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Wednesday, March 31, 2010

BUSINESSWEEK: BYD Starts Selling Plug-In Vehicle to Consumers in Shenzhen

March 31, 2010, 12:19 AM EDT

March 31 (Bloomberg) -- BYD Co., the Chinese carmaker backed by Warren Buffett, started selling its F3DM plug-in hybrid car to individual customers in the city of Shenzhen on March 29 as the government prepares to offer subsidies for alternative energy-fueled vehicles.

BYD, which started marketing the vehicle to government and corporate buyers in December 2008, is charging 169,800 yuan ($24,900) for the model, more than double the price of its cheapest gasoline-fueled F3 compact car. The F3DM has a range of about 60 miles when using only electric power, according to BYD.

The Shenzhen-based carmaker, 10 percent owned by Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc., delivered 48 F3DM cars last year. Future sales may be boosted by subsidies for alternative energy-fueled vehicles being considered by China’s government, which is expected to announce measures this year.

The F3DM being sold to individual customers is an updated version equipped with a solar panel on the roof, allowing it to use gasoline, electricity and solar energy, the company said.

--Tian Ying. Editors: Terje Langeland, Ian Rowley.

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BARRONS: The Best CEOs

MONDAY, MARCH 29, 2010

In tough times, Barron's 30 kept their companies safe and strong. New names: Larry Ellison of Oracle; Reed Hastings of Netflix; and Alan Mulally of Ford. Stalwart returnees: Jamie Dimon of JPMorgan Chase; Tesco's Terrence Leahy.

WHILE MANY COMPANIES WERE FORCED to hunker down during the recession and financial crisis of 2008 and 2009, others went on the offensive -- and scored big. So as we drew up our annual list of the 30 Most Respected CEOs, we sought to identify executives who kept their companies out of trouble and took advantage of the downturn to expand, make shrewd acquisitions, feast on the problems of competitors or otherwise distance themselves from rivals. The roster includes 11 new names, including Larry Ellison of Oracle, Alan Mulally of Ford Motor, Reed Hastings of Netflix, Tim Solso of Cummins and Gordon Nixon of Royal Bank of Canada.

Ellison is one of the most dynamic and controversial executives in technology, not to mention an accomplished yachtsman who brought the America's Cup back home earlier this year from the reigning champs in New Zealand. He has shattered the idea that tech mergers don't work,pursuing a successful strategy of buying and rolling up companies like PeopleSoft and Siebel Systems to create a software behemoth. Oracle is now digesting Sun Microsystems, one of its largest deals yet.

Ford's smart moves under Mulally's leadership enabled it to be the only member of the Big Three auto makers to avoid bankruptcy. The former Boeing leader cut through an infamous bureaucracy, promoted accountability and focused on the company's best asset: the Ford brand. Ford now is a Wall Street favorite, with its stock price up five-fold in the past year.

While not an obvious member of our elite group, Hastings qualifies because he has consistently defied doubters -- and short sellers -- to position Netflix as the leader in the DVD-rental business and video downloads, while once-formidable rivals like Blockbuster lie in ruins.

The little-known Solso has turned an underperforming company into a model of industrial competitiveness; Cummins now is the world leader in diesel-engine technology.

Nixon doesn't get much attention compared with prominent U.S. bankers, but he kept Canada's largest bank profitable throughout the downturn, and Royal Bank now has something Jamie Dimon covets: a lofty price/book ratio of nearly three, against just one for JPMorgan. In all, our list includes a dozen CEOs from outside the U.S.

THIS RANKING ISN'T BASED on any statistical formula. Barron's has an investment orientation, and we pay close attention to how stocks perform during a CEO's tenure. We talk to investors, analysts and executives to identify those CEOs who have made a difference internally and on Wall Street. We haven't tried to rank the 30 in importance -- they are profiled individually in alphabetical order.

Top CEOs: B-D | E-J | K-N | O-Si | Sk-W

Not surprisingly, the stocks of most of the these companies have beaten the market during the CEOs' tenures, and the 30 stocks were up an average of 91% in the 12 months ended March 19, well ahead of the 51% gain in the Standard & Poor's 500.

Probably the world's most valuable CEO is Steve Jobs of Apple, as shown by stock dips on news of his medical problems. Apple recently hit a record, with a market value topping $200 billion, a reflection of the Street's confidence that a healthy Jobs (at least from what we can tell) continues to keep Apple ahead of the game. Jobs likely accounts for $25 billion or more of Apple's market value.

