Buffett's Betrayal 133 comments
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When I was 14, Warren Buffett wrote me a letter.
It was a response to one I’d sent him, pitching an investment idea. For a kid interested in learning stocks, Buffett was a great role model. His investing style — diligent security analysis, finding competent management, patience — was immediately appealing.
Buffett was kind enough to respond to my letter, thanking me for it and inviting me to his company’s annual meeting. I was hooked. Today, Buffett remains famous for investing The Right Way. He even has a television cartoon in the works, which will groom the next generation of acolytes.
But it turns out much of the story is fiction. A good chunk of his fortune is dependent on taxpayer largess. Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.
Berkshire Hathaway (BRK.A), in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt.
To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee. (Click chart to enlarge in new window)
Without FDIC’s debt guarantee program, even impregnable Goldman would have collapsed.
And this excludes the emergency, opaque lending facilities from the Federal Reserve that also helped rescue the big banks. Without all these bailouts, the financial system would have been forced to recapitalize itself.
Banks that couldn’t finance their balance sheets would have sold toxic assets at market prices, and the losses would have wiped out their shareholder’s equity. With $7 billion at stake, Buffett is one of the biggest of these shareholders.
He even traded the bailout, seeking morally hazardous profits in preferred stock and warrants of Goldman and GE because he had “confidence in Congress to do the right thing” — to rescue shareholders in too-big-to-fail financials from the losses that were rightfully theirs to absorb.
Keeping this in mind, I was struck by Buffett’s letter to Berkshire shareholders this year:
“Funders that have access to any sort of government guarantee — banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella — have money costs that are minimal,” he wrote.
“Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that … are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.”
It takes remarkable chutzpah to lobby for bailouts, make trades seeking to profit from them, and then complain that those doing so put you at a disadvantage.
Elsewhere in his letter he laments “atrocious sales practices” in the financial industry, holding up Berkshire subsidiary Clayton Homes as a model of lending rectitude.
Conveniently, he neglects to mention Wells Fargo’s toxic book of home equity loans, American Express’ exploding charge-offs, GE Capital’s awful balance sheet, Bank of America’s disastrous acquisitions of Countrywide and Merrill Lynch, and Goldman Sachs’ reckless trading practices.
And what of Moody’s, the credit-rating agency that enabled lending excesses Buffett criticizes, and in which he’s held a major stake for years? Recently Berkshire cut its stake to 16 percent from 20 percent. Publicly, however, the Oracle of Omaha has been silent.
This is remarkably incongruous for the world’s most famous financial straight-shooter. Few have called him on it, though one notable exception was a good article by Charles Piller in the Sacramento Bee earlier this year.
Buffett didn’t respond to my email seeking a comment.
What saddens me is that Buffett is uniquely positioned to lobby for better public policy, but he’s chosen to spend his considerable political capital protecting his own holdings.
If we learn one lesson from this episode, it’s that banks should carry substantially more capital than may be necessary. You would think Buffett would agree. He has always emphasized investing with a “margin of safety” — so why shouldn’t banks lend with one?
Yet he mocked Tim Geithner’s stress tests, which forced banks to replenish their capital. Why? Is it because his banks are drastically undercapitalized? The more capital they’re forced to raise, the more his stake is diluted.
He points to Wells Fargo’s (WFC) deposit funding model being more robust than investment banks’, but that’s no excuse for letting tangible equity dwindle to three percent of assets. At that low level, the capital structure would have collapsed were it not for bailouts.
And by the way, the strength of Wells’ funding model is a result of FDIC insurance, among the government subsidies Buffett complains about in this year’s letter.
To me this feels like a betrayal. There’s a reason he’s Warren Buffett and not, say, Carl Icahn.
As Roger Lowenstein wrote in his 1995 biography of Buffett, “Wall Street’s modern financiers got rich by exploiting their control of the public’s money … Buffett shunned this game … In effect, he rediscovered the art of pure capitalism — a cold-blooded sport, but a fair one.”
But there’s nothing fair about Buffett getting a bailout, about exploiting the taxpaying public for his own gain. The naïve 14-year-olds among us thought he was better than this.
What would Ben Graham say?
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This article has 133 comments:
However, kinda cool that Buffett replied to your snail mail.
The rest of the article, not so much. If most of Wall Street had 10% of his integrity, we'd be a lot better of.
It's nice that he responded to your email. As for betrayal, who's betraying who?
He has been two faced on his derivatives and CDS positions: while disapproving in principle in public, while participating fully and wildly. That is fraud, but he would say it was done before he came out.
If buffet had half of a quarter of a brain or conciousness he'd realize that the economy is going nowhere for quite some time and simply give his money to the poor and go away. But that's not very sociopathic so that won't happen.
If Buffett knew the bailouts were going to happen, I'd fully expect him to take advantage of it. I wouldn't invest with a money manager who does not. Take a look at Ken Lewis, he "did the right thing" by saving Merrill Lynch to stabilize the financial system and destroyed a lot of shareholder value at the same time. If you are a BAC shareholder who brought at $50, how would you feel? If Ken Lewis goes up to your doorstep and says "I destroyed 70% of your retirement to help stabilize the economy", you'd beat the crap out of him. I don't see a lot of people cheering on Ken Lewis. You do not put your morals ahead of someone else's money if you manage money.
Second - this article is a little misleading. Berkshire Hathaway didn't receive a dime of government money. Warren Buffett and Berkshire Hathaway should be admired - never was this company in jeopardy (relying on the kindness of strangers).
