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Eliot Spitzer is returning to Washington, D.C., but this time as an investor in the commercial real-estate market.

The former New York governor, who resigned in disgrace a year ago after getting caught patronizing a prostitute in a Washington hotel, has purchased a prominent office building blocks from the White House through his father’s real-estate company.

The Spitzers are paying $180 million to buy 1615 L St. NW, a 13-story dark-glass building whose tenants include the public-relations firm Fleishman-Hillard, the Washington outpost of the Nixon Presidential Library and the Institute of Scrap Recycling Industries.

The move is part of the ex-governor’s re-emergence into public life and a renewed interest in the successful real-estate business founded by his father, Bernard Spitzer. In an interview, Mr. Spitzer spoke about the investment, the economy and about his new life in business after “a detour along the way” as New York’s attorney general and governor.

“Obviously it brought great joy for a great period of time,” Mr. Spitzer said about his years in government. Mr. Spitzer declined to discuss the scandal that led to his resignation.

The purchase comes at an inauspicious time in commercial real estate, amid falling prices and high debt. Any deal of this size is getting a lot of attention for what’s happening to values.

The Spitzers are buying the building from a distressed seller that defaulted on part of its debt. Private-equity firm Broadway Partners bought the tower at the end of 2006 for $209 million, according to Real Capital Analytics. Broadway’s lenders have moved to foreclose on several buildings.

But the Spitzers aren’t paying a bargain-basement price. While $180 million is well below what the previous owner paid, it’s above what the building sold for five years ago, $124 million.  Mr. Spitzer said his family intends to hold the property for years and is unconcerned that values might fall further. “We aren’t trying to time the global market,” he said.

The building is one block from the Mayflower Hotel, the location of Mr. Spitzer’s tryst, which led to his undoing. Asked if the proximity to the hotel creates mixed feelings, Mr. Spitzer demurred. “No. We are buying a great building. That’s why we are buying it,” he said.

Mr. Spitzer reflected on his new professional duties in light of his time in government, during which he often tangled furiously with Wall Street’s titans. “There were folks in the market, on Wall Street in particular, who tried to challenge my dedication to the market and to market forces. I said to them repeatedly that I’m a capitalist who believes in the market, but also knows how to protect the market,” he said.

Mr. Spitzer said his positive outlook for real estate despite today’s troubles is girded by his father’s 60 years in the business. “We are optimists,” he said. As for the economy overall: “What we are facing is as much a psychological hurdle as a real economic hurdle,” he said.

The family’s company owns several prominent towers, including the Crown Building at 730 Fifth Ave. in Manhattan. They rarely sell property. “We have a longtime horizon and little debt,” Mr. Spitzer said.

The elder Mr. Spitzer built some of the largest and most expensive apartment buildings in Manhattan, including the 56-story Corinthian and several luxury buildings on Fifth Avenue.

This is the first major deal for the Spitzers in years, and represents as much Mr. Spitzer’s first act after his fall from grace as a passing of the torch. Mr. Spitzer falls short of saying he’s picking up the reins.

People familiar with the Washington deal say Mr. Spitzer worked closely on it. “Did I walk the floors? Yes. Talk to the tenants? Make sure the building was in every respect what we wanted? Yes.”

The purchase was made possible largely because the Spitzers will inherit a $138 million existing mortgage and will pay the balance — $42 million — in cash.

Mr. Spitzer sounds content in his new career. “I love the vitality and the dynamism and the competition of the marketplace. Asked if it’s better than government, he said: “They are different.”

The man considered by many to be the greatest investor of all time just had his worst year ever.  Berkshire Hathaway Inc., the large holding company steered by Warren Buffett, reported Saturday that its far-flung empire, ranging from insurance to ice cream to underwear, took some big hits from the sharp economic downturn in 2008.

A common metric Berkshire uses to track performance, book value per share, fell 9.6% in 2008, its biggest decline since Mr. Buffett took over the company in 1965 when it was a family-run East Coast textile maker.

Berkshire’s report was yet another stark sign of the severity of the financial crisis that continues to roil stock markets and businesses around the world. It was only the second year in more than 40 years that Berkshire’s book value per share fell; it was down 6.2% in 2001.

The company also reported its fifth year-over-year quarterly decline. The $117 million quarterly gain it eked out in the fourth quarter marked a 96% drop from last year’s $2.9 billion in fourth-quarter income.

