OM­A­HA-Bil­lion­aire in­vestor War­ren Buf­fett said yes­ter­day that he was "dead wrong" with a pre­dic­tion that the US hous­ing mar­ket would be­gin to re­cov­er by now, but he re­mains op­ti­mistic about the na­tion's econ­o­my. In his an­nu­al let­ter to Berk­shire Hath­away share­hold­ers, Buf­fett said he is sure hous­ing will re­cov­er even­tu­al­ly and help bring down the na­tion's un­em­ploy­ment rate. But he did not pre­dict when that will hap­pen.

In­vestors ea­ger­ly await the let­ter from Buf­fett, 81, the so-called Or­a­cle of Om­a­ha, who built a rough­ly USUS$44 bil­lion for­tune by fol­low­ing a stead­fast, no-non­sense in­vest­ing strat­e­gy. Buf­fett said hous­ing "re­mains in a de­pres­sion of its own," but he pre­dict­ed, in typ­i­cal plain­spo­ken style, that the hous­ing mar­ket will come back be­cause some hu­man fac­tors can't be de­nied for­ev­er.

"Peo­ple may post­pone hitch­ing up dur­ing un­cer­tain times, but even­tu­al­ly hor­mones take over," he wrote. "And while 'dou­bling-up' may be the ini­tial re­ac­tion of some dur­ing a re­ces­sion, liv­ing with in-laws can quick­ly lose its al­lure." The hous­ing pre­dic­tion proved painful for Berk­shire Hath­away. It owns more than 80 sub­sidiaries, in­clud­ing the Ge­ico in­sur­ance com­pa­ny and See's Can­dy, and five of them re­ly heav­i­ly on con­struc­tion ac­tiv­i­ty.

Those busi­ness­es, which in­clude Acme Brick, Clay­ton Homes and Shaw car­pet, gen­er­at­ed pre-tax prof­its of US$513 mil­lion last year. That's well off the US$1.8 bil­lion those com­pa­nies added to Berk­shire in 2006. Berk­shire's in­sur­ance com­pa­nies took US$1.7 bil­lion in cat­a­stro­phe loss­es last year, in­clud­ing from the earth­quake and tsuna­mi in Japan. Berk­shire re­port­ed on­ly US$154 mil­lion in un­der­writ­ing prof­it, down from US$1.3 bil­lion the pre­vi­ous year.

But sev­er­al of Berk­shire's larg­er non-in­sur­ance busi­ness­es-Burling­ton North­ern San­ta Fe rail­road, Mi­dAmer­i­can En­er­gy, Mar­mon Group, Lu­bri­zol and Is­car-all gen­er­at­ed record earn­ings in 2011. That helped Berk­shire as a whole to gen­er­ate US$10.3 bil­lion in net in­come, or US$6,215 per Class A share, last year, down from near­ly US$13 bil­lion, or US$7,928 per share, in 2010.

A Class A share of Berk­shire stock, which has nev­er been split by the com­pa­ny, trad­ed for US$120,000 on Fri­day. Its more af­ford­able Class B shares trad­ed for about US$80. Buf­fett re­as­sured Berk­shire share­hold­ers that the com­pa­ny has some­one in mind to re­place him even­tu­al­ly, but did not name the suc­ces­sor. He em­pha­sised that he has no plans to leave.

Even though the suc­ces­sor wasn't named, stock­bro­ker and au­thor Andy Kil­patrick said the way Buf­fett de­scribed the per­son makes him more con­fi­dent that the lead­ing can­di­date is Ajit Jain, who runs Berk­shire's rein­sur­ance di­vi­sion. "The more I think about it, the more I think we have a suc­ces­sor," said Kil­patrick, who wrote "Of Per­ma­nent Val­ue: The Sto­ry of War­ren Buf­fett."

Be­sides Jain, the oth­er Berk­shire man­agers be­lieved to be pos­si­ble suc­ces­sors as CEO are Greg Abel, pres­i­dent and CEO of Mi­dAmer­i­can; Tony Nice­ly, chief ex­ec­u­tive of Ge­ico; and Burling­ton North­ern San­ta Fe CEO Matt Rose. Berk­shire has al­so cleared up some suc­ces­sion ques­tions over the past two years by hir­ing two hedge fund man­agers, Todd Combs and Ted Weschler. Buf­fett said those two have the "brains, judg­ment and char­ac­ter" to man­age Berk­shire's en­tire port­fo­lio even­tu­al­ly. Buf­fett said Combs built a US$1.75 bil­lion port­fo­lio last year and Weschler is in the process of do­ing the same.

Buf­fett said he spent US$67 mil­lion last fall buy­ing back Berk­shire stock for the first time since tak­ing over the firm in 1965 be­cause he be­lieved it was un­der­val­ued. He said he re­grets buy­ing out share­hold­ers at prices less than what the stock is worth. Buf­fett has au­tho­ri­sa­tion to buy back stock any­time it is sell­ing for less than 110 per cent of its book val­ue.

AP