Third, if there is any implication of greed, let's keep in mind that Buffett is giving most of his fortune to charity.
Fourth, I find it interesting that Goldman Sachs would have collapsed. Assuming that it did, don't you think Warren Buffett would have been happy buying this company out and injecting it with capital. He made a fortune on doing something similar w/ GEICO.
Not sure of the purpose/intent of this article.
Regarding your second point, the author's point may be that Berkshire did not receive government aid directly, but Buffett was all too enthusiastic about getting the government involved in his investments. And for him to accredit his company's laurels for recent performance rather than his political clout is disingenuous to the fundamental approach investors have come to respect him for.
If some banks don't end up paying it back, it doesn't matter. The government (through the FDIC) was on the hook to insure them anyway. So TARP is a no risk situation for taxpayers.
Another point: John Stumpf, the head of Wells Fargo, oversees an operation of over 10,000 branches, 12,000 ATMs, tens of thousands of employees, and $1.3 Trillion in assets. Shouldn't he make at least half of what A-Rod, Julia Roberts, or George Clooney make? As and owner of Wells, I think so!
If the banking system collapsed, what would you do to buy groceries? Barter? Would you say: "I'll write you an interesting business article, in exchange for a can of beans?"
The problem I have is not about saving the banking system. It is about enriching the parasites that created the collapse to begin with. Never confuse a system with the actors that happen to be in charge of it at any given time.
On Aug 05 04:46 PM paxguy wrote:
> TARP was a great investment for Tax Payers. They borrowed the money
> at 0.5% (that's what 4 year Treasuries went for around the time of
> TARP) and, in a facist, non-democratic manner, forced banks to borrow
> it at 5.5%. The banks are paying that money back with interest. Then
> Obama continued the fascism by exerting control over the way banks
> operate, meddling in compensation matters.
>
> If some banks don't end up paying it back, it doesn't matter. The
> government (through the FDIC) was on the hook to insure them anyway.
> So TARP is a no risk situation for taxpayers.
>
> Another point: John Stumpf, the head of Wells Fargo, oversees an
> operation of over 10,000 branches, 12,000 ATMs, tens of thousands
> of employees, and $1.3 Trillion in assets. Shouldn't he make at least
> half of what A-Rod, Julia Roberts, or George Clooney make? As and
> owner of Wells, I think so!
>
> If the banking system collapsed, what would you do to buy groceries?
> Barter? Would you say: "I'll write you an interesting business article,
> in exchange for a can of beans?"
With no money down, interest only loans, where income doesn't need to be verified, why wouldn't you buy a house you can't afford? Of course that leads to massive real estate inflation, which reinforces the notion of "If I can't make the payments when rates go up next year, I'll just sell the house for a $50,000 profit". Of course we now know what happens when interest rates go up, and home values go down!
On Aug 05 04:34 PM Dan Braem wrote:
> First - Buffett has a fiduciary duty to his shareholders. I challenge
> anyone on Seeking Alpha to find a CEO that has taken this more seriously
> than Warren Buffett. I would suggest not even trying.
>
> Second - this article is a little misleading. Berkshire Hathaway
> didn't receive a dime of government money. Warren Buffett and Berkshire
> Hathaway should be admired - never was this company in jeopardy (relying
> on the kindness of strangers).
>
> Third, if there is any implication of greed, let's keep in mind that
> Buffett is giving most of his fortune to charity.
>
> Fourth, I find it interesting that Goldman Sachs would have collapsed.
> Assuming that it did, don't you think Warren Buffett would have been
> happy buying this company out and injecting it with capital. He
> made a fortune on doing something similar w/ GEICO.
>
> Not sure of the purpose/intent of this article.
What I do know is that Buffet is a CEO/Investor in charge of a company. His job is to seek best returns for his company. He owes nobody else, include the author, any favors.
The media and an investment public hungry for star power made him into a supernatural, morally perfect investment saint. So maybe Buffet made the mistake by playing along with that surreal image a little bit, but if he had taken up that role too seriously, he would have failed his own rule of offering "competent management" to Bershire's stakeholders (stock and bond holders, employees) and would have become a failure long ago.
I actually find the author's display of a prevalent sense of righteousness and entitlement to be pretentious and rather odious.
On Aug 05 04:01 PM JPSmith wrote:
> I lost all respect for Buffet several years ago when he and Bill
> Gates started arguing for higher inheritance tax rates, trying to
> frame this as a "moral issue" when it was a transparent effort to
> boost his insurance businesses.
I understand your point - but Warren Buffett had 0% impact on whether or not Goldman Sachs, GE or Wells Fargo received government loans. No impact at all. It would be hard for me to believe that Rolfe Winkler or anyone for that matter would state the case that the efforts of Warren Buffett resulted in government bailouts. In fact, the aurthor made the point that these companies would have gone to zero if not for the government - a much better motivating factor for the government to intervene.
And to my earlier point, if he did
On Aug 05 04:39 PM WhoisJohnGalt wrote:
> Dan,
>
> Regarding your second point, the author's point may be that Berkshire
> did not receive government aid directly, but Buffett was all too
> enthusiastic about getting the government involved in his investments.
> And for him to accredit his company's laurels for recent performance
> rather than his political clout is disingenuous to the fundamental
> approach investors have come to respect him for.
On Aug 05 05:38 PM stev53e wrote:
> I'm curious - how did his insurance business benefit?
GE bet the company on Obama.
Buffet helped cheerlead the ascension.
There is nothing folksy about Buffet.
He is a fellow traveler with all of the other Progressives.
These people want to cut the population level in half, in whatever way is neccessary.
