BLOOMBERG: Dow Chemical to Sell Assets, Cut Jobs to Fund �Rich� Rohm Deal

By Jack Kaskey and Jef Feeley

March 10 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, will use asset sales, job cuts and new debt to try to maintain investment-grade credit ratings after paying what some investors are calling a �rich� price for Rohm & Haas Co.

Dow plans to raise about $4 billion from selling assets, including at least $1.5 billion from Rohm & Haas�s Morton Salt unit, Dow Chief Executive Officer Andrew Liveris said yesterday. The company will issue $4.3 billion of debt and cut costs by $400 million more than previously estimated, partly by eliminating an additional 3,500 jobs, mostly at Rohm & Haas, Liveris said.

Liveris sought new terms for the buyout after a joint venture with Kuwait collapsed, depriving Dow of $9 billion and prompting debt downgrades. Rohm & Haas investors will get $78 a share as originally agreed, and the two largest shareholders get equity that cuts Dow�s cash cost by as much as $3 billion and contributes to a 7.8 percent higher deal price of $16.5 billion.

�There are still concerns about the financial viability of Dow, and the fact they still agreed to pay $78 a share to the individual shareholders was a bit of a disappointment,� said Gene Pisasale, who helps manage $13 billion, including Dow shares, at PNC Capital in Baltimore. �That is a pretty rich price.�

Dow refused to complete the all-cash purchase as planned in January, saying the combined company wouldn�t be viable because of slumping chemical demand and increased debt. The companies reached the accord after the start of a trial in Georgetown, Delaware, was delayed for settlement talks.

Dow, based in Midland, Michigan, fell 45 cents, or 7.1 percent, to $5.88 in trading after the official close of the New York Stock Exchange. Philadelphia-based Rohm & Haas rose $3.42, or 4.6 percent, to $77.42.

�Favorable Resolution�

�This is a favorable resolution for Rohm & Haas because the shareholders are getting exactly what they were promised,� said Dmitry Silversteyn, an analyst at Longbow Research in Independence, Ohio.

Under the revised accord, which is set to close on April 1, Dow will pay a so-called ticking fee of $100 million a month from Jan. 10 to closing, contributing to the higher deal price, Chief Financial Officer Geoffery Merszei said yesterday.

The Haas family trusts and Paulson Co., the largest shareholders will exchange some of their stock for $2.5 billion in preferred Dow shares, and the Haas family may take an additional $500 million in equity at Dow�s discretion, the company said.

Interest payments on the preferred shares will reduce annual earnings by as much as 20 cents a share compared with debt financing, Merszei said.

Bridge Loan

Dow will need to draw only $9.5 billion of a $12.5 billion bridge loan to finance the deal because of the latest equity investments, Merszei said. In addition, Dow has a $3 billion equity investment from Warren Buffett�s Berkshire Hathaway Inc. and a $1 billion investment by the Kuwait Investment Authority.

By June, the issuance of long term debt will help cut the bridge loan to $4 billion, and asset sales will help Dow repay the entire amount within a year, Merszei said.

Standard & Poor�s said March 6 that Dow�s corporate credit and senior unsecured debt ratings of BBB, two levels above junk, may be lowered if the merger closed on the original terms or if the company was found liable for a large legal judgment.

Dow has six bidders for Morton Salt, the biggest U.S. salt producer, and the unit will be sold soon after the merger is complete, Liveris said. Selling stakes in a Dutch oil-refining business and in southeast Asia olefins ventures will raise about $1.5 billion, Liveris said. Other businesses worth about $1 billion will be sold, he said.

Job Cuts

Dow plans to save $1.3 billion by combining purchasing operations, sharing services and closing duplicate plants and research facilities, Liveris said. The latest job cuts bring the total at both companies to 10,000, he said. The combined company will spend $1.6 billion a year on research, among the biggest budgets in the industry, he said.

Acquiring Rohm & Haas was a key part of Liveris�s effort to transform Dow from a commodity producer into a maker of specialty products, such as material for electronics and paints, that command higher profit margins.

�This deal is strategic and it positions Dow for the future,� Liveris said. �We are back in control of our own destiny.�

Dow is pursuing more than $2.5 billion in restitution through arbitration from Kuwait�s Petroleum Industries Co. for backing out of an agreement to buy a 50 percent stake in the basic plastics unit, the world�s largest maker of polyethylene plastic. Dow isn�t aggressively pursuing damages against the nation in case it wants to restart the aborted K-Dow joint venture, he said.

Other state-owned petroleum companies also are interested in buying the plastics stake, Liveris said.