Berkshire remains on solid footing with a large war chest of cash and diversified investments, in companies such as Wal-Mart Stores Inc., that are likely to weather the economic upheaval. What’s more, the company’s book-value performance in 2008 still far outpaced the Standard & Poor’s 500-stock index, which fell 37% last year, including dividends, as well as hedge funds, which last year averaged about an 18% decline, according to Hedge Fund Research.

Berkshire’s results “could have been a lot worse,” given the extreme economic conditions, said Morningstar’s analyst on the company, Bill Bergman. “It’s the worst economic environment in recent history, and despite that they’ve performed well.”

Mr. Buffett, in his annual letter closely read by shareholders and nonshareholders alike, said he didn’t expect an improved economy any time soon but did expect better times eventually.

“Our country has faced far worse travails in the past,” he said. “Without fail, however, we’ve overcome them.” He declined to draw a correlation between stocks and economics, saying that while he was certain the economy would be “in shambles for 2009″ that “does not tell us whether the stock market will rise or fall.”

In 2008, Berkshire’s Class A stock fell 32%. This year the shares are down about 19%, slightly better than the Dow Jones Industrial Average.

Mr. Buffett credited the federal government for stepping in with massive assistance last year, saying the intervention was “essential” to avoiding a total breakdown. But he cautioned there could be “unwelcome aftereffects,” such as inflation.

On oil, he said “odds are good that oil sells far higher in the future than the current $40 to $50 price. But so far I have been dead wrong.” And on Treasurys, he contended that the “investment world has gone from underpricing risk to overpricing it.” Future historians will comment on the Internet bubble of the 1990s and the housing bubble of the early 2000s, he said, but ” the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”

Some highlights of the report:

Investments

Berkshire’s annual net income fell to $4.99 billion in 2008 from $13.21 billion the previous year amid poor results from the firm’s insurance holdings and big declines in stock holdings such as Coca-Cola Co. and America Express Co. Berkshire also owns See’s Candy, Fruit of the Loom and Benjamin Moore paint, which are privately held, but its insurance businesses generate the bulk of the parent company’s results.

Mr. Buffett conceded in his letter that he “did some dumb things” in the past year, such as boosting the company’s holdings of the oil giant Conoco Philips when oil prices were near their peak. Since then, oil prices have tumbled and shares of ConocoPhillips and many other energy outfits are down sharply.

He also said he made a $244 million investment in two Irish banks “that appeared cheap.” At year-end, Berkshire wrote the holdings down to their market value of $27 million, an 89% loss on the investment.

The letter also provided new details on some moves Mr. Buffett made in late 2008 as the credit crisis worsened. Berkshire invested $14.5 billion in fixed-income securities from companies such as General Electric Co. and Goldman Sachs Group Inc. To fund the purchases, the letter says, he sold part of his holdings in ConocoPhillips, Johnson and Johnson and Procter and Gamble Co.–”holdings I would have preferred to keep,” he said.

Derivatives

Also cutting into Berkshire’s bottom line: A loss of $5.1 billion incurred when several derivatives deals Berkshire entered into in recent years are marked to current market prices.

Berkshire sold what are essentially insurance policies against long-term declines in U.S. and foreign stocks in exchange for $4.9 billion. Mr. Buffett said the company sold contracts on the S&P 500, the FTSE 100 in the U.K., the Dow Jones Euro Stoxx 50 index in Europe and the Nikkei 225 Stock Average in Japan.

When the contracts expire in 15 or 20 years, Berkshire will have to pay out if the indexes are below where they stood when the deals were struck. Berkshire’s liabilities on the contracts have soared as global markets tumbled in the fourth quarter. At year-end, Berkshire’s liabilities — a mathematical estimate of its exposure to its counterparties on the deals — stood at $10 billion, up from $6.7 billion at the end of the third quarter. That figure was in line with some analysts’ expectations.

Continuing weakness in global markets in 2009 has dinged the contracts further, Mr. Buffett said. Shareholders’ equity, a measure of the company’s assets minus its liabilities, declined by an additional $8 billion so far this year, according to the company’s estimates, because of weakness in its stock holdings and increased liabilities from the derivatives contracts. At the end of 2008, shareholders’ equity stood at $109.3 billion.

