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Buffett ran into criticism during the subprime crisis of 2007–2008, part of the recession that started in 2007, that he had allocated capital too early resulting in suboptimal deals. “Buy American. I am.” he wrote for an opinion piece published in the New York Times in 2008. Buffett called the downturn in the financial sector that started in 2007 “poetic justice”.Buffett’s Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his later deals suffered large mark-to-market losses.
Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs. Some of Buffett’s put options (European exercise at expiry only) that he wrote (sold) were running at around $6.73 billion mark-to-market losses as of late 2008.The scale of the potential loss prompted the SEC to demand that Berkshire produce, “a more robust disclosure” of factors used to value the contracts. Buffett also helped Dow Chemical pay for its $18.8 billion takeover of Rohm & Haas. He thus became the single largest shareholder in the enlarged group with his Berkshire Hathaway, which provided $3 billion, underlining his instrumental role during the crisis in debt and equity markets.
In 2008, Buffett became the richest person in the world, with a total net worth estimated at $62 billion by Forbes and at $58 billion by Yahoo, overtaking Bill Gates, who had been number one on the Forbes list for 13 consecutive years. In 2009, Gates regained the top position on the Forbes list, with Buffett shifted to second place. Both of the men’s values dropped, to $40 billion and $37 billion respectively—according to Forbes, Buffett lost $25 billion over a 12-month period during 2008/2009.
In October 2008, the media reported that Buffett had agreed to buy General Electric (GE) preferred stock. The operation included special incentives: He received an option to buy three billion shares of GE stock, at $22.25, over the five years following the agreement, and Buffett also received a 10% dividend (callable within three years). In February 2009, Buffett sold some Procter & Gamble Co. and Johnson & Johnson shares from his personal portfolio.
In addition to suggestions of mistiming, the wisdom in keeping some of Berkshire’s major holdings, including The Coca-Cola Company, which in 1998 peaked at $86, raised questions. Buffett discussed the difficulties of knowing when to sell in the company’s 2004 annual report:
That may seem easy to do when one looks through an always-clean, rear-view mirror. Unfortunately, however, it’s the windshield through which investors must peer, and that glass is invariably fogged.
In March 2009, Buffett said in a cable television interview that the economy had “fallen off a cliff … Not only has the economy slowed down a lot, but people have really changed their habits like I haven’t seen”. Additionally, Buffett feared that inflation levels that occurred in the 1970s—which led to years of painful stagflation—might re-emerge.
In 2009, Buffett invested $2.6 billion as a part of Swiss Re’s campaign to raise equity capital. Berkshire Hathaway already owned a 3% stake, with rights to own more than 20%. Also in 2009, Buffett acquired Burlington Northern Santa Fe Corp. for $34 billion in cash and stock. Alice Schroeder, author of Snowball, said that a key reason for the purchase was to diversify Berkshire Hathaway from the financial industry. Measured by market capitalization in the Financial Times Global 500, Berkshire Hathaway was the eighteenth largest corporation in the world as of June 2009.
In 2009, Buffett divested his failed investment in ConocoPhillips, saying to his Berkshire investors,
I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year. I still believe the odds are good that oil sells far higher in the future than the current $40–$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars.
The merger with the Burlington Northern Santa Fe Railway (BNSF) closed upon BNSF shareholder approval in 1Q2010. This deal was valued at approximately $34 billion and represented an increase of the previously existing stake of 22%.
In June 2010, Buffett defended the credit-rating agencies for their role in the US financial crisis, claiming:
Very, very few people could appreciate the bubble. That’s the nature of bubbles – they’re mass delusions.
On March 18, 2011, Goldman Sachs was given Federal Reserve approval to buy back Berkshire’s preferred stock in Goldman. Buffett had been reluctant to give up the stock, which averaged $1.4 million in dividends per day, saying:
I’m going to be the Osama bin Laden of capitalism. I’m on my way to an unknown destination in Asia where I’m going to look for a cave. If the U.S. Armed forces can’t find Osama bin Laden in 10 years, let Goldman Sachs try to find me.
In November 2011, it was announced that over the course of the previous eight months, Buffett had bought 64 million shares of International Business Machine Corp (IBM) stock, worth around $11 billion. This unanticipated investment raised his stake in the company to around 5.5 percent—the largest stake in IBM alongside that of State Street Global Advisors. Buffett had said on numerous prior occasions that he would not invest in technology because he did not fully understand it, so the move came as a surprise to many investors and observers. During the interview, in which he revealed the investment to the public, Buffett stated that he was impressed by the company’s ability to retain corporate clients and said, “I don’t know of any large company that really has been as specific on what they intend to do and how they intend to do it as IBM.”
In May 2012, Buffett’s acquisition of Media General, consisting of 63 newspapers in the south-eastern U.S., was announced. The company was the second news print purchase made by Buffett in one year.
Interim publisher James W. Hopson announced on July 18, 2013 that the Press of Atlantic City would be sold to Buffett’s BH Media Group by ABARTA, a private holding company based in Pittsburgh, U.S. At the Berkshire shareholders meeting in May 2013, Buffett explained that he did not expect to “move the needle” at Berkshire with newspaper acquisitions, but he anticipates an annual return of 10 percent. The Press of Atlantic City became Berkshire’s 30th daily newspaper, following other purchases such as Virginia, U.S.’ Roanoke Times and The Tulsa World in Oklahoma, U.S.
During a presentation to Georgetown University students in Washington, D.C. in late September 2013, Buffett compared the U.S. Federal Reserve to a hedge fund and stated that the bank is generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government. Buffett also advocated further on the issue of wealth equality in society:
We have learned to turn out lots of goods and services, but we haven’t learned as well how to have everybody share in the bounty. The obligation of a society as prosperous as ours is to figure out how nobody gets left too far behind.
After the difficulties of the economic crisis, Buffett managed to bring its company back to its pre-recession standards: in Q2 2014, Berkshire Hathaway made $6.4 billion in net profit, the most it had ever made in a three-month period.