Vote of Confidence: Warren Buffett Increases Ownership Stake in Tesco to 5.08%

During an interview on the CNBC business network in November of last year famed investor Warren Buffett was asked if he saw any good long-term opportunities in European equities. His response: "If the price came down on some Tesco, I'd buy some more of that."

Buffett has done just that, following last Thursday's 16% drop in the United Kingdom-based global retailer's stock share price, which was the result of Tesco's issuing of a profit warning due to it poor Christmas season financial results at home in the UK, which accounts for nearly 70% of its annual revenue. [See this story for details - January 11, 2012: Tesco Reports 19.3% Comparable Sales Growth at Fresh & Easy Neighborhood Market For 6 Week Holiday Period.]

On Friday, the following day, Buffett increased his stake in Tesco from 3.21% to 5.08%, at a cost of about £500 million ($774 million), according to a required regulatory filing submitted to government authorities by his Berkshire Hathaway holding company, dated January 13, 2012.

Tesco owns and operates Fresh & Easy Neighborhood Market, which is based in El Segundo, California and has 189 stores stores in California (140 units), Nevada (21 units) and Arizona (28 units).

Tesco is closing 12 Fresh & Easy stores, a story we broke on January 8 (read here) and January 9 (read here). A few hours after we published our January 9 follow-up report, Fresh & Easy Neighborhood Market's corporate spokesperson began calling and e-mailing editors and writers at various publications, ranging from the Financial Times and the Orange County Register to supermarket industry trade publications, announcing the store closings.

Current plans call for Fresh & Easy Neighborhood Market to close the 12 stores by the end of this month to early February 2012.

Buffett's big buy is an important vote of confidence for Tesco following last week's big decline in its value. After all, when it comes to investing, he is regularly referred to as "The Oracle of Omaha."

Buffett, who also owns around $2.5 billion of Walmart Stores, Inc. stock, particularly likes Tesco's growth prospects in Asia, and most particularly the future growth opportunities afforded the global retailer in China, where CEO Philip Clarke is putting a major focus.

Prior to taking over as CEO from Terry Leahy in March 2011, Clarke was in charge of Tesco's Asian and European operations, along with heading up the retailer's corporate information technology efforts.

It is a stretch though to suggest Buffett's increased stake in Tesco is a specific vote of confidence for its money-losing Fresh & Easy chain in the U.S., however, because the legendary investor has as recently as late last year voiced serious concern over the enterprise.

It is fair to say though that Buffett is bullish enough on Tesco as a whole that he would increase his stake in the company by such a significant amount even though he harbors such concerns over the U.S. chain.

The "Sage of the Plains," another nickname for the man from Omaha, is a long-term value investor. So buying when he did, when Tesco was down by such a significant percentage last week, is classic Buffett. In other words, based on his proven research methods and track record, he knows a deal when he sees one. Buffett's seldom wrong.

But Tesco does face some big challenges, both at home an abroad.

It's competitors in the UK are getting much better and bigger, for example. And Tesco's focus on price-focused promotions, such as its recent 'Big Price Drop" promo, which is being called the "Big Price Flop" in the UK, aren't working so far.

Globally Tesco is focused on breaking even with Fresh & Easy by the end of its 2012/13 fiscal year, which ends in February 2013. It's not going to literally break even by then, in our analysis. And even if it does somehow achieve that objective by closing stores and cutting costs it must figure out a strategy to make its Fresh & Easy chain not only less of a financial drain but also a real contributor and asset to group Tesco.

But for now, in terms of Buffett's vote of confidence in Tesco, "Every Little Helps."

Related Stories

June 24, 2010: Warren Buffett Strikes Again: Buys 2 Million More Shares of Tesco Stock For 3.2% Ownership Stake

March 3, 2010: Mr. [Tesco] Three Percent Warren Buffett Still Has That 'Oracle' About Him

March 1, 2010: Warren Buffett, 'The Oracle of Omaha,' Wants you to shop at Tesco...But He Doesn't Mind if You Shop at Walmart

February 28, 2009: Warren Buffett: 'Our Country Has Faced Far Worse Travails': A Paralyzing Fear Has Engulfed the Country. But America's Best Days Lie Ahead.'

See addditional related stories at these links: Berkshire Hathaway, Warren Buffet, Warren Buffett and Tesco.

[Illustration credit: The ink-on-paper illustration of Warren Buffett at the top, titled 'The Oracle of Omaha," is coutesy of artist Andrew Mitchell. You can learn more about his work at his site here.]

Warren Buffett Strikes Again: Buys 2 Million More Shares of Tesco Stock For 3.2% Ownership Stake

In a March 1, 2010 story - Warren Buffett, 'The Oracle of Omaha,' Wants you to shop at Tesco...But He Doesn't Mind if You Shop at Walmart - we reported Warren Buffett (above), often called 'The Oracle of Omaha' because of the combination of his legendary investment skills and near-lifelong residence in Omaha, Nebraska, where he was born and raised and still lives, disclosed in his annual letter to shareholders that his Berkshire Hathaway holding company had increased its common stock share holdings in United Kingdom-based Tesco plc to a total of 234,247,373 shares, valued at $1, 367 billion, giving him ownership of about 3% of the company. The precise total was more like 2.99%, which is why Buffett's then stock buy didn't trigger a disclosure as required by law in the UK when an investor acquires 3% or more of a company.

Now Warren Buffett has struck again, buying nearly 2 million additional shares of Tesco plc stock on Tuesday, June 22.

Buffett, through Berkshire Hathaway, now owns 242 million Tesco shares, or 3.02% of the company. The shares are valued at about £968 million - or $1.445 billion, based on today's exchange rate.

And because Buffet's stock buy on Tuesday increased his ownership stake in Tesco, which owns and operates Southern California-based 159-store Fresh & Easy Neighborhood Market USA, over that 3% threshold, Tesco plc is required to disclose it, which the global retailer did today in this financial news release.

'The Oracle of Omaha' first invested in Tesco through Berkshire Hathaway in 2006, right about the time the retailer announced it was coming to America with Fresh & Easy, acquiring shares then equaling about a 1% ownership stake in the company. Since then Buffett, who's also called 'The Sage of the Plains' (the Omaha angle again), has regularly increased his purchases of Tesco stock, resulting in the 3.2% ownership stake he now has as of Tuesday.

It's safe to say Buffett is bullish on Tesco.

It's also safe to say the $208 million fiscal year 2008/09, and the $253 million fiscal year 2009/10 losses for Tesco's U.S. Fresh & Easy Neighborhood Market grocery retailing venture, along with Tesco's projected 2010/11 fiscal year loss of about the same amount as in 2009/10, haven't detouried Warren Buffett from buying more Tesco plc stock, as evidenced by his big buy on Tuesday. Nor does Fresh & Easy CEO Tim Mason's $6.188 million 2009 pay package seem to have dissuaded the legendary investor from increasing his stake in Tesco. Tesco plc reported record profits in April for its 2009/10 fiscal year.