Mr. Buffett said a small percentage of Berkshire’s derivatives contracts call for posting collateral if the market moves against the company. (Meeting costly collateral calls was one of the issues that felled America International Group Inc., the insurer bailed out last year by the federal government.)

Berkshire holds 251 derivatives contracts and expanded some of its positions last year, Mr. Buffett said, but most are of the type that don’t expose the company to counterparty risk, he said. (This figure doesn’t include those derivatives used for operational purposes at its utility outfit, MidAmerican Energy Holdings, and the few remaining at its reinsurance unit General Re.)

More broadly, he railed on derivatives as generally too complex and creating dangerous mutual dependence among financial institutions involved. “Auditors can’t audit these contracts, and regulators can’t regulate them,” Mr. Buffett said. He cited Fannie Mae, Freddie Mac and Bear Stearns — all of which suffered losses because of derivatives and last year either were sold or brought into government control — as examples of what can go wrong. He faulted the Office of Federal Housing Enterprise Oversight, or OFHEO, which had oversight of mortgage giants Fannie and Freddie. The firms’ regulators didn’t respond to requests for comment.

Insurance

Berkshire’s powerful insurance business also struggled in 2008 along with the sector. Underwriting profits at Geico, its car-insurance unit, fell 18%, although Mr. Buffett said market share rose to 7.7% from 7.2%. Earnings at General Re slid 38%.

Broadly, operating earnings in Berkshire’s insurance-underwriting units fell 17% from a year ago to $2.79 billion, hurt by last year’s heavy hurricane season. Hurricanes Gustav and Ike inflicted losses on Berkshire’s property- and casualty-reinsurance operations of about $900 million, Mr. Buffett said. Reinsurance firms provide financial backstops to other insurance companies.

Mr. Buffett also commented on the municipal-bond insurance business he entered in early 2008. He created Berkshire Hathaway Assurance Co. as other, monoline, bond insurers such as Ambac Financial Group Inc. and MBIAInc. struggled with huge losses amid the credit crisis.

Mr. Buffett seemed pleased with some of the deals the company has struck. It has written $15.6 billion of insurance, about 77% of it on bonds that were already insured, making Mr. Buffett’s insurer the second, third or fourth to pay, at rates averaging 3.3%. Before he did those deals, he said, he had offered to take over guarantees on $822 billion of bonds insured by the monolines for a lower rate — 1.5%. They turned him down, he says, which ended up working out in Berkshire’s favor because it later scored the better rates — often for the preferable position of not being first in line to pay.

Still, Mr. Buffett sounded a warning for the municipal-bond insurance business: the risk that local governments running short of cash may decide to default on bond payments if they carry bond insurance. Shortfalls in many city and state pension funds at the end of the year were “staggering,” he wrote, and could push some local governments to inflict pain on bond insurers.

“What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a far-away bond insurer?” Mr. Buffett said.

LIBERTYVILLE, Ill. — Thomas H. Forester somehow managed to be the only stock mutual fund manager among 8,200 peer diversified U.S. stock offerings to post a gain for 2008.Those funds had a 39% average loss, while his Forester Value fund ended the year with a small 0.4% gain.

Thomas H Forester

Mr. Forester, 50 years old, is an unlikely hero. He has toiled in obscurity for most of his 20-year investment career. His $70 million fund is less than a tenth the size of the average U.S. stock fund. And one year it lagged behind the S&P 500 by nearly 30 points. His wife, Kaye, wanted him to fold it a year ago unless he could improve his results.

His success hasn’t gone unnoticed. The fund has swelled $20 million in the past two months, while parts of the $9.6 trillion mutual-fund industry are battling record withdrawals. He recently visited Philadelphia and Long Island to meet brokers newly interested in selling the Forester fund. He made his first TV appearance in December. Chilean newspaper El Mercurio called to ask him for an interview. Mr. Forester moved into new, larger and fancier offices this month.  Good luck to him. The mutual-fund industry is obsessed with one-year returns, and last year’s winners can be this year’s flameouts. “It’s the nature of the business, you can go from hero to goat to hero again quite quickly,” says Ryan Jacob. And he should know.

