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Warren buffets advice for 2009

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PostPosted: Fri Feb 06, 2009 7:59 am    Post subject: Warren buffets advice for 2009 Reply with quote

Warren buffets advice for 2009

We begin this New Year with dampened enthusiasm and dented optimism. Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organizations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health. They expect the financial experts to provide them with remedies, forgetting the fact that it is these experts who created this financial mess.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

* Hard work: All hard work bring a profit, but mere talk leads only to poverty.

* Laziness: A sleeping lobster is carried away by the water current.

* Earnings: Never depend on a single source of income. [ At least make your Investments get you second earning ]

* Spending: If you buy things you don't need, you'll soon sell things you need.

* Savings: Don't save what is left after spending; Spend what is left after saving.

* Borrowings: The borrower becomes the lender's slave.

* Accounting: It's no use carrying an umbrella, if your shoes are leaking.

* Auditing: Beware of little expenses; A small leak can sink a large ship.

* Risk-taking: Never test the depth of the river with both feet. [ Have an alternate plan ready ]

* Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy. I'm equally confident that
those who resolve to start practicing these principles wil quickly regain their financial health.

Let us become wiser and lead a happy, healthy, prosperous and peaceful life.


Last edited by rashmi on Sun Feb 08, 2009 11:44 am; edited 1 time in total
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PostPosted: Sat Feb 07, 2009 7:56 am    Post subject: Swiss Re Falls Most on Record After Buffett Injection Reply with quote

Swiss Re Falls Most on Record After Buffett Injection


Feb. 5 (Bloomberg) -- Swiss Reinsurance Co., the world’s second-biggest reinsurer, fell the most in 18 years after turning to Warren Buffett’s Berkshire Hathaway Inc. for 3 billion Swiss francs ($2.6 billion) to shore up capital depleted by record losses.

Swiss Re slumped 28 percent to 21.70 Swiss francs, the most since at least 1990, after posting a 2008 loss of about 1 billion francs and announcing plans to cut the dividend. The Zurich-based company also will disband its financial-markets unit and may seek more capital. Berkshire’s investment may give it a stake of more than 20 percent as Swiss Re struggles to keep its credit rating.

“Management is reacting to losses rather than proactively trying to clean up the balance sheet,” Will Morgan, a London- based analyst at Goldman Sachs Group Inc. said in a note to clients today. “With no real ring-fencing of balance sheet issues, we believe confidence in the company will stay low.” Morgan lowered his rating on Swiss Re to “neutral” from “conviction buy.”

Chief Executive Officer Jacques Aigrain is abandoning his attempt to increase profit by trading securities such as credit- default swaps. The foray led to writedowns of 6 billion francs last year, depleted shareholder equity and took two-thirds off the insurer’s market value in 2008. Swiss Re became the world’s biggest reinsurer after buying GE Insurance Solutions in 2005 and now has only one third the market value of Munich Re.

“The contacts were extremely recent, and the solutions were developed in an extremely short time-frame, leading to a signing of our agreement during the night,” Aigrain told reporters today. While the 2008 results are disappointing, Buffett’s decision to increase his investment in Swiss Re “is a testament to the strength of our franchise,” Aigrain said.

Worst Performer

Swiss Re has plunged 57 percent in 2009, making it the worst performer in the 35-member Bloomberg Europe 500 Insurance Index as investors anticipated the writedowns. Standard & Poor’s Ratings Services said it may lower the company’s long-term credit ratings by one level from AA-.

While Swiss Re said it has more capital than regulators require, it needed at least 1.5 billion francs on Dec. 31 to keep its credit rating. The company plans to get approval to sell as much as 2 billion francs of additional stock, it said.

Swiss Re’s shareholder equity was less than 20 billion francs as of Dec. 31, down from almost 32 billion francs at the end of 2007, it said. Still, the company said it doesn’t expect to seek government assistance, Aigrain said.

No Contact

“We have never been contacted, nor contacted the national bank or government,” he told reporters.

Berkshire Hathaway’s latest investment comes in the form of convertible notes paying a 12 percent coupon, Swiss Re said. Berkshire can convert them to Swiss Re shares after three years at a price of 25 francs apiece or continue to receive “perpetual” payments of 12 percent a year.

Buffett bought 3 percent of Swiss Re in January 2008, ceding 20 percent of its property and casualty business to Berkshire Hathaway over five years to free up capital.

“I’m very impressed by Jacques Aigrain and his management team,” Buffett, 78, said in the statement. Buffett didn’t respond to a request for comment left with assistant Carrie Kizer.

General Electric Co., Goldman Sachs Group Inc. and Harley- Davidson Inc. are among the companies that have gone to Buffett in the last year after the global credit crunch made it more difficult to get funding. The Omaha, Nebraska-based billionaire also is the largest shareholder in American Express Co.

Goldman Deal

Buffett’s investment vehicle bought $5 billion of preferred stock in Goldman Sachs in September. It pays a 10 percent divided and can be converted to common stock at any time at a 10 percent premium. The company also received warrants to buy $5 billion of common stock at any time until 2013. Buffett gets 15 percent interest on $300 million of notes sold by Harley Davidson.

Berkshire fell $3,270, or 3.6 percent, to $87,020 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have fallen 37 percent in the past year.

Swiss Re has been plagued by losses on contracts sold to protect clients against declines in fixed-income securities after the worst U.S. housing market since the Great Depression sparked a global credit crunch.


The company is now disbanding its financial markets unit as part of the “derisking” strategy, Swiss Re said. Remaining assets will be split between the asset-management division and

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PostPosted: Sat Feb 07, 2009 8:03 am    Post subject: Buffett debt purchase gives Harley-Davidson a lift Reply with quote

Buffett debt purchase gives Harley-Davidson a lift

Harley-Davidson Inc. has sold $600 million worth of debt, including half to Warren Buffett's Berkshire Hathaway Inc., a move that boosted Harley shares.

Berkshire and money manager Davis Selected Advisers, the largest Harley shareholder, each bought $300 million of senior unsecured notes carrying an annual rate of 15 percent -- about twice the yield of a typical investment-grade corporate bond.

Berkshire's involvement could boost investors' confidence, making it easier for Harley to secure additional financing. Berkshire doesn't buy company debt without considering many possible outcomes, said analyst Ned Douthat with Ockham Research.

"It's encouraging. I think they're showing a sign of confidence, which should give others a good bit of confidence," he said.

He added: "Warren Buffett is a big buyer of American securities now. He's trying to bottom feed on some companies that have been beaten down the worst" on Wall Street.

The notes mature in 2014 and provide Harley with more cash at a time when many funding sources have dried up.

Harley-Davidson Financial Services (HDFS), the consumer lending arm at Harley, needs about $1 billion in funding this year to continue providing new motorcycle loans to its customers. It also has a $500 million bank advance due in March.

Harley's outlook for 2009 largely depends on the ability of HDFS to get significant financing, according to industry analysts.

Issuing $600 million of 5-year notes at 15 percent interest appears costly on the surface. But the transaction could open other avenues of more affordable financing for HDFS, analyst Tim Conder with Wachovia Capital Markets said in a note to clients.

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