Buffett spends $3.6bn on shares - but was it Sage?

Warren Buffett's company, Berkshire Hathaway, has gone on something of a spending spree, it seems. Although it was a bit of a gamble.

by Emma Haslett
Last Updated: 08 Aug 2011
Is Warren Buffett single-handedly trying to kick-start spending in the US economy? Buffett’s company, Berkshire Hathaway, has apparently splashed out $3.6bn (£2.2bn) on shares over the three months to June, the most it has spent on equities in the last three years. That suggests Buffett expects the stock markets to rise quite substantially at some point in the very near future. Although even the Sage of Omaha has been known to get it wrong in the past…

That said, according to Berkshire’s latest figures, released today, it made a $3.42bn profit, 74% more than a year earlier (impressive – unless Buffett simply cut down on his consumption of his beloved burgers and cherry coke this year). Which probably has something to do with his optimism when he told an interviewer on Bloomberg Television that Standard & Poor’s was wrong to downgrade US debt: ‘Financial markets create their own dynamics, but I don’t think we’re facing a double-dip recession,’ he said. Jolly good. In fact, Buffett reckons that it’s all at risk of becoming self-perpetuating. ‘What stock markets do have is an effect on confidence, and this selloff can create a lack of confidence.’

Interestingly, Berkshire Hathaway’s fortunes haven’t been much different: during the depths of the financial crisis, it had a large chunk wiped off its value, also losing its AAA rating in the process. And back in March, Buffett’s protégé and heir apparent, David Sokol, resigned from the company off the back of insider trading allegations. Sokol had bought $10m worth of shares in a chemicals company Berkshire had also bought shares in, based on his recommendation. Although he was keen to point out that he didn’t think he’d done anything wrong.

Nevertheless: it goes to show that even the third-richest man in the world does make the odd bad decision. He may well have it right, where that investment in shares is concerned. But we’d imagine that after the turmoil of the last few days, his confidence is more than a little shaken…

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