Their philosophy is psychotic.
This is technical market, there is nothing fundamental about it and Buffett is all about "fundamentals". If you want to make money in this type of market - follow Jesse Livermore. The only person Buffett's advise is good for is Buffett himself - it served him well so far, didn't it?
I personally think the large financial institutions are a bunch of fascist pigs. They are basically selling our freedoms in exchange for power and money. How is it possible for a business like Goldman Sachs to make the billions that they make and produce ZERO products. Goldman may be getting richer but the taxpayers are getting hosed. Socialism for the rich and poor. Middle Class is quietly being enslaved. When it comes time to pay off these debts and entitlements it will be the middle class that suddenly finds itself poor.
Truth be told we have it great in this country but the foundation of our destruction has been laid and it is deep. The thought that Americans returning to a moderate savings rate spells doom for the economy (EVEN BEFORE all those entitltements kick in) just shows how misallocated our resources have become. The idea that government is somehow going to get the right mix is just stupid.
I was talking with a friend and told him how much or my companies revenue is related to school construction. He said ohhh well you should benefit from all that stimulus money. That certainly isn't the case. I don't know where all the stimulus money is going but it certainly isn't in construction. I don't even think they are spending it on other infrastructure projects.
Most of stimulus money appears to be in the form of wealth transfers and transfers to political machinery orgainizations.
Kudos to those who have been heckeling our politicians.
If you don't like and admire Warren Buffet, who would you put ahead of him in terms of integrity, principles and humility?
I don't think any other business leader comes close.
> You're all haters.
>
> If you don't like and admire Warren Buffet, who would you put ahead
> of him in terms of integrity, principles and humility?
>
> I don't think any other business leader comes close.
Humility? Ya. He seems entirely oblivous to his influence. It's like if some john nobody doe from omaha decided to one day auction off a lunch with himself for charity and then was shocked that someone paid $600,000 for lunch. It's so great that we can have these great leaders and watch them in little interviews on the TV box that made up the screwed up collective conciousness that we possessed for so long (that was basicly the delphi technique) before we got the actual working polylithic conciousness that we have now in the internet.
I missed the good old days of innocence where you could have a really deeply superficial relationship with our sociopaths. Of course they won't ever adopt the internet because they can't handle people not agreeing with them.
When you think about integrity among people in the public eye, we obviously see alot of scandal.
Would you not agree it is unthinkable that....
1. Buffet be caught in a sex scandal
2. Buffet be indicted for some financial crime or theft
3. Buffet wage a public feud where he 'ad hominen' attacks another public person
4. A BRK employee leaves in anger, and writes a scathing book blasting buffet.
We all know these would never happen to him. He MUST be a highly ethical and respected person among all he meets! If he were not... one of those 4 would be plausible. None of them are!
Read his essays, read his books, listen to what he says.
He stands by all he does, and has proven to be simply a l e g e n d.
When the history of the 20th Century is written, Buffet will represent it in a good way. How many other people will?
Don't knock success, kid.
Your article tells me you're starting to get a feel for how things work.
I just don't understand the moral posturing.
Hell, Buffett gives a lot of it away.
Buffet got caught in some bad buys and stands to lose Billions. I believe he fully intends to pay back if at all possible but he is still on the dole out BIG TIME.
For starters you can pull "Mortgage Liquidity Du Jour" by Credit Suisse off the internet. It will show you that 48% of mortgages in 2006 were "low\ no Docs" and Wells Fargo was the biggest lender by a fair margin. On 60% of those mortgages the borrower overstated their income by MORE than 50%. Literally fruit pickers flipping houses in California!
It took me a long time to accept that Buffett could be that stupid.....but I also always new, he had to get too big to handle at some point.........with all that cash and equity! Yeesh this has happened to many before and he is not a god.
On Aug 05 11:42 PM PenName Dave wrote:
> Ok... lets think about this.
>
> When you think about integrity among people in the public eye, we
> obviously see alot of scandal.
>
> Would you not agree it is unthinkable that....
> 1. Buffet be caught in a sex scandal
> 2. Buffet be indicted for some financial crime or theft
> 3. Buffet wage a public feud where he 'ad hominen' attacks another
> public person
> 4. A BRK employee leaves in anger, and writes a scathing book blasting
> buffet.
>
> We all know these would never happen to him. He MUST be a highly
> ethical and respected person among all he meets! If he were not...
> one of those 4 would be plausible. None of them are!
>
> Read his essays, read his books, listen to what he says.
>
> He stands by all he does, and has proven to be simply a l e g e n
> d.
>
> When the history of the 20th Century is written, Buffet will represent
> it in a good way. How many other people will?
Sociopaths like Buffet cannot fathom that they are sociopaths - they think their just the lucky ones. The ones whom divine providence happens to bestow treasure and luxury - it helps to have the government in the pocket as well. We couldn't have the Hampton or Omaha swells out of their houses. We had to bail them out. This is the way of things - it is their wonderful karma which protects them.
I agree with most sentiments here about what vile things should be done to the Buffetts of the world but we really don't have the stomach for such things anymore. Guillotines are so 17th century. I am not sure it would do any good in the long-run.
Funny, too, what PenName Dave said. I thought the absence of scandal made someone normal, not superior.
But the most telling insight into our culture from these comments is the fact that hypocrisy is acceptable if one is generous, kind, soft spoken, doesn't break any laws, and looks out for your stockholders.
So all the GS leadership need do is be more generous, kind, and soft spoken, then they too can win our admiration. I understand they pay their employees well and provide an excellent ROI for their customers and stockholders.