Mr. Jacob helped run Kinetics Internet fund, the nation’s top performer in 1998. He famously returned 196% that year amid the dot-com bubble. His assets ballooned from $5 million in 1998 to more than $600 million in 1999. He then departed to start his own Jacob Internet fund. It took an 80% dive in 2000. It’s down 6% on average for the past five years and has amassed just $25 million.

Mr. Forester, a boyish, softspoken man who wears jeans and fleece to work on cold winter days, is eager to prove the win was more a stroke of genius than a stroke of luck. But retaining the championship is a tall order. A lot of his success in 2008 came not from great stock picks but from taking large cash positions. Already, the positive return is slipping away. He’s down 13% so far in 2009.

Mr. Forester grew up in Illinois and began his portfolio manager career in 1992. He did well, he says, helping run a $50 million account for investment guru Sir John Templeton. He also did a stint at a Wells Fargo & Co. unit in Minneapolis.

But he struggled later at Scudder Investments in New York. Mr. Forester bought stock of Southern Pacific Funding Corp., only to see the subprime lender file for bankruptcy protection in 1998. That was “a stinker,” he says. His fund fell 10 points behind its benchmark that year.

The next year, Mr. Forester founded Forester Value from his home, with his own money, about $100,000. He decided to stay largely in cash during the dot-com bubble, a move that was rare in the fund industry, where managers generally aim to stay fully invested in the market. He was convinced stocks were too expensive.

That was the right call until 2002. But in 2003, as the market rebounded, Mr. Forester trailed the S&P 500 by 28 points. He improved in 2004 but trailed again from 2005 to 2007.

By 2007, “I was at the end of my rope,” he says. His fund had barely attracted $2 million. He and a partner, Michael Ditzler, invested 40% of that personally. Mr. Forester and his wife were burning through their savings supporting their two children.

Mr. Forester says he didn’t mind the sacrifices because, for him, “value is a lifestyle.” He finds cheap hotels on Priceline.com for New York business trips. He prefers buying used cars. But his wife was annoyed.

“I just kept asking myself, ‘When is this going to happen?’” she says.

Sitting in their living room in October 2007, the two agreed Mr. Forester would close shop if he wasn’t beating the S&P 500 by 10 points by March 2008. “I can’t give up when everything is right on the threshold of the way I thought it would happen,” he recalls telling his wife.

He was expecting a market crash, having monitored government data for years suggesting to him that housing prices were going to fall off a cliff. He dumped financials like Citigroup Inc. by March 2008. The bank has fallen more than 85% since then. He snapped up health-care stock Bristol-Myers Squibb Co., which rose 8% while he held it last year.

Forester Value beat the S&P 500 by 9.5 points through March, and that was good enough for Mrs. Forester. She agreed he should stick with the business. And she’s glad she did. She and Mr. Forester often drive to get coffee together early in the morning and talk about the growing business. They’ve considered buying a sport utility vehicle to replace her old red van.

Oil stock EOG Resources Inc. rose 60% when he held it from January to May. Mr. Forester sold some shares by June. That helped him sidestep the commodities collapse last summer. He bought some Bank of America Corp. stock at $18 a share in July and sold the bulk at $30 in September. (It’s now trading at about $5.)

By summer, his fund had hit No. 1. He then hoarded cash, salting away 30% of his assets in cash by September, and thus largely avoided the year-end crash. He also held on all year to McDonald’s Corp. and Wal-Mart Stores Inc., the only two stocks in the Dow Jones Industrial Average with gains last year.

Mr. Forester knew his 0.4% gain was a big deal by 4 p.m. on Dec. 31 — when he saw on an online investment site that his fund was the only one in the black.

Mr. Forester has tried, in a rocky market, to keep his roll going. One day late in January, he sat in his office contemplating the situation. He was horrified by insurer Allstate Corp.’s bad earnings that week. The holding is “a pain in my side,” he muttered. Another holding, manufacturer Textron Inc., tanked 32% that day after reporting a disappointing quarter.

The next day, he reviewed dozens of stocks looking for possible purchases. Dell Inc. was a contender. However, he said, “I’m trying to not freak out and just do something.” He again held off on any new stocks. Meanwhile, favorites like H.J. Heinz Co. that held up relatively well last year are getting caught in this year’s market declines. “It’s been very emotionally difficult to execute a lot of these things,” he says. “Everyone’s afraid” of the market, and “I’m a little afraid, too.”