How Deep Are Buffett's SEC & Derivative Issues? (BRK-A) (BRK-B)

Investing

Published: August 14, 2009 10:18 am

Last Updated: April 27, 2020 11:12 pm

Buffett Image Berkshire Hathaway Inc.(NYE: BRK-A) (BRK-B) had its earnings and quarterly report last Friday, but the aftermath this week has shown more derivative criticism. But more importantly, issues over SEC correspondence have been gathering some heightened interest.

Buffet and friends have seen their shares of Berkshire drop since earnings were reported. Last Friday ahead of earnings, the stock closed at $108,100.00. It closed down at $104,000.00 on Monday and has moved slightly lower since to the $102,000.00 mark.

The reality is that Berkshire did have some issues with the SEC, but these appear to be mostly resolved. There could be some ongoing correspondence in the matter, although it is not yet known. There is also a key issue as to why this is the case.

Berkshire Hathaway is a truly unique company that has no real comparable operation in the United States. It is definitely a giant insurer. But there is much more to it. Berkshire Hathaway is also holding company of operating companies which are all run independently as subsidiaries. It is partly an equity mutual fund. And its new bets have made it part hedge fund and part corporate and transaction lender. It is no wonder that the SEC has had issues.

There are effectively two differing views out there on this SEC issue from this week. Bloombeg has a take on this that differs a bit from the take that Reuters presented. But there is another issue here. This may be all more noise than news over the SEC issues. The reviews seem to be over, even though there could be more down the road or currently. If this was a significant issue then this stock would be far lower. Also, as noted last week, it was derivatives that actually HELPED Berkshire Hathaway’s earnings.

The full Buffett holdings due soon should show more insight into what Buffet is holding and what he’s unloading. Unfortunately, derivatives, debt, and above-common-level holdings will not be disclosed in that data.

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JON C. OGG

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