Warren Buffett's Berkshire Hathaway saw its long-term credit rating cut to Aa2 from top-rated Aaa by Moody's, which cited the troubled economy and the "severe decline in equity markets" for the move as Berkshire's investments in the likes of Wells Fargo and American Express fell hard, the WSJ reports.
Bad news right? Not really, for a couple of reasons. Berkshire lost about a third of its value in the last year, and it's obvious even Buffett didn't escape the worst of the credit crisis. The latest rating change was expected after Fitch and S&P revised their ratings, and this downgrade actually makes the legendary investor look more like his usual honest self after questions were raised over Moody's hesitance to cut Berkshire given Buffett's 20 percent sake in the ratings firm. As Felix Salmon notes, the open conflict of interest actually makes the news less meaningful.
Plus, it's got to feel good that on the day after your credit ratings get cut for investing in Wells Fargo that same bank says it's in good shape and watches its shares jump almost 20 percent. According to Bloomberg, that boosts the value of Berkshire's stake by some $1.1 billion. Berkshire shares are up a bit less than 3 percent today, and if more banks beat estimates Buffett's investments during the crisis (in Goldman Sachs, for example) will do much to restore a slightly tarnished reputation.
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Tony Lee of CA 4:09PM April 09, 2009