GOODYRL

Anyone have an opinion and/or know if Monish still owns it? Thanks

http://www.bloomberg.com/apps/news?pid=20601103&sid=aVUWGn3Mqu58

March 12, 2009 Is Warren Buffett Crazy? Given the relentless barrage of bad news about the U.S. banking system and the near-constant calls for the government to nationalize the country's biggest banks, you couldn't be faulted for wondering if Warren Buffett had lost his mind when, in a three-hour appearance on CNBC Tuesday, he called this "a great time to be in banking," talked about the massive "earnings power" of banks like Wells Fargo, and said that the government actually doesn't need to supply most banks with "lots of capital." (Another explanation for Buffett's relatively upbeat forecast was that, in industry parlance, he was just "talking his book," since he has big stakes in banks like Wells Fargo and U.S. Bancorp.) But the truth is that the recent history of U.S. banking suggests there's a chance, at least, that Buffett was right. The key to understanding Buffett's less-than-apocalyptic take on the banks is the idea of the spread: the gap between the interest rate banks can charge for the loans they make and the interest rate they have to pay for the money they borrow -- from depositors or other lenders. When the Federal Reserve slashes interest rates, particularly when they slash them as aggressively as they have in the past year, spreads widen, so that every loan a bank issues becomes more profitable. And that's especially true today, because the risk aversion of investors and financial institutions has meant that the interest rates on loans have fallen less than they normally would have, given the steep decline in the fed funds rate. Buffett, for instance, said that in the fourth quarter of 2008, Wells Fargo's cost of funds -- how much it had to pay to borrow money -- was just 1.44 percent. Needless to say, the average interest rate it charged the people it was lending to was a lot higher than that. In fact, though it's hard to get exact data on this, it's possible that, as Buffett said, the spreads on loans have "never been wider." And when you combine that with the sheer number of loans these giant banks have on their books, you're talking about individual banks earning tens of billions of dollars on their own. Does that mean that the banks are fine? Not necessarily. The basic problem the banks face is that they need to recapitalize themselves. One way to do that is by taking their profits and, as it were, banking them. But the banks still have lots of old, bad assets on their books, and it's possible that, as many predict, the value of those assets will fall more than their earnings will rise. And if the economy gets significantly worse, the increase in bad loans will probably cancel out the effect of wider spreads. So why might most of the banks come out of this okay, without having the government nationalize them? One reason is that since most of these banks have slashed their dividends to pennies, every dollar they earn essentially goes to recapitalization, instead of going out the door to shareholders. And with the government looking over their shoulders, it's also likely that the banks are going to be running tighter ships, so their expenses may be down as well. That's why Buffett said on Tuesday: "I mean, the right prescription with most of the banks is just let them pay very little in the way of dividends and build up capital for awhile, and they will build up a lot of capital." The interesting thing about this prescription is that, in some ways, it's precisely how the U.S. got out of its last big banking crisis, which happened during the recession of 1990-1991. While it hasn't been talked about very much, during that recession most of the big moneycenter banks were, by today's standards, insolvent -- arguably more insolvent, in fact, than the big banks are today. They were not nationalized or put into receivership. Instead, after the Fed slashed interest rates, the banks hunkered down, cut back on risky loans, and allowed the wider spreads to work their magic, and over time earned their way out of insolvency. Today's crisis is different in some important respects (in the earlier crisis, banks were able to make easy profits by investing in government debt, while today the profits on such an investment would be quite small). And there are some banks today which may be carrying so many bad loans that even their increased earnings power won't save them. At the very least, though, history suggests that Buffett has not gone around the bend, and that it's a mistake to think that nationalization is the only plausible solution to our current banking crisis. http://www.newyorker.com/online/blogs/jamessurowiecki/2009/03/is-warren-buffe.html

