OMAHA, Neb. (AP) -- Berkshire Hathaway Inc. said Friday its fourth-quarter profit fell almost 18 percent as its companies linked to construction were hurt by nationwide housing woes, and the company generated smaller insurance underwriting profits and investment gains.

But the full-year picture CEO Warren Buffett described in his annual letter to shareholders appeared much brighter. The company's net income soared 20 percent as it took on more derivative risk.

Berkshire reported earning $2.95 billion, or $1,904 per share, in the quarter. That's down from $3.58 billion, or $2,323 per share, in the year earlier period.

For 2007, Berkshire earned $13.2 billion, or $8,548 per share, up 20 percent from $11.02 billion, or $7,144 per share, the prior year.

On average, the four analysts surveyed by Thomson Financial have been expecting fourth-quarter earnings per share of $1,606 and annual earnings per share of $6,321.

Berkshire generated revenue of $118.2 billion in 2007, up from $98.5 billion in the previous year.

Buffett said Berkshire gained $12.3 billion in net worth during 2007, which represents an 11 percent increase in the per-share book value of the company. That beat the 5.5 percent gain in the S&P 500's

BERLIN (AP) -- The dollar kept spiraling down Friday, hitting another low against the euro and dropping to a three-year record against the yen, as worries about the U.S. economy depress the currency and raise thorny issues in Europe about how to cope with the growing gap.

The euro flew past its previous high to hit $1.5238, before subsiding to $1.5194 late in New York. The euro topped $1.50 this week for the first time since being introduced in 1999 at $1.17, then surged above $1.51 after markets took comments from Fed Chairman Ben Bernanke as a sign that yet more U.S. rate cuts are on the way.

"The dollar looks set to finish the month with yet more downside pressure being heaped upon it," said Gary Thomson of CMC Markets in London.

The dollar also slumped to 103.96 Japanese yen on Friday from 105.36 yen in New York the night before. The dollar has not been below 104 yen since March 2005.

The dollar also fell to 1.0433 Swiss francs from 1.0503 Swiss francs, hitting a record low of 1.0410 francs, according to Dow Jones' Interbank foreign exchange rates.

The two "carry-trade currencies" tend to trade inversely to the market. The Dow Jones industrial average dropped more than 300 points in late trading in New York.

Carry trader borrow currencies from countries with low interest rates and investing the funds in higher

The rivalry between value investing and growth investing is as intense as a Mets-Yankees duel. At any given time, one will outperform the other.

For example, during the Internet era, you got hung out to dry if you were a value investor. People were saying that even Warren Buffett had lost his touch, as his holding company, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), languished while the likes of Oracle (Nasdaq: ORCL) and Yahoo! (Nasdaq: YHOO) racked up double-digit percentage gains weekly -- sometimes daily.

But when the dot-com bubble burst, the trophy returned to the value-investing approach, as good old-fashioned companies like McDonalds (NYSE: MCD) began to sizzle once again.

Care to wager which school of thought is winning today? I don't.

Value plus growth equals investing
Regular readers already know that I have a value-oriented investing approach. However, I apply just one rule to my investing decisions: I'll invest only in businesses that I can understand, and that are selling at an attractive price.

I consider this approach "value investing" only in the sense that any investing decision should be based on the act of seeking out value. After all, if our goal is to realize capital gain, the way to maximize that gain is

With the euro flexing its muscle at a record levels against the dollar, Point View Financial Services president and chief investment strategist David Dietze has three ways to play the currency equation:| U.S. multinationals, foreign fund investments, and commodities.

Among multinationals, he mentions Procter and Gamble (NYSE:PG - News), Coca-Cola (NYSE:KO - News), and McDonald's (NYSE:MCD - News), companies that draw at least 50 percent of their revenues from foreign countries.

"The other way to go is go overseas yourself," he told CNBC.| "Buy into, say, a European sector fund...particularly a small-cap European sector fund, where they're getting most of their revenue in the euro, and then, of course, as the euro rises, you have more."

