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Foolish Preview: Berkshire, banks and a budget

US Markets closed down sharply on Friday night, with the Dow Jones Industrial Average falling 1.3% to 13,038.3 and the S&P 500 down 1.6% to 1,369.1 points. The Nasdaq suffered the most of the three indices, enduring losses of 2.2% on Friday, to close at 2,956.3.

The losses weren’t reserved just for shares, with oil also falling, by 4% in this case, while gold rose slightly (up 0.6%). The Australian dollar also closed lower against the US, falling 0.9 cents on Friday night.

The losses seemed to come from a combination of weaker US jobs data than was expected, and continually soft data out of Europe.

Berkshire or bust!

Investors at least had the Berkshire Hathaway (NYSE: BRK.A, BRK.B) AGM overnight on Saturday to cushion some of the fallout from Friday night’s US market.

Warren Buffett and Charlie Munger were both in fine form, holding court in front of a crowd of up to 30,000 people for 5 hours of unscripted questions from journalists, analysts and shareholders.

While not a lot of new news came from the meeting, Buffett was clearer than any other time I can recall on the issue of Berkshire’s share price versus what he believes the intrinsic value to be – that Berkshire’s stock is currently quite cheap.

If you want to know more, we published a comprehensive lead-up article on Saturday. It also includes a live blog of the event, run by our colleagues at fool.com (and with yours truly on-site in Omaha helping out), which gives you a blow-by-blow summary of the event.

Banks and profit

In local news, Orica (ASX: ORI) is due to release its half-year profit numbers today, but with little other local news expected, the US news will weigh heavily on our market this morning.

Banks will continue to be in focus as they decide how to respond to the recent RBA rate cut, and to the resultant competitive position. The most recent news was on Friday, with Westpac (ASX: WBC) cutting 37 basis points from their mortgage loans and 50 basis points from its variable rate for business.

Bank of Queensland (ASX: BOQ), National Australia Bank (ASX: NAB) and Commonwealth Bank (ASX: CBA) had already announced their intentions (in that order), cutting rates by 35, 32 and 40 basis points, respectively. ANZ (ASX: ANZ) is so far sticking to its guns of announcing its interest rate changes once a month, on the second Friday of each month.

Budget eve

The big news this week will be the federal budget on Tuesday evening. With the government under political pressure to deliver itsmuch-promised budget surplus, expectations are that spending increases will be minimal, while pre-budget speculation (or leaks – this is budget season, after all) has centred on a higher tax rate for superannuation contributions from higher income earners.

With interest rates on the way down, we think there’s even more reason to consider dividend-paying shares. To find out why, and see which shares we think fit the bill, look no further than “Secure Your Future with 3 Rock-Solid Dividend Stocks”. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

If you had a busy weekend, why not catch up on these stories we published on Saturday and Sunday:

Scott Phillips is an investment analyst with The Motley Fool. Scott owns shares in Berkshire Hathaway. You can follow him on Twitter  @TMFGilla . Take Stock is The Motley Fool Australia’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

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