Wednesday, September 10, 2008

Buffet Runs for Cover

Good Morning Everyone!

Stocks are mildly higher this morning after two brutal trading days.

The Lehman news today was there is no news. Here is the link:

"Sept. 10 (Bloomberg) -- Lehman Brothers Holdings Inc., reporting the biggest loss in its 158-year history, said it will sell a majority stake in its asset-management unit, spin off commercial real-estate holdings and cut the dividend in an effort to shore up capital and regain investor confidence.

Lehman rose in New York trading after posting a $3.9 billion third-quarter loss on $5.6 billion of writedowns, worse than the $2.2 billion loss analysts had predicted. The company said it's auctioning off about 55 percent of the asset- management group, including fund-manager Neuberger Berman, and didn't name potential bidders. The real-estate spinoff is expected to be completed in the first fiscal quarter of 2009, according to a statement today.

``They are saying `we are fine now,' and that's buying them time to negotiate for that additional capital,'' Brad Hintz, an analyst at Sanford C. Bernstein in New York and former Lehman finance chief, said in a Bloomberg Television interview. ``They will need capital as part of the spinoff."

My Take:

Is anyone else as annoyed by this story as I am. How many times are they going to say the same damn thing? We know what you PLAN to do. WHERE are the buyers? I keep reading the same story week after week. If they keep stringing this out, they risk having zero options. The lower the stock price goes, the less leverage they possess in selling assets.

Berkshire's Blow to the banks

Well it looks like Warren Buffet's lost all confidence in the banking system. The Wall St. Journal is reporting that Buffet's no longer wants a part of insuring bank deposits:

"Berkshire, in Blow to Banks,
Reins In Its Deposit Insurer
September 10, 2008

Warren Buffett's Berkshire Hathaway Inc. has told one of its subsidiaries to stop insuring bank deposits above the amount guaranteed by the federal government, dealing a fresh blow to the financial-services industry as it tries to assuage anxious customers.

The subsidiary, Kansas Bankers Surety Co., is notifying about 1,500 banks in more than 30 states that it will no longer offer a program called "bank deposit guaranty bonds." KBS is an 18-employee subsidiary of Berkshire Hathaway, according to the parent firm's 2007 annual report. It is one of a handful of firms that offer such insurance, a big selling point for banks trying to attract wealthy customers.

Two people briefed on the matter said the order was made Monday by Mr. Buffett, Berkshire Hathaway's chief executive. Chuck Towle, a senior vice president at KBS, declined to comment on why his firm was leaving the business. "We have decided to do so," he said. "We'll work with each individual bank and work it out with them."

Mr. Towle wouldn't confirm or deny Mr. Buffett's involvement, calling it "strictly rumor." Mr. Buffett declined to comment."

My Take:

When the financial system is healthy and banks are thriving, Buffet's more than happy to insure your money at a nice profit.

Now that all hell is breaking loose in the financial system, Buffet wants out. When one of the best investors in the world wants out take notice! He sees the string of bank failures that are coming after the bursting of the debt bubble.

Bottom Line:

Stocks are all over the place this morning. There is very little confidence in this market. Its virtually impossible to invest right now because there are so many unknowns. Wall St. is slowly turning into the wild wild west where rumors and intervention determine price action vs. earnings.

Its going to take a long time for me to ever have confidence in the stock market again.


Avl Guy said...

"..Wall St. is slowly turning into the wild wild west where rumors and intervention determine price action vs. earnings..."

Rumors & price actions vs. earnings? Brings fond memories of a certain 8-week period, March 1st to May 1st, of 2000 on the DJIA. And we know what market serenity ensued from then for the next 18 months. NOT

Jeff said...



It reminds me of the same thing. Whew, the banks are blowing up this morning.

WAMU is down to $2 a share. Will they make it through the week?

Lehman did nothing to stabilize the financial markets this morning!

Minton Mckarkquey said...

Jeff, I'm as annoyed as you are about Lehman's no-news situation. I'm even more annoyed that I can sense a partial Fed bailout on the horizon.

I'm strongly thinking of buying a ranch in the mountains in Colorado, a shotgun, and refusing to file anymore taxes! Lol.

growler said...

well said

Jeff said...

"I'm strongly thinking of buying a ranch in the mountains in Colorado, a shotgun, and refusing to file anymore taxes! Lol."

That might be the best investment thesis I have heard today!

You gotta wonder what the Fed has up their sleeves.

This market is whacky isn't it?