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.
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.
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.
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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