Buffett's Buffet

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Sunday, December 30, 2007

Buffett's Buffet

Warren Buffett, the legendary investor from Omaha, had a busy week. On Wednesday, his holding company, Berkshire Hathaway, bought industrial conglomerate Marmon Holdings for $4.5 billion. On Friday, Berkshire bought a reinsurance company and launched a company to insure municipal bonds, taking advantage of the fact that competitors in that field are reeling from losses in mortgage-related securities.

All three moves are classic Buffett -- the first, an acquisition of a boring firm with stable earnings; the second, expanding his dominance of the global reinsurance business; and the third, exploiting Berkshire's sterling financial position to take advantage of a market breakdown. (Berkshire is a leading shareholder of The Washington Post Co., and Buffett is a member of The Post Co.'s board.)

More interesting are the moves Buffett is not making. With massive losses on complicated investment vehicles in recent months, a wide variety of financial institutions have gone about raising new capital on rather unfavorable terms. Citigroup, Morgan Stanley and Freddie Mac have all done so, and Merrill Lynch joined the club last week.

But despite stakes in these icons of finance being available at discounts, Buffett's name has not surfaced publicly in connection with any of these capital infusions. That's true even though he has stated that he wants to deploy some of Berkshire's $45 billion cash hoard. What to make of that? Apparently, as he surveys the investment buffet, he is finding tastier treats elsewhere.

Patriots Games

NFL Commissioner Roger Goodell got a Christmas wish last week when the New England Patriots won, giving them a chance to be the first team since 1972 to complete a perfect season.

Just one problem: The epic game between the Pats and the New York Giants, scheduled for last night, was to be broadcast only on the NFL Network, which does not reach subscribers of the nation's largest cable providers such as Time Warner and Cablevision. The league is locked in a dispute with those providers, which want to make the network available only on a premium sports tier, not as part of basic cable.

This would seem to have been just what Goodell had hoped for -- a game so desirable that fans would demand that their cable providers cave and add the network to their lineup despite the hefty fee the league is demanding (up to 75 cents per subscriber per month).

Then Washington got involved. Sens. Arlen Specter (R-Pa.) and Patrick J. Leahy (D-Vt.) threatened to rethink the NFL's antitrust exemption, and the league caved, making the game available on NBC and CBS as well.

The lesson: Building a lucrative cable network would be great for the NFL -- but not so great as to risk losing the whole store.

For their next act, perhaps Specter and Leahy could take on the rash of unsportsmanlike conduct penalties for perfectly sound tackles on quarterbacks.

Ouch

Everyone knew the November housing numbers would be bad. But this bad? Sheesh.

New-home sales were at their lowest level in 12 years, the Commerce Department reported Friday. Earlier in the week, the Case-Schiller index of housing prices in major cities fell sharply.

What is surprising is that this is a surprise. The housing market, from 2001 to 2006, experienced a price run-up without precedent in American history. The excesses of that era are only now starting to work themselves out.

The bigger the party, the worse the hangover. Which means that shocking housing data like last week's could be the norm for some time to come.


© 2007 The Washington Post Company

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