And hey, Warren was just talking his book after taking his first chunky derivatives hit...pesky WMD's.
ROTFLMAO...... yea, I noticed that too Berkshire Hathaway saw earnings fall by something like 64%
and Charlie Munger, who by some accounts is the smarter half of the Buffett Munger team had these comments regarding subprime...
May 5, 2008, 11:32 am
Berkshire’s Munger: Subprime Makes “Enron Look Like a Tea Party”
Posted by Dan Slater
Most of the time, Warren Buffet’s activities, when unrelated to Gen Re, fall outside the Law Blog’s long-arm jurisdiction. But then there’s Charlie Munger, Berkshire Hathaway’s vice chairman who, after founding law firm Munger, Tolles & Olson, left law to join Buffet in a, well, slightly more profitable line of work. And at Berkshire Hathaway’s annual shareholder meeting in Omaha on Saturday, Munger, according to this WSJ report, made some LB-worthy comments.
Munger, 84, told shareholders that the current credit crisis is worse than the market disruptions triggered by Enron’s bankruptcy earlier this decade. After Enron collapsed, U.S. legislators passed the Sarbanes-Oxley Act to try to prevent such massive frauds rocking markets in the future, Munger said. “We now know they were shooting at an elephant with a pea shooter. We have convulsions now that make Enron look like a tea party.” What does that mean for potential regulatory overhaul? According to Munger, the credit crunch will produce more changes in regulations that “won’t work for everybody.”
Still, in the absence of any Sarb-Ox-like regulatory reform to address the mortgage crisis, investors may well be turning to their old friend, the lawsuit. Back in July, the Law Blog posted on a study released by Cornerstone Research and Stanford Law’s Securities Class Action Clearinghouse indicating that, by mid-2007, securities class actions were down from 2006 numbers. According to Joseph Grundfest, the director of the Clearinghouse, increased enforcement activity by the SEC and DOJ, and a strong stock market accounted for the drop. But then, five months later, the Law Blog came across studies (here and here) indicating that, due to the subprime crisis, securities-fraud class actions were up. Lawyers filed 166 securities-fraud wannabe class actions in 2007, a 43% increase over last year’s filings.
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Speaking to reporters Sunday, a day after Berkshire Hathaway Inc.'s annual fan-fest for shareholders at the Qwest Center in Omaha, Neb., both Mr. Buffett, 77 years old, and Vice Chairman Charlie Munger, 84, criticized regulators, politicians and accountants for lax oversight of financial institutions that are at the center of the subprime-mortgage crisis, and, according to Mr. Munger, were guilty of "deep conflicts of interest."
"The regulators and the accountants have failed us terribly," Mr. Munger said, adding that mark-to-market accounting rules are necessary but can obscure other problems within a company.
This year at Mr. Buffett's annual gathering for shareholders -- often called "Woodstock for Capitalists" -- 31,000 Buffett enthusiasts were serenaded by Fruit of the Loom minstrels, enjoyed samples of Berkshire portfolio companies such as Dilly Bars and watched artist Michael Israel speed-paint a Buffett portrait with Benjamin Moore paints.
Mr. Buffett credited the Federal Reserve for helping to avert a more-widespread crisis on Wall Street by orchestrating a bailout of Bear Stearns Cos. that "prevented, in my opinion, the contagion where you're going to have runs on investment banks."
Bank losses "aren't over by a long shot, but a lot of it has already been recognized," he said, adding that the depth of the housing crisis, unemployment and other economic factors would help determine how long the write-downs continue.
"The idea of financial panic -- that has been pretty much taken care of," he said.
As to buying opportunities, Mr. Buffett told shareholders, "We are happy to invest in businesses that earn their money in the euro, or in companies that derive their earnings in Germany, or from the sterling in the [United Kingdom], because I don't have a feeling that those currencies are going to depreciate in a big way against the dollar." Sunday he said a Berkshire unit is close to buying a midsize company in the U.K., but he didn't elaborate. This month, Mr. Buffett is scheduled to tour five European cities looking for more buying opportunities.
What may not be an attractive buying opportunity? Berkshire itself, Mr. Buffett said on Saturday. "Anyone who expects us to come close to replicating the past should sell their stock. It's not gonna happen," he said. "You may have something better to do with your money than buy Berkshire."
Mr. Buffett also said Berkshire Hathaway's four-month-old municipal-bond insurance business garnered more than $400 million of premiums in the first quarter, boasting that this made its new business bigger than that of its rival. "This whole company has been built in just a couple of months," Mr. Buffett said.
Sunday he took a few jabs at rivals, saying he was confounded by the ability of his municipal-bond insurer's biggest rivals, MBIA Inc. and Ambac Financial Corp., to retain their triple-A ratings.
"If you can find another illustration of a company whose stock that's gone down by 95% in one year and is still rated triple-A, I have yet to see it," Mr. Buffett said. |