Among the best CEOs are founders who bring an entrepreneurial energy deep into their careers. Warren Buffett, at 79, is the ultimate founder/CEO. His Berkshire Hathaway is his baby, and he cares for it with a parent's devotion. Thanks to Buffett's guts and financial smarts, Berkshire capitalized on the financial crisis at least as well as any large company by making more than $20 billion in lucrative investments, such as preferred shares in Goldman Sachs, General Electric and insurer Swiss Re.

[whose]

The little stuff about Buffett is telling. He recently mentioned that he plowed through American International Group's 500-page 10-K report for 2009 on a Friday night. That kind of homework has helped Berkshire's market value go from $20 million to $200 billion in Buffett's 45-year tenure.

While Buffett prefers to stay in Omaha and have the world come to him, Costco co-founder and CEO Jim Sinegal, at 74, maintains a punishing travel schedule that takes him to most of the warehouse chain's 566 stores each year. "There are no annuities in retailing," Sinegal says, adding that there also is no substitute for seeing stores and talking to managers and other employees face to face.

Another bunch of valuable executives are consummate managers like Mark Hurd of Hewlett-Packard, John Chambers of Cisco Systems and Rex Tillerson of ExxonMobil. Hurd put HP back on track after Carly Fiorina's rocky tenure, while Chambers keeps Cisco ahead of the pack as the dominant networking equipment company. Under Tillerson, Exxon has remained one of the world's best-managed big companies in any industry.

Buffett says risk control is so critical for a large financial company that it should be the CEO's job to personally monitor it. JPMorgan's Dimon has the same philosophy, and it helped the bank avoid the worst of the financial mess. Strong leadership was lacking in many of the financial companies battered by the crisis, including American International Group, Bear Stearns and Citigroup.

JPMorgan is clearly playing offense while rival Citigroup continues to regroup. For example, JPMorgan is targeting American Express' affluent customer base with its Sapphire Visa cards.

When we began this list in 2005, the little-known Larry Fink of BlackRock made the cut because we felt he was one of the smartest and most capable executives in the financial industry. Fink has rewarded our confidence, building BlackRock into one of the largest asset managers in the world. Fink is also the go-to guy for Washington policymakers seeking advice on dealing with Wall Street -- thanks to his independent streak and deep understanding of the markets.

Another good pick: Bob Simpson, the founder and former CEO of XTO Energy, one of the most successful independent energy companies. Simpson capped his career by agreeing to sell XTO to Exxon for $41 billion in late 2009. Like Fink, he has been another multiyear member of our list.

We have made mistakes over the years. We're embarrassed that Fred Goodwin, the former CEO of Royal Bank of Scotland, made our list in the past; his overextended bank had to be rescued by the British government. For several years, we were impressed by Lehman Brothers' Dick Fuld, not recognizing that the downside of his steely and seemingly successful leadership was an authoritarian corporate culture where risk control went awry.

Readers may disagree with some of our choices. We welcome feedback and CEO nominations for next year's list. We require that CEOs have been on the job for at least three years, and we prefer executives who lead companies with market values of at least a few billion dollars.

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Tuesday, March 30, 2010

THE DEAL MAGAZINE: Exceptional Warren



So here we are in the middle of March, which for the financial media, means one thing: It's time to worship at the altar of Warren Buffett. After soaking up the kind of space The Wall Street Journal typically reserves for earthquakes and terrorist attacks, Buffett's annual letter to shareholders, released during the last weekend in February, is still being pored over by journalists in search of wisdom -- and in anticipation of Berkshire Hathaway Inc.'s annual shareholderfest in May.

Buffett's grinning mug was recently found on the cover of BusinessWeek magazine. And then there was his three-hour interview (three hours!) on CNBC, held at Piccolo Pete's, Buffett's favorite Omaha restaurant, founded in 1933. How -- dare we say it? -- folksy!

Yes, for a certain segment of the financial media, it's been all Warren, all the time, a phenomenon that continues to grow, along with Berkshire's shareholder base. The avalanche of cheery coverage serves to burnish Buffett's image not only as a great investor, but as a great man, a morally superior alternative to Wall Street, who favors frugality and value over greed and excess. Indeed, his pronouncement that getting deal advice from investment bankers is a bad idea -- "Don't ask the barber whether you need a haircut" is how he put it -- was heralded as good advice "far beyond Wall Street" by Andrew Ross Sorkin in his New York Times column. "Just think of all the other parts of life where people offer only encouraging words -- 'You should do this!' -- because that's the only way they get paid (real estate agents, stockbrokers, the list goes on)," wrote Sorkin, who once again this year will question Buffett at Berkshire's shareholder jamboree.

