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Buffett: 'I Did Some Dumb Things' in 2008

Warren E. Buffett, chairman of Berkshire Hathaway investment fund and holding company and possibly still the world's richest person, released his annual shareholders letter moments ago, in which he says, "during 2008 I did some dumb things in investments."

"I made at least one major mistake of commission and several lesser ones that also hurt," he said. "Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action."

That "major mistake," Buffett writes, was the purchase of millions of shares of ConocoPhillips oil company when oil prices were near their peak.

"I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price. But so far I have been dead wrong," Buffet writes. "Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars."

Buffett writes that "the economy will be in shambles in 2009 -- and, for that matter, probably well beyond."

Nevertheless, he writes, "America's best days lie ahead."

In explaining the crisis, he writes:

"By the fourth quarter, the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country," Buffett writes. "A freefall in business activity ensued, accelerating at a pace that I have never before witnessed."

"This led to a dysfunctional credit market that in important respects soon turned non-functional," Buffett writes. "The watchword throughout the country became the creed I saw on restaurant walls when I was young: “ 'In God we trust; all others pay cash.' ”

You can read the entire letter here.

The release of Buffett's letter, which often combines folksiness and wit with surprising candor, has been more highly anticipated this year than most, as investors have been waiting to see how Buffett would explain the steep drop in his previously gold-plated stock.

Shares of Berkshire Hathaway closed yesterday at $78,600. Yes, it's a ridiculously high number, but it's down nearly 45 percent compared to this time last year, performing only a little better than the S&P 500.

Earlier this week, shares of Berkshire Hathaway hit a five-and-a-half-year low.

Last year, Forbes magazine ranked Buffett as the world's richest person. It will be interesting to see if he retains the title this year; it's hard to imagine anyone who had a boffo 2008.

He has been hit especially hard by his investments in the financial sector, which included a $5 billion buy-in to Goldman Sachs last year.

Despite Buffett's downturn, his moves are still closely monitored by investors large and small, especially those who take part in what is colloquially called "whale watching," or tracking big-money investors.

Last year, Buffett sold shares of Lowes, Home Depot, Bank of America and CarMax.

Berkshire Hathaway owns Geico and Dairy Queen, is the top shareholder of Coca-Cola and Burlington Northern Santa Fe railroad, and pitched in $4.4 billion to the Mars-Wrigley tie-up last year.

Buffett is a director of The Washington Post Co. and the largest non-family shareholder.

-- Frank Ahrens

By Frank Ahrens  |  February 28, 2009; 8:49 AM ET
Categories:  The Ticker  | Tags: Coca-Cola, Warren Buffett, Washington Post  
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Comments

Yes Warren did do some dumb things in 2008 not the least of which was his support for the Obama financial plan which will result in same way as Buffet 2008 investments

Posted by: fuelman1 | February 28, 2009 10:58 AM | Report abuse

Buffett should blame Greenspan in his letter, old man scolding old man for everything. Buffett's mistake resulted from Greenspan's big mistake. Buffett was enjoying his buffet in stocks while Greenspan exuberantly, madly raised the interest rates 17 times in less than 2 years; 17 nails to the coffin of US economy; Greeenspan was squeezing everyone's balls but let no one have anytime time to breathe. He just squeezed without regulating. Interest rate could be dropped quickly to relax the markets but to raise it, Greenspan should have given people, the markets time to adjust and adopt. Who called him a maestro must be an idiot.
Anyway, for everyone to remember, Greenspan to Buffett is Redspan, and Buffett is no buffet nor guru.

Posted by: scooterlibre | February 28, 2009 11:17 AM | Report abuse

There was a day when people thought Greenspan was a genius. Now we have Buffet and Immelt crying the blues for the administration. My, how conveeeenient. Most of the spending in the spending bill won't occur until just before the next presidential campaign season, just in time for these visible expenditures to be seen by the general public. Gotta hand it to the Obama oligarchy, they're true genius. Things will be bad enough for as long as it takes to satisfy the Acorn lovers.

Posted by: nobama7 | February 28, 2009 11:28 AM | Report abuse

I heard Buffett on Charlie Rose when the bottom fell out on the economy and he gave an unqualified endorsement of Hank Paulson.

I wonder if he's changed his mind on that judgment.

Posted by: citykid | February 28, 2009 11:29 AM | Report abuse

I think PAT Paulson could do a better job.

