IBM's (IBM) Future Looks Bright

As measured by sentiment from brokerages, analysts, and leading mutual funds, International Business Machines (NYSE: IBM) is among the favorites in looking ahead to 2012.

IBM garnered a lot of attention this year when it was discovered Warren Buffett's Berkshire Hathaway (BRK-B) had been acquiring shares in the company throughout 2011.

Buffett's realization IBM was now a service company with a big moat and growth potential, put the tech giant on everyone's radar again, although many investors have stayed with IBM through the years.

IBM was trading at $185.56, down $0.62, or 0.33 percent, as of 10:34 AM EST.

Bove Says BofA (NYSE:BAC), Buffett Deal Sucks

According to Rochdale Securities analyst Dick Bove, the deal by Bank of America (NYSE:BAC) CEO Brian Moynihan allowing Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) to invest $5 billion in the bank, harms both Moynihan and the giant bank.

Bove said, "He's gone back on his word. That is, I think, a big negative given his credibility is under such question. Now why did he do it? He did it because he needed to buy credibility." Its "a terrible, terrible deal," concludes Bove, "There's no way the bank can make money."

Essentially Bank of America is buying Buffett's endorsement for approximately $300 million annually. That doesn't include the warrants to acquire 700 million shares of Bank of America stock at just over $7.14 a share. Buffett could cash them in now for a nice profit, as the bank is trading at $7.69 a share, as of 12:38 PM EDT.

In response to Bove's criticism, Bank of America's Moynihan released a statement saying this:

"I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy."

My question is why didn't Moynihan just say right out that the bank has the capital and liquidity, not that he was "confident" they did?

Buffet's Berkshire (BRK-A) Props BoA (BAC)

Berkshire Hathaway (NYSE:BRK-A) announced it has invested $5 billion in Bank of America (NYSE:BAC), in a deal similar to the one Warren Buffett made when he invested in Goldman Sachs (NYSE:GS).

Some are spinning this as some type of patriotic move by Buffett, but that's a ridiculous and ignorant conclusion. Buffett knows the stock has been beaten down, and this is all about creating shareholder value and nothing else.

This is why Buffett likes to support the state interference in financial companies, as it makes it a sure bet to invest in when they are under pressure, knowing he is about as safe as he can be with the capital he invests.

Buffett's investment is in 50,000 shares of cumulative perpetual preferred stock, which will give a 6 percent annual dividend. Bank of America can acquire the stock back any time by paying a premium of 5 percent.

Berkshire also has the option of acquiring 700 million shares of Bank of America via warrant priced at about $7.14 a share. The company exercise the warrants any time over the next ten years.

Investors have been hammering Bank of America its mortgage loan portfolio, as it is believed the giant financial institution has billions left to deal with.

Bank of America was trading at $7.83, gaining $0.84, or 12.02 percent, as of 11:53 AM EDT.

Berkshire's (BRK) Warren Buffett Losing Credibility in Twilight Years

Berkshire Hathaway's (NYSE:BRK-A) Warren Buffett has gradually undermined his credibility over the last several years, possibly significantly weakening his legacy, as he has forgone his own advice and stepped outside his expertise and entered into the macro-economic fray, where he is far from an expert, and which he revealed himself as very politically partisan, ruining what had in general, been a more objective participation in the past.

Buffett has moved almost lockstep economically with Obama, support his Keynesian practices of printing money as the answer to all our economic ills. Buffett has also ridiculously called for higher taxation of the productive, using the tired old idea of everyone needing to pay their "fair" share, even though the wealthy pay far more in taxes than everyone else.

In the end, Buffett and Berkshire wildly benefit from big government and their intervention in the free market, and his inputs have been colored by that self-enhancement.

Warren Buffett years ago broke away from his father Howard Buffett economically, who supported liberty in the markets, and life in general, looking for much smaller government.

The worst offense, to me, with Warren Buffett, is his recent declaration the cut in the AAA credit rating in the U.S. was uncalled for, not noting Berkshire Hathaway is a major holder in S&P's competitor Moody's (NYSE:MCO).

You have to question Buffett's credibility or ability to think straight any longer, as to suggest that the U.S. is financially healthy and should continue to be rated AAA, suggests the loss of one or the other, maybe both.

Most people, even his economic detractors, have always had respect for Warren Buffett, who is fact is probably the greatest investor of all time. But to see him speaking as he has, points to either a loss of integrity or a weakening of his faculties. Either way, there is now a taint on Warren Buffett history will probably take note of, which hadn't been there in the past.