What else is new? Every year around this time we're reminded how Buffett gets a pass, even as the contradictions grow. Derivatives? They might be weapons of mass destruction, but Buffett uses them. Wall Street? There's his very profitable, $5 billion investment in the vampire squid itself, Goldman, Sachs & Co., a firm that, like Salomon Brothers before it, engages in everything Buffett supposedly disapproves of: speculative trading, leverage, derivatives, investment banking, predation. Asked by a CNBC viewer if he would invest in Goldman again, given its "political problems," Buffett is unrepentant. "It's a very, very strong, well-run business," he responded. And as for Lloyd Blankfein, he said, "You cannot find a better manager."

Uttered by almost anyone else, those words would bring out the Goldman haters in droves. Recall the outcry a few weeks ago after President Obama called Blankfein a "savvy" businessman during an interview with BusinessWeek. But even for the anti-Goldman media, Buffett remains beyond reproach, a policy that extends from his business to his personal life. Indeed, Buffett and his first wife, Susie, lived apart for 27 years, during which time he lived with Astrid, a friend of Susie's, and dated Katharine Graham. He married Astrid after Susie died.

Hey, that's fine with us. But what's interesting here is the way these facts are acknowledged by the media but rarely, if ever, judged, dwelled upon or snickered at, even when they were laid bare last year by his biographer, Alice Schroeder (whom Buffett apparently has stopped speaking to). Time magazine's observation last year that Buffett's personal life "can be something of a wreck" was as damning as the coverage ever really got.

To understand just how exceptional such treatment is, imagine, say, if Dick Fuld, of Lehman Brothers infamy, had engaged in a similar arrangement. The media would have busted a gut clucking over every detail it could find.

As it turns out, Fuld appears to be a devoted husband, one half of "one of the happiest couples on the planet," at least according to an article, "Lehman's Desperate Housewives," in the most recent issue of Vanity Fair. But in this telling, excerpted from Vicky Ward's upcoming book, "The Devil's Casino: Friendship, Betrayal, and the High Stakes Games Played Inside Lehman Brothers," Fuld's happy marriage is largely portrayed as creepy. It seems Fuld wanted his senior executives to be happily married, too, which apparently put too much pressure on other Lehman wives "to be happy and pretty and smiling when there was an event, and you really would have liked to strangle somebody."

Fuld had the audacity to thank wives of new managing directors for all the "canceled dinners, weekends, and vacations" they were about to suffer, which Ward offers as proof that "[i]f you were married to a Lehmanite, you belonged to the firm." He even required some wives to attend Lehman's summer retreats in Sun Valley, which was always "an absolute nightmare to pack for," what with the dresses, Manolo Blahniks and hiking gear the trip required.

We could go on about the excerpt, which reads like a lesser version of the seminal piece on unhappy Wall Street wives, New York magazine's 1998 "Married to the Market," which still holds up today.

But the more important point here is how the media can take what's typically seen as a virtue -- Fuld's devotion to his wife -- and turn it into a negative, even as Buffett is not only given a pass on his marital eccentricities, but is deified for his "folksy" values. Maybe stock prices are our true moral barometer: Lehman, of course, has evaporated while Berkshire Hathaway flies on.

Of course that can all change in a nanosecond. If Fuld had somehow saved Lehman, chances are the media would be singing the praises of his happy marriage and family values. And if Berkshire Hathaway suddenly tanked, Buffett's "something of a wreck" of a personal life would become front-page news, not to mention his cozy relationship with the vampire squid.

Yvette Kantrow is executive editor of The Deal.

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Saturday, March 27, 2010

Wesco Annual Letter 2009

Read the latest Wesco Annual Letter from Charlie Munger out today 27/03/10

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BLOOMBERG: Berkshire’s Munger Says Furniture Business Takes a ‘Hammering’

By Andrew Frye

March 26 (Bloomberg) -- Berkshire Hathaway Inc. Vice Chairman Charles Munger said the furniture-rental business he oversees will post “disappointing profits” this year after a loss in 2009 driven by the U.S. economic slump.

CORT Business Services Corp. reported a $1.4 million loss last year, compared with profit of $15.7 million in 2008, Munger said today in his annual letter to shareholders of Wesco Financial Corp., which owns the furniture company. The letter by Munger, 86, was posted today on the Web site of Wesco, which is majority owned by Omaha, Nebraska-based Berkshire.

The results reflect “the hammering caused by the severe economic recession,” said Munger, Wesco’s chairman. “So far, CORT’s business has been melting away faster than CORT can fix it.” CORT, which cut its staff about 19 percent last year to 2,248, is focusing on expenses rather than expanding services, Munger said. While Munger doesn’t forecast another loss, “we expect disappointing profits” at CORT in 2010, he said.

