Buffett Brought Down to Earth

Kass: Buffett Brought Down to Earth - TheStreet.com:

"It's never paid to bet against America.... We come through things, but it's not always a smooth ride....This is an economic Pearl Harbor."

-- Warren Buffett, "Dateline" interview on NBC (Jan. 18, 2009)

On Sunday evening, Warren Buffett sat down with NBC's Tom Brokaw for a marvelous and straightforward interview. (Here is the complete transcript.)

Early in 2008, I took a controversial and negative view on Berkshire Hathaway's (BRK.A Quote - Cramer on BRK.A - Stock Picks) stock. During the late summer, I profitably covered a short I put on Berkshire at approximately $140,000 per share.

Based on the recent deterioration of Berkshire's investments, I might have been premature. (Berkshire's common now trades for under $89,000 a share.)

In the last 60 days, Berkshire's investment portfolio has plummeted in value. Buffett has lost over $4.5 billion alone on his 300-million-share investment in Wells Fargo (WFC Quote - Cramer on WFC - Stock Picks) since Dec. 1, 2008, and another $1 billion loss on U.S. Bancorp's (USB Quote - Cramer on USB - Stock Picks) shares; both stocks have been halved in less than two months. His most recent investments in Burlington Northern Santa Fe (BNI Quote - Cramer on BNI - Stock Picks), General Electric (GE Quote - Cramer on GE - Stock Picks) and Goldman Sachs (GS Quote - Cramer on GS - Stock Picks) have deteriorated markedly in value from his cost basis.

Equally important, I have repeatedly uttered the notion that Berkshire's large derivative position -- namely, short puts on the S&P 500 -- was evidence of investment style drift. Regardless of that view, Berkshire has now likely recorded a nonrealized loss in excess of a $10 billion on the index short put position. A loss on that scale, whether realized or unrealized, is large even for Warren Buffett.

In 2008 and (so far) 2009, The Oracle of Omaha has been wrong; it has paid to bet against America.