Obviously with Buffett a major shareholder of Moody’s, the only place where a downgrade of Berkshire could come from was S&P. Moments ago, the rating agency that dared to downgrade the US for which it is being targeted by Eric Holder’s Department of “Justice”, did just that.

On New Criteria, Berkshire Hathaway Inc. Downgraded To ‘AA’, Core Ins. Subs Affirmed At ‘AA+’, Senior Debt Rated ‘AA’

Overview

• Under our revised group methodology criteria, we are lowering our counterparty credit rating on BRK to ‘AA’ from ‘AA+’. At the same time, we are affirming our ‘AA+’ counterparty credit and financial strength ratings on BRK’s core operating insurance companies.
• The ratings reflect our view of the group’s excellent business risk profile and very strong financial risk profile based on an extremely strong competitive position and very strong capital and earnings.
• The negative outlook reflects the U.S. sovereign ratings cap and our view that the group’s capital adequacy per our capital adequacy model could deteriorate relative to its risk profile.

Rating Action

On May 16, 2013, Standard & Poor’s Ratings Services lowered its counterparty  credit rating on Berkshire Hathaway Inc. (NYSE:BRK; AA/Negative/A-1+) by one  notch to ‘AA’ from ‘AA+’ and affirmed its ‘AA+’ insurance financial strength  ratings on BRK’s core subsidiaries following release of our revised Insurers  Rating and Group Rating Methodology, released on May 7, 2013. The outlook on all ratings is negative. At the same time, we assigned our ‘AA’ senior debt rating to Berkshire Hathaway Finance Corp.’s (BHFC) $1.0 billion senior 
unsecured notes. BHFC has issued the notes in two tranches: $500 million 1.3% senior unsecured notes due May 15, 2018, and $500 million 4.3% senior unsecured notes due May 15, 2043. The company used the proceeds of this issue to repay $1.0 billion of senior notes maturing on May 15, 2013. >> Read More

Users of iPad and Android tablets might not have noticed, but a lot of them are “frustrated” because they “can’t type, they can’t create documents, they don’t have [Microsoft] Office there”. At least according to Bill Gates, who three years ago said of the iPad: “there’s nothing on the iPad I look at and say ‘Oh, I wish Microsoft had done it.’”

 But with total iPad sales since April 2010 already past 141m, and total tablet sales according to IDC at 253m – of which fewer than 2m are the Surface RT or Surface Pro – one might wonder whether he’s right.

 Gates also says that a key problem for Microsoft in trying to grow its business in China is levels of piracy within government and large businesses there – a problem that it doesn’t face elsewhere – and which has made it a “disaster” for revenue growth. >> Read More

Above is Monthly Chart of Berkshire Hathway -A

Warren Buffett was in the news a lot this weekend as Berkshire Hathaway ($BRKA) held its annual conference. I see that BRKA is currently the top-performer today in the S&P 100. The shares got over $166,000. In 1990, the stock was worth a mere $5,500. When the tech bubble peaked in March 2000, BRKA was worth 30 times the S&P 500. Now it’s up to 103 times the index.

Technically Yours/ASR TEAM/BARODA/INDIA

At the Berkshire Hathaway annual shareholder meeting, billionaire, Warren Buffett-buddy, and Berkshire board member Bill Gates participated in the annual, folksy tossing of the newspapers.

From Reuters:

Berkshire Hathaway CEO Warren Buffett (R) watches friend Microsoft Chairman Bill Gates throw a newspaper in a competition just before the Berkshire annual meeting in Omaha May 4, 2013. Buffett and the board of his conglomerate Berkshire Hathaway Inc are “solidly in agreement” on who should be the company’s next chief executive, he said at Berkshire’s annual shareholder meeting on Saturday.

Berkshire Hathaway, the $262bn conglomerate controlled by Warren Buffett, will pay $2bn to acquire the remaining 20 per cent outside stake in the Israel-based International Metalworking Cos.

The purchase comes ahead of Berkshire’s annual meeting in Omaha on Saturday, a grand festival of capitalism attended by tens of thousands of shareholders who will gather to hear Mr Buffett’s thoughts on his company, investing and the economy.

The latest deal reflects the success of Mr Buffett’s first overseas purchase. In 2006 Berkshire paid the Wertheimer family, who founded IMC 60 years ago, $4bn for an initial 80 per cent stake.

“As you can surmise from the price we’re paying for the remaining interest, IMC has enjoyed very significant growth over the past seven years”, Mr Buffett said in a statement. >> Read More

This week is the annual shareholder meeting for Berkshire Hathaway, the gigantic conglomerate run by billionaire Warren Buffett.

 Buffett has a way of explaining complicated finance topics so that they’re fun and understandable.

