"To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates." - Forbes.com 2009
"Beware of geeks bearing formulas" - Warren Buffet 2008
On the other hand, Warren Buffett is equally contrarian, and is doing a lot of similar things with his money, though on a larger scale (writing massive loans to Goldman, Harley, GE etc for 10-15% interest rates). He also has the same complaint about the government. His AAA rated business pays much higher rates to borrow money than Citi, BoA or any of the now gov't sponsored entities.
They went down as the market went down and did have some losses, but they also had an enormous pile of cash and not very much debt. Buffett has been waiting for the market to go down like it has so he could make his move with that cash. As a result, I think he's going to make out extraordinarily well in the coming years.
Sorry for the Buffett fanboyism, but he's the man.
As I understand it he made some serious missteps in the recession. WP:
> Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs at $123[40] only for it to fall to below $60. Furthermore some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses.
Actually, the preferred stock in Goldman is an option. He has the option to buy the stock at $123 indefinitely, meaning if it ever goes above that amount he can then choose to buy it and sell it for a profit.
And like I said, the stock went down with the market. Yes, at one point his stock was down 44%, but so was everything else. And if you look at the fundamentals, they have a small leverage ratio, close to zero actually if I remember correctly, lots of cash, and are one of a handful of companies still rated AAA.
The guy in the article keeps saying if only he had access to more cash he would be making piles more money. Well Buffett has the cash, and he's going to rake it in when the market rebounds.
You understand incorrectly, for the most part. A sinking tide lowers all boats. Buffett doesn't care what the stock market prices his company at in the short term, only how the intrinsic value of his company improves over decades.
Also, the financial press loves to take pot shots, even though Buffett repeatedly and thoroughly explains that Berkshire's stock price will go through severe beatings from time to time.
"Beware of geeks bearing formulas" - Warren Buffet 2008