Warren Buffett biggest loser on Wall Street

While folksy old Warren is buying into Goldman Sachs at a bargain basement price, observers seem to have forgotten that the vast amount of stock in USA Inc that he owns has been plummeting in value this week.

I have not got time to work out how many billions, or tens of billions his investment company Berkshire Hathaway has lost on its portfolio this week. But when you are such a big investor you are particularly illiquid and have to sit there and take a very big hit. He just has to be the biggest loser on Wall Street this week.

Where Mr Buffett can now score is by buying stocks when the market bottoms and by averaging down some of his losses. That assumes the market now makes a meaningful recovery.

Sir Richard Branson observed yesterday that the US and Europe are going into a situation like Japan in the 1990s or 2000s for that matter. The Nikkei peaked at 38,000 in 1990 and where is it today? Still under 10,000!

Stocks do not always go up, particularly in bear markets like the one we have been in since 2000. In that case Mr Buffett’s whole investment strategy is going to fail as being long on US common stocks will be a disaster.

He says himself recent events on Wall Street are a kind of economic Pearl Harbor. And the US did then manage to rally itself in 1942 from the Great Depression and win the Second World War.

But nobody today is offering any plausible strategy to restore US economic growth. It is all just sticking plasters and ad hoc initiatives, and I fail to see how nationalizing the banking system could possibly help. We all know what happens to socialist economies.

Inflation might help bail Mr Buffett out – in nominal terms. But he may never be as rich again in real terms. The title of his biography ‘The Snowball’ says it all: snowballs eventually melt!