The bottom line is Warren Buffett is no longer an economic bellwether, and for whichever reason, can no longer be trusted as he has been in the past.

Berkshire's (BRK-A) Preview Shows Earnings Plunge for 1Q

Berkshire Hathaway Inc. (NYSE:BRK-A) tried to manage and lower expectations of shareholders for its upcoming quarterly report, as the company announced Saturday that disasters in Australia, New Zealand and Japan will weigh heavily on the results of the company, and the company's earnings will plunge in the first quarter.

Chief Executive Officer Warren Buffett said at the company's annual shareholders meeting, the he looks for net earnings of $1.5 billion for the first quarter, a dramatic fall from $3.63 billion reported last year.

Operating earnings, which excludes certain gains/losses, are projected to be $1.59 billion for the quarter, compared with $2.22 billion in the same quarter last year.

Insurance underwriting losses for the quarter will come in at $821 million, far below the gain of $226 million last year.

Buffett added that pretax losses from the disasters are close to $1.67 billion for the quarter. This includes $1.06 billion from the Japan earthquake, $412 million from the New Zealand earthquake, and the rest from the Australian floods.

Berkshire closed Friday at $124,570, down $55.00, or 0.04 percent.

Buffett, Berkshire (BRK-A) Sued Over Sokol, Lubrizol (LZ) Situation

In what appears to be the first lawsuit filed against Berkshire Hathaway Inc. (NYSE:BRK-A) and Warren Buffett over the recommendation by former Berkshire manager David Sokol for Buffett to invest in Lubrizol Corp. (NYSE:LZ) after Sokol had acquired shares in the company, Berkshire investor Mason Kirby is asking for the recovery of damages.

Kirby stated in papers made public in Delaware Chancery Court in Wilmington, “Sokol knew that Buffett would closely consider and likely take his recommendation. As a result of Sokol’s unethical behavior, Berkshire suffered significant reputational losses and other damages.”

Kirby asserts that Buffett and Sokol, “working in concert,” violated duties to shareholders “and put the company at risk for a potential adverse SEC action and negative credit rating.”

Sokol acquired over 96,000 shares of Lubrizol in early January before making a recommendation to Buffett for Berkshire to acquire shares in the company.

Berkshire was trading at $120,903.00, gaining $378.00, or 0.31 percent, as of 2:55 PM EDT.

Goldman (GS) Guidance Less Than Inspiring

Goldman Sachs' (NYSE:GS) quarterly earnings plunged 72 percent, saying in the current regulatory and economic environment there were less opportunities to generate revenue.

Even with the poor performance, it was better than analysts had been looking for, although cautious comments from Goldman about future profits balanced the better-than-expected performance.

Revenue in the quarter dropped by 7 percent, as a major source of income - customer trading - fell 22 percent.

The bank earnings were $908 million, or $1.56 a share. Analysts' average projection was 82 cents a share. Last year in the same quarter revenue was $3.3 billion, or $5.59 a share.

Goldman repurchased $5 billion of preferred shares from Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) in the quarter, resulting in a one-time charge of $1.64 billion.

Minus the preferred share buyback, the bank would have earned $4.38 a share.

Revenue from fixed income, currency and commodities fell 28 percent.

Goldman Sachs was trading at $151.60, falling $2.18, or 1.42 percent, as of 11:37 AM EDT.

Berkshire (BRK-A) Hires Wells (WFC) for Bond Underwriting

Warren Buffett's Berkshire Hathaway (NYSE:BRK-A), which has a huge stake in Wells Fargo (NYSE:WFC), has hired the investment banking unit of the company to underwrite a $1.5 billion bond offering in January.

With not much growth opportunity in retail and commercial banking, Wells Fargo is looking to expand its investment banking operations to compete more with giants in that segment like Bank of America (NYSE:BAC), Citigroup (NYSE:C) and JP Morgan Chase (NYSE:JPM), which are far larger in that area.

Contrary to the strategies used by its rivals, it appears Wells Fargo isn't going to go the route of hiring the big players in investment banking, rather they're attempting to market its strong balance sheet in hopes of attracting underwriting clients, according to the Wall Street Journal.

Wells Fargo was trading at $31.32, falling $0.08, or 0.25 percent, as of 1:24 PM EDT. Berkshire was trading at $122,377., down $1,120.00, or 0.91 percent.

Berkshire (BRK-A) (GOOG) Interested in Wind Turbines?

