AIG's $60 Billion Loss, Buffett's Mea Culpa

Death is Pretty Final
I’m Collecting Vinyl
I’m Gonna DJ at the End of the World!
– R.E.M.

And the Deflation Olympics marches on with a more vicious news cycle this morning than usual.

First up, the best-run insurance company on earth, AIG, announces yet another staggering loss for the fourth quarter, this time in excess of $60 billion pesos.  Rock and Roll, geniuses.  They’re getting a fresh $30 billion dollar handout from you and I and have released the details of their umpteenth restructuring plan.  Barry was first out with the breakdown directly from the Federal Reserve.

Guys, we can restructure this thing once a week, but a loser is a loser.  This is precisely what happens when we allow an institution to become too fat to fail.

In a letter from the Financial Capital of the World, Omaha, Warren Buffett does his much anticipated shareholder annual message thing and his hand was probably shaking holding the quill for this one.

From Reuters:

Profit fell 96 percent, the fifth straight quarterly decline, and Berkshire’s net worth tumbled $10.9 billion in the year’s final three months. Net worth per share fell 9.6 percent in 2008, only the second decline since Buffett began running Berkshire in 1965. It fell 6.2 percent in 2001.

I have two things to say on this.  One, Buffett is refreshingly honest about the individual and specific mistakes he’s made and that’s cool, because he certainly has earned the right not to be.  Two, if you run money for a living, as I do, it’s nice to know that in this environment, even the greatest investor of all time has a bloody lip and a couple of black eyes.  Not easy out there for anyone.  Warren may have sidestepped the dot coms, but this one took him like Vesuvius took Pompeii, and everything is now covered in ash, including vaunted Berkshire Hathaway.

If you’re in the mood, here’s the whole enchilada:  Buffett’s Letter to Shareholders PDF

Full Disclosure:  I am not currently long or short AIG or Berkshire Hathaway