Berkshire Hathaway 4Q Net Slides...

Berkshire Hathaway Inc. (BRKA BRKB) posted an 18% drop in fourth-quarter net income on lower investment gains and a drop in insurance underwriting fees, and Chairman Warren Buffett warned that the insurance business is likely to get tougher in 2008.

"That party is over," the billionaire investor wrote in his annual letter to shareholders. "It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008."

The investment holding company reported net income of $2.95 billion, or $1,904 a Class A share, compared with $3.58 billion, or $2,323 a Class A share, a year earlier.

Analysts surveyed by Thomson Financial had expected the Omaha, Neb., company to post earnings of $1,606 a share.

Stocks Plunge on Inflation Worries....

Credit losses from American International Group combine with troubling growth and inflation data to diminish hopes that the U.S. stock market and the economy have seen the worst this year.

DJIA ends down 316 points, with all 30 components lower. The Nasdaq Composite falls 60 points.

Ugly Market....

Want to see some Bad Breadth:

NYSE

Advances 417
Declines 2528 6:1

Advancing Volume 34 Million shares
Declining Volume 373 Million shares 11:1


As a result:

Dow -216
S&P -24
Nasdaq -41


It is no longer coincidence that when Bush and Bernanke speak....the market sells off....

Today's Upgrades...

Stocks Upgraded this Morning...

Nippon Telegraph (NTT) by Credit Suisse
Deutsche Telekom (DT) by Citigroup
Quest Diagnostics (DGX) by Credit Suisse
Dell (DELL) by Friedman Billings
Deckers Outdoor (DECK) by RBC Capital Mkts
Entergy (ETR) by UBS
Repsol SA (REP) by UBS
Pfizer (PFE) by Lehman Brothers

Today's Downgrades....

Stocks Dowgraded this Morning....

Take-Two (TTWO) by Cowen & Co
Carrizo Oil & Gas (CRZO) by CapitalOne southcoast
Jackson Hewitt (JTX) by FTN Midwest
InterNAP (INAP) by RBC Capital Mkts
EOG Resources (EOG) by RBC Capital Mkts
BEA Systems (BEAS) by Deutsche Securities
R.H. Donnelley (RHD) by Bear Stearns
Omnicare (OCR) by Bear Stearns
Novartis AG (NVS) by HSBC Securities
American Intl Group (AIG) by Keefe Bruyette
MF Global (MF) by Lehman Brothers
R.H. Donnelley (RHD) by Deutsche Securities

Microsoft Optimistic on Yahoo Merger...

"We continue to have a very close dialogue with Yahoo's (YHOO) shareholders (and) Yahoo's management," Microsoft (MSFT) senior vice president Jean-Philippe Courtois said. Though the talks appear to be informal, the ice may be thawing.

Sears Lowers Bid For Restoration Hardware...

Late Thursday Sears (SHLD) revised its buyout bid for Restoration Hardware (RSTO) $4.55/share from a previous $6.75, and offered reverse break-up fee that is $5M greater than the break-up fee Restoration set in its negotiations with private-equity firm Catterton Partners. Sears offered $6.75/share in December after Restoration agreed to be acquired by Catterton for $6.70/share in November. Catterton later dropped its bid to $4.50/share. Sears apparently likes to one-up Catterton by increments of 5.

Is Someone Else Interested in Take Two???

In a SEC filing, Take-Two Interactive Software (TTWO) disclosed it has received additional interest since Electronic Arts (ERTS) made public its $2B bid for the company Sunday. It has not, however, received a written offer nor entered "substantive discussions" with any suitors.

Viacom CEO Philippe Dauman said yesterday he's not considering a bid for Take-Two.

As much as Electronic Arts has been criticized for overpaying here, I doubt anyone else will step in.

Deere to Buy Into Chinese Machinery Company...

Deere & Co. (DE) Friday said it would buy a 50%stake of Xuzhou Xuwa Excavator Machinery Co. for an undisclosed amount. Xuzhou, a Chinese manufacturer of construction equipment, is a subsidiary ofXuzhou Bohui Science and Technology Development Co. Deere said it was seeking government approval in China for the transaction.

Shares of Deere, a Moline, Ill.-based manufacturer of agricultural andforestry machinery, closed Thursday at $86.97.

Dell 4Q Down 6%, Misses Expectations...

Computer maker earns $679 million, or 31¢ a share, on revenue of $15.99 billion, as costs tied to a realignment hit bottom line. Analysts were expecting EPS 36¢ on sales of $16.24 billion. Expects double-digit sales growth in Asia.

Ambac Deal hits Snag...

At issue is a disparity between how much money a bank consortium is willing to invest in the troubled bond insurer and how much capital cushion ratings agencies require to maintain the company's rating, CNBC's Charlie Gasparino reports.

AIG Falls, Swings to $5.3B Loss....

Shares fall 5% pre-market after global insurer reports a $5.3 billion 4Q loss largely because of a write-down that exceeded many analysts' expectations. Write-down comes on derivatives that fell in value by $11.12 billion.