Buffett keeps off subprime fall guys
Billionaire Warren Buffett said his Berkshire Hathaway won’t buy a stake in Bear Stearns and that he “never came close” to acquiring shares of mortgage lender Countrywide Financial, which fell 61% this year.
By Agencies |
NEW YORK: Billionaire Warren Buffett said his Berkshire Hathaway won’t buy a stake in Bear Stearns and that he “never came close” to acquiring shares of mortgage lender Countrywide Financial, which fell 61% this year.
Buffett denied a New York Times report published last month that said he might buy as much as 20% of New York-based Bear Stearns, the fifth-largest US securities firm, during an interview on News Corp’ Fox Business Network.
“That was an incorrect story,” he said. “We were not taking a stake. That one had no basis.” Shares of Bear Stearns fell as much as 37% this year after the collapse of the subprime mortgage market pushed two of its hedge funds into bankruptcy and eroded fixed-income revenue.
The stock remains the worst performer this year among the five biggest US investment banks, even after rallying 7.7% on September 26 when the New York Times story was published. Buffett, 77, over four decades transformed Omaha, Nebraska-based Berkshire from a failing textile maker into a $200 billion investment and holding company with businesses ranging from ice cream to insurance and corporate jet leasing. His investment decisions are followed worldwide.
The Berkshire chairman said he was in contact with Calabasas, California-based Countrywide as the company’s stock fell in August amid a cash shortage brought on by the worst housing slump in 16 years. The company lacked a comprehensive plan that might have interested Berkshire, Buffett said.
He never bought any shares of Countrywide or Hovnanian Enterprises, the largest US luxury homebuilder and the subject of takeover speculation. The Red Bank, New Jersey-based company has dropped 70% this year. Neither stock is undervalued, he said.
Buffett said he was skeptical about the US Treasury’s plan to create an $80 billion fund to buy distressed assets from structured investment vehicles linked to home lending.
“I don’t see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself — whether people can make the payments,” he said. “It would be better to have them on the balance sheets so everyone would know what’s going on.”
Buffett identified the Brazilian real as the unnamed currency he said in May that he owned, noting it has doubled against the US dollar in the past five years. “During much of that time, the Brazilian government has in effect been supporting the US dollar,” Buffett said.
“They have been buying dollars in the market, they have been building up their own reserves. Their current account has turned into a good surplus,” while the US is behaving like “the Brazilians or the Argentinians 10 or 20 years ago.”
Buffett said he wasn’t suggesting anyone buy reais. “We may be cashing out. This is not a huge position. We’ll make $100 million,” he said.
Buffett denied a New York Times report published last month that said he might buy as much as 20% of New York-based Bear Stearns, the fifth-largest US securities firm, during an interview on News Corp’ Fox Business Network.
“That was an incorrect story,” he said. “We were not taking a stake. That one had no basis.” Shares of Bear Stearns fell as much as 37% this year after the collapse of the subprime mortgage market pushed two of its hedge funds into bankruptcy and eroded fixed-income revenue.
The stock remains the worst performer this year among the five biggest US investment banks, even after rallying 7.7% on September 26 when the New York Times story was published. Buffett, 77, over four decades transformed Omaha, Nebraska-based Berkshire from a failing textile maker into a $200 billion investment and holding company with businesses ranging from ice cream to insurance and corporate jet leasing. His investment decisions are followed worldwide.
The Berkshire chairman said he was in contact with Calabasas, California-based Countrywide as the company’s stock fell in August amid a cash shortage brought on by the worst housing slump in 16 years. The company lacked a comprehensive plan that might have interested Berkshire, Buffett said.
He never bought any shares of Countrywide or Hovnanian Enterprises, the largest US luxury homebuilder and the subject of takeover speculation. The Red Bank, New Jersey-based company has dropped 70% this year. Neither stock is undervalued, he said.
ADVERTISEMENT
Buffett said he was skeptical about the US Treasury’s plan to create an $80 billion fund to buy distressed assets from structured investment vehicles linked to home lending.
“I don’t see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself — whether people can make the payments,” he said. “It would be better to have them on the balance sheets so everyone would know what’s going on.”
Buffett identified the Brazilian real as the unnamed currency he said in May that he owned, noting it has doubled against the US dollar in the past five years. “During much of that time, the Brazilian government has in effect been supporting the US dollar,” Buffett said.
“They have been buying dollars in the market, they have been building up their own reserves. Their current account has turned into a good surplus,” while the US is behaving like “the Brazilians or the Argentinians 10 or 20 years ago.”
ADVERTISEMENT
Buffett said he wasn’t suggesting anyone buy reais. “We may be cashing out. This is not a huge position. We’ll make $100 million,” he said.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
