, 2008

Buffett banks on Goldman Sachs Group

Didn’t blog earlier on Warren Buffett’s foray into the financial crisis morass, but this Wall Street Journal article puts the Berkshire Hathaway deal in the context of Paulson’s proposed $700B bailout.

This is the very first bit I’ve read anywhere that puts some real substance on the issues at hand and why Buffett’s deal is rational in a way the Bush 43 administration’s bailout is not as presently constructed.

From the link:

Berkshire Hathaway‘s investment in Goldman Sachs Group provides a template for how to get the financial system back on its feet.

The problem is, the Bush administration’s $700 billion bailout plan ignores some of the key lessons of Warren Buffett’s deal. Most notably: Capital, or lack of it, is at the heart of the crisis.

The proposed bailout only goes a certain distance in addressing that, so it mightn’t spark the sort of quick confidence rebound its proponents are hoping for. That explains Wednesday’s renewed stress in debt markets.

The realism of the Goldman/Buffett deal is instructive. The market was getting nervous about funding Goldman’s highly leveraged balance sheet. The bank had to adjust and raise expensive capital quickly.

First, Goldman agreed to become a bank-holding company Sunday, giving it greater access to Federal Reserve credit. Then it reduced leverage markedly by raising $10 billion in fresh capital from Berkshire and other investors. It did so even though it meant diluting shareholders by as much as 20%.

In contrast, the government’s bailout plan contains no explicit demands that banks raise capital. If Goldman needed to, others surely do.