Daily Archives: February 28, 2009

Buffett: Economy will remain in ‘shambles’

Annual letter to shareholders says crisis has led to ‘paralyzing fear’

MSNBC | Feb 28, 2009

NEW YORK – Billionaire investor Warren Buffett predicted Saturday that “the nation’s economy will be in shambles throughout 2009” and probably “well beyond.”

In his annual letter to Berkshire Hathaway Inc. shareholders, Buffett said the credit crisis and falling housing and stock prices have led to “paralyzing fear.”

But the famed investor remained optimistic about America’s resilience.
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“Though the path has not been smooth, our economic system has worked extraordinarily well over time,” he said. “It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.”

America has faced bigger economic challenges in the past, Buffett said, including two World Wars and the Great Depression.

Buffett detailed his worst year leading Berkshire, insurance and investment company, in the shareholder letter issued Saturday.

Net worth shrinks

Berkshire barely broke even in the fourth quarter because of losses on derivatives contracts tied to the stock market.

Profit fell 96 percent, the fifth straight quarterly decline, and Berkshire’s net worth tumbled $10.9 billion in the year’s final three months.

Net worth per share fell 9.6 percent for the whole of 2008, only the second decline since Buffett began running Berkshire in 1965. It fell 6.2 percent in 2001.

Berkshire generates about half its results from insurance, including auto insurer Geico Corp, but operates more than 70 businesses that offer such things as carpeting, ice cream, paint, real estate services and underwear.

Buffett said he made at least one major investing mistake last year by buying a large amount of ConocoPhillips stock when oil and gas prices were near their peak.

Berkshire increased its stake in ConocoPhillips from 17.5 million shares in 2007 to 84.9 million shares at the end of 2008.

Buffett said he did not anticipate last year’s dramatic fall in energy prices, so his decision cost Berkshire shareholders several billion dollars.

He said he also spent $244 million on stock in two Irish banks that appeared cheap. But since then, he wrote down the value of those purchases to $27 million.

‘Unsatisfactory’

Berkshire’s results were battered by $4.61 billion of pretax losses on about 251 derivative contracts largely tied to the longer-term performance of four stock market indexes and the credit quality of higher-risk “junk” bonds.

A deteriorating economy and tight credit led to steep declines in stock prices and an increase in junk bond defaults, resulting in losses for Berkshire.

While the losses exist on paper, accounting rules require Berkshire to report them with earnings.

Buffett revealed for the first time which stock indexes he has been using: the Standard & Poor’s 500, Britain’s FTSE 100, Europe’s Euro Stoxx 50, and the Nikkei 225 in Japan.

In his letter, Buffett said he believed each contract that Berkshire owns was “mispriced” at the outset, and that the ups and downs “neither cheer nor bother” him.

He said, though, that Berkshire got $8.1 billion of upfront payments from parties on the other side of the contracts, which the company can invest as it wishes. This, he has said, makes the contracts different from the “financial weapons of mass destruction” that he has called other derivatives.

For all of 2008, profit at Berkshire fell 62 percent to a six-year low of $4.99 billion, or $3,224 per share, from $13.21 billion, or $8,548. Revenue fell 9 percent to $107.8 billion. Buffett called full-year results “unsatisfactory.”

Berkshire Class A shares closed Friday at $78,600 on the New York Stock Exchange. They have fallen 44 percent since the end of February 2008, while the Standard & Poor’s 500 has dropped 45 percent.

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Ghanaian royalty in Maltese knighthood muddle

The decision has angered the official Order of Malta.

Ghana Business News | Feb 27, 2009

By Emmanuel K. Dogbevi

kingsley_fletcherA Ghanaian citizen has stirred controversy in the Island of Malta over plans by an organization to knight him.

The man, known as Kingsley Fletcher, is a preacher, businessman and traditional ruler. He is the founder of the Kingsley Fletcher Ministries, a charismatic Christian organization based in the US and owner of a number of businesses in the country and overseas.

According to news reaching ghanabusinessnews.com from Malta, Mr. Fletcher whose traditional title is Nene Adamtey I and is the Suapolor of the Se Kingdom in the Greater Accra region, was due to be invested into the Knights of Malta, but the decision has angered the official Order of Malta.

Related

First African King to be Knighted in Malta

Nene Adamtey I is due to be knighted in a ceremony at the Castello dei Baroni, Wardija by the “historic Knights of Malta,” the report says.

It also added that his status as a traditional ruler would make him the third highest ranked individual in the order.