Berkshire Hathaway's Derivative Play by: David Enke May 05, 2008 | about stocks: BRK.A / BRK.B David Enke In its recent first quarter statement, Berkshire Hathaway (BRK.A) released that it has bought derivatives on various stock indexes that were set to expire between 2019 and 2028. The indexes of interest for Berkshire include the FTSE, Euro Stoxx 50, Nikkei, and S&P 500. The derivative plays included multi-billion-dollar positions that involved selling puts on the indexes. The report has Berkshire with $4.5 billion in premiums and $4.6 billion in liabilities at the end of 2007. Apparently, Berkshire is not done and is continuing to increase its position, where premiums increased by $383 million after selling additional puts. This increases its derivative liabilities to $6.2 billion. In Q1 the positions went against Berkshire, causing it to record a loss of $1.2 billion. Given the long expiration dates, the losses appear to be mainly mark-to-market accounting losses, and not positions that have been closed. Each of the indexes that puts have been written against has been down for the year. Of interests is that since $4.5 billion was generated in premiums in 2007, the notational value of the assets (indexes) themselves could be estimated to be in the range of $70-$100 billion. While Berkshire's insurance business has surely used derivatives to hedge risk, this direct speculative move into derivatives is both surprising and understandable.. On the one hand, Buffett has repeatedly talked about derivatives being "financial weapons of mass destruction," and something that has contributed to the current problems we are experiencing in the markets. Granted, there is a big difference between writing naked puts and writing a CDO-squared, where counterparty risk is not only huge, but often unknown. Nonetheless, it is interesting. On the other hand, Berkshire's large insurance businesses have been providing a large float for Buffett to redeploy. The writing of naked puts will now provide extra income that can be put to work, albeit at a different level and degree of risk. Furthermore, the move signals that Buffett may feel that the market correction is over, and that the indexes are going up. If you believe this, as Buffett apparently does, then selling puts would seem more logical, and would also give you the cash you need to begin buying relatively cheap assets that you expect will be moving up from recent lows. Buffett has said as much, stating recently that he believes the worst of the credit crisis is over for Wall Street and the markets, even though individuals will still feel pressure. With the recent moves, Buffett is certainly putting his money where is mouth is, but is taking on more risk. Finally, in addition to market direction bias, this move may also be giving us clues about the Berkshire insurance business, and the level of float that Berkshire needs and expects to receive in the future. Time will only tell how all this plays out for Berkshire and its shareholders. Disclosure: Long BRK.B http://seekingalpha.com/article/75744-berkshire-hathaway-s-derivative-play

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&data-ipsquote-timestamp=20090303&id=9661169 Buffett's Berkshire cuts jobs broadly, more coming March 3, 2009 10:12 AM ET NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc reduced staffing last year in half of its nearly 80 operating units, and said more job cuts were coming in an economy unlikely to recover before 2010. Many of the deepest cuts came in businesses tied closely to the housing market. Clayton Homes Inc, a manufacturing housing unit, eliminated 2,290 jobs, or 16 percent, to end the year with 11,998 workers. Carpeting maker Shaw Industries shed 1,900 jobs, or 6.2 percent, to end with 28,974 workers. Other units tied to housing that cut jobs last year include brick maker Acme Building Brands, paint producer Benjamin Moore, recreational vehicle maker Forest River Inc, real estate brokerage HomeServices of America, and furniture makers Star Furniture and R.C. Willey Home Furnishings. Berkshire detailed the operating unit cuts in a Monday filing with the U.S. Securities and Exchange Commission. It said the units "will continue to take cost reduction actions in response to the current economic situation, including curtailing production, reducing capital expenditures, closing facilities and reducing employment to partially compensate for the declines in demand for goods and services." Buffett, who runs Berkshire and is one of the world's wealthiest people, normally stays out of day-to-day management at Berkshire's operating units, though he monitors their performance and regularly talks with executives. In his annual letter to Berkshire shareholders on February 28, Buffett said the economy will be "in shambles" through 2009 and perhaps beyond. "Most of the Berkshire businesses whose results are significantly affected by the economy earned below their potential last year, and that will be true in 2009," he wrote. Economists polled by Reuters last month on average expected the U.S. unemployment rate to rise to 9.1 percent before the recession ends, up from 7.6 percent in January. Some analysts fear the rate could reach double digits. Overall employment within Berkshire rose 5.7 percent last year to 246,083 workers, largely from the acquisition of the 18,000-person Marmon Holdings Inc, which makes industrial products. Excluding Marmon, staffing fell 2 percent. Six of Berkshire's 10 insurance businesses including the largest, auto insurer Geico Corp, also cut jobs in 2008. The Omaha, Nebraska, home office of Berkshire was spared job cuts in 2008. Staffing there was unchanged at 19. (Editing by Maureen Bavdek)

So did i make a mistake?

Shoulda coulda woulda (waited) the spread got even better at end of day.

I converted some got 5% more shares in B plus some cash. Thanks Granitepost for bringing to my attention :)

Warren Loses Midas Touch, it's almost like this guy copied from another writer who wrote similar story a few months ago. Won't they be surprised ! http://www.theaustralian.news.com.au/business/story/0,28124,25049808-5001942,00.html

LINK & copyright info: http://www.independent.co.uk/news/business/analysis-and-features/warren-buffet-the-secret-of-the-billionaires-success-1622649.html

There are at least 3 sides to every story and we have only heard the grandaughters. No health insurance, no cable? Wonder if the whole story has been told. Has/is Peter helping. Something just might be missing, what do you think??

http://freepdfhosting.com/ad22991dac.pdf