None of us here has created billions and give away billions and standing here and picking bones just seems so much easier.
They do not call Buffett the American Capitalist for nothing, he is just doing his job and doing it well.
Who is betrying who here?
On Aug 06 03:06 AM Jade Bond wrote:
> I'm certain Buffett isn't vile, but it's hardly a virtue to give
> away what you can't possibly hope to ever spend.
>
> Funny, too, what PenName Dave said. I thought the absence of scandal
> made someone normal, not superior.
>
> But the most telling insight into our culture from these comments
> is the fact that hypocrisy is acceptable if one is generous, kind,
> soft spoken, doesn't break any laws, and looks out for your stockholders.
>
>
> So all the GS leadership need do is be more generous, kind, and soft
> spoken, then they too can win our admiration. I understand they pay
> their employees well and provide an excellent ROI for their customers
> and stockholders.
Michael Clark wrote:
> One thing I can say for Buffet is that he gives money to charity,
> along with Bill Gates.
Oh, so if you give money to charity that makes all that "If you have to lie, cheat and steal to win, then you do it" bullbiscuits just OK!?!?
> Is he a god or a saint? Apparently not.
Saint? Hardly. Capitalist? Certainly.
> But capitalism is about making money. If you have to lie, cheat
> and steal to win, then you do it.
And Duhmericans ask with a straight face why Duhmerica is so universally hated? Its Duhmerica's unique brand of FU Capitalism.
> America respects cheaters who win more than saints who lose. It always has.
Rah rah rah sis boom bah, we're number one! FU Capitalism, ain't it grand!
> We claim to be a Christian country, but if Jesus walked down our
> streets today, we'd have him arrested or thrown in an insane asylum.
Again, Duhmericans ask with a straight face why Duhmerica is so universally hated!
On Aug 05 05:02 PM paxguy wrote:
> The main reason the system was about to collapse was that liberals
> (through the Community ReInvestment Act) thought it was a good idea
> to loan money to people who can't afford to pay it back, to increase
> home ownership.
>
> With no money down, interest only loans, where income doesn't need
> to be verified, why wouldn't you buy a house you can't afford? Of
> course that leads to massive real estate inflation, which reinforces
> the notion of "If I can't make the payments when rates go up next
> year, I'll just sell the house for a $50,000 profit". Of course we
> now know what happens when interest rates go up, and home values
> go down!
Sorry, but this article has no credibility. Mr. Buffett obviously believes that he has an important role to play in the public policy area and rightfully so given his track record. I personally do not agree with all of his recommendations (particularly on taxes) but this does not prevent me from appreciating his involvement. The country would be worse off if people like Mr. Buffett chose to retreat from the public arena.
I realize that the various "Buffett has lost it", etc articles get a significant amount of attention for the authors. Sadly for these critics, the fame is always short lived and fleeting. In this particular case, I suspect that the attention will soon turn to amusement as we start to see that Buffett was right on the money with most of his statements and his management of Berkshire.
We are all now slaves because of people like Buffet.
Winterset, Iowa, which made furniture for his Nebraska Furniture Mart. He closed the plant in a way that almost no one got any job transfer assistance, destroyed over 600 jobs in a town of 5000 people, and moved all the jobs to China. Warren has Chinese made furniture in his own home. What a guy!
Buffet is two things: lucky and an exploiter of others. If this is what capitalism is all about, lets move on.
None of us whats to be into that situation. I am not commenting here his decision, but I would just say that he should have learned from Ben Graham that the most important legacy is knowledge and mind set. It seems to me that Buffett failed Ben Graham...
"I don't see any prominent American leader sticking up for average citizens."
So, lets try and keep raising awareness.
www.daily-protest.com
www.bloggersagainstcha...
www.robotsagainstchase...
On Aug 05 03:12 PM Leftfield wrote:
> I don't see any prominent American leader sticking up for average
> citizens. The founders risked everything on principle and now our
> leaders are far worse than King George III. Getting far ahead in
> life used to bring a sense of service to society amongst some. Now,
> besides Ron Paul, all I see is continued swindle.
And, if you don't think he, or his lawyers, lobbied for the bailout with OUR money, you are a bigger fool than he.
I'll make a bold prediction right now. Buffett will be flat broke before the next decade. The companies he owns will not change their behavior and they will blow up in another spectacular financial meltdown of epic proportions only this time the government won't be able to squeeze another bailout from it beleaguered taxpayers. Atlas shrugs and a game of musical chairs of historical proportions will ensue as the wealthiest most gigantic fat asses ever commit fratricide, pushing each other of cliffs, under buses, hissing and spitting trying desperately to sit on ever smaller and fewer chairs before the music stops. It will happen.
Jason Douglas Brown
On Aug 05 04:05 PM noblepaladin wrote:
> Buffett has always been about making money. Activists complained
> when he invested in PetroChina because PetroChina had some connections
> to genocide, Buffett didn't care, it was vastly undervalued when
> he brought and he sold when he felt it was overvalued. As CEO, it
> is his responsibility to protect and increase shareholder value.
> Buffett was and is a supporter of the bailouts, but he didn't cause
> them to happen.
>
> If Buffett knew the bailouts were going to happen, I'd fully expect
> him to take advantage of it. I wouldn't invest with a money manager
> who does not. Take a look at Ken Lewis, he "did the right thing"
> by saving Merrill Lynch to stabilize the financial system and destroyed
> a lot of shareholder value at the same time. If you are a BAC shareholder
> who brought at $50, how would you feel? If Ken Lewis goes up to your
> doorstep and says "I destroyed 70% of your retirement to help stabilize
> the economy", you'd beat the crap out of him. I don't see a lot of
> people cheering on Ken Lewis. You do not put your morals ahead of
> someone else's money if you manage money.