Berkshire, run by billionaire Warren Buffett, owns 80 percent of Wesco. The Pasadena, California-based company makes steel parts, rents furniture and sells insurance to banks and airlines. Munger’s letters and public statements have earned him attention alongside Buffett, and inspired authors to collect his pronouncements in books.

Last year, Munger warned that the economic slump would get worse and said he was following the advice of Benjamin Franklin that “‘a penny saved is a penny earned’ as we trim expenses, albeit in higher denominations.”

Job Losses

The U.S. has lost 8.4 million jobs since the recession began in December 2007, the worst slump in the post-World War II period. The decline has reduced demand for office furniture.

Wesco posted net income of $54.1 million last year, a 34 percent decline from 2008, as Berkshire’s profit rose 61 percent to $8.06 billion. Wesco shares rose 19 percent last year to $343, compared with the 2.7 percent increase in Berkshire’s stock and the 23 percent increase in the Standard & Poor’s 500 Index.

Buffett, 79, writes his own annual letter to Berkshire shareholders. This year, Buffett projected the U.S. residential real estate slump will end by about 2011 and said he wished Berkshire spent more on corporate and municipal bonds in 2009. Buffett was named the third-richest person in the world by Forbes magazine this year. Munger tied for 582nd.

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Friday, March 26, 2010

NASDAQ: Berkshire Hathaway Sells 205,628 Shares Of Moody's - Filing


By Aparajita Saha-Bubna, Of DOW JONES NEWSWIRES

Billionaire investor Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) disclosed in a filing Thursday it sold 205,628 shares of Moody's Corp. (MCO) in two batches this week, reducing its stake in the ratings company to 30,786,876 shares.

Berkshire has been selling Moody's shares since the summer. As of Dec. 31, 2009, Berkshire's remaining stake in Moody's amounted to 13% of Moody's fully diluted shares.

The Omaha, Neb., conglomerate sold one batch of 148,054 shares on March 23 at $30.23 and another 57,574 shares on March 24 at $30.37, according to the filing, raising more than $6 million in the sale for Berkshire.

Earlier this week, Berkshire Hathaway disclosed in a separate filing on March 22 that it sold nearly 816,000 shares of Moody's, raising more than $24 million in the sale.

Moody's business has suffered during the financial crisis, and the New York- based company has been criticized for the top grades it and some other ratings firms had issued to mortgage-backed securities that later underperformed.

-By Aparajita Saha-Bubna, Dow Jones Newswires

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FINANCIAL POST: What Warren Buffett's Geico ad says about him -- and about CEOs

Daniel Gross, Slate.com Published: Thursday, March 25, 2010

Warren Buffett Rocks Out for Geico

Warren Buffett dons an Axl Rose costume circa 1989 and belts out a few lines in this new Geico commercial. His company Berkshire Hathaway is the full owner of Geico.

March 19, 2010

In a climate in which CEOs -- especially really wealthy CEOs of financial firms -- are generally unpopular, it might seem dicey to use one in an advertisement. Of course, there is a long tradition of bosses and founders appearing in pitches for their firms' products and services. And there are good reasons for doing so. It saves ad agencies the cost and effort of hiring actors. CEOs are more likely to approve high-concept ads if they themselves are in them. Most significant, the ads can work.

Over the years, CEO ad appearances have come in several forms. There's the CEO as product endorser. In the 1980s, Victor Kiam was a fixture in advertisements for the Remington razor. His famous pitch: "I liked it so much that I bought the company." There's the founding CEO as folksy embodiment of the brand. Wendy's founder Dave Thomas routinely appeared in ads (like this one) pitching his aw-shucks demeanor and the fast-food joint's square burgers. There's the CEO explaining what his company does and trumpeting a slogan. Joseph Goryeb, CEO of Champion Mortgage, an early subprime lender, appeared in his company's advertisements, always uttering the catchphrase "When your bank says no, Champion says yes." (Of course, those ads became obsolete during the late credit bubble, when banks stopped saying no.)

And then there's the CEO as tattooed and bandana'd rock star Axl Rose.

Huh? Yes, that's right. That's Warren Buffett hamming it up in a new ad for the auto insurance firm Geico. Buffett, the CEO of Berkshire Hathaway, which owns Geico, is an icon of American capitalism, the second wealthiest American (and a member of the board of directors of Slate.com's parent company, the Washington Post Co.).

