S&P Erred in Cutting U.S. Rating: Buffett

[Denny]

And his motives are? If you say money, you lose.

You know better than that. I think it would be the preservation of the market system the way it stands now. Big problems could bring changes. Changes that he'd have to adapt to. He's got this set-up down pretty well now as it is.

[Broncojohnny]

The only difference between him and a politician is that he is not in an official capacity (which helps him in this case).

I know he and many others have come out smelling like a rose during down swings, but I think that he realizes that this is something different. That, I agree with him on.

And his motives are? If you say money, you lose.

[Denny]

The only difference between him and a politician is that he is not in an official capacity (which helps him in this case).

I know he and many others have come out smelling like a rose during down swings, but I think that he realizes that this is something different. That, I agree with him on.

[Broncojohnny]

I agree that it will pass, but I think he is trying to minimize loss by convincing the sheep that all is well. I'm thinking sub 8000 by the end of the year, but I suppose that depends on how Monday looks.

That sounds great until you consider the fact that he has made more money when the market or a specific stock takes a massive dump than he ever has when times are good. If he had a profit motive, he would have come out and said that the world was ending and we should all sell everything.

In 1990 at the end of the S&L scandal he bought millions of shares of Wells Fargo. It was the "banking recession". Much like today, no one wanted banking stocks. By 1997 those shares were worth 8 times what he paid for them.

During the "New Coke" fiasco in the 1980s when Coke shares plunged and everyone said the company fucked up, he bought shares of Coke that he still owns today. He mentioned in the Berkshire annual report that the annual dividend yield from his 200 million shares will be more than he paid for the shares in a few years.

I think you guys are mistaking him for a politician.

[Denny]

Of course it's S&P's fault. They only stopped at AA+. He can have his opinion about if he thinks it was deserved or not. We all have it. But to say poo poo like the US should be given something even higher then AAA, placing them in a class of their own, basically; then he's completely off his rocker. It is blatantly obvious that he's trying to protect a sell-off... well, just long enough for him to at least.

Now, I'm not going to completely disagree with him on everything here. A downgrade for the country shouldn't affect some solid US companies. Exxon, Apple, whatever just name it, SHOULD hold the same values and investment potentials as they did prior to the downgrade, but I still think a panic will prevail. If that is the case, everything will be taking a big hit, people will pull back to something stupid like cash, then problems will start to compound. Let's hope for everyone's sake, Buffett is right (and Buffett's sake too LOL).

When was it that S&P also downgraded Berkshire Hathaway? He's not still bitter about that either, is he?

Sean, if we see a sub-8000 DOW this year, I'd put money on gold being in a 2:1 ratio in no time. The S&P indicies are better tells, though.

[Sean88gt]

I agree that it will pass, but I think he is trying to minimize loss by convincing the sheep that all is well. I'm thinking sub 8000 by the end of the year, but I suppose that depends on how Monday looks.

[Broncojohnny]

Of course he doesn't think there's going to be a double-dip. The Obama administration gave him specific orders to say that bit.

How does it feel to have your idol in the asshole in chief's back pocket?

He would say nothing before saying something he didn't believe in. He believes in the American system of capitalism over the long term. Meaning that he believes in the words of Benjamin Graham, "This too shall pass". This is a man who has lived through the great depression and everything since, no one should choose the meaning of his words frivolously, primarily because he didn't choose them frivolously.

[slow99]

How does it feel to have your idol in the asshole in chief's back pocket?

Terrible, my life sucks now.

[Geor!]

Of course he doesn't think there's going to be a double-dip. The Obama administration gave him specific orders to say that bit.

How does it feel to have your idol in the asshole in chief's back pocket?

[slow99]

Any objective, intelligent person should think hard and fast about what he has to gain by making statements like these.

Stevo

*** Edit, Stevo, my apologies, you're absolutely correct with that statement.

[stevo]

Any objective, intelligent person should think hard and fast about what he has to gain by making statements like these.

Stevo

[slow99]

In before the idiots start posting about Buffett not knowing anything.
Interesting commentary.

Lol, he took me to task on my assessment of the debt situation. What the fuck am I going to do, argue with one of my idols and greatest financial/economic thinkers of our time?

Regardless of your opinion on Buffett, any objective, intelligent person should think hard and fast about what he has to say.

[Broncojohnny]

http://www.bloomberg.com/news/2011-08-06/buffett-says-s-p-s-downgrade-mistaken-still-doesn-t-see-another-recession.html

Billionaire Warren Buffett said Standard & Poor’s erred when it lowered the U.S. credit rating and reiterated his view that the economy will avoid its second recession in three years.

The U.S., which was cut Aug. 5 to AA+ from AAA at S&P, merits a “quadruple A” rating, Buffett, 80, said yesterday in an interview with Betty Liu at Bloomberg Television. The downgrade followed the biggest weekly selloff in U.S. stocks in 32 months, with the S&P 500 slumping 7.2 percent to its lowest level since November.

“Financial markets create their own dynamics, but I don’t think we’re facing a double dip recession,” said Buffett, chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/A) “Clearly what stock markets do have is an effect on confidence, and this selloff can create a lack of confidence.”

Stocks plunged last week amid signs the U.S. economy is slowing and speculation that Europe will fail to contain its sovereign-debt crisis. Reports on manufacturing and consumer spending trailed economists’ forecasts. Euro-region central bank governors are planning emergency talks aimed at limiting the market fallout from the first U.S. rating downgrade in history.

The U.S. cut, announced after the close of trading in New York, was prompted by rising public debt and “greater policymaking uncertainty,” S&P said in a statement. The U.S. has the top credit rating at both Moody’s Investors Service and Fitch Ratings. Buffett said he doesn’t rely on the views of ratings firms when buying and selling securities. Berkshire is the biggest shareholder of Moody’s Corp.

Rising Earnings
Berkshire posted a $3.42 billion second-quarter profit, up 74 percent from a year earlier, the company said Aug. 5. Returns from derivatives improved, and Buffett’s 2008 investment in Goldman Sachs Group Inc. led to an after-tax gain of about $806 million. Buffett is seeking investments and acquisitions as Berkshire’s cash climbed to $47.9 billion at the end of June.

The S&P downgrade won’t have an impact on investment decisions in money funds and bond funds at Western Asset Management, said Pasadena, California-based Chief Investment Officer Stephen Walsh. Western Asset, the bond unit of Legg Mason Inc., manages about $365 billion in assets and has an “underweight” position in U.S. Treasuries.

“Our money funds are required to invest in securities with the full faith and credit of the U.S. government, but it doesn’t speak to a rating,” Walsh said. “Our conversations with central banks and foreign investors show that they won’t view Treasuries differently.”

Mohamed El-Erian, the chief executive officer of Newport Beach, California-based Pacific Investment Management Co., said that the downgrade will spur uncertainty in the market.

“It will fuel uncertainties about the functioning over time of the world economy as there are no other pure AAA’s able and willing to materially complement or replace the role of the U.S. at the core of the global financial system,” El-Erian wrote in an e-mailed response to questions.

To contact the reporters on this story: Betty Liu in New York at bliu17@bloomberg.net; Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net