Maybe 100% honesty is simply incompatible with either becoming ultra-rich or becoming ultra-powerful politically? It's not a clean world out there and if one really wants to be completely clean unfortunately it's pretty hard. (and there will NOT be any reward up in heaven either for those who succeed - or even try to)
Anyone who says Buffet does not have integrity is not considering all factors. He is not Christ or a pretend to be Christ. He is a brillent hard nosed investor.
On Aug 05 03:42 PM Hephasteus wrote:
> Buffet doesn't have integrity. He's just a really good sympathetic
> magician using the folksy approach. I say we beat him and hang him
> on a cross and see if people are still crying about him 2000 years
> later. That's the only way to know if you're a sympathy whore or
> not and how good at it you are. It's really up to you to learn to
> not give a crap about him or his investments or what he thinks or
> what "approach" he's using. Having power always has and always will
> be abused. The sympathy and too much support always lead to betrayal.
> The problem is that nobody can really care about more than a few
> people. So we are in a sense evolving towards bigger and better and
> more refined sociopaths. Whether those sociopaths take the political
> or financial or music/movie industry route it doesn't matter.
>
> If buffet had half of a quarter of a brain or conciousness he'd realize
> that the economy is going nowhere for quite some time and simply
> give his money to the poor and go away. But that's not very sociopathic
> so that won't happen.
He is a capitalist and will seek and take rents when and where he can.
I will join the criticism when and if I hear hypocrisy from him. So far he’s been consistent.
We should not act as-if Buffet is above the fray.
The artical's point is valid; Berkshire is profiting greatly from low or no interest loans and Government backing. That is just fact.
We can debate the merits of his action but not the facts.
On Aug 05 03:15 PM Vafer wrote:
> Great headline. Did you get the web hits you were looking for?<br/>
>
> The rest of the article, not so much. If most of Wall Street had
> 10% of his integrity, we'd be a lot better of.
>
> It's nice that he responded to your email. As for betrayal, who's
> betraying who?
IMHO, at Buffet's age he should be focussed on wealth preservation, and I see his moves of late to be focussed on just that.
On Aug 05 03:02 PM WhoisJohnGalt wrote:
> Good points you bring up. For the humble man he portrays himself
> to be, he certainly does not seem willing to recognize when he's
> made a mistake. I am particularly frustrated with his hush-hush business
> with Moody's. The rating agencies do not get enough heat for their
> far-fetched valuations of MBS. Talk about "atrocious sale practices".
>
>
> However, kinda cool that Buffett replied to your snail mail.
To criticize Buffet's action's in an economic vacuum as this article seems to...seems self aggrandizing, self absorbed and nauseating to me. Sorry, but it does.
It is my view, sadly, that the world in recent years has not had the great people that it once did, to shape and better it for all. Power today continues to corrupt. The leaders we have now look out for themselves first, then perhaps consider the rest of us. It is for that reason that we now have the financial crisis that exists, and why it will continue for years beyond what it should do, because these leaders persue strategies that dictate a continuence as those strategies are the ones that suit them best and keep them wealthy and immune from the ailments that beset everyone else due to the problems caused by these self-same leaders in the first instance.
Is it too much to hope that when we do recover, that we may start to build a society that is less materialistic; that cares genuinely for all, and strives for a good and rich life through happiness as opposed to a rich one that provides happiness through goods?
The CRA was passed to stop banks from redlining neighborhoods. If an individual in a certain neighborhood was qualified for a home loan, the banks that serviced that area, taking deposits, checking, were obligated to also lend to qualified borrowers in that area. Previously banks were taking these folks money but weren't lending to them. There is nothing in the CRA that "forced" banks to lend to anyone that walked in the door regardless of qualifications. The banking industry and their lapdogs in congress would have screamed bloody murder if that was in the bill and would have done everything in their power to stop it. The banks and the securitizers are the ones who came up with the brilliant idea to lend to anyone regardless of qualifications. They could just push those securitized loans out the door and peddle them to an unsuspecting public, thanks to the rating agencies, and then turn around and make more loans, fees, etc. The previous administration with its non existent watchdog policies, its no regulation/deregulatio... market is everything policies allowed that system to grow out of control, causing the near total collapse of the financial system. I thought this was common knowledge.
Yep. He has a fiduciary duty to rob the taxpayers blind. In fact he is morally obligated to get the government to perform the robbery for the benefit of his shareholders. This is a variant of socialism called fascism.
What was it Franklin said? "A Republic, madam. If you can keep it."
powerandcontrol.blogsp...
seen the opportunity and took it.
1. Buffett’s fortune is definitely not dependent on taxpayer largess, in fact, Berkshire Hathaway is a large taxpayer itself, paying paying an average of 4 1/2 billion dollars in taxes a year from 2005 to 2008. The investment in these institutions is a small fraction of his net worth (maybe 10% to 15% - much less if you only count those investments prior to the calamity). In my analysis at the time, I concluded that none of these institutions would have failed even without any government assistance. (There are many companies that would not have failed even if the government had not provided financial assistance.
2. The bailout is somewhat of a misnomer. The Government is and will make a profit on this money and the Government required some of the institutions to take the money. For example, the Tarp money is not free money but was given in return for convertible preferred shares that paid 5% (10% after 5 years) and are convertible into common stock at various prices. The Tarp also came with numerous restrictions, such that some many of the institutions wish they hadn’t taken it.