The Sovereign Military Order of Malta (SMOM), however, is objecting to this claim, pointing out that the “historic knights” are actually another organisation, calling itself the Knights Hospitallers of the Sovereign Order of St John of Jerusalem. Although bearing a similar name, the order, frequently referred to as the Ecumenical Order, is not affiliated with the SMOM, which is considered to be the main successor to the Knights which ruled Malta between 1530 and 1798, and which has formal diplomatic relations with over 100 countries. But no diplomatic relations have yet been established between the order and Ghana.

The SMOM also objected to the group’s plan to organise a Solemn Mass on Sunday, March 1 at St John’s Co-Cathedral. It contacted the Co-Cathedral’s rector Lawrence Mifsud who, following an investigation of the matter, stopped the church function from taking place, the reports said.

While still able to attend Mass at the Co-Cathedral on the day, members of the Ecumenical Order will not be admitted in uniforms or church robes, and no special seats will be reserved for them.

Mr. Fletcher was quoted as saying that it was unusual for an African leader to be invited into knighthood, but added that “because it is an effort of nobility, I gladly accepted”.

He is set to arrive in Malta today Friday February 27, 2009 and leave on Sunday.

Selling body parts to make ends meet a sign of the times

Digital Journal | Feb 25, 2009

By Sandy Sand

Throughout the ages, people have been doing whatever is necessary to keep body and soul together. The world has seen everything from men selling off their daughters for a few cows and sheep, to women being prostitutes. Today, it’s selling body parts.

Today, the cash-strapped people who earn meager salaries, or have run out of unemployment benefits and can’t find work, are literally selling parts of themselves as their only means of carrying on.

Selling body parts is not a new idea, but it’s being done more and more by more people today who never dreamed of doing such things.

For years, male college student have been using the bounty of their sperm to earn money for everything from books to beer busts. More people are taking lessons from them and giving up parts of themselves to meet expenses.

Selling off one’s hair, sperm, eggs, blood or participating in medical studies may be one of the ultimate signs of just how bad the economy is for many people.

“Economic times are hard now, but for me they were also hard last semester and the semester before. This is a good way where I am making money and not having to work a full-time job,” Melanie Burnett, a kinesiology (study of how the body moves) major at California State University, Northridge.

Last year Burnett earned $6,000 selling her eggs to a fertility clinic, and this spring she expects to earn a similar amount.

Fertility clinics in and around Los Angeles are reporting an up-tick in business. California Cryobank reported that during the past 18 months, donations by men are up 15 percent, and egg donations up by 25 percent.

Some women are even resorting to renting out their uteruses to be surrogate mothers.

Dr. Jeffrey Steinberg, director of the Fertility Institutes California-Nevada, said some women, who are able to make several egg donations a year have been earning as much as $40,000 annually.

“We’ve had a spike not only in egg donors but also in surrogates,” Steinberg added. “People are looking at more creative ways to get money. Even donors from two and three years ago are coming back to do it again.”

When it comes to sperm donations, UCLA senior Jordan Meyers said, “Every so often you see ads in The Daily Bruin where they’re seeking sperm donors, but they’ve got to attend UCLA, USC, Stanford or Harvard.” Although he said he’s never been a donor, he knows students who have been.

Giving up a pint of blood to buy a pint of whiskey has long been a Skid Row tradition. No longer.

A representative of Advance Biological Services Blood and Plasma Center said that on “any given day” their waiting room is pack with people. Many are averaging $240 a month for bi-weekly donations.

Its shades of O’Henry’s Gift of the Magi for thehairtrader.com, which is getting their cut of the business, too. They pay from $150 to $2,500 for hair depending on its length, texture and color.

“Because of the economy, we’ve experienced about a 40 percent increase over the last few months,” a company spokesman said.

For those not willing or able to give up part of themselves, they are taking advantage of hundreds of medical studies that are offered across the country.

Thousands of dollars can be earned by participating in clinical trials where various medical conditions are studied, or by being human guinea pigs and testing experimental drugs.

Taking a dim view of all of this is Beverly Hills psychiatrist Dr. Nancy Lieberman, whose specialty is human behavior.

“What makes it really sad and distressing is that these are people who wouldn’t ordinarily choose to sell parts of themselves,” Lieberman said. “It’s just so primitive and animalistic: selling a part of yourself and being forced to reach down to the bottom of your resources.”

Taking a less critical view is Allen Martin, a professor of family finances at CSUN.

“It’s a sign of how hard times are and that when people are desperate, they will do anything to make some extra cash,” Martin said.