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Warren Buffett: Financial "Drama" Makes Last 18 Months An "Incredibly Interesting Period"

Published: Monday, 7 Sep 2009 | 11:47 PM ET

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By: Alex Crippen
Executive Producer

Warren Buffett

Warren Buffett always says he loves to go to work each day. Despite losing an estimated $25 billion on paper from his personal fortune, the global financial crisis has done nothing to damper that enthusiasm for his job.

Buffett tells the New York Times:

"It has been an incredibly interesting period in the last year and a half. Just the drama. Watching the movie has been fun, and occasionally participating has been fun too, though not in what it has done to people's lives."

And, as he's been saying in recent months, the movie is still unreeling:

"We are not out of problems yet. We have got to get the sputtering economy back so it is functioning as it should be."

Buffett's comments are from an interview with the Times last week, recounted in an article for Tuesday's paper, headlined Closely Watched Buffett Recalculating His Bets online and The Billionaire Who Didn't Panic in print.

Graham Bowley gives us an overview of how Buffett has taken advantage of the troubled times, noting "few people on or off Wall Street have capitalized on this crisis as deftly" as he has.

Bowley admiringly writes that when others were "running scared" last fall, Buffett invested billions in Goldman Sachs and General Electric. Taxpayers bailed out some of his stock holdings, including Goldman, American Express, Bank of America, Wells Fargo, and U.S. Bancorp:

"After counseling Washington to rescue the nation’s financial industry and publicly urging Americans to buy stocks as the markets reeled, in he swooped. Mr. Buffett positioned himself to profit from the market mayhem — as well as all those taxpayer-financed bailouts — and thus secure his legacy as one of the greatest investors of all time."

Now, however, Bowley thinks Buffett "seems to be retrenching a bit" with Berkshire Hathaway "pulling back, buying fewer stocks while investing in corporate and government debt." That's in contrast, Bowley writes, to how it had been "boldly buying when so many were selling assets."

To Bowley, Buffett "seems to be worrying that the broader stock market might falter again" although he "refused to be drawn out on where stocks are headed."

Could those "worries" be prompting Berkshire to cut its spending on stocks to the "lowest level in more than five years?"

Possibly. But remember that even when Berkshire was "boldly buying" a year ago, it wasn't buying a lot of common stock.

When Buffett's company released its stock portfolio snapshot for the end of last year's fourth quarter, it showed more selling than buying, including a 54 percent drop in holdings of Johnson & Johnson, and a 7.4 percent decrease for U.S. Bancorp. Berkshire's other big bank holdings remained unchanged during those three months.

Buffett's billions, and the prestige value of his money, opened the door for him to make enormous loans to Goldman and GE, with an annual payback of 10 percent. (The J&J sales helped fund those loans.)

If you can get deals like that with big guaranteed returns, it makes a lot of sense to concentrate on corporate debt .. even if you aren't worried about the stock market "faltering" again.

Current stock prices:

Berkshire Class A: [BRK.A Loading... () ]