Is Buffett Becoming A Lagging Indicator? (BRK-A)

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Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK-A) was out yesterday talking up “enormous progress” that has been made since a year ago.  His comments came from an interview and an opening address at the 4th annual closed-door Lydian Roundtable on the Payments Industry, a gathering of senior executives in the payments space.  Buffett noted the resiliency of the American system, yet he also cautioned that we are not 100% there just yet when it comes to a return of consumer confidence and spending.  Where this gets interesting is that Buffett has been far more timid in 2009 and it is getting hard to not wonder if Buffett is starting to become a lagging economic indicator.  His Berkshire Hathaway stock may or may not confirm this notion, but it has underperformed the market since at least the market recovery began.

He was interviewed by Cathy Baron Tamraz, President and CEO of Business Wire, a Berkshire Hathaway subsidiary.  While the effort was to promote the payments sector via, Buffett’s larger macro calls are what everyone really cares about.  Buffett now believes that the worst is behind us, but is still cautious about unemployment rates noting that hiring may take some time.

But what is even more interesting than Buffetts’s macro-calls is how far Buffett has been behind the recovery.  Buffett spoke at the Fortune’s Most Powerful Women conference in September, and that was actually one of the first more positive speeches on the economy.   It was just in July when Warren Buffett was calling for a second  stimulus package.

What seems to be happening is that Warren Buffett became just as shell shocked as the public.  It may have been to the point that Buffett did not heed his own mantra and investing philosophy: “Be fearful when others are greedy, and be greedy when others are fearful.”  Buffett’s investment activities did pick up in the meltdown, but he did much more investing in bonds and convertible preferred instruments that put him higher up in the food chain than just being the common stockholder.  It seems he was taking his other advice: “Own things you can own even if they close the stock market.”  Buffett’s most recent full list of public stocks is here and it shows the changes from prior quarters.

Still, things recovered significantly and were bottoming out in a very hard way when Buffett was still being cautious. Now that the recovery is afoot, Buffett is finally getting more positive, or at least much less negative.  For some reason, it feels as though Buffett is starting to become a lagging indicator.

For a comparison, Berkshire Hathaway Inc. (NYSE: BRK-A) is up about 43% from the 52-week lows.  Its shares are up 11.5% from the June 30 close and are up 37% from the March 9 close that traders use as the official date of the end of the death spiral bear market.  For a comparison, the S&P 500 Index via the SPDRs (NYSE: SPY) is up over 19% from the June 30 close and up a whopping 63% since the March 9 close.  The DJIA via the DIAMONDS (NYSE: DIA) is up 20% since the June 30 close and up over 56% since the March 9 close.

Buffett and Berkshire Hathaway are always big topics of the Value Investing Congress, where most have been Buffett loyalists.  It will be interesting to see how that ties in after the last year we have all endured.

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OCTOBER 21, 2009