The downgrade of General Electric got lots of attention yesterday, but another AAA was kicked down a notch as well: Warren Buffett�s Berkshire Hathaway. Fitch Ratings downgraded the company in large part because of the volatility inherent in the company�s large, unhedged equity and derivative investments.
But the New York-based rating agency also cited �long-standing concerns� about Warren Buffett, 78, and how intimately the company�s investment record and corporate acquisitions are tied to the Sage of Omaha. �Fitch does not view this concentration as consistent with an �AAA� rating,� the report concludes.
Buffett is the last celebrity CEO standing, one could easily argue. He�s important enough that CNBC happily took its entire production to Omaha to tape a morning with him earlier this week. His comments can still move the markets the way Alan Greenspan�s once did.
But if there�s a lesson to draw from the tortured unwinding of American International Group, it�s that companies built around one man, no matter how brilliant, are at some risk. Berkshire�s portfolio companies are run by top notch operators, for sure, but the same could be said for AIG�s insurance companies. Buffett has said that his board has a successor in mind. But whoever he is, he won�t be Buffett.
GE�s stock shook off its downgrade, rising 9.6% yesterday, an up day for the market overall. But Berkshire�s Class A share are down almost 4% at this moment, and the market is down slightly too. It must be said, of course, that a share of Buffett�s company sells for $82,400, compared to General Electric, now under $10 a share.
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