The disclosure today of Buffett's latest buy also resulted in Tesco's stock share price getting a nice lift, even though the UK's FTSE dropped by 39 points.

Interestingly, we just mentioned Warren Buffett briefly in a piece published in Fresh & Easy Buzz yesterday - June 23, 2010: Tesco Fresh & Easy Neighborhood Market CEO Tim Mason Gets Big Stock Award Featuring a Singular Twist - in relation to a letter the CtW Investment Group and the Change to Win Coalition of labor unions sent to Tesco shareholders on June 17, asking the investors to vote against the company's senior executive-board of director pay package at Tesco's annual shareholder meeting on July 2, 2010.

In yesterday's story we said this about the probability Tesco investors will vote down the pay package, called the Remuneration Report:

The objective reality is the probability of Ctw Investment Group and the labor union group getting a majority investor vote against the Directors Remuneration report is highly unlikely for a number of reasons, chief among those reasons being that the majority of Tesco investors with voting rights are the big, institutional investors. For example, U.S. billionaire Warren Buffett, who owns 3% (about $1.3 -to- $1.4 billion in value) of Tesco plc through his Berkshire Hathaway holding company and investment firm, won't likely vote against the report.

Based on the disclosure by Tesco today that Warren Buffett has bought nearly 2 million more shares in the company, we feel in even stronger stead in terms of our prediction on which way he - and the majority of investors who have voting rights - will vote on the approval of the Remuneration Report at the shareholders meeting in London on July 2, which is to approve it per Tesco's request.

Meanwhile, his now 3.2% ownership stake makes Buffet one of Tesco's top shareholders, moving him even higher up than he already was before buying the additional 2 million shares on Tuesday.

Being so bullish on Tesco plc, as he's also been on Walmart Stores, Inc., we doubt if this is the last buy of Tesco stock 'The Oracle of Omaha' makes. [See - March 3, 2010: Mr. [Tesco] Three Percent Warren Buffett Still Has That 'Oracle' About Him]

Read more about Tesco plc investor Warren Buffett in Fresh & Easy Buzz here

Mr. [Tesco] Three Percent Warren Buffett Still Has That 'Oracle' About Him

Apparently Warren Buffett, also known as 'The Oracle of Omaha,' still has influence with the global investor class, despite the more than a few investment stumbles he's made over the last couple years. He mentions some of those stumbles in his just-out Berkshire Hathaway Inc. letter to shareholders here.

Speaking of his nickname, we've given Mr. Buffett a second one befitting his new 3% Tesco ownership stake: "Mr. [Tesco] Three Percent."

On Monday we wrote about 'The Oracle of Omaha' upping his investment in United Kingdom-based Tesco, the parent company of Fresh & Easy USA, to a 3% overall ownership stake in the global food, grocery and general merchandise retailer.

Buffett disclosed his increased investment in Tesco in his annual Berkshire Hathaway Inc. letter to shareholders, as we discussed in our story. [March 1, 2010: Warren Buffett, 'The Oracle of Omaha,' Wants you to shop at Tesco...But He Doesn't Mind if You Shop at Walmart]

Buffett - who trades off every couple years with his pal Bill Gates as either the richest or the second-richest person in the world in Forbes annual list - is now the sixth-biggest Tesco shareholder, according to our research.

On Monday (and through Tuesday) when the media reported Buffett's now 3% stake in Tesco, the retailer's stock soared by about 3.5%, its highest gain since May 2009.

Tesco's stock dropped a bit at the end of business today, which could be expected after the Monday and Tuesday run up.

Stock analysts on Wall Street and in London are attributing the significant gain in Tesco stock on Monday (the first day of trading after Buffett's Saturday disclosure) and Tuesday virtually 100% to Buffett's increased ownership stake.

It appears Warren Buffett still has that 'Oracle' about him when it comes to the reaction of and his influence on the global investment class when it comes to his stock picks and investment moves.

[Illustration credit: The ink-on-paper illustration of Warren Buffett at the top, titled 'The Oracle of Omaha," is by artist Andrew Mitchell. You can learn more about his work at his site here.]

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[Fresh & Easy Buzz Library: Click here for a selection of related, past stories about Warren Buffett]

Warren Buffett, 'The Oracle of Omaha,' Wants you to shop at Tesco...But He Doesn't Mind if You Shop at Walmart

Billionare investor and founder, chairman and CEO of the Berkshire Hathaway Inc. corporate holding company, Warren Buffett, wants you to shop at Tesco stores in the United Kingdom and throughout the world, and at Tesco's Fresh & Easy Neighborhood Market stores in California, Nevada and Arizona.

But ever the equal opportunity - and financially cautious - investor, Warren Buffett doesn't mind if you also shop at Walmart. In fact, he wants you to. You'll see why that is below.

On Saturday (February 27), Mr. Buffett - nicknamed 'The Oracle of Omaha' because of his legendary investment talents and near-lifelong residence in Omaha, Nebraska, where he was born and raised and lives today - disclosed in his annual letter to shareholders that Berkshire had increased its common stock share holdings in United Kingdom-headquartered Tesco plc during its 2009 fiscal year.

Buffett's Berkshire Hathaway now holds 234,247,373 shares of Tesco common stock, valued at $1, 367 billion, at the end of 2009.

Buffett's current stake in Tesco, parent company of Fresh & Easy Neighborhood Market USA, amounts to a 3% ownership stake in the global retailing company, up from a 2.8%-2.9% ownership stake in the same period in 2008. Berkshire held 227 million shares of Tesco plc common stock in its fiscal year 2008.

Based on our research, that makes Buffett's Berkshire the six-biggest investor in Tesco.

Going from a 2.8%-2.9% ownership stake to 3% might not sound like much. But keep in mind that at this level such fractions represent real money.

Tesco is currently ranked as the fourth-largest retailer - including of food and groceries - in the world. [January 10, 2010: Tesco Drops From Third to Fourth Place in Important Global Retailing Ranking Despite Having Higher Sales Growth Than Rival.]

Walmart Stores, Inc. is number one, followed by France-based Carrefour and Germany's Metro Group.

Warren Buffett doesn't mind if you shop at Walmart

Speaking of Walmart, Buffett also disclosed in his shareholder letter on Saturday that he continues to hold a major stake (one that has grown from last year) in the world's leading retailer, Walmart Stores, Inc. In fact, that dollar value is even greater that his Tesco holdings.

Buffett owns 39,037,142 shares of Walmart Stores, Inc. common stock, which was valued at $2, 087 billion at the end of Berkshire's 2009 fiscal year. The holdings represent a 1% ownership stake in Walmart for the "Oracle of Omaha' and his Berkshire Hathaway shareholders.

Warren Buffett's grocery shopping list for you

Berkshire-Hathaway also has major stakes in a number of companies that supply Tesco, Walmart and other retailers throughout the world with branded food, grocery, beverage and non-food packaged goods products.

