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Has Buffett "lost his groove"?
November 12, 2008 10:48 AM
Just in from our Bianna Golodryga:
As the market continues to disappoint, the Oracle of Omaha's investment strategy has disappointed even his staunchest supporters. This is one report from a big investor, who was also one of Buffett's biggest fans. Indeed Buffett's Berkshire Hathaway has suffered major losses this year.
The exceprts below were written by Douglas Kass, general partner, Seabreeze Partners Management.
I have worshiped at the altar of Warren Buffett since the late 1970s -- ever since an investor and acquaintance, Conrad Taft, introduced me to his investment methodology and style at Berkshire Hathaway. In fact, my writings over the past seven years have often been punctuated with Buffettisms. I have repeatedly objected to, scoffed at and refuted criticisms of Buffett's strategy on this site and elsewhere. The weight of the evidence suggests that Warren Buffett has recently been swimming naked. He has lost his groove, and here is why. Style drift. In the process of establishing a large derivative position on the S&P 500 by shorting puts, Buffett has deviated from his long-established investment discipline of avoiding "market plays" and of avoiding "financial weapons of mass destruction" (derivatives). This "play" has led to continued, multibillion-dollar losses over the past few quarters. Recent share acquisitions of Goldman Sachs (GS) and General Electric (GE) have been ill-timed. Buffett has convinced Corporate America (and Corporate Europe!) that he is a kind, avuncular sort, an easy and quick-to-deal with investor of last resort. Toward that end, Buffett recently came to the rescue of General Electric and Goldman Sachs, investing $8 billion in both issues combined. While both investments were made on favorable terms -- they are both seriously underwater -- not too long ago Buffett purchased $5 billion of 10% preferreds in Goldman Sachs, with five-year warrants struck at $115 per share. At the time, Goldman was trading at $125; it now trades at $74 per share. Buffett's notion of long term is now becoming a convenient shroud to poorly timed investments. Berkshire's list of longer-term holdings includes a great many successful positions based on relationship to cost, but the cost/market gap is rapidly closing. Importantly, over the last few years, the performance of many of these investments -- including Comcast (CMCSA), Coca-Cola (KO), Kraft (KFT), and U.S. Bancorp (USB) -- have underperformed the market dramatically. Over time, Warren Buffett has been the greatest investor extant. His long-term investment performance is unparalleled, but his performance over the past five years, and especially over the past year, is beginning to trail off badly. Warren Buffett has lost his groove. The question is whether he will get it back any time soon. |
November 12, 2008 | Permalink | Share | User Comments (14)
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Adapt or become extinct
Posted by: samhiguchi | Nov 12, 2008 11:09:51 AM
The problem is that he didn't listen to Ron Paul.
Posted by: Huh | Nov 12, 2008 11:41:05 AM
many of so called experts have doubted buffet before. if he is in it for the long term how can one year determine him loosing his groove? he has a 10% dividen on the goldman sachs deal. We'll see their stock price in 5 years than you should come back and apologize. everybody stocks are under preforming in this market the market is in a downturn but when it goes back up i'm betting as history has proven time and time again buffet was on the money and you are just another news person with a short attention span
Posted by: pay attention | Nov 12, 2008 11:44:24 AM
LMAO Disney down to $21.00 parks empty
GE down to $17.60
New York Slime down to $8.00 and falling revenue down almost 56%
Keep up the boycotts drive these left winger out of business.. Sell Sell Sell
Posted by: like it or not here I come | Nov 12, 2008 12:06:08 PM
everyone is losing these days. This will recover, I hope, some days. He always counts on long-term investment. If he is for short-term, he has pulled out completely 2 months ago. Given past Goldman Sach and GE performance when things went fine, he got a bargain. Yet, as he mentioned, the key reason why he GS and GE is because he believes they are fine producing organizations and therefore, they have a strong prospect for recovery from the current turbulence. Buffet always makes safe bets in companies that he thinks are productive.
Let's wait and see and wish him the best of luck.
Posted by: pmp2008 | Nov 12, 2008 12:16:26 PM
Then how come GE is standing in line with all then other big company's for a handout????????
Posted by: usa | Nov 12, 2008 4:03:33 PM
THIS TIME IT'S DIFFERENT. THE NEW WORLD ORDER IS UPON US. THE FED HAS BANKRUPTED THE U.S. THE FACT THAT THE FED WON'T REVEAL WHICH BANKS IT "GAVE" 2 $TRILLION TO SPEAKS FOR ITSELF. THERE AREN'T ENOUGH JOBS TO EVER RECOVER FROM THE GREATEST ROBBERY EVER. ALMOST 1 BILLION PEOPLE ARE STARVING TO DEATH AND WE ARE CLOSE TO ENSLAVEMENT.
Posted by: truthh | Nov 12, 2008 5:17:37 PM
AH HELL, LET'S JUST THROUGH IN THE TOWEL AND SPRED PANIC. I THINK WE ALL CAN AGREE WHERE THAT WILL TAKE US.
Posted by: FRANKRIGHTBRAIN | Nov 12, 2008 7:18:02 PM
Ezekial 7 warns:
“They will throw their money in the streets,tossing it out like worthless trash.Their silver and gold won’t save them on that day of the Lord’s anger.
It will neither satisfy nor feed them,for their greed can only trip them up.20 They were proud of their beautiful jewelry and used it to make detestable idols and vile images.
Therefore, I will make all their wealth disgusting to them.
Posted by: Brad | Nov 12, 2008 7:32:49 PM
Let's add the BIGGEST GLARING FACT -that he also Picked Obama. Yes, he is definately on the down slope.
Posted by: heidi b | Nov 12, 2008 9:53:07 PM
WB.. AKA OOO has his flagship asking taxpayer $??
I thought OOO wanted to pay more taxes..
guess he missed the plate?
Posted by: loblo | Nov 12, 2008 11:15:59 PM
I just saw a historical Dow Jones Chart adjusted for inflation (that's shrinking money value because they print more of it than the economy grows. That allows for the illusion of growth when there is none).
To reach the market decline of the 1930's the Dow will have to fall to 4000 a cut of another 50%! Watch out Warren those losses can really pile up. Maybe your socialist friend Obama will want to bail out an old capitalist!
Posted by: kerry | Nov 13, 2008 10:23:49 AM
Do you think that Warren Buffett is THAT dumb? Warren Buffett is the largest shareholder in Disney which owns ABC television. He bought General Electric because they own CBS. In doing so, he owns the largest propaganda machine which happens to be pro-Obama. Ask yourself, why has he done this for Obama? Taking a lesson from the Tony Rezko connection, Obama's formula is to use the face of poverty to juice government money and launder it through a rich person. The poor never saw a dime of that money, but parts of it did turn up in the Obama campaign. With that said, Obama is the leading sponsor of the Global Poverty Act which again uses the face of poverty. This act commits the United States to submit $845 billion to the United Nations, but not one dime of it stays here. You know that Buffett and Bill Gates have been into the idea of philanthropy lately. Do you the pattern and connection now?
Posted by: junebug | Nov 13, 2008 10:50:42 AM
I'm sorry ... correction .. GE owns NBC, and not CBS.
Posted by: junebug | Nov 13, 2008 10:59:47 AM
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