Warren Buffett admits to $873 million mistake
is famous for his stock-picking ability, but he also puts a substantial
amount of Berkshire Hathaway's money in bonds.
don't get a lot of attention. Unlike the contents of its stock
portfolio that must be filed with the SEC four times a year, Berkshire
doesn't have to publicly disclose its debt holdings.
letter to shareholders released Saturday, however, Buffett admitted to a
money-losing bond buy involving Energy Future Holdings.
said he decided to buy about $2 billion of EFH's debt when it was
created in 2007 as part of a leveraged buyout of Texas electric utility
He made that decision "without consulting with (business partner) Charlie (Munger). That was a big mistake."
wrote that unless there's a big increase in natural gas prices, the
company will "almost certainly" file for bankruptcy protection this
Last year, Berkshire sold the bonds for $259 million.
Adding back the $837 million received in cash interest, Buffett's
decision produced a pre-tax loss of $873 million.
"Next time," Buffett promised, "I'll call Charlie."