For example, Buffett's Berkshire holds 200,000,000 shares of Coca-Cola Company stock. The holdings are valued (at the end of 2009) at a whopping $11, 400 billion, giving Buffett an 8.6% ownership stake in Coke. It just so happens his favorite beverage is a Diet Coke.

Berkshire-Hathaway also owns 130,272,500 shares of common stock in food giant Kraft Foods, Inc., which recently acquired the iconic British confections company Cadbury.

Buffett's holdings in Kraft Foods, which is the second-biggest global food company after number one Nestle, are valued (2009 end) at $3,541 billion, giving Berkshire an 8.8% ownership stake in Kraft.

Buffett fought Kraft's initial takeover bid of Cadbury last month, saying it was too high. Kraft worked with him and he eventually agreed on its final bid for the British confectionary giant.

Kraft Foods' huge brand portfolio includes: Kraft, Nabisco, Oscar Mayer, Maxwell House and many others.

Additionally, Buffett is a major investor in consumer products giant Proctor & Gamble, maker and marketer of such leading consumer packaged goods brands as Tide, Crest, Charmin, Gillette, Pringles and numerous others. Out of its about 90 brands, P&G has 22 that do over a billion dollars in annual sales.

Berkshire holds 83,128,411 shares of Proctor & Gamble common stock, valued at $5,040 billion. This represents a 2.9% ownership stake in P&G for Buffett.

Lastly, in the food/grocery/consumer packaged goods sector, Buffett's Berkshire holds 28,530,467 shares of consumer packaged goods, health care and pharmaceutical company Johnson & Johnson.

Among J&J's packaged goods brands are Johnson's (baby powder and other health and beauty care category items), Listerine, Tylenol, Band-Aid, Visine, Splenda and others.

The value of Berkshire's holdings in Johnson & Johnson is $1, 838 billion, which is a 1% ownership stake in the company.

Warren Buffett: Chairman of the Board(s)

Buffett's Berkshire Hathaway - which he runs with his "senior" partner Charlie Munger (Buffett is in his late 70's, Munger is in his mid-80's, hence "senior" partner) - is far more than an investment firm.

In fact, Berkshire is primarily a corporate holding company, which owns 53 companies, ranging from A - Acme Brick Company and Applied Underwriters - to F - Fruit of the Loom and Forest River - and G - GEICO Insurance - and on to S - See's Candy - and W - Wesco Financial Corporation - along with 46 other companies in between. [You can view a complete list of the Berkshire-Hataway-owned companies here]

All of the 53 companies owned by Buffett's Berkshire have their own CEOs and senior management, and are run as independent companies by the respective managment teams.

Buffett is the original champion of decentralization. He coordinates with each of the 53 CEOs, acting as a chairman of the board for each of the holding companies.

And since Buffett likes investing in food and grocery retailers - Walmart and Tesco - and food, grocery and consumer packaged companies - Coke, Kraft, P&G and Johnson & Johnson, plus a few others in a smaller way - it should come as no surprise that his Berkshire Hathaway owns a number of companies in the food/grocery/consumer packaged goods sector.

These companies include: grocery, mass-merchandise and convenience store wholesale distributor McLane Company, which Buffett bought from Walmart a number of years ago; popular confections-maker, marketer and retailer See's Candies; the casual dining chain International Dairy Queen, Inc.; and gourmet products' retailer The Pampered Chef.

McLane Company is the largest of the Berkshire-owned companies in the sector, with annual sales of $31.2 billion in 2009.

McLane was also the top-performing company in Buffett's 53-company portfolio for 2009, a year in which many of Berkshire's companies were racked by the recession. McLane inked pre-tax record earnings of $344 million on sales of $31.2 billion (distribution is a penny per-dollar business) for the fiscal year.

McLane's CEO is Grady Rosier. Here's what Buffett says about Rosier in the annual shareholders letter that went out on Saturday: "McLane employs a vast array of physical assets – practically all of which it owns – including 3,242 trailers, 2,309 tractors and 55 distribution centers with 15.2 million square feet of space. McLane’s prime asset, however, is Grady."

That's vintage Buffett. Chairman of the board and motivator-in-chief, all done with a smiling and humble - yet stern - hand.

McLane's largest customer is Walmart Stores, Inc., although the company's major distribution focus is on convenience stores.

A little dot-connecting: Walmart sold McLane to Buffett a number of years ago. (Walmart bought it from founder Drayton McLane.) Buffett owns 1% of Walmart. Buffett's Berkshire owns McLane Company. Walmart is McLane's largest customer.

McLane Company doesn't distribute any product to Tesco's Fresh & Easy USA by the way, even though its a major distributor in the Western U.S. states where the 145 Fresh & Easy stores are located. But for you conspiracy theorists, its more about relationships that it is about interlocking directorates. And the Buffett-Walmart relationship goes back a long way - and remains a strong one.

Based on his increased stake in Tesco, Buffett obviously sees strong long-term prospects for the global retailer. Buffett is a long-term, value investor.

But what does 'The Oracle of Omaha' think about Tesco's U.S. food and grocery retailing venture, Fresh & Easy Neighborhood Market? We're working on that. Hopefully, we'll have some word on that question from Mr. Buffett in short course. Stay tuned.

Meanwhile, Warren Buffett wants you to shop at Tesco stortes throughout the world - and its Fresh & Easy Neighborhood Market stores in the U.S.

But he doesn't mind if you shop at Walmart and at Walmart's various chains and thousands of stores throughout the world, such as its Asda chain in the United Kingdom, which is Britain's number two food and grocery retailer after Tesco.

'The Oracle of Omaha' will also be happy if, in the U.S., you fill-in your Walmart and Tesco Fresh & Easy shopping by visiting any of the thousands of convenience stores supplied by Berkshire-owned wholesaler-distributor McLane Company.

And while shopping at a Tesco-owned or Walmart-owned store anywhere in the world, the Warren Buffett would also love it if you would buy a 12-pack or two of Diet Coke, or any of the hundreds of other beverages Coca-Cola sells under its 100 brands; a few boxes of Kraft Macaroni & Cheese and packages of Nabisco Oreo cookies (Kraft Foods); a big bottle of Tide Laundry Detergent and a 12 roll-pack of Charmin Bath Tissue (Proctor & Gamble); and then top off your shopping trip by buying a big bottle of Listerine (Johnson & Johnson).

If you do, we're pretty sure Warren Buffett thanks you.

[Illustration credit: The ink-on-paper illustration of Warren Buffett at the top, titled 'The Oracle of Omaha," is by artist Andrew Mitchell. You can learn more about his work at his site here.]

Reader Resources:

[If you've never read one of Warren Buffett's (and partner Charlie Munger's) annual Berkshire Hathaway shareholder letters, you're missing out. They're far different than the typical annual or year-end financial communications most corporations have with shareholders. You can read Berkshire's 2009 letter here.]