How to play commodities?

"Of course, in the stock market, that basically means your energy companies, because as the dollar

WASHINGTON (AP) -- The economy is in turmoil, yet President Bush and Federal Reserve chief Ben Bernanke say the country will weather the storm. Neither sees a recession on the horizon.

Both Bush and Bernanke are on the front lines of the government's efforts to right an economy that increasing numbers of economists fear is on the verge of its first recession since 2001, if it hasn't fallen into one already.

The housing market's collapse, a credit crisis and galloping energy prices are crimping spending and investing. Those are mighty punches to a teetering economy that nearly stalled at the end of last year.

Bush and Bernanke acknowledged the dangers Thursday. But Bush, at a White House news conference, and Bernanke, in congressional testimony, seemed to strike the same hopeful note that the economy should be able to survive the fallout.

"I don't think we're headed to a recession, but no question we're in a slowdown," Bush said.

The Federal Reserve is not forecasting a recession. It does predict slow growth for this year as well as higher unemployment.

"I realize that my testimony wasn't the most cheerful thing you'll hear today ... but I do very much believe

WASHINGTON (AP) -- The Federal Reserve is ready to lower interest rates again to brace the wobbly economy even as zooming oil prices spread inflation, Chairman Ben Bernanke signaled to Congress on Wednesday.

He is fighting to keep the economy afloat after mighty blows from the housing and credit crises, while trying to contain inflation.

For now, the priority is shoring up the economy, Bernanke suggested in an appearance before the House Financial Services Committee. He pledged anew to slice a key interest rate and help the economy, which many fear is on the verge of a recession, if not already in one.

"The economic situation has become distinctly less favorable" since the summer, the Fed chief told lawmakers.

Since then, the housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that combination of bad news has made people and businesses more cautious about spending and investing, further weakening the economy.

The country should prepare for "sluggish economic activity in the near term," Bernanke said. Concern is growing about the possible return of stagflation, when stagnant growth is combined with rising inflation

WASHINGTON (AP) -- Fannie Mae and Freddie Mac will be allowed to expand their roles in the turbulent mortgage market even as worsening conditions in the housing sector punish the two companies.

Fannie, the largest buyer and backer of U.S. home loans, said Wednesday it lost nearly $3.6 billion in the fourth quarter of 2007 amid mounting home-loan delinquencies and soured bets on interest rates. Freddie is expected Thursday to report a $1.5 billion fourth-quarter loss, according to Wall Street estimates.

Under a previous agreement with federal regulators, the timely filing of Fannie's and Freddie's financial results triggers the removal of an investment-portfolio cap placed in the aftermath of multibillion-dollar accounting scandals at the government-sponsored companies.

Analysts said the impact will be limited, however, because of the large cash cushion Fannie and No. 2 mortgage financer Freddie must maintain as a reserve against risk. Tightness in credit markets makes it expensive for Fannie and Freddie to marshal additi/.onal funds.

Fannie, which gave a pessimistic housing outlook for 2008, said close to 90 percent of its fourth-quarter losses stemmed from investments it made based on the assumption that falling interest rates would cause

Eligibility to Make Contributions
The contribution maximum is the same for Roth IRAs as it is for traditional IRAs. For 2007, you can contribute $4,000--or $5,000 for investors over age 50. (You have until April 15 to make a 2007 contribution.) The contribution limit goes up for 2008--to $5,000 for those under 50 and $6,000 for those over 50. The income thresholds, however, are higher than they are for deductible contributions to a traditional IRA.

Singles may make at least a partial contribution to a Roth IRA if modified adjusted gross income is less than $114,000 (in 2008 that increases to $116,000). Married couples filing jointly may contribute as long as their modified AGI is below $166,000 (in 2008 that increases to $169,000). Married filing separately may only contribute if modified AGI is less than $10,000.

You can contribute past age 70 1/2 as long as you have earned income and are otherwise eligible. You do not have to take Required Minimum Distributions at age 70 1/2.

