Buffett became a billionaire on paper when
Berkshire Hathaway began selling class A shares on May 29,
1990, when the market closed at $7,
175 a share. In
1998, in an unusual move, he acquired
General Re (Gen Re) for stock. In
2002, Buffett became involved with
Maurice R. Greenberg at
AIG, with General Re providing reinsurance. On March 15,
2005, AIG's board forced
Greenberg to resign from his post as
Chairman and CEO under the shadow of criticism from
Eliot Spitzer, former attorney general of the state of
New York. On
February 9,
2006, AIG and the
New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6 billion. In
2010, the federal government settled with Berkshire Hathaway for $92 million in return for the firm avoiding prosecution in an AIG fraud scheme, and undergoing 'corporate governance concessions'.
In 2002, Buffett entered in $11 billion worth of forward contracts to deliver
U.S. dollars against other currencies. By
April 2006, his total gain on these contracts was over $2 billion. In 2006, Buffett announced in June that he gradually would give away 85% of his
Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. The largest contribution would go to the
Bill and Melinda Gates Foundation. In
2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or perhaps successors, to run his investment business. Buffett had previously selected Lou
Simpson, who runs investments at
Geico, to fill that role. However, Simpson is only six years younger than Buffett.
Buffett ran into criticism during the subprime crisis of 2007--2008, part of the late
2000s recession, that he had allocated capital too early resulting in suboptimal deals. "
Buy American. I am." he wrote for an opinion piece published in the
New York Times in 2008. Buffett has called the 2007--present downturn in the financial sector "poetic justice". Buffett's Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his recent deals appear to be running into large mark-to-market losses.
Berkshire Hathaway acquired 10% perpetual preferred stock of
Goldman Sachs. Some of Buffett's
Index put options (
European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. The scale of the potential loss prompted the
SEC to demand that Berkshire produce, "a more robust disclosure" of factors used to value the contracts. Buffett also helped
Dow Chemical pay for its $18.8 billion takeover of
Rohm & Haas. He thus became the single largest shareholder in the enlarged group with his Berkshire Hathaway, which provided $3 billion, underlining his instrumental role during the current crisis in debt and equity markets.
In 2008, Buffett became the richest man in the world, with a total net worth estimated at $62 billion by
Forbes and at $58 billion by
Yahoo, dethroning
Bill Gates, who had been number one on the Forbes list for 13 consecutive years. In 2009,
Gates regained the position of number one on the Forbes list, with Buffett second. Their values have dropped to $40 billion and $37 billion, respectively, Buffett having lost $25 billion in 12 months during 2008/2009, according to Forbes.
In
October 2008, the media reported that
Warren Buffett had agreed to buy
General Electric (GE) preferred stock. The operation included extra special incentives: he received an option to buy 3 billion GE at $22.25 in the next five years, and also received a 10% dividend (callable within three years). In
February 2009, Buffett sold some of the
Procter & Gamble Co, and
Johnson & Johnson shares from his portfolio.
In addition to suggestions of mistiming, questions have been raised as to the wisdom in keeping some of Berkshire's major holdings, including
The Coca-Cola Company (
NYSE:KO) which in 1998 peaked at $86. Buffett discussed the difficulties of knowing when to sell in the company's 2004 annual report:
That may seem easy to do when one looks through an always-clean, rear-view mirror.
Unfortunately, however, it's the windshield through which investors must peer, and that glass is invariably fogged.
http://en.wikipedia.org/wiki/Warren_Buffett
- published: 03 May 2013
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