Charlie Munger, Vice Chairman of Berkshire Hathaway, speaks on behalf the companies stock investing formula. Munger mentions that Buffett follows a 4 step formula which has been the way he has managed through business in the past.

Those four steps include:
1. Understand the business
2. Sustainable competitive advantages
3. Able and trustworthy managers
4. Bargain Price (Margin of safety)

Watch the video below to listen to Charlie Munger explain these key points:

Watch the discussion below:

Berkshire is so diverse that it can serve as an indicator of how the economy is doing. The “Cash for Clunkers” program may benefit Berkshire-owned Geico Corp. Cash for Clunkers may drive an extra $375 million in insurance premiums.

Buffett wrote in Berkshire’s second-quarter earnings report that “the weakening economy is also believed to be causing customers to raise policy deductibles and reduce coverage in order to save money.”

read related articles here:
Cash for Clunkers article

Warren Buffett 2nd Quarter Earnings

Mr.Child discusses the reasons why Mr.Buffett bought his Home Furnishings business in an interview this month. Mr.Child wrote a book where he advises other entrepreneurs how to make a business that would appeal to Mr.Buffett.

Watch the interview below:

The stock jumped to $92,000 at 4 p.m in the NYSE according to Bloomberg data. Berkshire owned 290.2 million Wells Fargo shares as of December 31.

All other stocks in Berkshire’s portfolio including American Express co. and U.S. Bancorp have suffered as the global recession forced down the market value of financial firms. Shares of Berkshire have dropped nearly 30 percent in the past 12 months.

Berkshire Hathaway had its top level Aaa credit rating cut by Moody’s Investors Service and was cut two levels to Aa2.

Berkshire shares, which have been down 40 percent from last fall have risen sharply with the financial sector stock rally.

However, Berkshire Hathaway has not received any TARP dollars and the company holds stock valued at more than $13 billion in the top recipients of TARP funds.

According to the Houston Chronicle, Berkshire is at least twice as dependent on bailed-out banks as any other large investor.

“I am, to some extent, betting on the fact that the government will do the rational thing here and act promptly,” Buffett told CNBC after investing $5 billion in Goldman Sachs.

“If I didn’t think the government was going to act, I would not be doing anything this week.”

Buffett’s stake in the bailout has been closely watched and people can draw their own conclusions. Only time will tell what Berkshire awaits in the long run.

Fannie Mae and Freddie Mac are the mortgage lenders that lost a combined amount of $108.8 billion in 2008. Bank of America Corp (BAC) is also paying a lower interest on notes under a program in which the U.S. agrees to guarantee debt.

Berkshire Hathaway has not had a bad previous year in comparison to practically bankrupt competitors. However, Berkshire is to pay 4 percent to bondholders who bought $750 million of the firm’s AAA-rated debt last week.

Berkshire’s competitors, in the other hand, were able to find buyers for notes paying 2.375 percent or less. The Government has aided falling companies in need of multiple helpings of U.S. rescue funds.

For now, various financials may report “profits” but in the long run those companies who have been falling may indeed continue to do so in the future.