Wednesday, January 02, 2008

Buffett is getting better as an investor!

Interesting comment about how Buffett has managed to improve upon his previous investment mistakes such as General Re( bad derivative contract, reinsurance fraud scandal with AIG) and handling Salomon Brother's near collapse and how this has had an impact on his strategy of starting a new bond insurer instead of bailing out market players such as Ambac or MBIA

People who follow Mr. Buffett said such wariness is a hallmark of his investing style. He has learned from past mistakes, said Gerald Martin, a finance professor at American University and Texas A&M University.

For instance, Berkshire’s 1998 acquisition of General Re, the insurance company, was marred by a portfolio of complex derivative securities and state and federal investigations into reinsurance policies written by the company. Salomon Brothers, the Wall Street firm that Mr. Buffett was pressed to take control of in the early 1990s amid a trading scandal, was another taxing experience.

Fixing a troubled company has “got to take a tremendous amount of management time,” said Mr. Martin, who in October published a paper on how well investors would have done if they had copied Mr. Buffett’s investment moves. “I can certainly understand him wanting to shy away from it.”

That may explain why Mr. Buffett has decided to start a new bond guarantor rather than take control of one of the many firms already in the business, among them MBIA, Ambac and FGIC. Critics say those bond guarantors do not have enough capital to cover future losses in the mortgage-related securities they have guaranteed.

Link to the entire article