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BLOOMBERG.COM: Buffett Says Economy `on Floor" After Cardiac Arrest

By Erik Holm and Andrew Frye

Oct. 1 (Bloomberg) -- Billionaire Warren Buffett, the world"s preeminent stock picker, said the U.S. economy is ``flat on the floor"" after a cardiac arrest as companies struggle to secure funding and unemployment increases.

``In my adult lifetime I don"t think I"ve ever seen people as fearful, economically, as they are now,"" Buffett said today in an interview with Charlie Rose to be broadcast tonight on PBS. ``The economy is going to be getting worse for a while.""

The biggest housing slump since the Depression has spurred a wave of defaults and a yearlong contraction in global credit markets, squeezing companies" capacity for investment. Buffett"s Berkshire Hathaway Inc., based in Omaha, Nebraska, agreed in the past two weeks to buy $8 billion in preferred shares from General Electric Co. and Goldman Sachs Group Inc. to help the companies fund their businesses.

The credit freeze is ``sucking blood"" from the U.S. economy, Buffett said.

The bankruptcy of Lehman Brothers Holdings Inc. and Washington Mutual Inc., and the emergency sales of Merrill Lynch & Co. and Wachovia Corp. fueled fears about the vulnerability of firms that rely on capital markets for short-term funding.

Buffett is taking advantage of fragile stock markets, the lack of available credit and his own reputation as a picker of successful companies to extract outsized payments for Berkshire"s cash and endorsement. He has told shareholders that his strategy is to be ``greedy when others are fearful.""

`Seizing Opportunity"

``He"s seizing the opportunity,"" said Tom Kersting, an analyst for Edward Jones & Co in St. Louis. ``His philosophy is always to keep some powder dry. That allows him to take advantage of the current turmoil we"re in and take advantage when others can"t.""

For both Goldman and GE, Buffett"s endorsement comes with a cost. Both companies agreed to pay Berkshire a 10 percent dividend on his preferred shares, and each gave him warrants to buy their common stock at any point in the next five years at a price that"s a discount to where it"s currently trading.

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BLOOMBERG: GE�s Immelt Waived Bonus Pay After 2008 Profit Drop

By Rachel Layne

Feb. 18 (Bloomberg) -- General Electric Co. said Chief Executive Officer Jeffrey Immelt waived a bonus and incentives worth at least $11.7 million for 2008 as a global recession and credit crisis undercut GE�s profit and share performance.

Immelt�s 2008 salary was $3.3 million, unchanged since 2005, Fairfield, Connecticut-based GE said today in its annual proxy filing. He declined a bonus and a three-year cash compensation award that the board�s compensation committee said he earned. In 2007, he received a $5.8 million bonus.

The chief executive �performed well in an extraordinarily tough business environment,� even while missing financial goals set a year ago, the committee wrote in the proxy. Immelt, who turns 53 tomorrow, has held the job since Sept. 7, 2001, and works without a contract.

GE lost 56 percent of its market value in 2008, trailing the 38 percent decline in the S&P 500 amid the worst economic conditions since the Great Depression. Immelt lowered his annual profit forecast twice during the year, and investors punished the stock as earnings declined at the GE Capital finance unit while credit markets seized and banks collapsed.

Immelt, writing today on the company�s GEReports.com Web site, said that while GE�s profit dropped 19 percent in 2008, it still outperformed the Standard & Poor�s 500 earnings decline of 35 percent. �That�s not the kind of outperformance we like, but it was still better than the broader market,� he wrote.

The board accepted Immelt�s proposal to decline the award and a bonus, reducing his cash compensation 64 percent from 2007, the proxy showed. His total compensation, including the value of some previously awarded grants, dropped 28 percent to $14.1 million, the proxy said.

Performance Awards

GE rose 12 cents to $10.93 in New York Stock Exchange composite trading at 9:44 a.m. Yesterday, the stock closed at its lowest value since Nov. 7, 1995.

Profit from continuing operations in 2008 was $18.1 billion, including $8.6 billion from GE Capital. GE had record revenue in 2008 and profit, the third-highest in its history, �compared very favorably to S&P 500 earnings,� the committee wrote.

�Through his skilled leadership and decisive action, Mr. Immelt adapted the company to rapidly changing and deteriorating economic conditions that emerged after the goals were set.�

Under a 2004 grant, Immelt also got 125,000 shares of stock with a market value of $1.39 million tied to cash flow from operating activities, while the other half of the award tied to stock performance was canceled because GE fell short of that goal, the proxy said.

