Buffett admits being ‘dead wrong’ on housing recovery

OMAHA, Neb. — Billionaire investor Warren Buffett said Saturday that he was “dead wrong” with a prediction that the U.S. housing market would begin to recover by now, but he remains optimistic about the nation’s economy.

OMAHA, Neb. — Billionaire investor Warren Buffett said Saturday that he was “dead wrong” with a prediction that the U.S. housing market would begin to recover by now, but he remains optimistic about the nation’s economy.

In his annual letter to Berkshire Hathaway shareholders, Buffett said he is sure housing will recover eventually and help bring down the nation’s unemployment rate. But he did not predict when that will happen.

Investors eagerly await the letter from Buffett, 81, the so-called Oracle of Omaha, who built a roughly $44 billion fortune by following a steadfast, no-nonsense investing strategy.

Buffett said housing “remains in a depression of its own,” but he predicted, in typical plainspoken style, that the housing market will come back because some human factors can’t be denied forever.

“People may postpone hitching up during uncertain times, but eventually hormones take over,” he wrote. “And while ’doubling-up’ may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.”

The housing prediction proved painful for Berkshire Hathaway. It owns more than 80 subsidiaries, including the Geico insurance company and See’s Candy, and five of them depend on construction activity.

Those businesses, which include Acme Brick, Clayton Homes and Shaw carpet, generated pre-tax profits of $513 million last year. That’s well off the $1.8 billion those companies added to Berkshire in 2006.

Berkshire’s insurance companies took $1.7 billion in catastrophe losses last year, including from the earthquake and tsunami in Japan. Berkshire reported only $154 million in underwriting profit, down from $1.3 billion the previous year.

But several of Berkshire’s larger non-insurance businesses — Burlington Northern Santa Fe railroad, MidAmerican Energy, Marmon Group, Lubrizol and Iscar — all generated record earnings in 2011.

That helped Berkshire as a whole to generate $10.3 billion in net income, or $6,215 per Class A share, last year, down from nearly $13 billion, or $7,928 per share, in 2010.

A Class A share of Berkshire stock, which has never been split by the company, traded for $120,000 on Friday. Its more affordable Class B shares traded for about $80.

Buffett reassured Berkshire shareholders that the company has someone in mind to replace him eventually, but did not name the successor. He emphasized that he has no plans to leave.

Glenn Tongue, a managing partner at T2Partners investment firm, said he was struck by the fact that Buffett chose to deal with the succession topic as one of the first items in his letter.

“I think this was a forceful and stronger attempt to put this issue to bed,” Tongue said.

Buffett offered a couple of details about Berkshire’s succession planning in this year’s letter. Investors have long worried about who will replace Buffett as Berkshire chairman and CEO.

Buffett said the Berkshire board is enthusiastic about the executive it has picked and said there are two good back-up candidates.

“When a transfer of responsibility is required, it will be seamless, and Berkshire’s prospects will remain bright,” Buffett said.

Previously, Buffett had said only that the board had three internal candidates for the CEO job. Berkshire plans to split Buffett’s jobs into three parts to replace him with a CEO, a chairman and several investment managers.

Berkshire has also cleared up some succession questions by hiring two hedge fund managers, Todd Combs and Ted Weschler. Buffett says those two have the “brains, judgment and character” to manage Berkshire’s entire portfolio eventually.

———

Online:

Berkshire Hathaway Inc.: www.berkshirehathaway.com

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer Rebels forward Jayden Grubbe is one of three Rebels on the NHL Central Scouting players to watch list for the 2021 NHL Draft. (Photo by BYRON HACKETT/Advocate Staff)
Rebels seek consistency ahead of matchup with Hitmen

The Red Deer Rebels had to deal with a pang of regret… Continue reading

Quinn Mason died from an opioid overdose at the age of 23 in June 2020. (Contributed photo)
Central Alberta mother whose son died from overdose advocates for ‘change’

It’s been about nine months since her son died from an overdose,… Continue reading

Health Minister Tyler Shandro said Thursday that the province was ready to move forward with Phase 2A and B in the coming weeks. (Photo by Paul Taillon/Office of the Premier)
Majority of Albertans to receive first shot before June 30: Shandro

Shandro says all Albertans should be offered the COVID-19 vaccine by June 30

Alberta’s chief medical officer of health Dr. Deena Hinshaw acknowledged that Friday would be one year since the first case of COVID-19 was identified in the province. (photography by Chris Schwarz/Government of Alberta)
Three more Red Deer COVID-19 deaths, 331 active cases in Alberta

