Tuesday, April 19, 2005

Berkshire Downgraded, Credit Bubble Collapsing

Fitch Ratings has downgraded Berkshire Hathaway due to current investigations and a lack of clarity as to who will replace Warren Buffet. "Fitch has revised the Rating Outlook to Negative from Stable on the 'AAA' long-term issuer and unsecured senior debt ratings of Berkshire Hathaway Inc. and its wholly owned subsidiary GEICO Corporation." Will there be any 'AAA' lenders left in the US when this is over?

"Berkshire continues to expand the manufactured housing lending operation of its Clayton Homes subsidiary. This expansion was financed through bonds issued by Berkshire Hathaway Finance Corporation that are guaranteed by Berkshire. Berkshire and its subsidiaries engage in both primary insurance and reinsurance of property and casualty risks."

10 Comments:

At 3:33 PM, Blogger Nayrab said...

I can't wait till this whole thing collapses.

We have a friend in southern California. Last year her father cashed in his 401K, took a home equity loan on his current residence, and he purchased three other single family homes.

He has them all rented, but the rent does not come near to covering the mortgage and taxes. Judging from past conversations, I figure he is losing $1,600-$2,000 a month in order to cover the costs, above what he is getting for rent.

He expects to resale them in a year or so and make a killing. When I brought up the possibility of a bubble he stated that even if the value drops 5-10% he will be ok, since he bought them a year ago and prices have gone up 20% in the past year.

I wonder how he sleeps at night, especially since he is so leveraged, and his retirement is riding on the future of the market

 
At 3:45 PM, Blogger Nayrab said...

BTW, I am not hoping for it too crash so that our friends dad loses his shirt. I just think it is too crazy. The housing market is absolute mania.

 
At 3:49 PM, Blogger Ben Jones said...

nayrab,
What these people don't understand is that when a little fear sets in and a certain percentage try to sell, prices will snowball downhill. Your friend is up today, but will he be when he tries to sell? I wish him well.

 
At 3:58 PM, Blogger John Law said...

these people don't totally understand berkshire. buffet gives his people wide latitude to work their businesses. they are all very good. buffet just wants them to give excess money for him to invest. I think lou simpson is the only one who invest money on his own. if lou simpson takes over, he's got a great track record too of investing. he's up near 25% a year.

 
At 4:06 PM, Anonymous Anonymous said...

I don't understand these series of asset bubbles (stocks/real estate/commodities etc...) that have resulted over last so many years. In my opinion, it appears what is happening here is that the U.S. economy can no longer survive via prodiction and savings. Therefore, there is a necessity for asset bubbles to give the illusion of a prosperous economy that does not exist. Tic-toc on this nonsense...

 
At 5:22 PM, Anonymous Anonymous said...

http://www.msnbc.msn.com/id/7558576/

 
At 5:26 PM, Anonymous Anonymous said...

People are still delusional !

"One thing keeping home prices high in hot markets is a lack of supply."

 
At 7:30 PM, Anonymous Anonymous said...

GM and FNM are failing.

http://moneycentral.msn.com/content/P102179.asp

 
At 7:34 PM, Anonymous Anonymous said...

That is an old article.

 
At 12:11 AM, Anonymous Anonymous said...

That's what is soo unnerving. Even the good companies will be hit by the fallout. I call it the fanancial principle of the rotten apples spoiling all the basket. Who is next ? That would be a nice list to have.

 

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