Another Blow to the Celebrity CEO: This Time It's Buffett

Posted by: Nanette Byrnes on March 13, 2009

The downgrade of General Electric got lots of attention yesterday, but another AAA was kicked down a notch as well: Warren Buffett’s Berkshire Hathaway. Fitch Ratings downgraded the company in large part because of the volatility inherent in the company’s large, unhedged equity and derivative investments.

But the New York-based rating agency also cited “long-standing concerns” about Warren Buffett, 78, and how intimately the company’s investment record and corporate acquisitions are tied to the Sage of Omaha. “Fitch does not view this concentration as consistent with an ‘AAA’ rating,” the report concludes.

Buffett is the last celebrity CEO standing, one could easily argue. He’s important enough that CNBC happily took its entire production to Omaha to tape a morning with him earlier this week. His comments can still move the markets the way Alan Greenspan’s once did.

But if there’s a lesson to draw from the tortured unwinding of American International Group, it’s that companies built around one man, no matter how brilliant, are at some risk. Berkshire’s portfolio companies are run by top notch operators, for sure, but the same could be said for AIG’s insurance companies. Buffett has said that his board has a successor in mind. But whoever he is, he won’t be Buffett.

GE’s stock shook off its downgrade, rising 9.6% yesterday, an up day for the market overall. But Berkshire’s Class A share closed down 2.5% today, while the market was up again. It must be said, of course, that a share of Buffett’s company sells for $83,550, compared to General Electric, now under $10 a share.

Reader Comments

Kevin

March 13, 2009 4:42 PM

I believe the nickname is "Oracle of Omaha," not Sage.

JKL

March 13, 2009 6:43 PM

I find Mr. Buffett´s explanation of the derivatives (BRKA 2008 10K) more convincing than the explanation of the downgrade.

Jon

March 13, 2009 7:04 PM

Seriously, "he"? We assume the successor is not a woman?

Who am I kidding. Of course it's a man.

steverino

March 13, 2009 9:08 PM

He made me into a millionaire. What can I say!

Thomas Huynh

March 14, 2009 12:15 AM

Fascinating perspective Nanette! Ironically Buffett is best known for his anti-celebrity approach yet remains one of the most famous investors of all time. Although I know what you mean about the stock price disparity, it really doesn't matter what the stock price but the market cap ($100B and $130B for GE and BRK.A respectively -- hardly a huge difference). Buffett because of his "anti-celebrityness" and financial textbook logic refused to split his stock and lower the price to encourage more stock purchases. Considering both GE and BRK were both downgraded by S&P yet received different responses from the market, perhaps in this case he's put too much faith in traders' logic? Thomas

Bob

March 14, 2009 12:16 AM

Gee, Jon. Perhaps it's not a 'she' either and is a post op tranny. Way to walk around with a closed mind.

I find it amazing that of all things to comment about you, you whine about the use of the word "he" in that sentence.

raja tadvai

March 14, 2009 9:33 PM

buffett lunch will last untill he lives derivatives what he bet in 2017 will cost for him plus or minus 10 percent and below of his profit and loss account so no worry for generations to come in and go,his mistakes are calculated risks at all the times no worry a penny for long run success

Lee KW

March 15, 2009 12:23 AM

This is deja vu all over again. Buffett has been criticized for missing out on the dot com boom and had his Berkshire shares bashed down by about 50 %. But he has always confounded his critics. Don't write him off.

Thomas Huynh

March 15, 2009 12:16 PM

Bob and Jon,

I bet Nanette doesn't mean it literally but just to avoid using the awkward "he or she." At the same time, however, the list of potential successors to Buffett ever written about in business news has only men in it. So perhaps "he" is more accurate. Which is unfortunate. Is it fair to say there aren't as many women investors as men investors? Yes. But is it fair to say of those women investors there aren't _any_ who is qualified to replace Buffet? No. Thomas

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