Insurance -- and car insurance in particular -- has become a surprisingly fertile field for creative ads. Maybe there's an inverse relationship between the excitement or intrinsic funniness of an industry and the ads crafted to pitch it. But in recent years, we've seen the highly popular and effective AFLAC duck, Progressive's wacky saleswoman Flo, and Geico's campaigns with the gecko, the googly eyes perched on dollar bills, and the cavemen. Now Geico has upped the ante once again.

One big difference between this ad and the standard CEO ad -- and perhaps a concession to the generally unfavourable public mood toward CEOs -- is that Buffett is uncredited. If you don't know it's him, you may think it's just some weird old guy with chunky glasses acting like Axl Rose, which you may find funny. If you don't know Axl Rose, maybe you'll chuckle at the notion of an earnest power ballad about car insurance. And if you know it's Warren Buffett's Axl Rose impersonation-which is to say, if you are a journalist, Nebraskan, or devotee of the cult of Buffett -- you have the added bonus of an inside joke.

The ad, like most things Buffett has done, works. Buffett has a good sense of humour. He takes his job and responsibility to shareholders very seriously, but the ad shows that he doesn't take himself too seriously. Buffett's public persona is frequently self-deprecating. I can't imagine many CEOs reacting favorably to an ad person suggesting that he wrap his head in a purple scarf, paint fake tattoos on his arms, put on a wig, and sing off-tune while rocking back and forth. But Buffett actually did.

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USA TODAY: Warren Buffett sees strong rail system as key to U.S. growth

By Dan Reed, USA TODAY

In Matt Rose's 10 years at the helm of BNSF Railway, he'd heard plenty of investors talk about quarterly performance. A few would even talk about the railroad's annual performance.

Then on Feb. 12, he answered a call from Warren Buffett, the legendary investor who looks for long-term return and whose Berkshire Hathaway holding company had just closed on its $26 billion purchase of the 77% of BNSF shares it didn't already own.

"Warren called me and said, 'I'm looking forward to our first century together,' " Rose says. "I'd never heard an investor use the word 'century' before."

When the deal — the largest purchase in Berkshire's history — was announced in November, there was plenty of second-guessing. Was age finally catching up with the "Oracle of Omaha?" Railroads, after all, generally are viewed as 19th-century technology, and they've suffered big drops in shipping and revenue in the recession. And the 79-year-old Buffett is talking about an investment that pays off throughout the 21st century?

Buffett chuckles at the suggestion that buying the nation's second-biggest railroad is a sign of senility. He argues that railroads represent the future. They're best-positioned to haul the raw material and finished goods for a nation and economy that he insists are bound to grow. Unlike trucks, trains don't have to compete on congested highways. Nor do railroads depend on strapped governments to maintain infrastructure.

"They don't need the government to build them new highways and airports," he says in an interview with USA TODAY. "They've already invested heavily in their infrastructure and technology, and they plan to invest more to keep up with the growing demand.

"They're the only mode of freight transportation that can handle growth. What's not to like about that?"

Buffett also laughs that his big bet on the future — taking what for him was the radical step of splitting Berkshire class B shares (BRKB) 50-to-1 to make the BNSF acquisition acceptable to the railroad's shareholders — is a second sign he's slipping.

"We didn't split the A stock!" Buffett says in a half-joking defense of his competency. Berkshire's iconic class A shares (BRKA) currently are priced at a jaw-dropping $122,090 each.

Nor would he have split Berkshire's class B shares, priced at more than $3,000 a share before the BNSF deal, if he didn't think his wager was worth it. When the class B shares were created in 1996 as a way for smaller investors to buy a piece of Berkshire, Buffett says the plan always was to execute a stock split if it became necessary to close an important purchase.

But he also intended to be pretty picky about what would be worth that step. A railroad is that purchase.

Tracking history

Buffett grew up in the 1930s and 1940s when folks in Omaha, the hometown he shares with Union Pacific, thought eating Sunday lunch at the Union Pacific station downtown was a sign of social sophistication.

And he confesses to a life-long love of railroads.

He has an elaborate model railroad layout on the third floor of his home for his children and grandchildren, though "it gets little action," he says, because they don't share his fascination and he has little time for it.

But buying BNSF (for Burlington Northern Santa Fe) is no nostalgia play. Buffett foresees a dynamic and profitable future not just for BNSF but for the nation's rail industry; so much so that he chastises himself for coming to that view, he says, two years late.

"There are just four big railroads in the U.S.," Buffett says. "I know the people who run three of the four, and they're all good people. They will all have similar destinies. They will all do very well, especially Union Pacific and BNSF."

