Pundits groping for reasons to explain the selloff in Treasuries over the last few months might consider
second-quarter earnings statement.
Warren Buffett's investment vehicle said it unloaded a portfolio of long-term government bonds worth more than $9 billion before the end of the quarter -- just before rates took off.
Berkshire reported second-quarter earnings of $2.23 billion, or $1,452 a Class A share, more than double the $1.05 billion, or $681 a share, of a year ago. Berkshire's Class A shares have never split and currently trade north of $72,000 a shot.
The company put up $900 million in investment gains during the latest quarter, about $600 million coming from the sale of "virtually all of the long-term U.S. government securities held in Berkshire's actively managed, fixed-income portfolio." The sale added $9.1 billion to Berkshire's cash equivalents, which vaulted to $24.4 billion from $10.3 billion at the end of 2002.
Such sales would barely rate notice in the enormously liquid Treasury market (the U.S. government sold $60 billion in new bonds last week), but for the fact that no money is perceived as smarter than Buffett's. Word that he was in or out of assets in the past has led markets to follow his lead. At the very least, Berkshire's Treasury divestiture is another trading coup for a man some consider the greatest investor of all time.
Investment gains were $43 million in the year-ago period.
Berkshire's operating earnings were buttressed by solid premium results at its core insurance operations. Premium volume at its Geico unit rose 16.3% and "this trend continues in the third quarter," the company said.
Revenue rose to $14.4 billion from $10 billion, mainly because of the addition of food distributor McLane Co. during the period.