Buffett Watch: One of the Worst Beatings Ever

This blog post originally appeared on RealMoney Silver on March. 2 at 8:25 a.m. EST.

From the hallowed halls in Omaha to the masters of the hedge fund universe in New York City, Mr. Market is humbling the greatest investors in history.

Many asset management franchises and investment managers with outstanding long-term track records are currently on their knees and cornered into risk-averse mode for fear of further investment losses or investor redemptions.

There are numerous reasons attached to the drubbing, including but not restricted to the major issues below:

• Economy -- a spiraling downturn in the world economy;
• Credit -- a still weak and clogged transmission of credit;
• Populism and political change -- an anti-capital President Obama;
• Structural -- ultra bear ETFs and momentum-based quant funds; and
• Structural (part deux) -- hedge and mutual fund redemptions.

In turn, the net worth of households, endowments, pension plans and other institutions have been caught by the dramatic descent in world share prices, contributing to the negative feedback loop for the economy.

"A lot of people were buying these stocks all the way down. Their models couldn't pick up what was garbage, so they couldn't adjust quickly enough."

-- Bill King, Market Strategist, M. Ramsey King Securities

Almost no asset class in the equity universe has been spared in a synchronized downturn that has hit nearly every strategy, even value investing.

Over the weekend, the single most successful investor over the past five decades, value investor Warren Buffett, issued his annual letter to Berkshire Hathaway (BRK.A Quote) shareholders, but what has transpired since year-end is even more interesting than what was contained in his annual missive.

But first, let me regress.

"John Maynard Keynes essentially said, Don't try and figure out what the market is doing. Figure out a business you understand, and concentrate."

-- Warren Buffett

For nearly a year, I have outlined issues that I have had with the Buffett way. Many of my concerns have been realized and have, arguably, contributed importantly to the recent drop in Berkshire Hathaway's book value and the halving of the company's share price since early 2008.

If current trends continue over the balance of the year, 2009 will mark the third annual drop in book value at Berkshire Hathaway since 2001.