It Will Take Warren Buffett More than 15 Minutes to Save Money on His Receivables
I'm sort of neutral on WB but find it funny that he sold his receivables. I would have liked to get one of his delinquent accounts. You know. Like a souvenir. Psst, Warren, I don't really know accounting but I'm pretty sure you're doing it wrong.
Billionaire Warren Buffett shut a Berkshire Hathaway Inc. credit-card business and sold bad loans at 55 cents on the dollar in what he called a “very expensive business fiasco.”
“I finally woke up,” Buffett said in his annual letter to Berkshire shareholders on Feb. 27. The 79-year-old chairman said the cards, issued by Berkshire’s car-insurance specialist Geico, were his idea and popular with clients. “We got business all right -- but of the wrong type,” Buffett wrote.
The retreat narrows Berkshire’s product offering to Geico policyholders, who provide a growing source of revenue. Buffett said the idea to issue credit cards came after “many years” of brainstorming about how to best serve the millions of drivers that Geico accumulated with the help of its caveman and talking- gecko ads. Its implementation was resisted by the insurer.
Berkshire lost $44 million selling its $98 million portfolio of “troubled receivables,” Buffett said. The company also had $6.3 million of losses from operations before Buffett “closed the book” on the business, he wrote.
Unfortunately it will take old WB more than 15 minutes to save money on his receivables. How about a nice Geico ringtone instead?
To hear Business Week tell it, Buffett seemed to believe these prestigious Geico credit cards that he just had to sell off were actually going to compete with American Express (AXP). I'm not sure what they smoke in Omaha but I'm not visualizing that. But he has bazillions and I have a few bucks to blow on TSA-friendly toys so I guess he's still the genius.