Red Deer is down to 362 active cases of the virus

Alberta’s Jobs, Economy and Innovation Minister Doug Schweitzer spoke on Thursday by webinar to Red Deer Chamber of Commerce members. (Screenshot by Advocate staff).
Alberta’s economic diversification is already underway, says Jobs Minister

From the geothermal to the TV industry, new jobs will be created, said Doug Schweitzer

Bryson, six, and Mara, eight, play with puppies from Dogs With Wings Saturday. (Photo by Sean McIntosh/Advocate staff)
WATCH: Dogs With Wings introduces Red Deer program

A program that trains puppies to be certified service, autism, facility and… Continue reading

Quebec Premier François Legault chairs a virtual news conference Thursday, March 4, 2021 in Montreal. The premiers from the left are: John Horgan, B.C.; Jason Kenney, Alberta; Scott Moe, Saskatchewan; Legault, Quebec; Brian Pallister, Manitoba; Doug Ford, Ontario; and Blaine Higgs, New Brunswick. THE CANADIAN PRESS/Ryan Remiorz
Premiers reiterate demand for $28-billion increase in health transfers from Ottawa

Premiers reiterate demand for $28-billion increase in health transfers from Ottawa

The Edmonton Law Courts building is shown on Wednesday, July 8, 2020. An Alberta pastor accused of holding Sunday services that violated COVID-19 rules is appealing his bail conditions. THE CANADIAN PRESS/Jason Franson
Jailed Alberta pastor should be able to lead services until his trial: lawyer

Jailed Alberta pastor should be able to lead services until his trial: lawyer

Seniors arrive for their COVID-19 vaccination at a clinic in Olympic Stadium in Montreal on March 3, 2021. THE CANADIAN PRESS/Paul Chiasson
Premiers blame Ottawa for delayed COVID-19 shots; Ontario pharmacies to offer jabs

Premiers blame Ottawa for delayed COVID-19 shots; Ontario pharmacies to offer jabs

Actors, clockwise from left, Luke Bilyk, Aislinn Paul, Alex Steeler, Melinda Shankar, Annie Clark, Jordan Todosey, Jahmil French and Munro Chambers from "Degrassi: The Next Generation," are shown at a screening event, Saturday, Feb. 18, 2012, at the Wellmont Theater in Montclair, N.J. Friends of French say he was a gifted 'true artist' who 'wanted to be great'THE CANADIAN PRESS/AP Photo/StarPix, Dave Allocca
Friends of Jahmil French say he was a gifted ‘true artist’ who ‘wanted to be great’

Friends of Jahmil French say he was a gifted ‘true artist’ who ‘wanted to be great’

FILE - In this Wednesday, Jan. 6, 2021, file photo, rioters storm the Capitol, in Washington. At least 10 Ohioans have been charged in connection with the deadly insurrection at the U.S Capitol after being identified through social media and surveillance footage to the FBI. The group includes people linked to the Oath Keepers militia group who have been indicted on charges that they planned and coordinated with one another in the attack. (AP Photo/John Minchillo, File)
Capitol Police chief appeals for National Guard to stay

Capitol Police chief appeals for National Guard to stay

People gather on high ground and check for any sign of a tsunami near Whangarei, New Zealand, Friday, March 5, 2021. A powerful magnitude 8.1 earthquake struck in the ocean off the coast of New Zealand prompting thousands of people to evacuate and triggering tsunami warnings across the South Pacific. (Karena Cooper/New Zealand Herald via AP)
Powerful quake hits off New Zealand, prompting evacuations

Powerful quake hits off New Zealand, prompting evacuations

FILE - In this Wednesday, Jan. 15, 2020 file photo, students discard food at the end of their lunch period as part of a lunch waste composting program at an elementary school in Connecticut. A United Nations report released on Thursday, March 4, 2021 estimates 17% of the food produced globally each year is wasted. That amounts to 931 million tons of food, or about double what researchers believed was being wasted a decade ago. And most of the waste — or 61% — happens in households, while food service accounts for 26% and retailers account for 13%. (Dave Zajac/Record-Journal via AP)
7% of food production globally wasted, UN report estimates

7% of food production globally wasted, UN report estimates

A vial of some of the first 500,000 of the two million AstraZeneca COVID-19 vaccine doses that Canada has secured through a deal with the Serum Institute of India in partnership with Verity Pharma at a facility in Milton, Ont., on Wedneday, March 3, 2021. THE CANADIAN PRESS/Carlos Osorio - POOL
Efficacy figures of COVID-19 vaccines don’t tell the whole story: experts

Efficacy figures of COVID-19 vaccines don’t tell the whole story: experts

Most Read