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Berkshire Rises to Highest Since 2008 as Buffett Touts Growth

Berkshire Hathaway Inc. rose to a 23-month high after Chief Executive Officer Warren Buffett said the company is expanding with the U.S. economy.

Berkshire’s Class A stock advanced $790 to $125,300 yesterday in New York Stock Exchange composite trading. Berkshire last closed above $125,000 on Oct. 6, 2008.

Buffett, 80, ruled out a second recession for the U.S. and said at a conference this week that businesses owned by Omaha, Nebraska-based Berkshire continue to grow. Berkshire is adding workers as demand rebounds for its machine tools, recreational vehicles and freight space in its railcars. The stock has gained 26 percent this year through yesterday, compared with a gain of less than 1 percent for the Standard & Poor’s 500 Index.

“We still think it’s undervalued,” said Bill Bergman, a Morningstar Inc. analyst. As the economy improves Berkshire will benefit from “the earnings power in the operating subsidiaries that have been hit so hard during the recession,” he said in an interview.

Berkshire’s record close was $149,200 on Dec. 10, 2007. The stock fell to a six-year low of $72,400 on March 5, 2009, as the recession reduced demand for Berkshire’s products and the equity market slump contributed to derivative losses.

Profits at Berkshire’s manufacturing units surged in the first half as economic expansion boosted spending and costs were curbed by job cuts last year. Buffett’s firm eliminated more than 20,000 positions companywide in 2009. The manufacturing, service and retailing businesses more than doubled earnings to $671 million in the second quarter on gains at RV-maker Forest River and toolmaker Iscar Metalworking Cos.

Acquisitions

Buffett built Berkshire into a $206 billion provider of insurance, energy and luxury goods and services over four decades of acquisitions and stock picks. In February, Berkshire bought railroad Burlington Northern Santa Fe Corp. for $27 billion in a deal that Buffett called a bet on the U.S. economy.

“I am a huge bull on this country,” Buffett, who also is Berkshire’s chairman, said in remarks to the Montana Economic Development Summit on Sept. 13. “We will not have a double-dip recession at all. I see our businesses coming back almost across the board.”

The world’s largest economy grew at a 1.6 percent annual pace in the second quarter, exceeding the median forecast of economists surveyed by Bloomberg News, revised figures from the Commerce Department showed on Aug. 27. U.S. economic growth will slow to 2.5 percent next year from a projected 2.7 percent this year as unemployment above 9 percent tempers consumer spending, according to the median forecast of economists surveyed by Bloomberg News this month.

Berkshire’s third-quarter operating earnings may rise 26 percent to $1,669 a share, according to the average estimate of five analysts surveyed by Bloomberg. Berkshire’s Class B stock was added to the S&P 500 in February after the company split the shares in a transaction connected to the Burlington Northern acquisition.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net;

 THE ULTIMATE NIGHTMARE  Deja vu 

Party Like it's 1979

The Conservative-Liberal Democrat coalition government in Britain is made up of and advised by millionaires and billionaires. And while they live a life that millions would dream of, they spend their time investigating how much they can cut spending on social services, healthcare, education and pensions. The contradiction is clear for all to see.

The Con/Dem coalition is a government of Big Business, nothing more, nothing less. Despite the protests of David Cameron that he is just a regular “middle class” fellow, he is related to Royalty (William IV), went to Eton and Oxford, and is married to an aristocrat. The Cabinet, the Fellowship of Threadneedle Street, is composed of 18 millionaires.

The latest additional “advisers” to this Big Business government are Lord Levene, the veteran City financier and the retail capitalist Sir Philip Green. They have been engaged to find “savings” before the October spending review and both are, as we can see, very well qualified for this onerous task of squeezing the poor.

Lord Levene “advised” John Major on efficiency from 1992 to 1997. His long career includes stints as chairman and chief executive of Canary Wharf and working for Morgan Stanley and Deutsche Bank.

Sir Philip Green’s Arcadia business includes Bhs, Topshop and Dorothy Perkins (he has also bid three times for Marks and Spencer) and he has lived in Monaco, a tax haven, since 1998. To avoid paying tax, his company paid a small £1.2 billion dividend to his wife, a Monaco resident and ineligible for tax.

Knighted four years ago, this tycoon enjoys a flamboyant lifestyle of yachts and extravagant parties, which makes him a very suitable candidate for the government’s austerity cuts! At the same time, Deputy PM, Nick Clegg, vows to “break Britain’s entrenched class structures.” He presides over a Cabinet of millionaires advised by millionaires on how to slash working class living standards and cut billions from public services… services they will never use themselves.

According to the Financial Times, “Sir Philip, speaking from his yacht in Italy, said he and Ian Grabiner, chief executive of Abcadia, would handle the day-to-day work and would start gathering information today.” (13 August).

Their attacks will hit the most vulnerable in society who rely on these public services: the old, the sick, and the infirm. The Budget cuts are threatening to close Britain’s only mobile TB unit this December. TB has become an important health problem, with London reporting the highest rates of the infection of any city in Western Europe. The disease affects those living in cramped, poorly ventilated and unhygienic conditions, hardly a concern of our government of millionaires.

Chancellor Osborn at the CBI dinner, surrounded by the Chief executive of IBM, the president of CBI and the chief executive of CBI. Photo by the CBI.Waiting lists for social housing are at record levels, with some 4.5 million seeking accommodation. With planned cuts to affordable homes, a further half million will join the waiting list. They will be trapped in bed-sits and campsite accommodation, never being able to find a home.

Next year nearly one million people will see their housing benefit cut by an average of £12 a week. With home building at its lowest level since the 1920s, we will see a return to “Cathy Come Home” conditions for many, 50 years after the film shocked the nation. In addition, Cameron has also suggested removing the right of council house tenants to remain in their homes.

“Some seem to think that austerity is a one-off event – something that has already happened in the Budget”, explained the big business Financial Timesrecently. However it warns, “The promised cuts in public spending have scarcely begun to bite.” Such retrenchment will bring “real pain.”

The government bailed out the banking system using tax-payers’ money. Now the banks are making billions. Barclays saw its profits jump to almost £4bn, up from £2.75bn last year. HSBC’s profits more than doubled to $11.1bn. The biggest five banks made more than £15bn in pre-tax profits in the first half of the year. Not only that, but the bankers are being asked to join the government as “advisers”. They did such a great job in the slump that Stephen Green, HSBC chairman, is to lead a “taskforce” made up of chief executives of Lloyds Banking Group, Royal Bank of Scotland, Barclays, HSBC, Santander and Standard Chartered to help the banks.

And, of course, the working class is now being presented with the bill for the crisis through cuts in services, wage cuts and mass unemployment. They will make cuts to try and eliminate the £149bn deficit in just five years.

No wonder consumers in Britain are amongst the most pessimistic in the world over their economy, with 34% believing it was in a “very bad” state.

Youth unemployment has rocketed, with 17.5% of the six million 18-24 year olds jobless. When BT recently offered 221 apprenticeships, 24,000 young people applied for the

While bankers’ profits are booming, the crisis is certainly not over for millions of people. They face years, if not decades of austerity.

This failure is a failure of the capitalist system, which produces for profit and not for need. Rather than austerity, there is sufficient productive potential, if used properly, to give everyone a job and dramatically increase living standards. Unfortunately, it is in the hands of the bankers, capitalists and speculators. There is no solution while this remains. All they can offer is counter-reforms and attacks.