Even though wind power isn't the most reliable source of energy, some companies, including Google (NASDAQ:GOOG) and Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) has apparently shown some interest in wind turbines, according to a couple of the world's largest manufacturers.

The interest of Google and Berkshire Hathaway allegedly stem from railroads in the case of Berkshire, and large computer server farms with Google.

Andris Cukurs, head of North American operations at Suzlon Energy Ltd. (SUEL), said, “Railroads could be huge potential customers of wind turbines, and companies like Google have already shown some interest. We expect to see more large energy consumers get involved directly in wind.”

Even so, orders have been falling in the case of developers in the U.S. like NextEra Energy Inc. (NYSE:NEE) and Exelon Corp. (NYSE:EXC), pushing wind turbine manufacturers to seek other customers outside of independent power producers.

Martha Wyrsch, president of Vestas’s unit in the region, added, “In North America, we’ve totally restructured our sales force and hired more engineers to work with customers that don’t have much experience with wind farms. We are seeing a lot of interest from carbon-conscious companies that we never saw before.”

With wind turbine sales about 30 percent below 2009 levels in 2011, and expected to stay that way for the year, the industry is struggling, and when asked about interest in wind turbines, it's only in the sense of delivering parts, not for the company's own use, casting a shadow on some of the assertions made.

Google for their part, also hasn't ordered any wind turbines to build wind farms, although they did offer to help develop a $5 billion high-voltage transmission line that could connect to offshore wind turbines off the Atlantic Coast from New Jersey to Virginia.

In conclusion, it appears the secondary connection of Berkshire and Google was used to make it look like interest was growing outside of the base wind turbine customers, when neither of the company's have had an interest in purchasing the turbines themselves.

Berkshire (BRK-A), Buffett Drooling over India

Although China has been an investors dream for some time, it has been so played out in the media, it's been harder to find deals there than it may be in India, even with its draconian rules. But that's not stopping Berkshire Hathaway (NYSE:BRK-a) and Warren Buffett from looking to spread their wings there.

What's powerful about India is the fact that Buffett can look at all sorts of infrastructure and foundational sectors which are very close to being at the beginning of the India growth story.

Couple that with Buffett's long-term horizon, and there is extraordinary potential there.

Eventually India will have to change its current rules which hold back capital investment and entry into the market, and when it does, those invested or prepared to invest could and will make a fortune, assuming the perform due diligence and know what they're doing.

Buffett obviously does, and that will bold well for the company if he's able to stick around long enough to make some effective moves.

Berkshire closed Thursday at $125,300, falling $2,803.00, or 2.19 percent.

Warren Buffett (BRK-A) Accepts Heir-Apparent's Resignation

Contrary to the past actions of Berkshire Hathaway (NYSE:BRK-A) CEO Warren Buffett concerning prior resignation attempts by David Sokol, Chairman, MidAmerican Energy Holdings, and Chairman, President, and CEO of NetJets, this time he accepted the resignation, in what appears to be in response to something that irked Buffett.

Buffett said in a press release, "Dave’s letter was a total surprise to me, despite the two earlier resignation talks. I had spoken with him the previous day about various operating matters and received no hint of his intention to resign. This time, however, I did not attempt to talk him out of his decision and accepted his resignation."

The accepted resignation appears to come from Sokol's acquisition of shares in Lubrizol (NYSE:LZ) before he had attempted to convince Buffett to invest in the company.

While Buffett doesn't believe it was in any way unlawful, the tone of his press release seemed to be that he was somewhat irritated by what could be construed as an impropriety.

As in the past, Sokol said he wants to pursue philanthropic efforts.

Buffett quoted him saying, “As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family’s resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests. I have no more detailed plan than this because my obligations from Berkshire Hathaway have been my first and only business priority.”

Buffett, Berkshire (BRK-A) in Sad Goodbye to Goldman (GS) Preferred

Liz Claman and Charles Gasparino broke down some of the response of Warren Buffett in this video over the $5 billion-plus sale of preferreds Berkshire Hathaway (NYSE:BRK-A) had owned in Goldman Sachs (NYSE:GS), which generated a cool $500,000 annually for the company.

Yet Berkshire still owns about $2 billion in warrants in the giant bank, which they have time to sit on until Goldman surges again, which is inevitable.

They also noted that Goldman CEO Lloyd Blankfein wants out of his position, as the scrutiny appears to be taking the enjoyment out of running the business.

