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Thursday, February 04, 2010

Berkshire loses AAA rating from S&P

I don't view this as bad news. I view it as an opinion about opportunities for investing excess cash.
“The [Burlington Northern] railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity,” S.&P. said. “Risk tolerances appear to have increased.”
So Buffett is willing to take on more risk now.

The universe of investments available to Berkshire are very limited and I'm surprised that they weren't hell-bent on losing their AAA rating a year ago. Maybe things really did look that scary back then.

Tuesday, February 02, 2010


Well, it seems Fission Energy dug up some serious uranium. NICK announced reasonably good 3rd quarter results and the stock continues its slow gains. Not only was Strathmore able to sell a major property and raise money, but they got a better counter-offer. And someone is paying high prices for CFRI stock (some of which I unloaded). CVU is hanging in there, but orders haven't been increasing. And then there's Berkshire Hathaway, which I've been buying as new money comes in, although I'm keeping about half of it [the new cash inflows] in cash despite the general concensus of raging inflation at some point in time. It's an odd situation in the global economy.

I'm tempted to bail on everything, but I probably won't because I can't time the market. If I had to make a prediction, I'd say that we'll continue to see stock market gains for a while. But there's going to be a very serious headwind before long. Interest rates are unsustainably low, government borrowing is unsustainably high, and inevitable demographics are going to cause enormous damage to the status quo in the US, Europe, and Japan. It's not entirely clear what to invest in if all hell breaks loose, but I suspect Buffett has a fairly good idea: well established brands with pricing power, companies with solid moats.


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