Berkshire downgraded to sell because of economy

Source: Associated Press

By JOSH FUNK (AP) – 15 minutes ago

OMAHA, Neb. — An analyst advised investors Thursday to sell shares of Warren Buffett's Berkshire Hathaway Inc. because the economy may weaken over the rest of the year and hurt demand for its businesses that rely on consumer spending.

Stifel Nicolaus analyst Meyer Shields said in a research note that declining consumer confidence will likely slow consumer spending. Oil prices could also rise and further reduce consumer spending.

Berkshire's insurance businesses, like Geico and General Re, generated more than half the company's $8.1 billion profit last year, but its clothing, furniture, jewelry, railroad and building materials businesses are sensitive to the health of the economy.

Shields also said Berkshire may be hurt more than other companies in an economic downturn because of its derivative contracts and investments. Some of Berkshire's derivatives are tied to the value of several stock market indexes, so their value would fall if those stock markets falter.
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Online:

Berkshire Hathaway Inc.: http://berkshirehathaway.com

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Yikes.

If it's any consolation, I can trade 100 shares for only a $7 commission.

good guy. My heart broke when I was informed of the truth.

We already know their plan to ruin the economy and the administration, and on the surface this fits like a freaking glove.

So I hope that THIS wasn't the only down grade of hers
based on that analysis.

I can buy more shares.

Keep Buying the Dips all the way to The Bottom.

This is like the canary in the coal mine.

:P

And the headline talks like the rating for Berkshire Hathaway, one of the most valuable stocks in America, is going down the toilet. Good move "liberal" media.

Is Warren Buffet dead? No? Then Berksire Hathaway is still a buy.

Lord Keynes explained the whole thing back in Principles of Economics 101, but nobody seems to have paid attention. The initial stimulus package was too small to begin with, and too heavily weighted in favor of tax cuts, which are an inefficient form of economic stimulus. Now the deficit hawks are getting all the attention, and nobody is even trying to explain Keynesian principles.

Don't be surprised if we wind up with a balanced budget, and a recession that outlasts all of us.

People seem to forget that there is no plan whatsoever for the second part of that.

Keynes saw the feckless accumulation of massive sovereign debt as a poison sure to kill the patient.

And this is a good thing, since trucking is worse for the environment. (Though then this puts truckers out of work. Argh.) Anyway, just a point in favor of Berkshire.

This analyst has a pretty decent track record. http://www2.stifel.com/site/content.aspx?id=192&aid=169

Why I call this technical is because BRKB had outperformed the S&P 500 by 26% YTD so this analyst just thinks the stock got too pricey. I won't venture a guess on that count.

General Re is a "supercat" insurance company meaning they insure against disasters. Last year there were no hurricanes that hit North America so General Re made out like a bandit. They had a huge loss in 2005 (the year of Katrina/Rita). That makes the insurance comment highly misleading. Berkshire also has a huge holding in Coca Cola and that is a stock that outperforms in hard times. Also, building materials have been weak for the last couple of years meaning that it will take still another year before recovery can occur. Besides, his holdings in that area are small when compared to Coca Cola.

Frankly, I think the writer got a little carried away with the comments on underlying reasons for a sell. The downgrade was less about the economy and more about overvaluation when compared with the S&P 500 but you would never get that from the article.