Buffett, Berkshire (BRK-A) Acquire Lubrizol (LZ) for $9 Billion

Take away the major $26 billion deal for Burlington Northern Santa Fe, the $9 billion acquisition of Lubrizol (NYSE:LZ) by Warren Buffett and Berkshire Hathaway (NYSE:BRK-A) is one of the largest deals made in years.

Berkshire Hathaway said in a news release today it was acquiring Lubrizol for close to $9 billion in cash, and will assume approximately $700 million in debt as well.

The offer is $135 a share for the chemicals company, a 28 percent premium over Friday's closing price of $105.44 and an 18 percent increase over its all-time high.

Buffett said this about the deal: "Lubrizol is exactly the sort of company with which we love to partner - the global leader in several market applications run by a talented CEO, James Hambrick. Our only instruction to James - just keep doing for us what you have done so successfully for your shareholders."

Luzrizol was trading at $134.06, up $28.62, or 27.14, as of 11:43 AM EST. Berkshire Hathaway was trading at $126,045.00, down $1,955.00, or 1.53 percent.

Ford (F) Facing CEO Succession Concerns

An article from the Detroit Free Press started the conversation again about the succession plans of Ford Motor (NYSE:F), which has apparently had a detrimental effect on the stock of the company Monday.

The Detroit Free Press noteded the potential succession of CEO Alan Mulally, which may happen before the end of 2011 or potentially within the next few years. Mulally, though 65, hasn't made any official comments about stepping down as Chief at Ford, but some speculate as to who will be next in line should something happen.

An aging Warren Buffett as Berkshire Hathaway (NYSE:BRK-A) and poor health of Apple's (NASDAQ:AAPL) CEO Steve Jobs has shareholders pressuring companies to lay out a more transparent process concerning succession plans for the heads of companies.

Some names being thrown about for potential successors to Mulally include Ford Americas President Mark Fields, Ford Europe CEO Stephen Odell, Asia Pacific and Africa President Joe Hinrichs, Group Vice President of Marketing Jim Farley and Vice President of Global Product Development Derrick Kuzak.

CFO Lewis Booth and Chairman Bill Ford, Jr. are considered possible short-term candidates in case something unexpected happens.

Ford was trading at $14.03, down $0.39, or 2.67 percent, as of 1:12 PM EST.

Apple (AAPL) At Top of Fortune's 'Most Admired' List

Of the top 50 most-admired companies in the world, Apple (NASDAQ:AAPL) landed at the top of the list of Fortune magazine. Following closely on the heels of Apple was nemesis Google (NASDAQ:GOOG), which came in at No. 2.

Fortune said about Apple, "The company's blistering pace of new product releases has continued to set the bar high for tech companies across the board."

Following the two tech giants was Warren Buffett's Berkshire Hathaway (NYSE:BRK-A), Southwest Airlines (NYSE:LUV) and Proctor & Gamble (NYSE:PG), in that order.

Others making the list were Coca Cola (NYSE:KO), in 6th place; Amazon.com (NASDAQ:AMZN) in 7th; FedEX (NYSE:FDX) in 8th; Cisco (Nasdaq:CSCO) in 9th. Microsoft (NASDAQ:MSFT) came in at 15th.

The rankings of the companies on the list were measured on innovation, people management, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment, quality of products/services and global competitiveness.

Berkshire (BRK-A) Adds Fourth Buffett Replacement to Pool

For several years Berkshire Hathaway (NYSE:BRK-A) has said they have three people in mind that could replace CEO Warren Buffett when the time comes for that to happen.

They said in a recent regulatory filing that they've now added a fourth candidate as a possible Buffett replacement.

One thing known about the Berkshire plan to replace Buffett will his role will be distributed in three parts - chief executive officer, chairman and several investment managers.

Adding a fourth potential candidate to the succession plans seems to strengthen speculation that has swirled around Burlington Northern Santa Fe CEO Matt Rose that he has been a contender for the position, which most think of as CEO when focusing on the future Berkshire succession process.

As far as the position of chairman, Buffett has made a personal recommendation that his son Howard fill that role, citing the desire to see the culture of Berkshire maintained.

Last Berkshire (BRK-a) Sell Call Removed

The last analyst having a "Sell" call on Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A) has now removed it, as Stifel Nicolaus analyst Erik Holm maintains it was the right call at the time, although for the wrong reasons.