Dividend and Ratings

GE remains under pressure in 2009. S&P and Moody�s Investors Service are considering whether to lower GE�s debt ratings from the highest-possible AAA, and Immelt and the board say they are reviewing whether to maintain the level of the dividend in the year�s second half. A dividend cut would be GE�s first since at least 1940, according to New York Stock Exchange records.

Immelt�s decision to forgo the bonus and incentive pay comes amid tighter scrutiny from Congress and the Obama administration of banking and finance companies that have accepted federal bailout funds. While GE hasn�t taken financial-rescue money and predicts its finance business will remain profitable this year, Immelt said earlier this month that he would make sure his pay doesn�t put GE in a bad light.

�I have said publicly and privately, my compensation is never going to be an embarrassment to GE,� Immelt said at an event in New York on Feb. 5. �It�s going to be responsible� and �reflect the financial performance of the company.�

Executive Compensation

Chief Financial Officer Keith Sherin and Vice Chairman Michael Neal, who oversees GE Capital, each got bonuses that were 15 percent and 25 percent lower than in 2007, respectively, the proxy said. Both declined half their respective long-term performance award, turning down $2.6 million and $2.9 million respectively. The average bonus award for the top executives declined 19 percent from 2007, the committee said.

�It�s important that the board and I have the freedom to compensate our senior executives in a fair and reasonable way,� Immelt wrote on the Web site today.

Immelt purchased about 317,000 shares on the open market last year, excluding restricted stock or options, according to regulatory filings. Immelt, who has always exceeded a requirement to hold shares valued at six times his salary in stock, agreed in October to hold at least 90 percent of the shares he already owns as a condition of Warren Buffett�s Berkshire Hathaway Inc.�s investment in the company.

Moody�s Review

Moody�s said Jan. 27 it�s evaluating lowering the long-term debt rating for GE and GE Capital, a review that typically takes about 90 days. S&P said in December that GE had a 1-in-3 chance of losing its top rating over the next two years, and changed its outlook to �negative� from �stable.�

Immelt and the board in September and October shored up the company�s cash position by eliminating the share buyback, keeping the $1.24 annual dividend payout unchanged for the first time in more than three decades, and raising $15 billion from an equity sale, including the $3 billion in preferred stock to Berkshire.

The compensation committee cited the equity raise as one of Immelt�s �decisive� actions and noted last year�s retention of the AAA credit ratings for the company.

GE�s indicated gross dividend yield ended yesterday at 11.5 percent, more than three times the S&P�s yield of 3.6 percent, according to Bloomberg data.

Performance Awards

Immelt also received 150,000 performance share units that will vest in five years, half awardable if he meets the cash flow goals and half tied to the stock exceeding the S&P 500 performance, GE said in the proxy. They were valued under accounting rules at about $2 million.

Immelt hasn�t taken stock options since 2002, instead receiving all of his equity incentive compensation in the form of these performance-based units since 2003.

GE is the world�s biggest provider of power plant turbines, jet engines, medical imaging machines, locomotives, aircraft leasing and private label credit cards. Other businesses include real estate, appliances, lighting, corporate lending, equipment leasing, water treatment, security and NBC Universal television and media.

Among shareholder proposals is one to study the potential of breaking the company into four segments. The board recommended against the proposal, citing its ability to change the company�s business mix. Similar proposals have been made before.

Since 2003, GE has shed more than $50 billion in businesses and acquired more than $100 billion, the proxy said.

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BLOOMBERG: Buffett"s Berkshire Reveals Stake in NRG Energy, Trims Anheuser

By Josh P. Hamilton and Erik Holm

Aug. 15 (Bloomberg) -- Billionaire Warren Buffett"s Berkshire Hathaway Inc. took a stake in NRG Energy Inc., the second-biggest power producer in Texas, where electricity prices surged 24 percent from a year earlier.

Berkshire had 3.24 million NRG shares as of June 30, the Omaha, Nebraska-based company said yesterday in a regulatory filing disclosing equity investments at the end of the second quarter. Buffett slashed by 61 percent its holding of Anheuser- Busch Cos. before the brewer agreed to be purchased by InBev NV.

Ranked the world"s richest man by Forbes magazine, Buffett built Berkshire by investing in out-of-favor securities and buying businesses whose prospects and management he deemed superior. NRG is an unregulated power company, able to charge whatever the market will bear as environmental concerns keep new plants from being built and demand continues to grow.

``It would be logical for him to increase his utility and energy holdings and NRG would fit in nicely,"" said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which oversees $800 million, including Berkshire shares. ``There"s exponentially increasing demand for energy.""

Buffett, 77, also added to stakes in refrigeration-equipment maker Ingersoll-Rand Co. and Sanofi-Aventis SA, France"s largest drugmaker.

