What? Have I lost my mind? Shorting the primary investment vehicle of a man who is considered by many to be the greatest investor of all time?
Well, we shall soon see. In my view 2009 is going to be a very rough year in the financial world. Many analysis, I believe Mr Warren Buffet, included, still really don't get it. They are still talking about America pulling out of the recession sometime during 2009 and on we go to even greater things in investment land.
I fear that many people, even seasoned pros like Buffet, are still underestimating the beast that has us in its claws. This is a super cycle to the downside. Scores of years of improperly evaluating risk, of improperly allocating capital, and of mispricing investments of all sorts, has to be and will be corrected.
The best efforts of the hard working Ben Benanke, Wall Street's best friend, Hank Paulson, and even the new hoped for savior, Barack Obama, will be like spiting into a 100 mile an hour headwind. The blowback is going to be impossible to avoid.
Warren Buffet's style of investing has served him well over the past decades. But perhaps it is his own professionalism and investing style that is about to cause him and his investors grief. Bottom fishing for solid companies, then buying the chosen few and holding on is one thing. However, trying to guess and to time the bottom of a super down cycle is all together another. The downdraft will likely last much longer then you first think.
Companies that are well managed and that had excellent prospects will be dragged down by the firestorm of further deleveraging and panic that 2009 will bring. While it is true that the way to investment riches often is to buy when there is blood in the streets the challenge of that approach in the coming panic is that the blood may be your own and of those companies that you have prematurely positioned in your portfolio.
While I am not forecasting the end of the world I am forecasting the end of the old world and of the old way of doing business. Do not expect things to go back to "normal" in an energy starved world.
Investment riches will flow to those who invest in companies that find ways of producing value, perhaps those companies that produce those things that are truly needed by the masses, like clean water and new sources of affordable energy. These companies may have to revert to water power as their major source of energy as existing power grids break down.
The old dinosaurs, like GM, Chrysler, Citigroup, and the like will almost surely perish. In regard to BRK.A some reported actions that if true are very unlike Buffet's investment style are sure to cause problems in 2009. Writing naked put options is a risky venture at any time. For the year ahead it looks to me to be reckless. The prospect of losses as stocks totally collapse just couldn't be worth the premium received upfront. .
$93200.0 (12/26/08)