Posted by: nobama7 | February 28, 2009 11:36 AM | Report abuse

The only way out of this morass is to expand the middle class. As many Americans as possible need high paying jobs they can count on being there for the long term. We have spent the last 30 years equalizing our standard of living with that of the third world through "free" trade. Is it any wonder that we hit a financial brick wall? Paying health care for employees isn't "free". Disposing of toxic waste responsibly isn't "free". Creating safe working environments for employees isn't "free". Yet it's the right thing to do and our laws should require this. But why should we make our companies compete against foreign concerns that have NONE of these costs? We must establish ethical trade standards for the production of goods and services which we allow to compete in the US market. Otherwise we are ensuring our own nation's defeat on the playing field of capitalism. This is the only path to long term expansion of the global middle class - and a red-hot expanding market for the US to export to. We can't sell much to sweatshop laborers in China who make 40 cents an hour and live in rat-infested dorms.

Posted by: JAS4 | February 28, 2009 11:50 AM | Report abuse

Buffet gave all his money away, so it's not like he's invested in any of this.

The credit markets froze up in August 2007. The Sept/Oct 2008 freeze-up was entirely predictable.

Posted by: blasmaic | February 28, 2009 12:01 PM | Report abuse

Basically Buffett did not have the unique privilege that he has, like no other common investor, which is to pick up the phone and call C.E.O's of companies and get the "inside: scoop on all that is going on with the companies he is considering investing in, or those that he is already invested in. Wouldn't you like to be able to have that luxury? He is a hypocrite for NOT admitting that he has a huge leg up on any other investor. Why does owning 5% matter? No shareholder should have any right to contact the C.E.O., unless all have the right. So without the foresight of these phone calls and Idaho meetings, with regad to the spiral of the economy, Buffet was found naked like all of us, and got his ASSets handed to him. Too bad the enormity of this recession has to happen to find some equality in the markets.

Posted by: gil10192003 | February 28, 2009 12:06 PM | Report abuse

quote from buffet, "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." (Nov. 2006)

but what have they won?

Posted by: disillisioned | February 28, 2009 12:19 PM | Report abuse

OBAMA IS KEEPING HIS PROMISE: HE IS A SOCIALIST

Obama's budget plan is unfair and it is redistribution of the wealth using tax code. At present the top 20% of taxpayers pay 80% of all taxes collected by the government. And 40% of households pay no income tax at all. Obama stated during the campaign, these 40% do pay to FICA tax like others and he is correct but they will collect higher rate of social security benefits during their retirement age. So Obama’s argument that they should also get more benefit now is not logical

Under Obama's budget plan the top 20% of the tax filers would pay 90% of all taxes, an increase by 10% and the number of families who owe no tax would climb to near 50% from the present 40%. In addition, Obama’s budget proposal include higher benefits to these 50% in terms of health care, student loan, and other tax credits, even though they do not pay tax at all.

If the country wants to excel in economic growth, incentives must be given to investors and not for consumers alone. Otherwise country should adapt a consumption tax rather than income tax.
Creation of another poor non- developed African nation or a European-style socialist nation or a failed communist nation in North American continent is bad for all including those Obama wants to help.

One thing is correct that Obama told the nation during the campaign that he will create a socialist society, if he gets elected and he is doing it. More than 52% of the high income earners supported Obama and they are facing the ax now!
Buffet says, he did a dump thing in 2009.
Is it supporting Obama?

Manixthoughts.blogspot.com

Posted by: madayilnair | February 28, 2009 12:20 PM | Report abuse

Here's the cold hard facts being CENSORED by WaPO .
Dem. , Independant or Repub you are being played for idiots

-------------------------------------------
"Recipe for Disaster: The Formula That Killed Wall Street"

{and the sovereign debt and central bank reserves of all of Americas' trading partners}


http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=4

"Li can't be blamed," says Gilkes of CreditSights. After all, he just invented the model. Instead, we should blame the bankers who misinterpreted it. And even then, the real danger was created not because any given trader adopted it but because every trader did. In financial markets, everybody doing the same thing is the classic recipe for a bubble and inevitable bust.

Nassim Nicholas Taleb, hedge fund manager and author of The Black Swan, is particularly harsh when it comes to the copula. "People got very excited about the Gaussian copula because of its mathematical elegance, but the thing never worked," he says. "Co-association between securities is not measurable using correlation," because past history can never prepare you for that one day when everything goes south. "Anything that relies on correlation is charlatanism."


Unless we address credit default swaps head on right now, the whole globe is going to be up for grabs in the blink of an eye.
http://www.guardian.co.uk/business/2009/feb/25/larry-elliott-depression-japan

What is to be Done With Credit Default Swaps? IRA's Chris Whalen @ AEI delivered on Monday Feb 23, 2008 CDS caused Citi, Bear, Merrill, AIG , Lehman etc. to fail
http://www.riskcenter.com/story.php?id=17904

