It looks like it is time for Warren to get on the Obamaphone and make it clear this is unacceptable…
Berkshire Hathaway announced (a 10% decline) $2,367 (Adjusted) EPS, missing estimates of $3,038 by 22.09% – the biggest disappointment since Nov 2008…
Worst still, Net income for the Omaha, Nebraska-based insurance and investment company fell to $4.01 billion, or $2,442 per share, from $6.4 billion, or $3,889 per share, a year earlier – a stunning 37% plunge.
The driver of the weakness appears to be a fall in the paper value of its investments and its insurance companies reported an underwriting loss.
Berkshire's insurance underwriting business, which includes Geico, swung to a $38 million loss.
In the same period a year earlier the business had posted a $411 million after-tax profit.
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Perhaps, as David Stockman previously noted, Warren's ride on the coat-tails of Fed exuberance is over.
During the 27 years after Alan Greenspan became Fed chairman in August 1987, the balance sheet of the Fed exploded from $200 billion to $4.5 trillion. Call it 23X.
Let's see what else happened over that 27 year span. Well, according to Forbes, Warren Buffet's net worth was $2.1 billion back in 1987 and it is now $73 billion. Call that 35X.
During those same years, the value of non-financial corporate equities rose from $2.6 trillion to $36.6 trillion. That's on the hefty side, too—- about 14X.
Corporate Equities and GDP – Click to enlarge
When we move to the underlying economy that purportedly gave rise to these fabulous gains, the X-factor is not so generous. As shown above, nominal GDP rose from $5.0 trillion to $17.7 trillion during the same 27-year period. But that was only 3.5X
Next we have wage and salary compensation, which rose from $2.5 trillion to $7.5 trillion over the period. Make that 3.0X.