The purchases disclosed yesterday may have cost Buffett about $260 million all told if he bought the shares at their highest second-quarter prices. Berkshire said last week that it spent $3.98 billion on equities in the period, leaving more than $3.5 billion unaccounted for in yesterday"s filing.

Confidential Treatment

Outsiders lack full details on the portfolio because Buffett often receives U.S. Securities and Exchange Commission approval to delay disclosure to avert copycat investing. The filing says some information was submitted confidentially, including details on a stake in ConocoPhillips, the No. 2 U.S. refiner. Yesterday"s document only lists equities traded on U.S. exchanges.

``I wouldn"t be at all surprised if he"s gone international, given his trip to Europe in May,"" said Gerald Martin, a finance professor at American University in Washington who has studied Buffett"s investing history.

Buffett made a four-day trip to Germany, Switzerland, Spain and Italy to drum up potential buyouts.

``He"s not only looking for 100 percent acquisitions, he"s also looking at 5, 20, 30 percent,"" said Uto Baader, chairman of brokerge Baader Wertpapierhandelsbank AG, after attending an invitation-only meeting with Buffett in Frankfurt.

France, Korea

Buffett disclosed in March of last year that Berkshire held a 4 percent stake in South Korea"s Posco, Asia"s third-largest steelmaker. He also has bought French shares of Sanofi and a stake in Britain"s Tesco Plc.

Mimicking Buffett"s stock trades when publicly revealed would have delivered annual returns of about 25 percent for more than three decades, double the return of the S&P 500, according to a study co-written by Martin in 2007. ``He"s probably earned the title of greatest investor of all-time,"" Martin said. ``I would expect he went confidential to get out of Conoco.""

Berkshire had 17.5 million shares of ConocoPhillips as of March 31. The Houston-based company"s stock peaked near the end of the second quarter, and dropped 17 percent since then, as oil fell about 23 percent from a record of more than $145 a barrel. Becky Johnson, spokeswoman for ConocoPhillips, didn"t return a call.

Berkshire reported record earnings last year as Buffett booked a $3.5 billion profit cashing out of a $500 million investment in oil producer PetroChina Co.

NRG, based in Princeton, New Jersey, declined 19 percent this year through yesterday.

Undervalued Assets

``I would suspect he"s looking at this move that we"ve seen in energy and he"s thinking assets are worth a whole lot more than what the market is currently valuing them at,"" said Gordon Howald, an analyst with Calyon Securities in New York who has a ``buy"" rating on NRG shares. NRG spokesman David Knox declined to comment.

Berkshire, previously the No. 2 investor in St. Louis-based Anheuser-Busch, reduced its stake to 13.8 million shares before the maker of Budweiser beer agreed on July 14 to be bought for $52 billion. The brewer rejected an earlier offer in June. Anheuser-Busch shares rose 31 percent in the second quarter, and 9.5 percent more from June 30 through yesterday.

Berkshire increased its holding of American depositary receipts in Sanofi-Aventis by 8.8 percent to 3.9 million.

Stock Slump

Berkshire shares had their worst first half since 1990 and are down 18 percent this year in New York Stock Exchange composite trading. Berkshire has posted three consecutive profit declines on slumping returns from insurance, the company"s biggest business.

Berkshire invested $5.51 billion on stocks in the first six months of the year compared with purchases of $11.5 billion a year earlier, according to a regulatory filing. The slower pace of purchases may signal that Buffett expects further market declines after saying in June he believes the U.S. is experiencing ``stagflation,"" a slowing economy with rising inflation.

Berkshire"s U.S. stocks listed on the filing were worth $57.9 billion on June 30. The largest holdings are Coca-Cola Co., the world"s biggest soft-drink maker, and Wells Fargo & Co., the No. 1 bank on the U.S. West Coast.

To contact the reporterson this story: Josh P. Hamilton in New York at jphamilton@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net.

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BLOOMBERG: Swiss Re Has Record Fourth-Quarter Loss on Writedowns (Update3)

By Warren Giles

Feb. 19 (Bloomberg) -- Swiss Reinsurance Co., the world�s second-biggest reinsurer, posted a record fourth-quarter loss after a failed effort to boost earnings with sales and trading of securities. The stock fell to its lowest ever.

The loss of 1.75 billion Swiss francs ($1.49 billion) compares with net income of 170 million francs in the same period a year earlier, according to a company statement released today. Zurich-based Swiss Re reported a full-year shortfall of 864 million francs, less than the 1 billion francs estimated Feb. 5, when it announced preliminary results.