Posted by: rtfanning | February 28, 2009 12:22 PM | Report abuse

Warren Buffet laughs

Warren Buffet laughs
because he has bought America cheap
He is a man who embraces his masks
Never showing us what is there
Your health co-pay goes up and Warren laughs
Your car insurance increases and Warren laughs
Movie ticket prices go up and Warren laughs
Airline fares increase and Warren laughs
Insidiousness comes in short/stout/off white
in this men's dept. always with a broad fake smile
Like your minister smiling
as he tells hermeneutic lies
Like your stockbroker smiling into the phone
as he touts another loser
Like your banker smiling gently
as he denies you a loan
Like your teacher smiling in pity
as you fail another test
Like the police smiling before the judge
as you await your fate
Warren Buffet laughs
He is a man who hides behind masks
because he has bought and sold losers
Dairy Queen, US Air, Disney, ABC,
Salomon, MickeyD's, GEICO and all the insurance companies
that with every 'loss' raise their premiums
Only to dump the cost always on us
Go ahead claim your hurricane loss in ‘Katrina’
He’ll probably tell you you’re not covered for flood damage
Ha…Ha…Ha…What about bond-fixing at Salomon or fraud at A.I.G.? Or those ‘Katrina’ victims left unpaid?
So what if hundreds of millions are squandered
Betting against the U.S. currency
Warren does what’s best for Warren
Yeah 9/11 was tragic the loss of life and all
allowing insurers and airlines and everyone to raise prices
to increase profit isn't that what it's all about?
And now ‘Warren’ tells us according to his accept his ‘metrics’
It is time to buy! Great now that Warren and his like
Are the only ones who have any money
And everyone tells Mr. Warren Buffet how brilliant he is
And Warren continues to laugh at us.


Posted by: ZyskandarAJaimot | February 28, 2009 12:26 PM | Report abuse

AHHHH!! Where would we be without yet ANOTHER corporatist warning us about socialism (madayilnair).

Have you corporatists, who vehemently support anti-competitive, entry-barrier building, collusion dependent, mega-corporations ever taken a close look at how dysfunctional your short-term attitude is? Give me a break with the "socialism" charge. ANYTHING beats the corporatism you espouse. BRING BACK COMPETITION.

Posted by: disillisioned | February 28, 2009 12:34 PM | Report abuse

Buffet should blame republicans for his investment losses. They caused everything to go down. Now, with obama in office, stocks will start going way up!! I'll be back in the market soon.

Posted by: Socialistic | February 28, 2009 1:14 PM | Report abuse

You were not alone Warren. Sadly, you were not alone.

Posted by: pgould1 | February 28, 2009 1:40 PM | Report abuse

Buffet apologizes! Just a decent human being.

Did these bank CEOs who brought us into this colossal mess apologize?

Posted by: lhao333 | February 28, 2009 1:50 PM | Report abuse

Buffet apologizes! Just a decent human being.

Did these bank CEOs who brought us into this colossal mess apologize?


Posted by: lhao333 | February 28, 2009 1:50 PM


No, and neither did the corrupt democrats who shielded the criminals who robbed and bankrupted Fannie and Freddie. Slugs like bendover Barney Frank, Countrywide Dodd, a host of black representatives, and the democrat leadership. Now these a holes are pontificating on how to correct the crisis they had a major role in causing.

Posted by: LarryG62 | February 28, 2009 2:05 PM | Report abuse

seems the republicans were in control when fannie and freddie headed south........where was the oversight? seems bush and his cronies managed our departments and agencies up until 6 weeks ago......where was the oversight? seems every deregulation bill passed was overwhelmingly supported by republicans....intentions of NO oversight. are there corporatist dems? some. but it's not their party platform to not providse oversight. it is STILL the platform of the repubs.

you know why adam smith was wrong? because his delusions of utopian behavior will never be realized. people will lie, cheat, and steal..........hence, needing oversight.

Posted by: disillisioned | February 28, 2009 2:15 PM | Report abuse

It's been obvious for some time that Buffett was over his head. He stopped understanding markets & has been reacting for some time. His kind of investing has really been underpinned by the expansion in fat and financial services in recent decades. Buffett's investments are in things that are essentially intangible or valueless products, in which there are high profit margins, like soft drink companies, Krispy Kreme donuts, insurance. He doesn't know how to invest in a world where a liquidity bubble is receding.

Frankly, anyone who is still in his fund is a fool. The prospects for his kind of investing are extremely dim right now. Buffett essentially has to stop investing and has to wait for the bubbles (credit, liquidity, etc) to fully deflate. For him to make any money at all right now he'd have to be shorting those industries he is invested in.

The only truly reliable investment right now ... is food & medicine & other basic necessities of life. If you can't afford the insurance, you get a cheap car or don't drive. But you have to eat! Who wants a fund full of intangibles & fluff products like soda, donuts, candy, insurance, financials like BRK?