[Fresh & Easy Buzz Library: Click here for a selection of related, past stories about Warren Buffett]

Warren Buffett: 'Our Country Has Faced Far Worse Travails': A Paralyzing Fear Has Engulfed the Country. But America's Best Days Lie Ahead.'

Warren Buffett. [Photo Credit: Stan Honda: AFP-Getty Images.]

Businessman, investor, philanthropist and advisor to Presidents, global corporations and governments, Warren Buffett, is a child of, and survivor of, America's "Great Depression."

Buffett, 78, is the founder and chairman of the Omaha, Nebraska-based Berkshire Hathaway Inc. holding company and investment firm.

He acquired Berkshire Hathaway, which at the time was primarily an apparel-making company, producing and marketing men's and women's under-clothing and men's dress and casual apparel mostly under the Fruit of the Loom label, 44-years ago, turning it into the mega-holding company and investment vehicle it is today.

Berkshire Hathaway Inc. owns over 100 corporations, in sectors ranging from food and food distribution (See's Candies and the convenience store distribution company McLane Company are two) to manufacturing (Acme Brick, Johns Mansville and others), apparel-making (Fruit of the Loom, Justin Brands), to furniture-making and retailing (Nebraska Furniture Mart, Jordan's Furniture) and insurance (Geico Auto Insurance), and many others. [Click here for a complete list of Berkshire-owned companies.]

Buffett and Berkshire Hathaway also hold major investments stakes in numerous corporations, including United Kingdom-based Tesco, which owns and operates the 115-store Fresh & Easy Neighborhood Market grocery and fresh foods chain, which has its stores in California, Nevada and Arizona. Buffett also is a major investor in Wal-Mart Stores, Inc., Coca-Cola and numerous other corporations.

Each year as part of Berkshire Hathaway's annual financial report to shareholders, Buffett writes a personal business letter to the company's investors. The Buffett letter has become famous in the financial world because the "Oracle of Omaha" uses his letter to shareholders to not just write about the performance of the Berkshire-owned companies but also to discuss the wider world and environment in which the companies and business in general operate in.

The letter is read closely by analysts as well for Buffett's views on both the current state of the U.S. micro and macro-economy.

Today Warren Buffett issued his annual letter to Berkshire Hathaway shareholders on a day that finds one of the world's biggest corporate success stories, Berkshire Hathaway Inc, reporting its worse year ever in the company's 44-year history, along with a very bad fourth quarter (2008), compared to the same period just a year ago.

Berkshire posted a $117 million quarterly income gain for the fourth quarter 2008, which marked a whopping 96% drop from last year's $2.95 billion in fourth-quarter net income.

For the year, Berkshire Hathaway's net income dropped 59% in 2008, from $12.2 billion, or $8,548 a share, a year earlier, to $4.99 billion, or $3,224 a share, from the previous year. In addition, the holding company's revenue fell 8.8%, from $118.2 billion, in the previous year, to $107.8 billion, for 2008.

Buffett takes much of the responsibility for this performance himself, despite the current global recession and financial crisis. Doing so is characteristically Buffett.

But it's important to note the Berkshire Hathaway didn't loss money in its fourth quarter, like is the case with so many corporations. But without a doubt times are tough in Omaha at Berkshire Hathaway, just like they are elsewhere. [You can read details of the company's fourth quarter financials here and at the link to its just-released financial report here: Annual & Interim Reports (Berkshire Hathaway Inc.)

But the "Oracle of Omaha," the man Forbes magazine ranks as the richest person in the world, says today --despite the devastating performance of his 44-year old (that's when Buffett took it over) Berkshire Hathaway, which over the last 44-years under Buffett's leadership has seen its book value grow from $19 to $70,530, a rate of 20.3 percent compounded annually -- and despite the serious economic recession and financial crisis the U.S. (and the world) finds itself in today -- that: "Our country has faced far worse travails' (than the current recession). A paralyzing fear has engulfed the country. But America's best days lie ahead."

That's the title of Warren Buffett's letter to Berkshire shareholders today, and it's the title of an opinion article he wrote for Newsweek magazine that was just published. Buffett is a member of the board of the Washington Post Company, which owns Newsweek.

Every year Buffett's letter to Berkshire shareholders is a market-moving event because of his legendary status as an investor. Perhaps that's why he chose to issue it on a Saturday this year, when the markets are closed.

But the letter is vintage Buffett, America's strongest cheerleader, but always from a real and grounded position. The 'Oracle of Omaha" may be a Wall Street wizard but he lives his life firmly on main street.

We strongly suggest reading Buffett's opinion piece on Newsweek online. You can do so here.

You can also view and read Warren Buffett's original letter to Berkshire Hathaway shareholders issued today here: Warren Buffett's Letters to Berkshire Shareholders, February 28, 2009. [We suggest reading Buffett's full shareholder letter even if you read the linked Newsweek piece because the Newsweek version is an abbreviated version of the full shareholder letter.]

Warren Buffett, born of the Great Depression, a man who has lived his entire life in Omaha but is a global citizen, says "America's Best Days Are Ahead." These are words we all need to remember, heed, and work together to make true.

Fresh & Easy Buzz Friday Essay: As Warren Buffet's Berkshire Hathaway Goes, So Goes America; But Like the Eternal Optimist Buffett is, 'Yes We Can'

It appears even America's smartest and wisest investor, Berkshire Hathaway, Inc. founder and Chairman, and major Tesco plc shareholder Warren Buffett, isn't immune from the United State's (and now the world's) worst financial crisis since the 1930's great depression and the stuck dead in the mud U.S. economy.

Berkshire Hathaway's third quarter operating earnings fell 19.3 percent to $1,335 a share from $1,655 a share in the same period the year before, the company reported today.

That's below the average forecast of $1429 from the two top analysts following the stock, as tracked by Thomson One Analytics.

Berkshire Hathaway owns a number of companies in the insurance industry, which is fairing about as badly as the financial services industry is in the current domestic and global financial crisis and recessionary economy.

Reflecting this industry reality, operating earnings for Berkshire Hathaway's insurance-underwriting activities took a big hit, falling to $81 million from $486 million in the year-ago quarter.

Overall, Berkshire Hathaway's net earnings plunged a whopping 77% to $1.06 billion ($682 per share) from $4.55 billion ($2942 per share.) A major factor behind these numbers are investment and derivative losses of $1.01 billion, compared to gains of $1.99 billion in last year's quarter.

Buffet said today though that last year's substantial derivative gains were do in large measure to Berkshire's year-ago period profitable sale of PetroChina stock.

The derivative portion of the gains and losses are on paper only. Buffett said the derivative contracts held by Berkshire will eventually be profitable, but right now they're losers, as they are for everybody who is holding them.

Berkshire Hathaway said today in a statement its net worth declined slightly to $120.15 billion over the first three quarters of the year. But it adds that net worth fell by roughly $9 billion in October amid all the carnage in the financial markets. That's not the kind of October surprise Warren Buffett, the "Oracle of Omaha" likes to receive.

