Even Warren Buffett gets it wrong in Q1

Investors angry at their bad results in Q1, and from hedge funds to US dollar holders there are many more losers than winners, should take some perverse comfort from Warren Buffett’s performance.

His Berkshire Hathaway reported a 64 per cent slump in Q1 profits to $181 million or $607 per share compared with $1,682 a year earlier. Remarkably for all his public warnings about the dangers of derivatives, the Sage of Omaha has run into problems with credit default swaps.

These are presently unrealized losses but have to be marked to market value under accounting conventions, so the write downs may get written back. But in the meantime Berkshire can invest the $4.9 billon it has taken in writing these swaps on which the earliest potential pay-out is 2019.

So assuming that longevity is a part of Buffett’s business model he will have the last laugh. It may well also be true for many investors down in Q1 but I still think this rally is the last chance to get out on top, and buy back when things are really down.

Buffett is still sitting on a huge cash pile to take advantage of market mayhem, so as usual he will probably win both ways. Will you?