Buffett Watch

Warren Buffett "Brought Down to Earth" By Economic "Pearl Harbor" - Kass

Doug Kass

Doug Kass, the short-seller who came out ahead by betting against Berkshire Hathaway last year, has some new criticism of Warren Buffett and his investment style.

In a post on TheStreet.com today, Kass takes aim at a Buffett quote from last weekend's interview on Dateline NBC.

The quote: "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."

Kass responds: "In 2008 and (so far) 2009, The Oracle of Omaha has been wrong; it has paid to bet against America... The U.S. 'economic Pearl Harbor' has humanized and brought down to earth many of the smartest investors in the world," including Warren Buffett and a long list of other well-known names.

(Last October, Kass endorsed Buffett's call in the New York Times to 'buy U.S. stocks now.')

Kass laments he may have been "premature" when he profitably covered a short position he put on Berkshire last year as it traded around $140,000.  Today, it is around $87,000.

He cites "the recent deterioration" of stocks in the Berkshire portfolio, including a $4.5 billion drop in the value of its Well Fargo holdings since December 1.  Berkshire's stake in U.S. Bancorp is worth $1 billion less.  Both Wells and USB have lost half their value in under two months.

Download the Complete Transcript of Warren Buffett's Dateline NBC Interview

Kass also writes that "Berkshire has now likely recorded a nonrealized loss in excess of $10 billion" on its large stock index derivative positions.  "A loss on that scale, whether realized or unrealized, is large even for Warren Buffett."

The bottom line for Kass:  "The average individual investor should continue to err on the side of conservatism in a market that provides a wonderful setting for trading but a not-so-exquisite setting for investing."

That's in sharp contrast with Buffett's current excitement about stocks.   He likes it when prices fall.  "There are a lot more things selling at sensible prices now than there were two years ago.  So clearly it's a better time to be buying stocks than a couple of years ago.  Is it better than tomorrow?  I have no idea."

Kass is sprinting.  Buffett is running a marathon.  Make sure you know which race you're in. 

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