3. Goldman and GE wanted to capital and Buffett agreed to provide it, in return for convertible preferred paying 10% and convertible to common stock at a particular price. There is nothing wrong with this. There were others with money that Goldman and GE could have struck a deal with.
4. Buffett tends to avoid attacking specific companies or people, although he does on occassion. To the extent Buffett criticized the financial industry and it applied to Well’s Fargo, American Express, etc., I saw nothing indicated that Buffett excluded them. In fact, I took some of the criticism to be referring to some of them. He is only a shareholder, he does not own a majority stake in or run any of the financial companies mentioned.
5. Buffett has spoken publicly of Moody’s and indicated that they made mistakes in their ratings and Munger, his partners, has also publicly so indicated. I can find and provide the cites if you need them, but with the internet, I am sure you can find them as well.
6. buffett did not mock the stress tests. His point, with which the government and perhaps you disagree, is that Well’s Fargo was adequately capitalized and not in danger of failure, particularly in light of their large earnings power. I happen to agree with this analysis. Wells Fargo would not have gone under, in my opinion and in Buffett’s I believe, even without government intervention. You may disagree.
7. I also agree with Bernanke’s action in quickly provided substantial liquidity to a variety of markets during the financial crisis and I agree with Buffett’s voval support of this course of action. Without such help, thousands of banks and thousands of companies would have gone bankrupt, causing a spiraling downward that would have had disastrous consequences far worse than what we have seen. At least this is my opinion and I believe it is Buffett’s opinion.
8. buffett did not get a bailout and did not exploit the taxpaying public, of which he is one of hte largest ones, for his own gain.
There is no doubt that Buffett, like all of us, has his flaws. I don’t think he, or anyone else, would dispute that. HOwever, as you can see, I disagree with virtually every point made in this article. Furthermore, while Buffett is wealthy, he has managed to be relatively modest in his spendings (althoug, let’s face it, he still spends substantially more than most of us even if he is thrifty) on himself and most of his money will go to charity.
Makes me want to own brk. Mgt. is definitelly lookiing out for shareholders.
On Aug 05 02:30 PM stink726 wrote:
> Interesting article; thanks
The definition of charity is interesting here. Some of our charities pay more in CEO salaries than most of our small businesses. It has become impossible to tell if an entity is truly charitable by the business form it has chosen to take.
Bill Gates has a foundation that is supposed to be a charity. According to Vandana Shiva, it gave $47 million to Monsanto for research. That does not meet my definition of charity.
Some ostensibly for-profits operate as non-profits and vice versa.
I have come to the conclusion that for-profit is the most honest of the forms because profit is defined in the conscience of the individual. I would add co-op to the mix in some states.
Arguing that a non-profit doesn't profit is an argument an honest person would lose.
Corporations are for-profit the minute you pay a salary, in these economic times in particular. Another reason is that if it isn't going to profit, we should call it a why-bother, just-dither-for-tax-re... If you do something people want, you will end up making money, because people like you and want to buy into your scene. You can always have a sliding-scale rate with scholarships so you can diversify your operation in a way that isn't boring.
My next point is that Ron Paul, lonely mouse who is so kindly he somehow has managed to co-exist with vipers for a long time, is now joined in his crusade for honesty by some interesting fellows: Kucinich, Sanders, but most interesting of all, a relatively young and very smart Democrat from Florida, Alan Grayson.
I'm not sure how they are going to try to defame and marginalize Grayson. If they were smart, neither party wouldn try. The Repubs could try to recruit him and the Dems would try to keep him. Grayson has the potential to keep a party in power for a long time if they let him continue to speak for whistleblowers and to champion ordinary people, from which he comes.
If the DemReps just let Ron Paul be the front guy and pick on him the way they always have, concerning transparency in the Fed, it will be the usual bi-partisan attack on Ron Paul, and Grayson can be left on reserve, when the egregiousness of the mess finally requires that some of the operatic stories be told.
If they couldn't shut up a Rock 'n Roll magazine writer from connecting the dots, it's going to get harder and harder to keep the fungal filaments from being noticed by a critical mass of gym rats, couch sitters, and assorted other sub-species of U.S. persons.
Tinea pedis is hard to ignore.
On Aug 06 09:19 AM max12345 wrote:
> Is it really possible for Buffet -or anyone else for that matter-
> to amass a huge fortune operating 100% honestly within THE SYSTEM
> (economic, political and social) that we all need to operate in?
>
>
> Maybe 100% honesty is simply incompatible with either becoming ultra-rich
> or becoming ultra-powerful politically? It's not a clean world out
> there and if one really wants to be completely clean unfortunately
> it's pretty hard. (and there will NOT be any reward up in heaven
> either for those who succeed - or even try to)
On Aug 06 10:10 AM Houston wrote:
> When an economic system is headed for collapse, reasonable people
> do what they have to...to survive it. That often includes things
> they would not do otherwise or believe in otherwise. A lot of that
> has happened in the last year.
>
> To criticize Buffet's action's in an economic vacuum as this article
> seems to...seems self aggrandizing, self absorbed and nauseating
> to me. Sorry, but it does.
He advocates for confiscatory death taxes.
He is in the insurance business, so he benefits when small businessmen are forced to buy life insurance to protect their heirs from having to sell the business to pay these confiscatory death taxes.
He also is an active acquiror of businesses for his portfolio when the heirs have to sell to pay those confiscatory death taxes.
Connect the dots. All of this is intentional.
