Warren Buffett's Irish Mistake "In 2008 I spent $244 million for two Irish Banks"

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aamstudent

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In the 2008 Berkeshire Letter to Shareholders, issued 27 Feb 09, Warren Buffett confesses

"I made some other already-recognizable errors as well. They were smaller, but unfortunately not that small. During 2008, I spent $244 million for shares of two Irish banks that appeared cheap to me. At yearend we wrote these holdings down to market: $27 million, for an 89% loss. Since then, the two stocks have declined even further. The tennis crowd would call my mistakes “unforced errors.”

I wonder which banks. He doesn't say.
 
I wonder what he means by " I wrote these holdings down to market"
Ie he wrote off the losses...but is he still holding the shares.

Good to know we are in such salubrious company :)
 
yes, it means he is still holding the shares....as far as i understand it.

He wont reveal which companies....he had to write the values down due to the dilution from the government guarantee.

It is a VERY positive development. VERY positive.

If the most successful investor in the world bought shares in our banks (and hasnt flogged them) it is fantastic news.
 
smiley said:
yes, it means he is still holding the shares....as far as i understand it.

He wont reveal which companies....he had to write the values down due to the dilution from the government guarantee.

It is a VERY positive development. VERY positive.

If the most successful investor in the world bought shares in our banks (and hasnt flogged them) it is fantastic news.
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LOL.

Um, he had to write them down because their values crashed by 89%

He has to write them down more, as they've crashed further from the point his results were pegged at.

The government's recapitalisation is not dilutive.... not yet anyway. If the coupon on the preference shares cannot be paid in cash, it will be paid in common stock at the prevailing share price (so will be really quite dilutive). I would be astonished if the banks do not pony up.

Anyway, who's to say that the two banks he invested in aren't Anglo and IL&P (just as examples...).
 
It's obvious that the banks he's referring to are AIB and BOI. It couldn't be Anglo, because their shares are now worthless and it couldn't be IL&P because they hadn't declined by 89% in 2008.
smiley said:
It is a VERY positive development. VERY positive.

If the most successful investor in the world bought shares in our banks (and hasnt flogged them) it is fantastic news.
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I wouldn't get too excited, he called his purchase of these shares an "error". That means that he doesn't like the businesses and does not see a turnaround. This contrasts with his Goldman Sachs/General Electric investments which are underwater, but he still sees good prospects for.

This situation only serves to undermine Ireland and makes our companies look untrustworthy.

Warren Buffet obviously read the annual reports of AIB and BOI for 2007 and took Goggin and Sheehy at face value. You can't blame Buffett though. The report presented the banks as having a top-notch loan book with a fortress-type balance sheet. In reality, he was duped. His experience will influence him (any many others who read the letter) that Ireland is not a good place to do business.

I hope he sues.
 
Raskolnikov said:
It's obvious that the banks he's referring to are AIB and BOI. It couldn't be Anglo, because their shares are now worthless and it couldn't be IL&P because they hadn't declined by 89% in 2008.
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Eh, IL&P declined about 84% from 12 euro to 1.90 during 2008.

Anglo declined from 10.70 to 50c in 2008.
(Based on closing prices which are neither the intraday high nor low).

There is no evidence to suggest which banks Mr. Buffet bought or did not buy.

Even had Anglo declined to zero in 2008, Mr. Buffet would still have booked a loss on them (100%) which averaged with the loss on the other bank share he bought might come to 89%.

Seekingalpha had both AIB and Anglo as recommendations at one point - my guess, for what it's worth, is those are the two that he bought... perhaps thinking he was just buying one of them!
 
yoganmahew said:
Eh, IL&P declined about 84% from 12 euro to 1.90 during 2008.

Anglo declined from 10.70 to 50c in 2008.
(Based on closing prices which are neither the intraday high nor low).

There is no evidence to suggest which banks Mr. Buffet bought or did not buy.

Even had Anglo declined to zero in 2008, Mr. Buffet would still have booked a loss on them (100%) which averaged with the loss on the other bank share he bought might come to 89%.

Seekingalpha had both AIB and Anglo as recommendations at one point - my guess, for what it's worth, is those are the two that he bought... perhaps thinking he was just buying one of them!
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Buffett would never deceive shareholders about an investment. If he had bought Anglo shares, he would have mentioned that at least part of his investment was written off, rather than written down.