Counting the $8 billion in BNSF shares Berkshire already owned, the $26 billion in cash it paid for the remaining BNSF shares, and the assumption of $10 billion of debt, Buffett has invested $44 billion in the railroad.

Rail also is a capital-intensive industry. Buffett says, "If anything, we'll be investing more" in BNSF in the near term "as we build it for the future."

His move has been good for the industry. When the BNSF buyout was announced, BNSF's stock, which had been bumping along at around $77 a share, immediately shot to near Berkshire's $100-a-share offer price. BNSF shareholders weren't the only beneficiaries. Most of its rail competitors' shares jumped, too, and, for the most part, have remained strong.

Several analysts suggest that as much as $18 billion has poured into the industry as investors bought other so-called class I rail stocks: Union Pacific, CSX, Norfolk Southern, Kansas City Southern, Canadian Pacific and Canadian National.

"Some of those who took money out of the BNSF deal wanted or needed to still be in rails," says Morgan Stanley transportation analyst William Greene. "But, of course, there's more to it than that. Some of that share (price) improvement in those other (railroads) is related to investors buying those names because they think the rail fundamentals are improving."

Drawing lots of attention

However it's attributed, the long-term value investment thesis for which Buffett is famous has become evident to other investors.

"Buffett is looking at (railroads) in terms of the long-term population and GDP growth in this country," Greene says. Assuming a modest long-term economic growth rate of 2.5% and average annual population growth of 1.5%, "that translates into a lot of new goods being made and transported to a lot more people in this country over the next few decades," he says.

"Then take into consideration that we're not building new highways and ports in this country," Greene adds. "That means there's only one way to move all the extra stuff we're going to have to move as our population and economy grow."

No one argues that railroads are now good investments simply because Buffett has deemed them worthy. But his ability to spot a long-term value opportunity, and his willingness to move ahead of the pack, makes him one of America's most closely followed investors.

"No doubt, Warren Buffett created a lot of positive press for the rails," says analyst John Mims, who follows the industry for BB&T in Richmond, Va. "But the institutional investors out there aren't going to be swayed as much by that as retail investors," he adds, noting that only a sliver of rail shares are owned by individuals.

Yet, institutional investment managers sometimes miss trends. Even when they don't, they can be reluctant to jump in until a prominent investor makes a bold leap.

"What Buffett did was highlight for everyone that this is just a real positive time for the rails right now," Mims says. "(Shipping) volumes are getting better. Pricing is getting better. By announcing that Berkshire was investing $44 billion in a railroad, Buffett, with his track record of success, was endorsing the viability of the rails."

Impact of ups and downs

But what if, as some economists continue to predict, a second half of a double-dip recession is headed this way later this year or next? What if, as some bears suggest, the U.S. economy goes into a prolonged period of stagnation and weakness, creating a Japanese-like lost decade or two?

"As long as it isn't a lost century, I'm OK," Buffett says.

"We used to call these things 'panics,' " Buffett says of the recent recession. "In the 19th century, we had seven or eight of them. We had the Great Depression. We've had flu epidemics. We had the Civil War. But the person who bets on this country and its economy going backward is the guy who has to explain himself, not me.

"Since 1790, this (the USA and its economy) is the wonder of the world," Buffett says. "The ingredients of that have not disappeared from this world; 9/11 and all sorts of things have come and gone, but the United States' success story isn't over." That's why he was comfortable in November calling Berkshire's BNSF buyout an "all-in wager on the economic future of the United States."

"Our country's prosperity depends on its having an efficient and well-maintained rail system," he said. At the same time, he said, "America must grow and prosper for railroads to do well."

BNSF's Rose says the industry, and BNSF in particular, is well-positioned to help the nation prosper. It's already made huge investments in new technology, infrastructure and markets, he says.

After the industry was deregulated in 1980, Rose says, "The railroads spent the next two decades going on a productivity binge, wringing out excess costs, getting rid of inefficient lines, finding wage rates that we all could live within, both for employees and our companies. We think we are a very productive institution at this time."

U.S. railroads were 144% more efficient in 2008 than in 1980, according to the Association of American Railroads, the industry's trade group. In 2008, they carried, on average, a ton of freight 457 miles on one gallon of diesel fuel, up 5% from 436 miles just a year earlier. And the association claims that if just 10% of the freight that now moves by truck were moved to the rails, the USA would burn 1 billion fewer gallons of fuel a year.

And that's what they want to do: move more freight from the highways to the railways. The fuel savings would be an economic benefit to the rails and shippers, and a general benefit to society and the environment, Rose says.

