Berkshire Hathaway and JPM claim "fortress" balance sheets, so let's take a look at them.On December 31, 2007 Berkshire Hathaway owned $75 billion of equity securities, with a $44 billion cost, and an unrealized loss of $1 billion, and a unrealized gain of $31 billion.
On September 30, 2008 Berkshire Hathaway owned $76 billion of equity securities, with a $52 billion cost, and an unrealized loss of $2.5 billion, and an unrealized gain of $27 billion.
In those 9 months, Buffett's buffer of what he paid for his stocks, and what they were worth went from $30.3 billion to $24.2 billion.
But since September 30, much of his core holdings have dropped considerably. Let's look at a few.
On September 30, 2007:
Wells Fargo was at $37.53. It closed today at $14.23. Buffett owned 290 million shares, a drop of $6.75 billion dollars.
ConocoPhillips was at $73.25. It closed today at $45.69. Buffet owned 60 million shares a drop of $1.65 billion dollars.
Coca Cola was at $52.88. It closed today at $42.88. Buffett owned 200 million shares a drop of $2 billion dollars.
American Express was at $35.43. It closed today at $15.60 Buffett owned 151 million shares, a drop of $3 billion dollars.
Burlington Northern was at $92.43. It closed today at $61.25. Buffett owned over 63 million shares, a drop of $2 billion dollars.
US Bancorp was at $36.02. It closed today at $15.34. Buffett owned 73 million shares, a drop of $1.5 billion dollars.
I won't even look at his position in GE, or his bet on Goldman Sachs, because they are preferreds, and I won't even look at his derivative bets where he sold puts on market indexes, but these 6 stocks knocked $17 billion of value off of Berkshire Hathaway's claim paying ability. So we are seeing cracks in Berkshire Hathaway. And don't think Warren Buffett doesn't know it. Read the transcript of his latest interview with Tom Brokaw. You can feel the nervous laughter. Why else does he call this an economic Pearl Harbor?
Now if we can see these cracks in Buffett's "fortress" balance sheet, what type of cracks are in Jamie Dimon's JP Morgan's? At least Buffett's balance sheet is transparent. Can anybody really tell us the extent of JP Morgan's derivative obligations?
Quite frankly, I think JP Morgan's balance sheet is an artistic work of fiction. But then again, I though State Street's balance sheet was a work of fiction when the stock was 50 points higher. It just takes the market a long time to recognize it!
So even though JP Morgan has a pension liability of over $8.5 billion dollars,
had suspect earnings,
and has a habit of stealing money from unsupecting parties,
I feel that I might be biased in my negativity so I'll just quote what Citigroup had to say about JP Morgan. And since Citigroup hasn't been half right on anything, you can double whatever they had for loss estimates and still be in the ballpark, and still be standing at homeplate!
Citigroup estimated that JP Morgan will incur cumulative credit losses of about $145 billion for 2008-2011, of which 55% have already been taken, and that managed loan loss provisions should peak this year at $30 billion, and that the first half of 09, JPM will have another $2.5 billion of writedowns in high risk assets, and another $1 billion in private equity.
Friday I said that the system needed a "bad bank"...and they need it before the Fed's favored sons, JP Morgan and Goldman Sachs expose more cracks than they want shown!
But now the market is seeing cracks in these banks, and shareholders are starting to freak out, especially now that the "favored sons" are starting to get hit.
After all, who would then carry Jamie Dimon's umbrella?
After all, who would then carry Jamie Dimon's umbrella?
2 comments:
It was rather interesting for me to read that article. Thank author for it. I like such themes and anything that is connected to this matter. I definitely want to read more soon.
BTW, buy GSM blocker to jam all spy transmitters in your home or office.
Post a Comment