While Swiss Re is reducing securities holdings, it still has 32.5 billion francs invested in assets that may be hurt by market declines, Rene Locher, an analyst at Bank Sal. Oppenheim said in a note to clients. Shares of Swiss Re, which turned to Warren Buffett�s Berkshire Hathaway Inc. for 3 billion francs of capital, have fallen 67 percent this year, making it the worst performer in the 35-member Bloomberg Europe 500 Insurance Index.

�Although we believe a lot of negative news is already reflected in the current share price, we believe it is too early to upgrade the stock,� Locher said. He has a negative rating on the shares.

Swiss Re also said its funding requirements will rise by $1.5 billion after Standard & Poor�s lowered the reinsurer�s debt rating yesterday. The company said it can meet those needs from existing reserves without resorting to a 2 billion-franc rights offering proposed two weeks ago.

Worsening Conditions

It may be an �error� not to raise additional capital �because conditions are worsening,� said Kepler Capital Management analyst Fabrizio Croce, who has a �hold� rating on the stock.

Swiss Re fell 88 centimes, or 5 percent, to 16.74 francs, a record low.

�This result is clearly disappointing,� Stefan Lippe, who replaced Jacques Aigrain as chief executive officer last week, said in the statement. �We have already taken extensive measures to de-risk the investment portfolio and to further protect the long-term financial strength of the company.�

Swiss Re became the world�s biggest reinsurer after buying GE Insurance Solutions in 2005. Today, it has less than one quarter the market value of Munich Re.

Buffett�s Stake

S&P cut Swiss Re�s credit and financial-strength ratings to A+ from AA- after the market close yesterday, citing �greater- than-anticipated capital depletion.�

The company�s losses �are symptomatic of Swiss Re�s greater tolerance for financial risk than its peers,� S&P said.

To help defend its credit rating, Swiss Re said it will cut its dividend to 10 centimes a share, from 4 francs. Berkshire Hathaway�s purchase of convertible bonds may give it a stake of more than 20 percent in Swiss Re.

�We would expect it will take us a year to two to demonstrate that the steps we�ve taken will be sufficient,� Chief Financial Officer George Quinn told reporters on a conference call. �S&P acknowledges that once we complete the capital plan we will hold capital in the AA range.�

Swiss Re has been plagued by losses on credit default swaps, contracts sold to protect clients against declines in fixed- income securities, amid the worst U.S. housing market since the Great Depression sparked a global credit crunch.

The company had 5.89 billion francs of writedowns in 2008, including 2 billion francs in structured credit default swaps, and 3.2 billion francs in discontinued trading activities.

Insurers� Losses

Insurers worldwide have posted more than $166 billion in losses and writedowns tied to the collapse of the mortgage market, according to data compiled by Bloomberg.

Aigrain ramped up Swiss Re�s sales and trading of securities in 2006 and 2007, when the reinsurance business was coping with stagnant premiums. While the strategy boosted profit in 2006, the credit crunch and rising bond defaults forced record writedowns in 2008.

The company is disbanding its financial markets unit as part of its �derisking� strategy. Remaining assets will be split between the asset-management division and a new �legacy� unit that will hold the company�s credit-default swaps, which provide guarantees against corporate bond defaults.

Demand for reinsurance is increasing, pushing up prices during January renewals, Quinn said in a Bloomberg Television interview today, adding that he expects �a continuing improvement throughout this year.� The company will announce revised targets for return on equity later this year, he said.

��Back to basics� does not mean back to the Stone Age,� Lippe told reporters. �It means we focus on what we are best at in reinsurance.�

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BLOOMBERG: Buffett Is Less Bullish on U.S. Than You Think: Alice Schroeder

Commentary by Alice Schroeder

June 4 (Bloomberg) -- To the unschooled ear, Warren Buffett�s reassuring words that �America�s best days lie ahead� and that he�s buying U.S. stocks sound prescient, not preposterous.

But fair warning -- he�s not as bullish as he sounds.

Buffett has been right so often that what his words mean, and whether he is right now, are important questions. His skill as a forecaster has a lot to do with his psychology: a buoyant optimism tempered by extreme caution that let him score killings on stocks such as Geico and American Express Co. while steering clear of speculative bubbles, leverage, subprime mortgages, and trying to figure out a rescue for his pal Hank Greenberg�s company American International Group Inc.

In temperament, he could be the son of Woody Allen and Doris Day.

His reputation as a seer took a hit in the public�s mind last October when the market tanked after his New York Times op- ed, �Buy American: I Am.�

Was he just talking his book?

It doesn�t really matter. As much as he loves money, Buffett loves his reputation a whole lot more. He never risks going on the record unless he is pretty sure he won�t be found wrong later.

