Posted tagged ‘Warren Buffet’

Quote for the Day: Financial Crisis/Warren Buffet Edition

October 17, 2008

From today’s NYT op-ed by the Sage of Omaha:

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

I get the restaurant line.  But actually visualizing the thought when I consider all the places my money has been?  Not such a pretty picture

Simple Question, Simple Answer?

September 23, 2008

Isn’t this how it is supposed to be?  You hand over cash, you get something other than worst of somebody’s paper in return?

Just askin.

(Image reposted by popular demand. OK.  By my demand. Can’t do better, IMHO)

Image:  Poster for the “War of Wealth” by Charles Turner Dazey, a play that opened February 10, 1896. Source:  Wikimedia Commons.

Quicky AIG thought

September 17, 2008

I have even less of a reason to post about AIG than most of the blogosphere, having spent no time studying the insurance business, the interpenetration of insurance with the rest of the financial world or any of that.  But stimulated by this post, (h/t a nervous making post from Bainbridge), I’ve decided to shoot my mouth off anyway.  What else is having a blog for, anyway?

In my defense, I have read with pleasure the foundational paper in the history of the life insurance business,  Edmund Halley’s — yup, that Halley, the comet fellow —  “An estimate of the mortality of mankind, drawn for curious tables of the births and funerals at the city of Breslaw; with an attempt to ascertain the price of annuities upon lives, by Mr. E. Halley, R.S.S.”

I also have read these — probably more on point.  Warren Buffet knows just a little about insurance, and I cannot recommend too highly browsing through his letters to shareholders over the last several years at least.

The reason to look at Buffet’s letters in this context is that like AIG, Berkshire Hathaway is a huge player in the reinsurance market, and Buffet was, if not nearly undone, certainly hammered by a miscalculation, or misunderstanding (stub only) on purchase, of the reinsurance exposure of General Re, bought by Berkshire Hathaway in 1998 — not to mention the prospect of outright fraud at the company (in a transaction involving AIG, btw).

As I say, BRK trembled a bit but did not fall on that miscalculation.  Similarly, if AIG’s risk management turns out to be as bad or worse as General Re’s, the US treasury will take the hit, and I’m reasonably sure that we the taxpayers and citizens of the US will feel some pain — but not a mortal wound.  The question, unanswerable on its face, is whether the risk of the range of possible outcomes in the US purchase of AIG is worth accepting in the face of the risks of the damage an AIG failure would do in the here and now.

But that still leaves me wondering:  are Mssrs. Paulson, Bernanke et. al smarter than Warren Buffet?

Now that one leaves me a little nervous.

(full disclosure — I own the tiniest bit of BRK stock, if anyone cares.  I certainly don’t have enough to have Warren’s phone number, if that’s what you are asking.)