To the Shareholders of Berkshire Hathaway Inc.:
Our gain in net worth during 2005 was $5.6 billion

…. And that’s where we are today: A record portion of the earnings that would go in their entirety to
owners – if they all just stayed in their rocking chairs – is now going to a swelling army of Helpers.
Particularly expensive is the recent pandemic of profit arrangements under which Helpers receive large
portions of the winnings when they are smart or lucky, and leave family members with all of the losses –
and large fixed fees to boot – when the Helpers are dumb or unlucky (or occasionally crooked).
A sufficient number of arrangements like this – heads, the Helper takes much of the winnings;
tails, the Gotrocks lose and pay dearly for the privilege of doing so – may make it more accurate to call the
family the Hadrocks. Today, in fact, the family’s frictional costs of all sorts may well amount to 20% of the earnings of American business. In other words, the burden of paying Helpers may cause American
equity investors, overall, to earn only 80% or so of what they would earn if they just sat still and listened to
no one

The average net asset value for SIVs has tumbled to 55 percent from 71 percent a month ago and 102 percent in June, according to Moody’s.

At least half of the 30 or so SIVs have yet to announce bailout plans. Even those that have been disclosed require approval from bondholders, including proposals by HSBC and Rabobank Groep NV.

Devised by former Citigroup bankers Stephen Partridge-Hicks and Nicholas Sossidis in 1988, SIVs aim to profit by borrowing at least 10 times the initial funding provided by long-term capital or income noteholders. The money is invested in hundreds of securities from asset-backed debt with AAA credit ratings to bank bonds. Mortgage debt made up 23 percent of SIV assets, with most having no direct subprime link, Moody’s said in July.

SIVs profit by using top credit ratings to borrow at low short-term rates. The model had broken down by September when money market investors either stopped buying SIV debt or charged as much as 6.3 percent on 30-day asset-backed commercial paper, the highest rate in more than six years. SIVs were left paying more to borrow than they were earning, Moody’s said in a report in September.

Sigma was put on negative outlook by S&P today.

Sigma is going down and it’s going to hurt a lot of money funds.

Maybe the banks think the SuperSIV can do something about it but the SuperSIV will not save Sigma.

Sigma is a $50 billion bomb about to go off.