What makes him so certain? He has explained his ebullient view of the economy using historical analogies instead of economic data. He has said that trying to call the bottom of the market is futile; buy into fear. The U.S. has surmounted worse troubles before, and it will survive this, too: �Your children and grandchildren will live better and better� than you.

Nostalgia Investing

Buffett seems to hearken back to mid-20th century America, when each decade brought us a higher living standard. The concern has been whether he is extrapolating from his own experiences rather than analyzing the future.

There�s evidence, though, that Buffett is awake to America�s problems. He says there will be no quick rebound in consumer spending, the economy has �fallen off a cliff,� and we are now �fighting a war.� Berkshire Hathaway Inc.�s real- estate arm just estimated that the backlog of unsold houses is double the official figures.

The state run by Buffett�s friend, Arnold �Governator� Schwarzenegger, is broke. Peter Kiewit Sons� Inc., the company that occupies every floor of the building Buffett works in except his own, is getting rich repairing America�s decayed infrastructure. Buffett himself is part of the headwind blown by our aging population against gross-domestic-product growth.

No Fun

Buffett doesn�t enjoy watching Berkshire labor under the burden of U.S. regulations and litigiousness, pay taxes that fund expensive military commitments overseas, and struggle against the financial quicksand of the health-care system. Recently, Berkshire�s profits have been hurt by a U.S. economy with too few jobs and over-reliance on debt-driven consumer spending.

Buffett and his partner, Charlie Munger, touched on this point at the Berkshire shareholder meeting when they referred to labor concessions being made to save jobs and described what they view as China�s inexorable economic expansion. Rather than dwell on his belief in Ricardian theory of comparative advantage, under which U.S. workers have little bargaining power to increase their incomes, Buffett, as is typical, framed this issue positively: A recovery will come from �unleashing human potential,� that is, productivity gains.

That�s a rational perspective. I believe Buffett�s optimism about the country is genuine. It�s a big-picture sort of optimism, though. Economists who are debating whether there will be a recovery in 2010 are living in a different world than Buffett, whose comparisons to periods as traumatic as World War II and the Civil War should sober anyone who thinks we are going to turn the economy on a dime.

Buffett�s Ace

Somebody could have said: �Your children and grandchildren will live better than you� in 1932, and that would have been reason to buy stocks, as well as reason to be nervous.

Buffett has also got an ace in the hole: inflation.

His advice for protecting against inflation is, first, to increase your earning power. That�s sort of difficult these days for most of us.

Second, invest in businesses or stocks. Even if the nominal profits from a business are gouged by inflation, a good business provides some real return over time.

He�s put his money where his mouth is. While he counsels long-term investing, he trades his personal account more actively -- this is how he keeps his restless predatory instinct sated. Last year he began moving out of bonds into U.S. stocks.

But if inflation is such a problem, why only U.S. stocks? Is he just patriotic, or shilling for President Obama?

Hard to Separate

Buffett doesn�t shill for anybody but himself, but with him it�s also hard to separate patriotism from prudence. He has been slow to invest outside the U.S. and has always described major U.S. stocks as global enough for most investors.

Moreover, he always advises that the financially na�ve should act with even more caution than he displays himself. Years ago, he recommended only municipal and government bonds as investments for divorced women. It�s inconceivable that he would tell the Average Joe it�s OK to buy global when he isn�t.

Once you disentangle all these strands -- the cautious Buffett who tends his reputation, Buffett the long-term optimist, Buffett the realist about economics, Buffett the hawk on inflation, and Buffett the domestic investor -- it turns out that Buffett is bullish, but not as bullish as he sounds. His optimism is long-term in nature, and inflation is his hedge.

Consider yourself warned.

(Alice Schroeder, author of �The Snowball: Warren Buffett and the Business of Life� and a senior adviser to Morgan Stanley, is a Bloomberg News columnist. She recently purchased Berkshire Hathaway shares. The opinions expressed are her own.)

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BLOOMBERG: Buffett Says Citigroup Distorts Perception of Banks

By Erik Holm and Andrew Frye

May 3 (Bloomberg) -- Billionaire Warren Buffett said losses at Citigroup Inc. have distorted the public perception of U.S. banks and that lenders including Wells Fargo & Co. are better able to withstand the recession.

�Wells Fargo has a dramatically different business model,� Buffett said at a press conference in Omaha, Nebraska, one day after Berkshire had its annual shareholders meeting.

Buffett has used the weekend events to tout the long-term prospects of his derivative bets and stock investments that soured in the recession. He said yesterday that Wells Fargo, the bank that�s the second-largest holding in Berkshire�s portfolio, will prosper regardless of the results of a federal stress test of top lenders.