[You can read additional, detailed information in Berkshire Hathaway's 10-Q filing for the quarter. You can read a press release issued today by Berkshire Hathaway at the link here: News Releases.]

Click on the links below for additional coverage of Berkshire Hathaway's 77% drop in third quarter earnings:

Associated Press: Berkshire reports 77 percent drop in 3Q earnings....Financial Times: Berkshire profit plunges 77%....MarketWatch.com: Berkshire quarterly net income falls 77%....Bloomberg: Berkshire Hathaway Profit Falls 77% to $1.06 Billion (Update2)....Reuters: Berkshire Hathaway profit tumbles 77 percent.

Warren Buffett holds about $1.4 billion in Tesco plc stock, which amounts to an approximate 3-4% ownership stake in the company, which is the third-largest food, grocery and general merchandise retailer in the world. United Kingdom-based Tesco owns and operates Fresh & Easy Neighborhood Market in the Western U.S.

Buffett is among the largest, if not the largest, single investors in Tesco.

Berkshire Hathaway's 77% third quarter earnings plunge demonstrates that not even one of the world's smartest, best and most prudent investors, Warren Buffett, is immune from the potentially negative investment results which are becoming a part of the most serious financial crisis in the U.S. since the great depression and recessionary economy gripping America and the world.

Unlike the investment banks that have now either been acquired for pennies on the dollar or have merely gone away, Buffett is a prudent investor. His Berkshire Hathaway, Inc. holding company owns "main street" companies, about 60 of them, including food and grocery industry sector companies like convenience store wholesaler McLane Company, candy maker and retailer See's Candies, and the International Dairy Queen, Inc. fast food chain.

Despite his practice of owning "main street" companies -- he also owns GEICO Auto Insurance, which is famous for its television commercials, the underwear and hosiery company Fruit of the Loom® and many others -- it is many of those "main street" companies that are hurting because of the bad economy.

For example, Berkshire Hathaway also owns a number of home building and related construction industry companies, a couple business services firms, additional insurance companies, furniture and jewelery retailers, and other main street-type companies that are seriously hurt when consumers have little money to spend and credit is super-tight. [Click here for a complete list of companies owned by Berkshire Hathaway.]

Warren Buffett was characteristically himself today though, despite Berkshire's Q-3 77% earnings drop. Still bullish on the stock market and optimistic about the future of the U.S. economy. Still looking to acquire new companies and get in on what he says are numerous great investments out there right now in companies that are seriously undervalued for the long term. And doing what he can to help the economy and country along.

In fact, Warren Buffett spent most of the day today in Chicago with U.S. President-elect Barack Obama, former chairman of the U.S. Federal Reserve Paul Volker, former U.S. Treasury Secretary (and current Chairman of Citicorp's executive committee) Robert Rubin, former head of Treasury and ex-president of Harvard University Larry Summers, and a group of other top Obama economic advisers, discussing and mapping out strategies to get the U.S. out of the current financial crisis and economic recession.

What Berkshire Hathaway's 77% drop in third quarter earnings should demonstrate to these policy makers giving advice to the new President-elect, and offer to those who don't think the U.S. is really in a historically severe financial and economic crisis situation, is to hammer home the urgency of the situation and the urgency of solving it.

After all, if a holding company, Berkshire Hathaway, owned and operated by a prudent, wise and historically successful investor, Warren Buffett, with arguably the best track record in the world, can experience such a dramatic drop in quarterly earnings, it means the financial crisis and economic meltdown has fully hit main street.

Things are unfortunately going to get a whole lot worse -- more firings and thus increased unemployment, continued tight credit, more business failings and more debt for taxpayers -- before they get better. This is especially true of unemployment, which is always a lagging indicator in a recession.

That's why it was good to watch President-elect Obama focus like a laser beam at his economic press conference in Chicago today, along with seeing Warren Buffett standing behind him with many other smart and good men and woman, Democrat, Republican and Independent.

President Franklin Delano Roosevelt (FDR) assembled what historians later came to call his "Brain Trust" to advise and help him pull the United States out of the great depression in the 1930's. FDR's "Brain Trust" included Democrats like himself and Republicans like the challenger he beat to win the Presidency of the United States.

We were pleased to see President-Elect Obama's version of his "Brain Trust" standing behind him at the press conference this afternoon. He's reached out and brought in some of the best and the brightest -- and is preparing well to hit the ground running in 74 days, when he becomes the 44th President of the United States.

Regardless if we share President-Elect Obama's politics completely or not, it would be wise to get behind him to solve the current financial crisis and recession. It's our (taxpayer's) money that will be used to do so after all, as already is the case with President Bush's $700 billion taxpayer-financed financial institutions bailout package.

Obama is approaching the economy in a much more serious and measured way though. And he is bringing in a bi-partisan group of experts, his version of FDR's "Brain Trust," to work on the economy.

It looks positive so far to us. He looks serious, calm and resolute. He isn't afraid to get advice from people who know more than he does. He is talking realistically about the nature of the problem but also is always optimistic, like Ronald Reagan was.

In the deepest hours of war and depression, FDR urged Americans not to fear. "Fear Nothing But Fear Itself," he said over and over in his characteristically optimistic way.

Barack Obama has been saying the same thing in his own way for two years during the long Presidential campaign -- just using different words: "Yes We Can." He offers optimism and hope for a better tomorrow, which is why he was elected in the main.

Like Ronald Reagan said often: "Hope and optimism are enduring American traits." Neither are a substitute for a good, well executed plan. But without hope and optimism it's hard to come up with such a plan or policy and get the American people to make it work. But of course..."Yes We Can."

Resources:

>Click here to read a selection of past stories about Warren Buffett from Fresh & Easy Buzz.

Business & the Economy: The Wisdom of Warren Buffett: On Innovators, Imitators and Idiots

Warren Buffett is many things -- the second-richest person in the world right behind his good friend Bill Gates, who's charitable foundation Buffett is giving most of his $40-plus billion fortune away to; the founder of Berkshire Hathaway, Inc., the largest corporate holding company on the planet with ownership in over 100 companies; the world's most able and humble investor; an advisor to Democratic Presidential candidate Barack Obama; and as he is called when it comes to all things economic and financial, the "Oracle of Omaha" (as in the Nebraska city where Berkshire Hathaway is based and where Buffett lives).

Warren Buffett also happens to be among the largest (if not the largest) individual investors in Tesco plc., the United Kingdom-based global food and general merchandise retailer that owns and operates Fresh & Easy Neighborhood Market in the U.S.

Buffett holds about $1.4 billion worth of Tesco stock, which amounts to a 3% -to- 4% total ownership stake in the company, which ha annual sales of $94,621 billion in its most recent fiscal year. Tesco is the world's third-largest retailer, after number two Carrefour Group of France and U.S-based Wal-Mart Stores, Inc, which is number one. Buffett also owns between $1.5 and $2 billion of Wal-Mart Stores, Inc. stock.