"While there's been a tremendous couple of decades of productivity with the trucks, they've hit that peak, and now they're headed down," he says.

And the railroads are ready. The AAR's member railroads have poured more than $440 billion, better than 40% of their combined revenues, between deregulation in 1980 and 2008 into new locomotives and technologies to improve hauling capabilities and lower costs. They've laid double, triple, quadruple tracks in heavily traveled rail corridors to relieve costly shipping bottlenecks. They've opened new and enlarged existing rail yards and intermodal shipping sites, where ocean shipping containers and de-coupled highway truck trailers can be stacked on flat cars for long-haul shipping, to make lines more accessible.

Meanwhile, inflation-adjusted average shipping rates, excluding fuel and other surcharges, fell 49% over that same 28-year period, according to AAR data. And the same economics of scale that help make rails the lowest-cost option for transporting heavy loads long distances also happen to make them relatively "green" in an era when that increasingly matters. Rose and other rail boosters claim long-haul trains are three to four times more fuel-efficient than trucks in terms of freight tons miles per gallon of fuel.

"This has an enormous beneficial effect on society," Buffett says.

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Buffett raises Munich Re stake to nearly 8%

By Jonathan Gould, ReutersMarch 25, 2010 11:25 AM

FRANKFURT -- Famed U.S. investor Warren Buffett, already Munich Re’s biggest shareholder, has built up his stake in the world’s No. 1 reinsurer to nearly 8%, increasing his bet on the sector’s long-term prospects.

Mr. Buffett, who owns the world’s third-biggest reinsurer Berkshire Hathaway Inc as well as a 3% stake in No. 2 player Swiss Re, exercised options on a stake of 2% in Munich Re on March 11, Munich Re said on Thursday, bringing his position to 7.988%.

Munich Re shares have risen more than 10% since Jan. 15, the day before Mr. Buffett’s stake crossed over the 3% mark for the first time, triggering a disclosure announcement.

The Stoxx Europe 600 index of insurance shares has risen 2.8% over the same period.

Mr. Buffett’s stake is now worth more than 1.8 billion euros (US$2.4-billion), based on the company’s market capitalisation of over 23 billion euros.

Analysts and even Munich Re itself have only been able to speculate about Mr. Buffett’s motives for building up the holding, as Mr. Buffett’s representatives have stuck to their policy of declining comment.

Most observers say the interest is financial rather than strategic.

"Buffett clearly likes the industry and has known all the participants well over a long period of time," said insurance analyst Ben Cohen at brokerage Collins Stewart.

If Mr. Buffett considered reinsurance industry margins as good and wanted to increase his exposure, buying stakes in competitors would give him that exposure without the danger of influencing reinsurance prices, analysts said.

Further raising its attractiveness, Munich Re has been buying back its own shares and has raised its dividend.

In May 2007, the company unveiled a 5 billion euro share buyback programme, of which 4 billion is expected to have been purchased by April this year.

Munich Re chief executive Nikolaus von Bomhard said Mr. Buffett’s arrival as a major shareholder backed the company’s strategy of reducing earnings volatility over the long term.

"He would not have bought in if he didn’t think our strategy good," Mr. von Bomhard said earlier this month.

The presence of Mr. Buffett, a traditional proponent of long-term investing, would help highlight Munich Re’s efforts to the wider investor community, chief financial officer Joerg Schneider added.

"He is ideal for us," he told Reuters.

Mr. Buffett’s Munich Re stake was revealed 11 months after Berkshire injected 3 billion Swiss francs (US$2.8-billion) into Swiss Re, after the world’s second-largest reinsurer wrote down large sums of illiquid assets.

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Thursday, March 25, 2010

THESTREET.COM: Buffett to Posco: Think Twice About Deal

By Eric Rosenbaum 03/24/10 - 09:04 AM EDT

OMAHA, Neb. (TheStreet) -- Is South Korea's steel giant Posco the Kraft(KFT) of the metals world?

Berkshire Hathaway
(BRK.B) was none too happy with Kraft last fall when it went full-throttle in its acquisition of British candymaker Cadbury, and now Warren Buffett is sounding alarms about Posco's plans to acquire shipbuilder Daewoo Shipbuilding & Marine Engineering.

Posco told Bloomberg that shareholders, including Buffett, have asked the steel maker to begin a "thorough" review of the bid, as the shipbuilding industry could be headed for a trough. The Korea Economic Daily was the first to report Buffett's latest reservations about a Berkshire Hathaway holding's acquisition plans. The Asian paper said that Buffett indicated he won't support the bid as it stands, though Buffett did not respond to a request for comment by Bloomberg.

