Is Buffett being clever - or losing his nerve?

Warren Buffett's unusual public warning to Kraft over its proposed takeover of Cadbury suggests the crafty US super-investor is either trying to help Kraft secure the British confectioner at a knockdown price, genuinely opposed to the deal or - at nearly 80 - simply losing his legendary nerve.

Kraft's $10.4 billion bid is so close to Cadbury's current value as to be neglible, so some analysts believe Buffett's public opposition to Kraft issuing shares to finance the deal is simply his way of driving Cadbury's price lower. And indeed, after his warning, Cadbury fell 3.2 per cent to 779p in London.

Buffett's Berkshire Hathaway is, after all, Kraft's biggest shareholder and the US company appears so committed to acquiring Cadbury that it is selling off profitable assets, including its frozen pizza division to Nestle, at reduced prices to raise money. Buffett, it turns out, wins both ways: he holds a stake in Nestle, too.

So it seems Buffett may not be the harmless, folksy granny-tickler he likes to portray and he's certainly not above manipulating situations to his advantage. In the past, Buffett's been a vocal dissenter on Coca-Cola's board when directors were looking at a $15.3 billion bid for Quaker Oats. Yet rarely does he do it so publicly.

And where the 'Sage of Omaha' leads, others follow: "If he says no, everybody else is going to pile on and say no too," explains Justin Fuller, a partner at Midway Capital Research & Management who runs the buffettologist.com website.

Yet could there be something else going on? Warren Buffett has an ego the size of one of the freight locomotives on the Burlington Northern Santa Fe, the railway operator he bought for $44bn last year. Many think he overpaid.

Last year, he delivered his worst performance compared to the S&P 500 index in a decade. Berkshire's value rose just 2.7pc on the New York Stock Exchange compared with a 23 per cent gain in the Standard & Poor's 500 Index, according to Bloomberg. In other words, he's got something to prove and buying Cadbury is not, he's telling Kraft's management, the way he wants to go.

Not that Cadbury shareholders should care - they've consistently signalled they won't accept the current offer. The company, too, is unimpressed, saying in a very British way yesterday that it still considers the American company's offer "derisory". ·