Posted by: AsperGirl | February 28, 2009 2:25 PM | Report abuse

I knew it...I wonder how much of that money ended up in Obama's,the 1/2 caucasian POTUS, campaign disguised as money from the untraceable internet contributions. I also wonder what the other billionaire and Buffet had to do with the economy tanking at such a convenient time ?

Posted by: BLAZESTOP | February 28, 2009 2:51 PM | Report abuse

At least he takes the blame for doing some dumb things with his own money. Who is going to take the blame for stealing mine?

Posted by: lcarter0311 | February 28, 2009 3:38 PM | Report abuse

JAS4 I totally agree. The WTO was created to make "international trade norms" but these norms have only focused on what business sees as "barriers," mostly taxes and regulation. We need international norms for worker safety, fair pay (relative to local cost of living), and environmental protection. Otherwise, no matter what we change here domestically, we are still stuck in the same global race to the bottom.

And for our part, industrialized countries need to accept that just as we have been outcompeted in the unregulated global market by worker and environmental exploitation, we have outcompeted many poor farmers throughout the world with government subsidized agrobusiness, which weakens global food supply through monocropping.

Posted by: siniod | February 28, 2009 4:00 PM | Report abuse

We all make mistakes. At many different levels of society to overstate the obvious. What is becoming less tolerable, by the minute, are all of the 'charades', usually designed to obfuscate the obvious. The 'people' need to see less quantitative analysis, more responsibility, accountability, especially from citizens who earn their wealth mostly from other peoples money. This one point simply won't 'fade' away in time. However, its' been nice to see so many true professionals back in play now. Under the bevy of recent microscopes, it is 'somewhat' reassurring to realize that the majority of true pros are getting back in the drvers' seat and finding answers. Gods speed to them.

Posted by: deepthroat21 | February 28, 2009 4:44 PM | Report abuse

LOL he *could* make his money merely by *shorting* stocks...how could you not make money shorting stocks in this economy?

Posted by: dubya19391 | February 28, 2009 5:07 PM | Report abuse

"Have you corporatists, who vehemently support anti-competitive, entry-barrier building, collusion dependent, mega-corporations ever taken a close look at how dysfunctional your short-term attitude is? Give me a break with the "socialism" charge. ANYTHING beats the corporatism you espouse. BRING BACK COMPETITION."

Excellent point. Not only is it dysfunctional but also suicidal.It is against their own long-term interests if they want to enjoy their material comfort with relative security. Unless, of course, they believe the fire in the house will not reach their room.

Posted by: garrafa10 | February 28, 2009 5:21 PM | Report abuse

Here is how my son will become a billionaire:
Find an industry that has just been deregulated. Buy up everything in sight using borrowed money at any price. Become a critical part of the US infrastructure and
'too big to fail'. Then retire, and leave the mess to others.

Successful examples of Corp avarice include Banking, airlines, trucking, telecom, railroads. Citigroups model consumed successful businesses and turned them into departments of Citi.

Why we are not unwinding the bad decisions of Sandy W. et al is beyond me.

Posted by: mikey999 | February 28, 2009 9:57 PM | Report abuse

The dumbest thing Mr. Buffet did was support the Marxist Socialist Barack Obama! He will rue the day he helped get that man in office as he sees the nation fall into chaos and total collapse due to the terrible lack of experience and understanding of this man who holds our highest office! We need to see millions of "tea" parties starting rightnow!

Posted by: Lcarnes1 | February 28, 2009 10:13 PM | Report abuse

"seems the republicans were in control when fannie and freddie headed south........where was the oversight? "
....Lol! Funny you ask!
Why don't you watch this video so you can see for yourself:
http://www.youtube.com/watch?v=_MGT_cSi7Rs&eurl=http://politicsandfinance.blogspot.com/

Seems the republicans were trying to solve this, but congressional democrats were blocking them every step of the way.

Posted by: Zack4 | February 28, 2009 11:45 PM | Report abuse

The following was posted by "Socialistic" @ 1:14pm February 28, 2009:
"Buffet should blame republicans for his investment losses. They caused everything to go down. Now, with obama in office, stocks will start going way up!"
-------------------------------------------
Dude, get your head outta the sand! In the 17 weeks between the failure of Lehman Brothers and Obama's inauguration, the market sank 28-percent. In the five weeks
since Obama moved into the White House, the market has declined 13-percent. Do the math. The decline is twice as steep, twice as fast under your man Obama. Reality check dude!

Posted by: bbahler | March 1, 2009 11:18 PM | Report abuse

It is not unusual to make mistakes. What's usual is openly admitting it. That explains why Warren Buffet is the most trusted money man.

His shareholder letter is a must-read for all aspiring investors. If they don't have time to read the entire 23 pages, at least read the excerpts here:

http://investmentscientist.com/2009/03/01/warren-buffets-letter-2009/

Posted by: mzhuang | March 2, 2009 11:31 AM | Report abuse

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