Warren Buffett has told shareholders in Berkshire Hathaway, the holding company of his insurance and asset management firm, that the group has turned in its worst-ever results, adding that investors are "bloodied and confused".
Mr Buffett, widely acknowledged as the world's richest man, who uses his annual letter to investors partly as a way of passing on his musings about the economy, blamed the global recession for Berkshire Hathaway's 96 per cent drop in fourth quarter net income. He warned that hamstrung credit markets and the drop in house and asset prices had produced "paralysing fear".
The net value of the group fell by $11.5bn (£8bn) in 2008, with net income down 59 per cent to $4.9bn.
In typical fashion, Mr Buffett told investors that 2008 "was devastating ... for corporate and municipal bonds, real estate and commodities. By year end, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game". Mr Buffett also warned that the greater reliance on government aid was likely to lead to unwelcome and lasting consequences for the wider economy: "In poker terms, the [US] Treasury and the Fed have gone 'all in'. Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation."
While conceding there was little reason to expect a quick improvement in the global economy, Mr Buffett stressed Berkshire Hathaway would remain "Gibraltar-like" in its financial strength and invited investors to consider that its insurance arm, Berkshire Hathaway's biggest business along with the group utilities investment division, "delivered outstanding results in 2008" and has "excellent prospects".
The company's insurance units rep-orted an underwriting profit of $2.79bn last year, a 17 per cent fall compared with 2007's numbers. The group's class A shares fell 32 per cent last year.