Wells Fargo declined 33 percent this year on the New York Stock Exchange on concern the bank will take losses on loans acquired with the purchase of Wachovia Corp. Berkshire held about 290 million shares of San Francisco-based Wells Fargo as of Dec. 31. Based on the May 1 stock price, the stake is valued at about $5.7 billion. The bank slashed its dividend 85 percent in March, reducing investment income for Berkshire.

Citigroup has plunged 56 percent this year. Stephen Cohen, a spokesman for the New York-based bank, declined to comment.

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BLOOMBERG: Buffett"s Berkshire Falls Most in at Least 23 Years

By Hugh Son and Linda Shen

Nov. 19 (Bloomberg) -- Warren Buffett"s Berkshire Hathaway Inc. fell the most in at least 23 years, dropping for the eighth straight day since reporting a 77 percent decline in third- quarter profit.

The stock plunged $11,550, or 12 percent, to $84,000 in New York Stock Exchange composite trading and has slipped 41 percent this year, compared with the 45 percent drop in the Standard & Poor"s 500 Index. Berkshire, based in Omaha, Nebraska, rose in 17 of the past 20 years.

``There"s nothing fundamentally wrong with Berkshire, what"s really happening is people are wondering if there"s something fundamentally wrong with the economy, and Berkshire is in some ways a bit of a proxy for that,"" said Michael Yoshikami, president of YCMNet Advisors in Walnut Creek, California, which manages $850 million including Berkshire shares.

Berkshire has posted four straight profit declines, the worst streak in at least 13 years, on falling returns at insurance businesses and investment losses. Buffett, ranked by Forbes magazine as the richest American, has committed at least $28 billion this year to acquire companies, finance buyouts and purchase securities as prices fell and competitors were hobbled by limited access to credit.

Berkshire"s shareholder equity, a measure of assets minus liabilities, fell by about $9 billion in October on declines in debt and equity markets, the firm said Nov. 7. American Express Co., the credit-card company that is one of Berkshire"s top 10 stock holdings, plunged 47 percent since Sept. 30 as borrower defaults increased. Wells Fargo & Co., Berkshire"s No. 2 investment, dropped about 35 percent.

`Under Pressure"

``Many of the companies Berkshire owns, such as American Express, are under pressure,"" Yoshikami said. ``What you"re seeing is a systematic de-leveraging process taking all financials down, including good-quality financials.""

Berkshire shareholders including Mohnish Pabrai, head of Pabrai Investment Funds, have said investors are concerned about losses on the company"s $37 billion bet on world equity values more than a decade from now. Buffett sold contracts to undisclosed counterparties for $4.85 billion protecting the buyers against declines in four stock indexes including the S&P 500.

Under the agreements, Berkshire will pay as much as $37 billion if, on specific dates beginning in 2019, the indexes are below the point where they were when he made the agreements. By Sept. 30, Berkshire had written down the contracts by $6.73 billion as the S&P declined for a fourth straight quarter.

Credit-Default Swaps

The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, has more than tripled in two months.

The swaps jumped to 475 basis points today from 129 points two months ago, according to CMA Datavision. That translates to $475,000 a year to protect $10 million for five years.

Jackie Wilson, a spokeswoman for Berkshire, didn"t immediately return a message seeking comment.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net

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BLOOMBERG: GE�s Immelt Waived Bonus Pay After 2008 Profit Drop

By Rachel Layne

Feb. 18 (Bloomberg) -- General Electric Co. said Chief Executive Officer Jeffrey Immelt waived a bonus and incentives worth at least $11.7 million for 2008 as a global recession and credit crisis undercut GE�s profit and share performance.

Immelt�s 2008 salary was $3.3 million, unchanged since 2005, Fairfield, Connecticut-based GE said today in its annual proxy filing. He declined a bonus and a three-year cash compensation award that the board�s compensation committee said he earned. In 2007, he received a $5.8 million bonus.

The chief executive �performed well in an extraordinarily tough business environment,� even while missing financial goals set a year ago, the committee wrote in the proxy. Immelt, who turns 53 tomorrow, has held the job since Sept. 7, 2001, and works without a contract.

GE lost 56 percent of its market value in 2008, trailing the 38 percent decline in the S&P 500 amid the worst economic conditions since the Great Depression. Immelt lowered his annual profit forecast twice during the year, and investors punished the stock as earnings declined at the GE Capital finance unit while credit markets seized and banks collapsed.