As you have stated, the fall in IL&P was less severe than that of BOI and AIB (which have both fallen closer to a figure that corresponds with the 89% number) in 2008. Given the information, I think it's less likely that he invested IL&P.
 
BOI was one of Fortune magazines worst picks of 2008. I wonder if they were copying Buffets picks or if he was copying them.
".. these managers argue that the long-term picture for the Bank of Ireland remains solid, largely because favorable corporate tax rates will result in a continuing flow of businesses and immigrants into the country. "
".. also has little exposure to structured investment vehicles or collateralized-debt obligations - those toxic products now wreaking havoc on Wall Street - and its lending operations do not rely heavily on the interbank market, where borrowing costs have increased with the global credit squeeze. "
".. is trading at less than seven times estimated 2008 earnings. "It's just dirt cheap," says Horn. "The price is now assuming that everything that can go wrong will go wrong." The shares also offer a hefty 7% dividend yield, meaning that you can still get paid handsomely while waiting for the stock to rebound. "
 
I'm obviously a lot smarter than Buffett. I only lost 66% and on a smaller investment.


Murt
 
The "billionaire next door" referenced this investment in a couple of Irish banks as one of his 2 biggest investment regrets of recent times in interview on CNBC last night (23 March) ... More global publicity for the Irish financial system!

BTW his other mistake was investing in Conoco when oil was $100 a barrel ...

Even the Master makes mistekes!!!!!!!!!!!
 
smiley said:
It is a VERY positive development. VERY positive.

If the most successful investor in the world bought shares in our banks (and hasnt flogged them) it is fantastic news.
Click to expand...

Funniest thing I've read all week.
 
ACBooks said:
The "billionaire next door" referenced this investment in a couple of Irish banks as one of his 2 biggest investment regrets of recent times in interview on CNBC last night (23 March) ... More global publicity for the Irish financial system!
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His most recent interview on cnbc was on the 10th of March.

By the way, who ever said Warren Buffett doesnt make mistakes???

Its the size of the mistakes that matter. You will find that any mistakes he makes are either very small or will rectify themselves over time...ie conoco philips. He may have bought at the slightly wrong time but he still bought at a fantastic discount to intrinsic value.
 
berkshire are in serious trouble with derivatives. buffets style of investing which has been the famous "buy and hold" is flawed and certainly does not work in a period like we are in now i.e. deleveraging, less credit etc
 
spursfan1234 said:
berkshire are in serious trouble with derivatives. buffets style of investing which has been the famous "buy and hold" is flawed and certainly does not work in a period like we are in now i.e. deleveraging, less credit etc
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What a load of garb. Buffett doesnt care about any short term period. Why dont you go and check out his long term success. It speaks for itself.

From my contrarian point of view its wonderful to see people knocking buffett. It always means its time to buy. History has proven this also. When people start criticising buffett and saying he has lost his touch i increase the amount i put into my investments.
 
Berkshire shares have dipped from time to time, sometimes for years at a time. When they do, there are always people who jump to the conclusion that Buffett is wrong and that his model is broken and that it's the end for Berkshire etc.

Very few of them are worth >$40 billion dollars...
 
smiley said:
From my contrarian point of view its wonderful to see people knocking buffett. It always means its time to buy. History has proven this also. When people start criticising buffett and saying he has lost his touch i increase the amount i put into my investments.
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You could be on the road to ruin with this policy. What do you buy?
 
berkshire had their rating downgraded just two days ago by s+p

and his "wealth" which is nothing more than paper money fell by 25 billion dollars last year and will likely continue to fall this year
 
spursfan1234 said:
berkshire had their rating downgraded just two days ago by s+p

and his "wealth" which is nothing more than paper money fell by 25 billion dollars last year and will likely continue to fall this year
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They actually didn't. They had their outlook changed which means a POSSIBLE rating action within 12 months.

And so he now only €40 billion of wealth. Poor guy.
 
he dosent have 40 billion in wealth. its 40 billion of paper profits (supposed profits). if he brought everything to the market to sell it would be much much less thatn 40 billion
 
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