Despite the current U.S. and global financial crisis and what looks like a resulting economic recession, the "Oracle of Omaha" is bullish on corporate America, along with business in other parts of the free world and China.

Buffett, who prefers to dine at one of the many Berkshire Hathaway-owned International Dairy Queen fast-food restaurants in the U.S. rather than at a fancy white tablecloth restaurant when he is on the road, has been the go-too-guy for numerous heavy hitters during the current financial and credit crisis and banking industry meltdown in the U.S. and abroad.

For example, the "Oracle of Omaha" serves as one of Democratic Presidential candidate Barack Obama's, who he supports for President, chief economic advisers. Republican candidate for President John McCain has even consulted Warren Buffett on the financial crisis, even though he supports Senator Obama.

In fact, during the last Presidential debate, when asked by moderator Bob Schieffer of CBS News to offer a few names of who he might choose as his Treasury Secretary if elected President, McCain mentioned only one name -- Warren Buffett. When asked the same question by the longtime CBS newsman, Obama also mentioned only one name, Warren Buffett, making sure to add Buffett is a supporter of his and one of his key advisers on all topics and issues economic and financial.

Treasury Secretary Henry Paulson has talked with Buffett about the U.S. Government's $700 billion financial services industry bailout program, as have the CEO's of a number of banks and corporations, including Wells Fargo, Goldman Sachs, General Motors and General Electric, to name just a few.

Buffett also is mobbed by everyday citizens and investors whenever he goes, all asking him for investment advise in these troubling economic times.

The "Oracle of Omaha" also is playing a major part in the current financial crisis in the U.S. In just the last two months he has made a multi-billion dollar investment in ailing investment bank Goldman Sachs, a $3 billion investment in General Electric, which is hurting because it's GE Financial Services division is feeling the credit crisis meltdown, and in his role as the largest individual investor in San Francisco, California-based Wells Fargo Bank was a major force behind the bank's $12 billion acquisition earlier this month of Wachovia Bank, which happens to be the financial services and credit card services banker for Tesco's Fresh & Easy Neighborhood Market.

In his Practically Radical column in today's Harvard Business Review Online, contributor Bill Taylor has a piece about Warren Buffett based on a one hour interview and discussion the investor had earlier this month with Charlie Rose, who hosts the popular Charlie Rose interview program on PBS.

In the interview, as Taylor writes about in today's HBR-Online, Buffett offered a simple yet insightful theory on how the U.S. got into the current financial mess.

Bill Taylor writes: "Leave it to Warren Buffett, one of the world's richest men, to offer the most valuable advice on this score. In a recent hour-long television interview, Buffet gave a masterful course on how the world got into this financial mess."

Taylor further writes: "At one point, his interviewer (Charlie Rose) asked the question that is on all our minds: 'Should wise people have known better?' Of course, they should have, Buffett replied, but there's a 'natural progression' to how good new ideas go wrong. He called this progression the 'three Is.' First come the innovators, who see opportunities that others don't. Then come the imitators, who copy what the innovators have done. And then come the idiots, whose avarice undoes the very innovations they are trying to use to get rich.

Buffet is too polite of a man to name the "idiots." But we can all guess who they are.

Click here to read Bill Taylor's full column (plus there are some interesting reader comments) in which he discusses Buffett's theory and offers some analysis of his own.

You can view Warren Buffett's interview and discussion from the Charlie Rose program at this link.

We don't see Warren Buffett accepting an offer either from Senator Obama or Senator McCain to be the next U.S. Secretary of the Treasury. At 75-years of age Buffett wants to continue running Berkshire Hathaway (he is currently picking a successor) and involve himself in other endeavors. It's not that the "Oracle of Omaha" isn't a patriot. Far from it. Rather, he is far more valuable in a role such as key advisor to a President rather than being put in the nuts and bolts position of Treasury Secretary. It would be a bad fit for Buffett to be in a nuts and bolts position like Secretary of the Treasury.

Secretary of Commerce might be an interesting position for Buffett though, particularly in an Obama administration because he has a strong relationship with the Democratic candidate who he supports for President.

Commerce has always been more of a ceremonial position, although it is a full cabinet department.

However, Commerce Secretary's who have had strong relationships to a President like Buffett has with Obama (Don Evans, the first Commerce Secretary for President George W . Bush and his longtime friend, for example), can be extremely influential and successful. Since Secretary of Commerce is less nuts and bolts than Treasury Secretary, it also allows a man for all seasons like Warren Buffett to impact a much wider range of economic, business and consumer issues than he would be able to do as Obama's Treasury Secretary, for example.

In fact, Commerce is the perfect position for a cheerleader for American business, which Buffett is. Not only could Warren Buffett continue to advise a President Obama (or even a President McCain) on key economic and finance-related issues as Secretary of Commerce, he could travel the U.S. and the world -- which he does already -- talking with corporate CEO's, investors and government leaders on a daily basis.

Buffett also would be a major confidence builder for U.S. business and the economy both at home and abroad. Additionally, the "Oracle of Omaha" already has relationships globally with Presidents and corporate chief that not even Obama or McCain currently have. And Buffett is widely respected throughout the world.

We can't think of a better Secretary of Commerce -- and one who should be given very broad portfolio by any President he serves -- for these trying times than the "Oracle of Omaha," Warren Buffett.

He is a man who not only rides (metaphorically) in the real "Straight Talk Express," but also only knows straight talk. Buffett walks the straight talk walk rather than just talking it.

The next President could use a trusted advisor like that. So could the country. And we think Buffett might just accept Commerce Secretary -- but would be reluctant to accept Treasury for the reasons we mentioned earlier.

Resources:

>Click here for a selection of related stories about Warren Buffett and Tesco plc. previously published in Fresh & Easy Buzz.

>Click here to view the Web site for Buffett's Berkshire Hathaway, Inc. (Notice how Buffett extends his belief in frugality and simplicity to the design of the company Web site.)

>Click here for a list of companies owned by Berkshire Hathaway, Inc. The holding company owns a number of companies in the food and grocery space, including convenience store wholesaler Mclane Company, See's Candy Company, International Dairy Queen and The Pampered Chef.

>Click here for regularly-updated polls on the U.S. Presidential race between Democratic candidate Barack Obama and Republican candidate John McCain. The election is only seven days away, on November 4, 2008.

Investment News Break: Major Tesco Plc. Investor Warren Buffett to the Rescue

Billionaire investor and CEO of the Berkshire Hathaway investment firm Warren Buffett, who owns $1.5 billion worth of Tesco Plc. stock (about 4% of the company), making him among if not the top individual investor in Tesco, is coming to the rescue of fledgling Wall Street investment bank Goldman Sachs, which is a major player in food and grocery retailing finance, with a $5 billion purchase of Goldman stock.