Contributions can be made in the year the income is earned or up to the filing deadline of your tax return, not including extensions (April 15 in most cases).

Tax Penalties on Roth IRAs
There are fewer potential penalties for Roth IRAs than there are with traditional IRAs. Because you are

WASHINGTON (AP) -- It's a toxic economic mix the nation hasn't seen in three decades: Prices are speeding upward at the fastest pace in a quarter century, even as the economy loses steam.

Economists call the disease "stagflation," and they're worried it might be coming back.

Already, paychecks aren't stretching as far, and jobs are harder to find, threatening to set off a vicious cycle that could make things even worse.

The economy nearly stalled in the final three months of last year and probably is barely growing or even shrinking now. That's the "stagnation" part of the ailment. Typically, that slowdown should slow inflation as well -- the second part of the diagnosis -- but prices are still marching higher.

The latest worrisome news came Tuesday: a government report showing wholesale prices climbed 7.4 percent in the past year. That was the biggest annual leap since 1981.

"We're in a slowdown," Press Secretary Dana Perino said at the White House, where the economics talk was still upbeat until recently.

Once the twin evils of stagflation take hold, it can be hard to break the grip. People cut back on their spending as they are stung by rising prices and shriveling wages. Businesses, also socked by rising costs

ARMONK, N.Y. (AP) -- IBM Corp. raised the low end of its 2008 earnings outlook Tuesday and said its board of directors had authorized a continuation of its massive stock buyback program. Its shares jumped almost 4 percent.

IBM now expects earnings per share to exceed $8.25 this year. Previously the company had given a range of $8.20 to $8.30, and analysts surveyed by Thomson Financial were expecting $8.22.

IBM has spent $94 billion buying back shares since 1995, including $18.8 billion last year. Tuesday's decision by the board will let the technology company spend another $15 billion on share repurchases, in addition to $400 million left over from a previous authorization.

IBM said it expects to spend $12 billion of that pool buying back shares in 2008.

IBM shares rose $4.30 to $114.38 in trading Tuesday.

IBM's aggressive stock repurchases are expected to continue in the coming years. IBM executives have described a plan for earnings per share in 2010 to be as high as $11, which would represent a gain of nearly $5 from 2006. Roughly $1.10 of that $5 increase is expected to come from taking shares off the

Whether it's the Dutch tulip craze of the 17th century, the dot-com mania of the late 1990s, or the most recent rush into real estate, there's no shortage of examples of investors behaving irrationally.

In the world of traditional economists and finance professors, though, that's not supposed to happen. If investors are rational decision-makers, then emotion-driven bubbles shouldn't be possible. Yet human weaknesses can limit our ability to think clearly. Many studies of investor behavior have shown that investors are too willing to extrapolate recent trends far into the future, too confident in their abilities, and too quick (or not quick enough) to react to new information. These tendencies often lead investors to make decisions that run counter to their own best interests.

The idea that investor psychology can result in poor investment decisions is a key insight of an increasingly influential field of study called behavioral finance. Behavioral-finance theorists blend finance and psychology to identify deep-seated human traits that get in the way of investment success. Behavioral finance isn't just an interesting academic diversion, however. Its findings can help you identify--and correct--behaviors that cost you money.

What commonplace mistakes should investors avoid? Here are a few key behavioral-finance lessons worth

Housing has imploded, the market's a yo-yo, recession's in the air. And the "working rich" are learning to do without. So says Russ Alan Prince, president of a private wealth-research firm and author of the book The Middle-Class Millionaire. What does that mean?

"They have certain middle-class values," says Prince. "They will continue giving to charity and to send their kids to get the best education, because those are important components to them. They will still buy the high-end luxury car, but not the sports car."

Prince's latest research shows that 78% of the "working rich," or "middle-class millionaires," defined having a net worth of between $1 million and $10 million and still working for a living, consider themselves "very or extremely concerned about their ability to maintain their current financial position." He also estimates that 21% of them have already begun pulling back on spending.