Immelt, writing today on the company�s GEReports.com Web site, said that while GE�s profit dropped 19 percent in 2008, it still outperformed the Standard & Poor�s 500 earnings decline of 35 percent. �That�s not the kind of outperformance we like, but it was still better than the broader market,� he wrote.

The board accepted Immelt�s proposal to decline the award and a bonus, reducing his cash compensation 64 percent from 2007, the proxy showed. His total compensation, including the value of some previously awarded grants, dropped 28 percent to $14.1 million, the proxy said.

Performance Awards

GE rose 12 cents to $10.93 in New York Stock Exchange composite trading at 9:44 a.m. Yesterday, the stock closed at its lowest value since Nov. 7, 1995.

Profit from continuing operations in 2008 was $18.1 billion, including $8.6 billion from GE Capital. GE had record revenue in 2008 and profit, the third-highest in its history, �compared very favorably to S&P 500 earnings,� the committee wrote.

�Through his skilled leadership and decisive action, Mr. Immelt adapted the company to rapidly changing and deteriorating economic conditions that emerged after the goals were set.�

Under a 2004 grant, Immelt also got 125,000 shares of stock with a market value of $1.39 million tied to cash flow from operating activities, while the other half of the award tied to stock performance was canceled because GE fell short of that goal, the proxy said.

Dividend and Ratings

GE remains under pressure in 2009. S&P and Moody�s Investors Service are considering whether to lower GE�s debt ratings from the highest-possible AAA, and Immelt and the board say they are reviewing whether to maintain the level of the dividend in the year�s second half. A dividend cut would be GE�s first since at least 1940, according to New York Stock Exchange records.

Immelt�s decision to forgo the bonus and incentive pay comes amid tighter scrutiny from Congress and the Obama administration of banking and finance companies that have accepted federal bailout funds. While GE hasn�t taken financial-rescue money and predicts its finance business will remain profitable this year, Immelt said earlier this month that he would make sure his pay doesn�t put GE in a bad light.

�I have said publicly and privately, my compensation is never going to be an embarrassment to GE,� Immelt said at an event in New York on Feb. 5. �It�s going to be responsible� and �reflect the financial performance of the company.�

Executive Compensation

Chief Financial Officer Keith Sherin and Vice Chairman Michael Neal, who oversees GE Capital, each got bonuses that were 15 percent and 25 percent lower than in 2007, respectively, the proxy said. Both declined half their respective long-term performance award, turning down $2.6 million and $2.9 million respectively. The average bonus award for the top executives declined 19 percent from 2007, the committee said.

�It�s important that the board and I have the freedom to compensate our senior executives in a fair and reasonable way,� Immelt wrote on the Web site today.

Immelt purchased about 317,000 shares on the open market last year, excluding restricted stock or options, according to regulatory filings. Immelt, who has always exceeded a requirement to hold shares valued at six times his salary in stock, agreed in October to hold at least 90 percent of the shares he already owns as a condition of Warren Buffett�s Berkshire Hathaway Inc.�s investment in the company.

Moody�s Review

Moody�s said Jan. 27 it�s evaluating lowering the long-term debt rating for GE and GE Capital, a review that typically takes about 90 days. S&P said in December that GE had a 1-in-3 chance of losing its top rating over the next two years, and changed its outlook to �negative� from �stable.�

Immelt and the board in September and October shored up the company�s cash position by eliminating the share buyback, keeping the $1.24 annual dividend payout unchanged for the first time in more than three decades, and raising $15 billion from an equity sale, including the $3 billion in preferred stock to Berkshire.

The compensation committee cited the equity raise as one of Immelt�s �decisive� actions and noted last year�s retention of the AAA credit ratings for the company.

GE�s indicated gross dividend yield ended yesterday at 11.5 percent, more than three times the S&P�s yield of 3.6 percent, according to Bloomberg data.

Performance Awards

Immelt also received 150,000 performance share units that will vest in five years, half awardable if he meets the cash flow goals and half tied to the stock exceeding the S&P 500 performance, GE said in the proxy. They were valued under accounting rules at about $2 million.

Immelt hasn�t taken stock options since 2002, instead receiving all of his equity incentive compensation in the form of these performance-based units since 2003.

GE is the world�s biggest provider of power plant turbines, jet engines, medical imaging machines, locomotives, aircraft leasing and private label credit cards. Other businesses include real estate, appliances, lighting, corporate lending, equipment leasing, water treatment, security and NBC Universal television and media.

Among shareholder proposals is one to study the potential of breaking the company into four segments. The board recommended against the proposal, citing its ability to change the company�s business mix. Similar proposals have been made before.

Since 2003, GE has shed more than $50 billion in businesses and acquired more than $100 billion, the proxy said.

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