On Aug 05 05:38 PM stev53e wrote:
> I'm curious - how did his insurance business benefit?
On Aug 05 11:42 PM PenName Dave wrote:
> When you think about integrity among people in the public eye, we
> obviously see alot of scandal.
>
> Would you not agree it is unthinkable that....
> 1. Buffet be caught in a sex scandal
Buffett warned repeatedly about financial armagedeon but failed to protect his take action on his own holdings. Now this buffoon supports another stimulus package since many of his wholly owned consumer businesses are on their back. enough of this money printing and stacking it high on the future generations.
1) If the Health insurance mandate goes through, he stands to reap huge windfall profits from the new demand that will be generated by making everyone purchase insurance, whether they want it or not.
2) If the public option goes through, the federal gov't. will have to sell huge amounts of Treasuries. Guess who will be doing a large amount of that underwriting.
3) The high death tax is a canard. Its not about fairness at all. Insurance companies LOVE it because it forces consumers to purchase huge life insurance policies as part of their estate plan in order to actually leave an inheritance for their children.
As for Buffett himself, anyone who has read his biography, "The Snowball," will recognise the "too big to fail" argument from back in the days when he 'saved' Soloman Brothers by convincing the regulators not to prosecute the firm because it was "too big to fail." It is also worth noting that much of the success of his businesses in the past several years has come from his political efforts. Even if he won't say it directly, he still allows this fact to be made quite clear in "The Snowball."
I have always admired him as a Capitalist. But like the capitalists of the past, who turned into the Robber Barons, Warren has learned that the easiest way for the top dog to stay there is to hamstring the competition. And that is where he betrayed those who would follow in his footsteps.
Buffet wants others to pay higher income taxes -- especially the people in California-- presumably to subsidize his investments? Why is a guy in Nebraska meddling in California's internal affairs anyway?
Buffet has long said he looks for manager integrity -- but then he bought into Salomon Bros while it was rigging treasury auctions; he bought into FNMA while it was literally cooking its books; he bought into GE while it was claiming to be an industrial conglomerate, but 75% of profits came from finance; Buffet bought all of GenRe, which was instrumental in hiding losses at AIG. Either Buffet didn't understand the businesses (in which case he says one shouldn't buy), or else he bought knowing the scams were happening. Once might have been on honest mistake, but Buffet has done this again and again and again. Is he stupid (doubt it) or does he know he is buying into a scam?
Buffet is a con man, simple as that
The Fascists were an effective amalgam of state and corporate power - kind of like rome on steroids. When the modern incarnation waded through europe in the last few centuries, it made any other systems that didn't adopt basic fascist elements quite ineffective. You cannot compete against them with a quaint (largely) agrarian economy which was America post 20th century. Il stato found America a ready and pliant state during WWII to fight-off the ultra-fascist Axis powers. Either way, we had to adopt many of the same governmental operating systems in order to compete and win against them.
In the old republic, it was often that censors found much that needed to be edited from the public dialogue. Their method of censor was brutish by modern standards. Our modern system affords us so much (the internet comes to mind) but yet we are straddled by the lameness of our language and education system which does nothing to prepare you for the onslaught of the modern polity. In fact, it does everything to make you a compliant consumer and true believer.
Today we have a polarized polity that largely only sees Red or Blue - any other colors are considered a distraction.
But old Warren is not a nice man. He is a rapacious predatory player wearing the mask of a decent country boy. He is also fantastically narcissistic. He believes God has "invested" in him a gift for "capital allocation". It's true. He has said this.
Thanks for quoting me, but you didn't even answer the question.
On Aug 06 10:43 AM MSimon wrote:
> " First - Buffett has a fiduciary duty to his shareholders. I challenge
> anyone on Seeking Alpha to find a CEO that has taken this more seriously
> than Warren Buffett. I would suggest not even trying."
>
> Yep. He has a fiduciary duty to rob the taxpayers blind. In fact
> he is morally obligated to get the government to perform the robbery
> for the benefit of his shareholders. This is a variant of socialism
> called fascism.
>
> What was it Franklin said? "A Republic, madam. If you can keep it."
Yours truly, LaVern Isely, Disgusted Middle Class Taxpayer, Public Citizen and AARP Member
These are just the beginning of the factual issues this article got wrong. Berkshire owned life insurance companies issue less than 1/2% of all life insurance being issued. The insurance companies that play a large part in Berkshire are re-insurance, auto insurance, catastrophic insurance and now bond insurance. So all that stuff about Buffett benefiting from the life insurance business is just crap.
Personally, I don't idolize Buffett, but I do give him a large part of my wealth to invest for me, which he does very successfully and charges me pennies to do!
The author should stick to whatever expertise he has, rather than try to write on issues he knows nothing about IMHO.
Finally, as an investor in BRK I can assure you that I expect Buffett to take advantage of whatever environment is out there.
Also, I tend to think Buffet probably has socially benevolent motives...he did commit to donating most of his money to charity after all.
Banks need to be regulated like utilities...until that happens, we're at the mercy of the pirates.
On Aug 05 02:30 PM stink726 wrote:
> Interesting article; thanks
Misters Shafer and Braem, we appreciate your honesty on the subject of Mr. Buffett's fiduciary duty. You and he seem to define such duty as though it requires a fiduciary to use any tactic necessary to turn a profit.
Such a view is remarkably shortsighted. The courts have ruled that fiduciary duties often require a holistic approach that accounts for all factors.
Is he doing anyone any favors by advocating a death tax that will affect future shareholders' ability to inherit these shares from their current owners?
