The Idea Blog

“You only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight.”

This memorable line is from Warren Buffett’s Letter to Shareholders in the recently released Berkshire Hathaway Annual Report for 2007. (Here’s a good synopsis from the NY Times if you don’t have the time to read the original. But that’s kind of like substituting Cliffs Notes for The Adventures of Huckleberry Finn.)

I look forward each year about this time to Buffett’s take on the state of BH’s businesses - and business in general. This year he takes to deserved task banks and mortgage companies’ lending practices, especially in feeding a housing bubble.

Now’s a great time to buy a home, I keep telling Betty, who is just now beginning to experience a bit more activity among clients looking for very, very good deals. They’re there. But watch out for the banks. They’re running scared. The tide’s gone out, and they’re swimming naked.