Last fall, Buffett's vocal criticisms of Kraft's plans got the food conglomerate to back off from using a significant portion of its shares to finance the acquisition of Cadbury.

Buffett was busy on the acquisition front earlier this week, announcing that Berkshire Hathaway had acquired its first liquor distribution company .

Daewoo's shares slumped on the news, while Posco shares rose in Asia on the report that the sale might not go through.

Final bids for the shipbuilder are due in mid April.

Both Kraft and Posco are among the largest public stocks in the Berkshire Hathaway portfolio.

-- Reported by Eric Rosenbaum in New York.

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Wednesday, March 24, 2010

BUSINESSWEEK: Posco Says Buffett Wants Study of Daewoo Ship Offer

By Sungwoo Park

March 24, 2010, 1:44 AM EDT

March 24 (Bloomberg) -- Posco, Asia’s most profitable steelmaker, said shareholders including Warren Buffett want the mill to undertake a “thorough” study of the effects of a bid for a shipbuilder because of concern over the industry’s outlook.

Buffett’s Berkshire Hathaway Inc. and other foreign and domestic investors “have expressed concerns that the shipbuilding industry may go through a prolonged downturn,” Choi Doo Jin, a Posco spokesman, said by phone today, commenting on a report in the Korea Economic Daily. Daewoo Shipbuilding & Marine Engineering Co. shares fell by the most in almost four months on the report, which said overseas shareholders oppose a bid for the shipyard.

Posco’s Chief Executive Officer Chung Joon Yang is spearheading a $30 billion expansion that includes plans to build plants in India and Indonesia as demand recovers after the global recession. Chung said in January Posco will consider bidding for Daewoo Shipbuilding, the world’s third-biggest shipbuilder.

“This is a blow to Daewoo Shipbuilding shares today because it could mean that the sale will fail again,” said Cho In Karp, head of research at Heungkuk Securities Co. in Seoul. “Posco is the only company that has the cash on hand to buy a company of this size.”

Posco shares rose as much as 1.9 percent and were 0.4 percent higher at 533,000 won at 1:45 p.m. in Seoul. Daewoo Shipbuilding fell as much as 8.2 percent, the biggest intraday decline since Nov. 27, and was down 4.1 percent at 21,100 won, valuing the company at about $3.5 billion.

Reviewing Synergies

Berkshire Hathaway and other overseas investors told Posco they won’t support the steelmaker’s bid for the shipbuilder, the Korea Economic Daily reported earlier today.

Buffett didn’t respond to a request for comment left with an assistant at his Omaha, Nebraska office. Berkshire holds a 4.5 percent stake in Pohang, South Korea-based Posco, according to data compiled by Bloomberg. Overseas investors own 49 percent of the Korean mill, according to Bloomberg data.

“We will thoroughly review possible synergies once the shipbuilder is put up for sale,” Choi said.

State-owned Korea Development Bank and Korea Asset Management Corp. scrapped plans to sell their 50 percent stake in Daewoo Shipbuilding last year in the hope of attracting a higher price.

Investors didn’t express concerns over or oppose Posco’s bid to buy a controlling stake in Daewoo International Corp., a South Korean trading company that’s leading a natural gas project in Myanmar, Posco’s Choi said.

Posco, Lotte Group and Jihan Global Consortium can conduct due diligence until mid-April before making final bids, Korea Asset Management Corp., the biggest shareholder of Daewoo International, said March 19.

--With assistance from Erik Holm in New York and Kyunghee Park in Singapore. Editors: Aaron Sheldrick, Matthew Oakley.

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NEW YORK TIMES: Buffett's Firm Sells 815, 905 More Moody's Shares

Filed at 11:29 a.m. ET

OMAHA, Neb. (AP) -- Billionaire Warren Buffett's company has sold another 815,905 shares of credit ratings firm Moody's Corp., but Berkshire Hathaway Inc. still holds nearly 31 million shares.

Berkshire reported the latest stock sales to the Securities and Exchange Commission on Monday.

Berkshire still controls about 13 percent of Moody's stock, but the Omaha company has significantly reduced its Moody's holdings over the past year.

Berkshire held 48 million shares at the end of last March and reduced that stake to 30.99 million as of last week.

Berkshire said the latest Moody's sales were completed last Thursday and Friday in two blocks, with average prices of $29.98 and $29.81. So the sales would have generated roughly $24.4 million for Buffett's company.

Moody's shares rose 8 cents to $30.10 on morning trading Tuesday.

------

On the Net:

Berkshire Hathaway Inc.: www.berkshirehathaway.com

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