Investors are already fretting about Berkshire Hathaway’s pristine financial standing, as the CDS market assigns the company a 13% chance of going totally bust. Meanwhile, Buffett’s latest stock moves — which may pan out over the long term — have gone the wrong way.
Yesterday’s Dow Jones (DJ) – Rohm & Hass (ROH) settlement means The Oracle needs to put up more cash, per an agreement he made last Summer. On Squawk Box yesterday, he described the $3 billion commitment as “dumb” in light of the changed economy:
QUICK: A lot of viewers wrote in and had specific questions about your
investments. David wrote in and says, “You’ve committed financing for
Dow Chemical’s acquisition of Rohm and Haas Company. What are your
thought on the upcoming lawsuit and whether or not the deal should
continue to move forward?”
Mr. BUFFETT: Yeah. Well, I can’t comment on that. The lawsuit will
either happen or it won’t happen. I guess they’re going to decide pretty
soon on that. I mean, any deal that was made last summer, you know, like
they say in golf, every putt makes someone happy. But all of the sellers
are happy and all of the buyers are unhappy. And you know, the deal
would not be at the same terms now and incidentally, we committed to buy
$3 billion worth of preferred. That is not a good commitment. I mean,
it’s good in the sense that we’re going to do it, as I’ve told the CEO
of Dow, I said, you know, our 3 billion will be there if Ben Bernanke
runs off to South America with Paris Hilton. I mean, they’ll have the
money. I mean, but the–was that–is that a smart deal today? No. No.
But conditions have changed and conditions change for Dow and Rohm and
Haas in a huge way. And what looked like a deal that was–they liked at
Dow and that it could be financed reasonably well and the Kuwaitis were
going to enter into a partnership with Dow, all kinds of things. But the
world has changed like nobody ever believed it would and so obviously,
it’s not only, you know, not only not a good deal now, I mean, it may
not be a doable deal now. Our commitment, which was–looked smart at the
time, looks dumb at the present time. But that’s the way the world is.
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