Britannia Radio

From The Sunday Times

May 3, 2009

Buffett: We’ve been struck by a financial hurricane

Dominic Rushe, Omaha

BILLIONAIRE investment guru Warren Buffett told shareholders yesterday that the world had been hit by a “financial hurricane” as the 78-year-old offered new clues about who will replace him at the helm of his company, Berkshire Hathaway.

Speaking at Berkshire’s annual meeting in Omaha after one of the worst years of his career, the legendary investor said his preferred replacements “did not cover themselves in glory” this year but added: “I did not either. I am very tolerant in that respect.”

Buffett faced several questions about succession. He refused to name the people who will become Berkshire’s next chief executive or its next chief investment officer.

However, Buffett said three of Berkshire’s internal managers are candidates to be chief executive. He said the board has a list of four internal and external investment managers who could manage Berkshire’s portfolio.

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“The candidates we have for CEO are running businesses, doing things every day of an operating nature,” said Buffett. “These are people who are ready for the job right now – 100%.

“They know how to allocate capital. They will have to develop relationships with the shareholders, and other managers – but they know how to run businesses. They would do many things better than I would.”

Some 35,000 people made the trip to Omaha to hear Buffett speak this year after the biggest financial melt-down in a generation. Buffett said his firm had been hit by a “financial hurricane”. He said he was impressed by the government’s reaction to the crisis. Buffett said the American government was “doing the right things”.

Berkshire’s Class A stock lost 32% in 2008, and Berkshire’s book value – assets minus liabilities – declined 9.6%, to $70,530 per share. It was only the second time that Berkshire’s book value had declined under Buffett.

Yet the Sage of Omaha, as Buffett is known, still outperformed the market – the S&P 500 fell 37% in 2008, and Berkshire reported a 2008 profit of $4.99 billion (£3.3 billion), down 62% from the previous year.

Last year Buffett said the US faced an “economic Pearl Harbor”.

He said he could not predict how quickly the economy and the markets would improve.

In an interview before the meeting, Buffett said there were no signs of any real recovery in housing or retailing. “You never know for sure, even if there’s a levelling off, which way the next move will be,” Buffett told Bloomberg television.

At the meeting Buffett was slightly more upbeat. He said that there were some signs of stabilisation in housing markets.

“In the last few months you’ve seen a real pickup in activity although at much lower prices,” Buffett said.

He added that there were signs of stability in medium to lower-priced homes, but at much reduced prices.

His four replacement candidates had failed to dodge the financial crisis this year, he said. “But their average over 10 years has been modestly to significantly better than average, and I would say that would be the case over the next 10 years,” he said.

• HAVE YOUR SAY

Hey!! Warren!! dont forget me!! Despite the doom and gloom I've tripled my money on stocks since december!!

Louis, Liverpool, UK

Berkshire lost 10% on investments. 
My pops pension decreased 33% in 8 months! 
Buffet is too modest sometimes.

G McMillan, Worcester, UK