Dow Jones Newswires reported:

"Stifel Nicolaus analyst changed his “sell” call on Warren Buffett’s Berkshire Hathaway, reports Dow Jones Newswires’ Erik Holm:

"Stifel had been the only major firm with a “sell” rating on the shares over the last several months. From the end of June through Friday, Berkshire’s Class B shares rose 6.5% compared to the 30% return of the Standard & Poor’s 500.

"Mr. Shields wrote that while the “sell” rating had been correct, it was “for the wrong reasons.”

"The recovery of Berkshire’s noninsurance units happened faster than Stifel anticipated, he said. And the company profited more from pulling funds from its insurance reserves than expected.

"In its annual report Saturday, Berkshire said its manufacturing, service and retailing operations earned $2.5 billion last year—more than double their combined profit in 2009. The firm attributed part of the increase to cuts in spending. But demand for products made and sold by many Berkshire companies is also on the rise, the company said."

Berkshire was trading at $129,848.00, up $2,298.00, or 1.80 percent, as of 11:38 AM EST.

Burlington Northern Berkshire's (BRK-A) Top Move Says Buffett

Berkshire Hathaway Inc.’s (NYSE:BRK) quarterly profit rose 43 percent to the highest since 2007 on derivative gains and earnings from the railroad that billionaire Chairman Warren Buffett bought last year.

Fourth-quarter net income advanced to $4.38 billion, or $2,656 a share, from $3.06 billion, or $1,969, a year earlier, Omaha, Nebraska-based Berkshire said today on its website.

Buffett acquired Burlington Northern Santa Fe for $26.5 billion to add the second-biggest U.S. railroad to Berkshire’s collection of insurance, energy and consumer-goods units. The 80-year-old chief executive officer issued stock and debt to fund the deal for Fort Worth, Texas-based Burlington. Economic expansion in the U.S. fueled profit gains at the freight-hauling unit in 2010.

“The highlight of 2010 was our acquisition of Burlington Northern Santa Fe, a purchase that’s working out even better than I expected,” Buffett said in his letter to shareholders today. He said he’s looking for more “major acquisitions.”




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Buffett's Berkshire (BRK-A) Still Driven by Insurance 'Float'

Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK-A) has spent tens of billions of dollars on railroads, machine tools and utility companies in recent years. But Mr. Buffett's 2010 annual letter, to be released Saturday, is likely to emphasize just how much Berkshire's core insurance business is still driving its growth.

Berkshire, where Mr. Buffett serves as chairman and chief executive, is likely to report improved fourth-quarter earnings and an increase in book value, a performance yardstick Mr. Buffett uses to measure the company's growth.

Warren Buffett has previously described investing with Berkshire's 'float' as using other people's money without having to pay interest.

Results will be buoyed by rising stock markets that helped Berkshire's large stock portfolio and its derivatives contracts. The company's manufacturing and retail operations, and its February 2010 acquisition of railroad Burlington Northern Santa Fe, likely boosted net income, as did insurance underwriting. Berkshire's net earnings through the first nine months of 2010 totaled $8.6 billion, already exceeding reported net income for the whole of 2009.

Of importance, Berkshire's pool of funds from insurance—something Mr. Buffett calls "float"—could have swelled to roughly $67 billion at the end of 2010 from $63 billion a year earlier. It is poised to rise further in 2011 despite challenging insurance-market conditions amid the slow economy, analysts say.





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Why Bank of America (NYSE:BAC) Will Lag Competitors

When Warren Buffett's Berkshire Hathaway (BRK.A) divested of its total holdings in Bank of America (NYSE:BAC) last quarter, it gave investors and analysts pause as to the reasoning, and most gave the company closer scrutiny as a result, and it appears Buffett was right in ridding himself of the giant bank.

Most analysts don't agree with Buffett, seeing the business model of BofA as being healthy.

The question of course is their troubling balance sheet and competitors expanding into their strongest territories, territories they're counting on for growth: Florida, Texas and California.

Bank of America's outlook is the three major markets above are going to bounce back in the near future, which will drive company growth.

But looking at major competitors in those areas, like Wells Fargo (NYSE:WFC) competing strongly in all those regions, and Toronto-Dominion (TD), which is focusing on southern expansion, Bank of America isn't assured of those markets driving the type of growth they expect them to, and Berkshire and Buffett apparently agree with that assessment.

This has the potential to dramatically effect the retail segment of the company, which could produce less growth in consumer deposits than expected.

Buffett chose to vote with Berkshires' dollars for American Express (AXP), JP Morgan (JPM), Suntrust (STI) and M&T (MTB) in the financial sector, rather than Bank of America, which doesn't look like a growth engine at this time.