ABC News reports this morning,
Even the world's best-known investor couldn't get it right in 2008, apologizing to his shareholders for doing "some dumb things" with their money.
What? Even the oracle of Omaha wasn't able to get it right last year? That seems impossible. Then again, it reinforces how bad the market is, and that everyone, even the richest and wisest was touched by this market down turn.
Billionaire Warren Buffett said in his annual letter to shareholders that while last year was a bad year for all investors, he made some mistakes that he now regrets.
"I made some errors of omission, sucking my thumb when new facts came in that should have caused me to reexamine my thinking and promptly take action," Buffett wrote in a letter released this (Saturday) morning.
During 2008, the price of Buffett's Berkshire Hathaway stock fell from $90,343 a share to $77,793.
- ABC News
OK, that is a wise man, when he is man enough (and honest enough) to admit that he makes mistakes. So many people in the business world, especially those in management, think and act like they never make mistakes and that their way is the only way. They may have good ideas, but most of them are to stuck on themselves to admit they make mistakes. I respect Buffett even more because of his honesty.
Joel L. Naroff, president and founder of Naroff Economic Advisors, apparently agrees with me. He was quoted in the article as saying,
Buffett is doing the right thing by acknowledging what went wrong.
"I think that's the way a good investor should operate: recognize you made some mistakes, see what they are and try to correct them going forward."
- ABC News
In his letter, which I look forward to receiving in the next few weeks, he recalled 2008 was a brutal year for everyone in the market.
He added: "The watchword throughout the country became the creed I saw on restaurant walls when I was young: 'In God we trust; all others pay cash.'"
Naroff said that it's a prime example of how bad things are in the economy when someone like Buffett stumbles.
"I think when somebody as astute as Warren Buffett has problems, I think we all have to recognize that this was a real difficult year and hopefully next year won't be nearly as bad," Naroff said. "His performance was not nearly as bad as the indices did, so he outperformed them."
Buffett's predictions for 2009 aren't much rosier. He said he expects many of Berkshire's companies to be impacted by the recession and earn below their potential in 2009.
- ABC News
So what does the so called Oracle predict for this year?
"We're certain, for example, that the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall," Buffett wrote.
The Omaha-based company owns major stakes in many household brands including American Express, Coca-Cola, Johnson & Johnson, Kraft, Procter & Gamble and The Washington Post. Buffett said, though, that it was Berkshire's insurance and utility groups that produced strong earnings in 2008 and helped prevent further losses. He said the two groups have "excellent prospects" for the coming year.
Take Berkshire-controlled GEICO, now the nation's third-largest car insurer. Buffett said when he thinks about the opportunities for GEICO he feels like a hungry mosquito at a nudist camp.
"Americans are focused on saving money as never before, and they are flocking to GEICO," he wrote. "In January 2009, we set a monthly record – by a wide margin – for growth in policyholders. That record will last exactly 28 days: As we go to press, it's clear February's gain will be even better."
- ABC News
The article then delves into his mistakes:
"I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year," he said. "I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars."
- ABC News
Buffett also spent $244 million on shares of two Irish banks in 2008 "that appeared cheap to me." By the end of the year, they were worth $27 million, an 89 percent loss. The shares have dropped even more since.
- ABC News
Overall I have to agree with Diane Swonk, we all knew these numbers were coming, but it doesn't make it any easier to swallow. No matter, how we invest, whether it is in our 401k's, simple IRA's, 403b's or privately in individual accounts, we all took a hit. However, the market will eventually turn and we will gain our money back. This is the time to put dollar cost averaging to work and purchase more in the market, so that we can get back as much as possible before retire. As is always the case timing is the key and for those that are near retirement, there isn't as much hope as those with more time. Still though, there is hope, it just takes wise and informed investing. However, the downturn has proved that nothing is 100%.
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go ahead share your thoughts with me now.
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