Unity Marketing's Luxury Consumption Index tumbled 27% in January to its lowest level since the firm started the survey in 2004. During the just-ended fourth quarter of 2007, 24% of luxury consumers said they felt their economic situations were worse than they were a year ago, double the 12% who said so in the third quarter. Sure enough, spending on luxury goods dropped 20% during the second half of 2007 from the first half. The company polled 1,281 mass affluent consumers whose income averaged $155,000

No matter who's elected president, there is a good chance taxes are going up. But that doesn't mean tax-deferred accounts are a bad idea.

Lately, readers have been writing in, fretting that tax-deductible individual retirement accounts and 401(k) plans will mean huge tax bills in retirement.

But even if tax rates leap, these accounts will likely remain a great investment. My advice: Keep funding that 401(k) -- but, if you're planning a 2007 IRA contribution by the April 15 deadline, plunk it in a Roth account. Here's why.

Under pressure. Republican front-runner John McCain and Democratic contenders Hillary Clinton and Barack Obama are all proposing middle-class tax relief. But forget the campaign promises and focus on the inevitable: The tax code has to be rewritten -- and the result will probably be higher taxes.

In fact, we're facing a barrage of bad tax news. We need to fix the alternative minimum tax. Many of the Bush tax cuts are set to expire. The absurdly complicated tax code needs to be simplified. We have a sizable budget deficit. We need to pay for Social Security and Medicare for retiring baby boomers.

All this could be damaging for 401(k) plans and tax-deductible IRAs. You might save 25 cents in taxes by stashing $1 in these accounts -- only to give back 33 cents when you withdraw money in retirement

NEW YORK (AP) -- Stocks are shaky, credit is tight, the economy may be tipping into a recession. Not the best of times to be going to the markets for what could be the largest initial public offering in U.S. history.

That's the gamble Visa is taking as it gave details Monday about an IPO that could raise up to nearly $19 billion: If it works, it could be an encouraging sign to the stock markets and may even help loosen the credit knot.

While Visa's IPO will have little direct effect on its cardholders, the banks that issue Visa cards are expected to see a total windfall of more than $10 billion -- which might keep them from pulling back credit lines further and pushing rates higher.

"That's a good thing for the banks, and a good thing for consumers. It might help ease the credit crisis a bit," said Ben Woolsey, marketing director at the card information Web site CreditCards.com.

Banks have suffered huge losses tied to defaults on subprime housing loans and are gearing up for more as consumer credit deteriorates. JPMorgan Chase & Co. -- which has a 23 percent stake in Visa -- stands to gain the most. The more cash-strapped Citigroup Inc. and Bank of America Corp. are also Visa stockholders.

Visa said Monday in a Securities and Exchange Commission filing that it will offer 406 million shares at $37

NEW YORK (AP) -- Wall Street bolted higher Monday after Standard & Poor's affirmed its ratings for Ambac Financial Group Inc. and MBIA Inc., raising hopes that troubled bond insurers will emerge from the credit market crisis on solid footing. The Dow Jones industrials rallied nearly 190 points.

The news came as a relief to a market that has fallen sharply in recent months on any negative news about the insurers; investors feared that a downgrade of the insurers' credit ratings would lead to billions of dollars in write-downs of securities held by already troubled banks and investment firms. Rating agencies including S&P have been under pressure to downgrade the insurers after they weakened their financial positions by insuring subprime mortgage securities that later collapsed.

There has been speculation that Ambac might find sufficient capital early this week to hold onto the stellar "AAA" rating it needs to remain in the municipal bond business. Municipalities and companies use these insurers to back bonds, allowing them to get higher ratings and cheaper financing.

"This is essentially evidence that S&P has signed off any tentative deal," said Charlie Smith, chief investment officer at Fort Pitt Capital Group, of the rating agency's announcement.

Financial institutions have already suffered billions of dollars in losses from securities that lost value during