Berkshire - the second manipulation - Buffett lost his grip

Insider trading makes me sick and tired these days even more than ever. Fridays miracle rally in Berkshire stocks - around 16% in one day and Barrons comes out with a bullish story on the WE - that stinks. Barrons is not what it used to be anymore since Murdoch took over the WSJ and Barrons. Its now a propaganda and cheerleader medium but keep in mind that Mr. Buffett lost his grip on markets already 2 years ago and it will get worse - so stay away from that stock on the long side. The story below is based on poor ground as you do not need that stock to participate and what the author might not know about astrology proves to be dangerous for insurance stocks especially the next 2-3 years the potential for damage is extremely high and just the opposite is likely that Berkshire makes extrodinary losses going forward.

Excerpt from Barrons

Finally, Berkshire Looks Undervalued

By ANDREW BARY | MORE ARTICLES BY AUTHOR

Ignore misplaced skepticism -- Buffet's baby is finally cheap again.

TEXT SIZE PRINT EMAIL DIGG SINGLE PAGE REPRINTS GET RSS Subscribe Now With these readers: Or copy the rss link: THE FINANCIAL CRISIS HAS GOTTEN SO BAD, some investors are even questioning Berkshire Hathaway 's strength. But the worries seem overblown. Berkshire's Class A shares (ticker: BRK/A) fell 10% last week. En route to their Friday closing price of $90,000 a share, they touched a five-year low of $74,100 amid Thursday's market rout. The stock is off 36% for this year. The selloff reflects concern about Berkshire's equity portfolio, valued at $76 billion on Sept. 30, plus a sizable bet involving put options on $37 billion of equity indexes, including the Standard & Poor's 500 and foreign markets. The derivatives bet, while ultimately likely to be profitable, looks like a rare mistake by Berkshire CEO Warren Buffett, who couldn't be reached for comment on this story. Santi Burgos/Bloomberg News The master investor's use of "financial weapons of mass destruction" has proved to be destructive indeed. How much Berkshire has lost on a mark-to-market basis isn't clear (our estimate is $5 billion) but Wall Street seems to have overpunished the stock for the bet. As well, Berkshire stands to make record profits in '09. The puts give their buyers the right to make Berkshire buy the indexes at a set price, based on the indexes' level on the day the options were sold, mostly from 2005 through 2007. The puts, whose current value is difficult to determine, don't jibe with Buffett's frequent criticism of derivatives as "financial weapons of mass destruction." Berkshire remains one of world's strongest companies, with a rare triple-A credit rating and a $140 billion stock-market value. It has loads of earnings power, due to dozens of businesses, including auto-insurer Geico, Shaw carpets and Benjamin Moore, although many are being stung by the weak economy. Barron's took heat from Berkshire boosters with our bearish cover story on Berkshire last December, when the stock traded around $144,000. Berkshire has been hurt by declining profits in the auto-insurance and reinsurance markets, both of which might be bottoming. But now is probably a good time to buy. Looking out to 2009, Berkshire's earnings could get a lift from improving conditions in the insurance market, and from some new high-yielding investments, including $8 billion of 10% preferred stock of Goldman Sachs (GS) and General Electric (GE). If the stock market rallies in 2009, Berkshire probably will see record profits. Its operating profits this year could be about $5,400 per Class A share, excluding losses on equity and junk-bond derivatives that may cause a fourth-quarter loss. One big investor says earnings could hit $7,000 a share by 2010, a modest 13 times the current stock price.