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.
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