Tesco Plc. owns and operates Fresh & Easy Neighborhood Market USA, which currently operates 83 small-format, combination basic grocery and fresh foods convenience-oriented grocery stores in Southern California, Nevada and Arizona.

Goldman Sachs said in a statement before the close of business today on the east coast that Buffett, through his Omaha, Nebraska USA-based Berkshire Hathaway holding and investment company, "will buy $5 billion of (Goldman Sachs) perpetual preferred stock that carries a 10 percent dividend. It (Berkshire) also will receive warrants to buy $5 billion of common stock at $115 per share, exercisable within five years."

Even though Goldman is struggling, it is the strongest investment bank in the U.S., according to industry analysts. Those two facts obviously weren't lost on the savvy Buffett, often called the "Oracle of Omaha," since the deal he's cut looks pretty good, particularly the 10% dividend aspect of the investment.

"This is a marriage of two incredibly intelligent, attractive partners," Michael Holland, a money manager at Holland & Co in New York told the Associated Press this afternoon. "Buffett is saying about the top management of Goldman Sachs that they're distinct and different from their competitors. and it's a vote of confidence which is gold plated. You don't get better than this."

Shares of Goldman rose $10.65, or 8.5 percent, to $135.70 in after-hours trading following the announcement. They rose $4.27, or 3.5 percent, to $125.05 in regular trading.

In its statement, Goldman Sachs also said, in addition to the Buffett/Berkshire Hathaway investment, it plans to sell at least $2.5 billion of common stock. It announced the offerings after earlier this week announcing it would become a bank holding company, enabling it to accept deposits, and killing the investment banking model that has dominated Wall Street for decades.

It appears the new Goldman -- part investment bank and part commercial bank now -- has no plans to go away or be taken over like Bear-Stearns, Lehman Bros. and Merrill-Lynch have.

Warren Buffett also issued a statement this afternoon about Berkshire Hathaway's $5 billion investment in Goldman Sachs.

"Goldman Sachs is an exceptional institution," Buffett said in the statement. "It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

In addition to his $1.5 billion stake in Tesco plc., Warren Buffett owns from $1.5 -to- $2 billion worth of stock in mega-retailer Wal-Mart, Inc.

Berkshire Hathaway also owns a number of food and grocery industry companies outright. Those companies include candy maker and retailer See's Candies, the International Dairy Queen restaurant chain, gourmet products retailer The Pampered Chef, and convenience store wholesale distribution company McLane Company. Berkshire Hathaway owns over 50 companies, along with having major investments in others. [ Click here for a list of the companies Berkshire owns.]

As an investment banking firm, Goldman Sachs provides considerable value to the international food and grocery retailing industry. For example, It's been a major investor in numerous supermarket chains and food and grocery manufacturing companies. Goldman also has on its staff some of the top supermarket and retail industry analysts in the business. The firm also holds what arguably are the top food retailing investment conferences in the U.S.

Although we doubt if it was even a minor consideration in making his investment, there's a certain synergy in Warren Buffett's coming to the rescue of Goldman Sachs, which is a major player in the food retailing space, and his and Berkshire Hathaway's major investment stakes in the world's number one retailer -- Wal-Mart -- and the number three global retailer -- Tesco plc.

Reader Resources:

Click here to read a number of past stories about Warren Buffet and Tesco published in Fresh & Easy Buzz.

Billionare and Major Tesco PLC Shareholder Warren Buffett Says He Wants A Democrat as U.S. President in November '08

Warren Buffet, the world's second-richest human, founder and chairman of mega-holding company Berkshire Hathaway, Inc., and one of the largest single shareholders of Tesco PLC stock, with current holdings of about $1.4 billion or around a 4% ownership stake in the company, says he wants a Democrat to win the U.S. Presidency in November, 2008.

Tesco PLC owns Fresh & Easy Neighborhood Market in the U.S.

During the "Oracle of Omaha's" recent tour of Europe, where the Berskshire Hathaway chairman and CEO was looking for companies to acquire or make major investments in, he told members of the world press traveling with him he's told both Democratic candidates Barack Obama and Hillary Clinton he would support either of them once one or the other gets the Democratic Party nomination for President.

Buffet added he believes either one will be a better President than Republican John McCain--who he said is a "first-class guy" who he respects much--for the economy and the nation as a whole, along with being a better choice in terms of global relations and policy.

"I told both Hillary and Barack I'd support them, and I'd be equally happy if either of them were the nominee. "Barack appears to have the nomination, Buffet told the Associated Press and other publications.

As for Republican John McCain, Buffett described him as a "first-class human being. I think he's admirable. I don't agree with him as much as I agree with Barack. I think the U.S. will do well over time whether the president becomes Barack or John McCain."

Buffet likens the Presidency to running a business.

"They say in the stock market, 'Buy into a business that's doing so well an idiot could run it, because sooner or later, one will,'" Buffett said. "The U.S. is sort of like that. I think the country will do fine whether it's the Democratic or Republican candidate, but I strongly prefer the Democrats."

Since it does look like Obama will get the Democratic party nomination for President, he might want to think about how he can use the "Oracle of Omaha" in his administration if he wins in November.

In addition to being called the "Oracle of Omaha," Buffett also is often referred to as the "Sage of the Plains," for his wisdom not only in economic, financial and business matters, but for international and domestic issues as well--along with just plain living.

What about Warren Buffett for Vice President? Or Secretary of Treasury or Commerce.

There's no better cheerleader for the United States' economy than Buffett. The "Oracle of Omaha" also knows both Wall Street and main street, understands global markets better than most, and is a no-nonsense, humble, modest man.

Despite his billions, Buffett is loved by people of all economic classes, due primarily to the fact he lives a very simple life, with a few exceptions, mostly all business-oriented.

Obama wouldn't have to worry about Buffet's wanting to "cash in" on his Vice Presidency or Cabinet position, would he? After all, at last count the "Sage of the Plains" was worth around $50 billion, nearly all of which he is giving away to his friend Bill Gates' charitable foundation.

America could use an experienced and wise man--with money and with life--advising the next President, couldn't it?

Billionaire Warren Buffett, the 'Oracle of Omaha,' is About $52 Million Richer Today on the Rise in Tesco PLC Stock Shares

As we've reported on Fresh & Easy Buzz before, one of the biggest individual shareholders in UK-based Tesco PLC is Warren Buffet, the world's second-richest person, friend of Bill (Gates, the world's richest person, not Bill Clinton) and founder and chairman of the Berkshire Hathaway holding company and investment firm based in Omaha, Nebraska.

Buffett holds about $1.3 billion worth of Tesco PLC stock, or about a 3% -to- 4% ownership stake in the company.

At least that was yesterday, before Tesco stock went up today by about 4-5 points on the retailer's strong annual sales and profit report.

In other words, Buffet who's also called the "Oracle of Omaha" and the "Sage of the Plains," is about $52 -to- $55 million richer today than he was yesterday.

