02 March 2009

Would you trust this man?

According to the recent financial report from Warren Buffett's holding company, "
Berkshire Hathaway reported today that its net worth fell in 2008 by $11.5 billion, a decline reducing its per-share book value by 9.6%. That was Berkshire's worst result in the 44 years that Chairman Warren Buffett has run the company."

Is this the kind of financial performance we expect to see from one of the world's greatest financial minds? According to Buffett's own words, he made a “major mistake” in buying shares when oil and gas prices were near their peak. Worse, Buffett made a bone-headed maneuver in selling derivatives, betting that markets would recover, putting Bershire on the hook for up to $37 billion dollars. And this is the same guy who called exotic financial instruments weapons of mass destruction!

Warren's great trick was buying stocks at the beginning of one of the greatest bull markets in history. Unfortunately, it looks as if the skills that had served so well in past decades are leading him astray in the new world of economic depression, and the prospect for long-term deflation.

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