Carleton English of Belus Capital Advisors points us to this gem of a quote from 2008 where he takes a jab at private equity.

Someone had asked the Oracle of Omaha why people sell their companies to him instead of private equity firms.  This is the type of question that you might hear later this week.  Here’s Buffett’s response:

“You can sell it to Berkshire, and we’ll put it in the Metropolitan Museum; it’ll have a wing all by itself; it’ll be there forever. Or you can sell it to some porn shop operator, and he’ll take the painting and he’ll make the boobs a little bigger and he’ll stick it up in the window, and some other guy will come along in a raincoat, and he’ll buy it.” >> Read More

Since Gold and Silver are crashing and are on everyone’s mind, here’s an extract from last year’s Berkshire Hathaway’s annual letter to shareholders, where Buffett eloquently reveals how he thinks about the shiny metal:

The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.

This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future. >> Read More

Warren Buffett’s Berkshire Hathaway will become one of the biggest investors in Goldman Sachs after agreeing to swap billions of dollars worth of warrants for shares.

The warrants which were issued when Mr Buffett rode to the investment bank’s rescue during the depths of the financial crisis gave Berkshire the right to purchase 43.5m Goldman shares – or about 9 per cent of the bank – at a price of $115 per share, up until October 1 this year.

 However in a revised deal announced on Tuesday, Goldman said it would use the profits from the position to buy stock for Berkshire, allowing the conglomerate to accrue a large holding without using its own cash.

Goldman stock closed at $146.11 on Monday, putting the paper profit on Mr Buffett’s warrants at about $1.35bn. At that price, the new deal struck by Mr Buffett means his company will own around 9.3m shares in the bank, or about 2 per cent, making him one of Goldman’s top ten investors. >> Read More

Here’s the link to this year’s letter.  Feel free to point out anything you might like to discuss or anything you think might be worthy of a post.

Here are the key points:

• For just the 9th time, Berkshire’s book value rose less than the S&P 500. Buffett calls the year subpar.
• Berkshire pursued a couple of “elephants” but mostly came up empty, until the recent big Heinz deal.
• Buffett explains his five guidelines for increasing shareholder value: “In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition. We will also try to maximize results for you by rarely, if ever, issuing Berkshire shares.”
• Berkshire’s five biggest non-insurance companies (BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy) broke the goal of having over $10 billion in income this year.
• Berkshire’s new portfolio managers Todd Combs and Ted Weschler both had portfolios that beat the S&P 500 in 2012.
• Both Combs and Weschler now have portfolios of $5 billion to invest.
• Buffett expects Berkshire to buy more Coca-Cola, American Express, Wells Fargo and IBM in the future.
• CEOs who whine about “uncertainty” are silly (see more here)
• Contrary to Buffett’s expectations, the “float” from Berkshire’s insurance businesses continues to grow. He doesn’t expect it to continue, but it grew another $2.5 billion last year. >> Read More

Positive:

1) Germany’s business confidence climbed to a 10 month high of 107.4 in February
2) St. Louis Fed President said The Federal Reserve’s “very aggressive” easy money policy is going to stay that way for a “long time.”
3) Via bespoke, the 2 day selloff has 8 of the 10 S&P sectors back to neutral from overbought conditions. This is healthy for the markets.
4) Shares of HP up 14% as their quarter was a surprising top and bottom line beat.
5) Warren Buffett still has “it”. Berkshire Hathaway’s A shares closed above $150,000 for the first time ever.
6) The market showed signs that this rally was getting tired, but ended the week on a strong note.

Negatives:

1) Prices at the pump have risen for 36 straight days
2) Legendary trader Marty Zweig, who predicted the 87 crash has passed away
3) U.S. home-builder confidence declined for the first time in 11 months.
4) Housing starts in January fell to 890k versus expectations of 920k, a drop of 8.5%
5) French service sector activity shrank in February at its fastest rate in nearly four years,
6) Euro Stoxx 50 volatility index is up 40% in the past month
7) Bullish sentiment declined again this week, marking the fourth weekly decline in a row. Based on the weekly survey from the American Association of Individual Investors (AAII
8) Jobless claims increased by 20,000 to 362,000 in the week ended Feb. 16
9) It took only 2 days to erase all monthly gains in the Nasdaq and the Dow
10) The S&P 500 ended lower for the first time in 7 weeks.
11) Comodities got hammered with copper, oil and metals all getting whacked.
12) The European Commission has put out a forecast that the Euro Zone growth would shrink by 0.3% in 2013.
13) The producer-price index rose 0.2% after a 0.3% drop in December. Wholesale prices in the U.S were higher in January for the first time in four months.