We tried to get in touch with the "Oracle of Omaha," who we know checks out Fresh & Easy Buzz on occasion as part of the three -to- four hours of research he does everyday, but he wasn't available in his Omaha office. We did talk to a Buffett aid, and we might just have some comments from the "Oracle of Omaha" in the near future.

Of course, since the humble and down to earth Buffett isn't much into conspicuous consumption, we doubt if he's going through the Neiman Marcus catalog today picking out his next toys.

In fact, the "Oracle of Omaha" has pledged nearly all of his approximately $62 billion dollar fortune to his friend Bill Gates' foundation, to be used for global charitable projects in the areas of medicine, aids elimination and prevention and more. The money is being given in huge sums each year, as Buffet says he wants the foundation to get it before he dies.

But the "Sage of the Plains" keeps score by how much his stocks goes up, although he is a buy-and-hold investor. So today's increase in Tesco PLC's share price is music to the nearly 77 year old investor's ears.

In fact, since among the more than fifty companies Buffet's Berkshire-Hathaway holding company owns outright is the International Dairy Queen fast food chain--which Buffett says is his favorite place to eat when traveling--we bet upon hearing today's news about the rise in Tesco PLC stock the "Oracle of Omaha," who is on the road today, found the nearest Dairy Queen, pulled the car over and had an ice cream sundae with flavored syrup, whipped cream and a cherry which is his favorite treat, to celebrate the news.

Billion Dollar-Plus Tesco plc. Stockholder Warren Buffett Says U.S. is in a Recession

Legendary billionaire investor and major Tesco plc. stockholder Warren Buffett says that the U.S. economy is basically in a recession even if it hasn't met the technical definition of one.

Buffett, Chairman and CEO of Omaha, Nebraska-based holding company Berkshire-Hathaway Inc., said in an interview last week on the cable business network CNBC the reports he gets from the retail businesses his holding company owns show a dramatic slow-down in consumer purchases.

The legendary stock-picker, and world's second-richest human according to Forbes magazine, said in the CNBC interview millions of people also have lost equity in their homes because home prices have dropped so significantly.

"I would say, by any common-sense definition, we are in a recession," Buffett, who is often referred to as the "Oracle of Omaha," said on CNBC. However, he added it's not clear how far the recession will go because that is near-impossible to predict.

Buffett owns about $1.3 billion worth of Tesco plc. stock, which works out to about a 4% stake in the world's number three retailer, making him one of the company's single largest shareholders.

Buffett's Berkshire-Hathaway holding company owns some 50 company's, ranging from Gieco Auto Insurance, home of the famous "Caveman" television commercials, and the Acme Brick Company, a seller of bricks for residential construction, to Netjets, the world's largest provider of fractional private jet time, and Fruit of the Loom, maker of men's and woman's underwear.

Additionally, the holding company owns a number of companies in the food and grocery industries. These include: confection company See's Candies, convenience store grocery wholesaler and logistics provider McLane Company, The Pampered Chef, a retail chain of upscale kitchen equipment and gourmet products, and International Dairy Queen, the fast-food restaurant chain. [View a complete list of Berkshire-Hathaway-owned companies here.

Through his holding company, Buffett also is one of the largest shareholders in Atlanta, Georgia -based beverage industry giant Coca-Cola. Coke was one of the first companies the "Oracle from Omaha" invested in when he started Berkshire-Hathaway. Buffett also is the single-largest individual shareholder in Kraft Foods, and owns sizeable portions of consumer packaged goods giant Proctor & Gamble and beer maker Anheuser-Bush, marketer of Budweiser brand beer.

Buffett is a "buy-and-hold" investor rather than a trader. He has said he sees strong long-term value (and eventual solid profits) in Tesco plc. In fact, he increased his investment stake in the British retailer late last year, shortly before the company opened its first Fresh & Easy Neighborhood Market grocery stores in the Western United States.

What about Buffett's track record? Well, keep in mind that the U.S. stock market on average has grown historically by about 10% per year. Meanwhile, Buffett's Berkshire Hathaway has grown on average by more than 21% annually since 1965. Today, the holding company is worth more than $200 billion. Ten thousand dollars invested with Buffett in 1965 has grown to be worth more than $36 million today. The "Oracle of Omaha" is personally worth about $45 billion, the majority of which he is giving to the Bill and Melinda Gates Fountation to be used for charitable causes.

Although the legendary investor is calling a recession in the U.S., technically there isn't one at present. The technical definition of a recession most economists' use is two consecutive quarters of negative growth in the nation's gross domestic product.

Last Thursday, the U.S. Commerce Department reported that the gross domestic product increased at a low 0.6% pace in the quarter that ended December 31, 2007. In the previous quarter--July - September, 2007--the U.S. economy grew at a strong 4.9%.

About half of the economists in the U.S. believe the first quarter 2008 growth in the U.S. economy will either be about what it was in the fourth quarter of 2007, or will actually be negative. These economists argue either the U.S. is already in a recession, or heading for one soon.

The other roughly 50% of U.S. economists say they are either unsure, or that its possible the U.S. can avoid a recession completely, especially since Congress passed an economic stimulus package, which starting in May will result in checks ranging from $600 -to- $1,200 being sent to every American who files a 2008 tax return. (This 50-50 split reminds us of the "on the one hand, but on the other hand, joke about professional economists.)

Despite saying the U.S. is already in a recession, the plain-talking Buffet added he believes the U.S. economy will be just fine in the long run. "Over time, my children are going to live better than I do, although they don't believe it," he said on CNBC.

In addition to the dramatic decline in the gross domestic product in the last quarter of 2007, unemployment is increasing in the U.S. This includes the states of California, Arizona and Nevada, where Tesco's Fresh & Easy Neighborhood Market has its small-format grocery stores. In California, the unemployment rate has increased by two full percentage-points since late last year.

Energy costs, especially gasoline, also have gone up significantly in the U.S. in the last year. The per-barrel price of oil is now well-over $100. The average cost of a gallon of gas at the pump is currently about $3.20 per-gallon in the U.S. and about $3.45 per-gallon in California.

Food inflation also is hitting the U.S. economy hard. On average, grocery prices at retail are up nearly 10% in the last year, with prices on commodity items like milk and eggs up nearly 20% from early 2007. For example, Steve Burd, CEO of California-based Safeway Stores, Inc. said two weeks ago in a conference call with supermarket analysts that food and grocery price inflation is currently the highest he has ever seen in his 15 years as CEO of the grocery chain.

Buffett, the "Oracle of Omaha," tends to call things as he sees them, rather than waiting for the "official" word on economic issues like recession. His view is similar to that of the American consumer, who is feeling the pinch from rising energy costs, higher food prices, the financial market's credit crisis and rising unemployment.

Like Buffett, consumers aren't all that interested in waiting to find out if the U.S. economy is really in a recession. Rather, they are feeling the effects of the serious economic downturn--as are the nation's retailers--in their pocketbooks.