Buffett Watch

Berkshire Hathaway Plunges 12% For Worst Day Since 1987's Black Monday

Warren Buffett's Berkshire Hathaway fell just over 12 percent on Wall Street today (Wednesday), its biggest one-day percentage drop since 1987's 'Black Monday' over 21 years ago.

Berkshire lost $11,550 today at close at a three-year low of $84,000.  That's a 12.09 percent decline, the second-largest daily drop ever for Berkshire, trailing only its 18.51 percent plunge on Monday, October 19, 1987.  It closed that day at $3170, down $720.

Berkshire shares have dropped 43.7 percent from their all-time closing high of $149,200 on December 10 last year.

The benchmark S&P is still doing worse this year, but Berkshire is closing the gap.  The S&P is down 45.1 percent compared to Berkshire's 40.7 percent drop. 

Just two days ago, when Berkshire closed below $100,000for the first time in two years, the S&P was 'winning' the mad dash lower: -42.1% to -32.5%.

Buffett's been getting some negative press lately, amid declining earnings for Berkshire's insurance operations and big paper losses on its stock holdings and long-term stock index derivative contracts.  The stock has dropped for eight consecutive days since the third quarter earnings report was released on November 7.

Credit-default swaps protecting against a Berkshire default have more than tripled in price over two monthsand some are even asking if Berkshire could lose its triple-A credit rating

Buffett points out that Berkshire has been paid almost $5 billion now for writing option contracts that wouldn't require any payouts for at least another 10 years, and would only be future money-losers if global stocks don't recover by then. 

There's also been criticism of Buffett's timing, since shares of both General Electric and Goldman Sachs have dropped in the weeks since Berkshire made multi-billion dollar investments in the two companies.


While Berkshire did get the right to buy common stock in GEand Goldman at prices that are now well above market, its primary investment is in the form of preferred shares, which still pay dividends of 10 percent a year, despite the common stock declines.  (James B. Stewart writes today that Goldman's stock decline has created a Buffett-style opportunity for individual investors.)

Bloomberg quotes YCMNet Advisors president Michael Yoshikami as saying, "There's nothing fundamentally wrong with Berkshire.  What's really happening is people are wondering if there's something fundamentally wrong with the economy, and Berkshire is in some ways a bit of a proxy for that."

And while the 'Gospel According to Buffett' preaches that bad economic times often create buying opportunities, it appears that some Berkshire shareholders are losing the faith and selling instead.

Current Berkshire stock prices:

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