As I mentioned in my comment at the Idea Locker, Berkshire Hathaway’s 2008 results are dramatically overstated due to the accounting treatment of consolidated subsidiaries:
If you recreated Berkshire in your portfolio with a series of consumer products investments, a big chunk of housing-related stocks, and an even more concentrated position in insurance, you got crushed.
This hasn’t stopped Warren from trying to talk up his investments. While it isn’t surprising – every other finance guy bouncing through CNBC is promoting his interest – Warren always seemed a bit more noble.
That is why it is so nice to read this response over at the Big Picture:
He noted that Wells Fargo’s cost of funding is now extremely cheap, and earnings spreads have never been wider. When Betsy Quick retorts, asking why the banks should be able to do this and get huge bailout checks from the government, he responds that in wartime, no one ever questioned shipbuilders and the excess of profit they made during those times.
The banks are arguably the ones who goofed up the MOST. They are NOT like shipbuilders in a war. The shipbuilders didn’t instigate the war in the 1st place!
When we debate spending a couple of billion dollars on welfare payments to single mothers, we inevitably get into the debate of what these women were doing having children they could not support. It is a fair point, but then we should be vigilant to avoid the “bad form, old boy” approach that says it is tacky to question hundreds of billions to the banks. The banks blew up, and the scrutiny should be strict and pitiless.