Maybe the tremendous amount of government debt and massive (10x historical) bank reserves that threaten to squash the value of the dollars most of his shareholders live on is a fair price to pay to help them avoid taking some lumps during a market slump. Maybe not. Who knows?
Not I, and not you. And to argue that fiduciary duty somehow mandates such behavior is complete rubbish.
Berkshire is trading 68% above where it was 10 years ago. The S & P 500 is trading down 25% from where it was 10 years ago. I'll take that 93% advantage over 10 years anytime. More hyperbole from the know nothing crowd!
You haven't yet described any tactic that is morally questionable. You have simply superimposed your own economic ideology onto ethics to come to your conclusions. I happen to agree with him on the inheritance tax. Here is a fact you might find enlightening. Life insurance proceeds are included in the inheritance tax calculations! Now you can set up a trust that cedes control of your money to another entity to avoid this, but that has its own repercussions. Now I don't expect you to understand or appreciate Buffett's politics, but their is nothing immoral about it as you would have us believe. As to the value of the dollar [ie inflation] Buffett has made comments on this as one of his concerns. You give much to much agency to Buffett over government action. Your real issues with him seem to be about political ideology.
Lastly, for some of you groupies, you might wanna spell your idol's name so we laymen don't confuse it with an all-you-can-eat diner in a northern suburb of Detroit.
For clarification, here's a sketchy chronology:
By 1900, aged 23, he had amassed roughly $50,000, from the bucket shops.
Fall of 1905 Thomas Lawson of Boston provided ALL partnership capital for Livermore to raid Union Pacifc stock, actively traded by the Harriman. pool.
Losing his ass up until April 18, 1906 San Franciso earthquake. UNP stock took two days to respond lower. Lawson got the proceeds and Livermore pocketed a $300,000 fee. Took off for Saratoga.
On an unknown date soon after Livermore made the mistake of going short the SAME stock. Harriman pool this time was prepared. Livermore watched a quarter of a million vanish on upticks.
Slightly later, another 50/50 deal with Lawson to short Great Northern. Made a second killing. .
Jesse made his FIRST million in shorting Anaconda in the summer of 1907. Market panic as much as his skill. Banks called existing loans. October 24, 1907 J.P. Morgan forced his fellow capitalists to start supporting stocks. Livermore knew better than to buck the Morgan crowd. Bought his first yacht, the Anita Venetian.
Had an epiphany that commodities posed less "problems" because prices depended upon supply and demand (rather than synthetic measures). Long 120,000 bales of cotton. First used the power of the press release. in the New York Hearld "July Cotton Cornered by Jesse Livermore". Shorts covered, suckers (his term) rushed in, Livermore unloaded. New nickname, Cotton King.
Spring of 1908, Desperately trying to stem a dropping price by buying in both New Orleans and Liverpool, found himself long 500,000 bales. Simply put, the Anita Venetian went under the hammer.
For Livermore 1911-1913 appear to be lean years.
In 1914 he was living Bretton Hall Hotel at 86th & Broadway.
Filed bankruptcy in 1915 with $102,474 in professed liabilities.
The Bethlehem Steel trade in cited LeFevere's book was in here somewhere.
December 20, 1916, somehow became alerted to a telegram to Finlay Barrel & Co. in Palm Beach from a Washington reporter named W.W. Price leaking of Wilson warning the warring parties. Figuring there'd be a market collapse, Livermore approached Lawson again. With capital, shorted the "four horsemen" US Steel, American Can, Baldwin, and Anaconda. E.F Hutton made a flash wire to its offices hours before Wilson's note was publicized. Bids melted away. Livermore bought a half million annuity to throw off $30,000 per annum Also rushed out and bought a speed boat called the 'sub-catcher" and a $120,000 platinum and emerald ring.
Unloaded his first wife via Reno in October 1917 and the 40 year old, on December 2, 1918, married the 18 year old daughter of a wealthy Brooklyn merchant named Wendt. Rented a furnished townhouse at 8 West 76th Street. January 1920, bought a seat on the Curb (today the AMEX). 1919, first son.
1921 had a pool agreement with the Lewisohn Brothers to ramp Seneca Copper. After running from $12 to $25, the brothers canceled the (then legal) agreement.
Summer of 1922, Livermore was reported to have lost $8.5 million on the short side of Mexican Pete. June 1922, Clarence Saunders, owner of the Piggly Wiggly chain hired Livermore to "kill the bears". By November, Livermore had amassed 105,000 of 200,000 shares outstanding at an average of $35. March 1923, stock was over $70. Livermore had 198,872 of the float. March 19th, Saunders asked Livermore to spring the trap demanding delivery from short sellers. Livermore RENEGED. Saunder's somehow succeeded anyway. From an open of 75 ½ sky rocked to $124, and closed the day at $82. Same year, ran the Mammoth Oil pool involving Harry Sinclair.
In 1924, Arthur Cutten forced wheat to over $2 per bushel for the first time. Livermore was short and lost a considerable amount.
In 1927, Livermore ran a pool to ramp Freeport Texas stock from $19 to $74 ½. Also a dirrector of Minter & Assoc, selling $9 million worth of Florida lots and filing BK two years after inception. Robbed at gunpoint in his home in May 1927.
April 1929, sued for $1,450,000 over the 1926 Boca Raton RE crash.
July 1929 refused to make a court appearance in a $525,000 suit against Livermore by the Carbonite Corp for an alleged breach of agreement.
October 1929, details sketchy but even though Livermore "won" millions on the short side, he lost $6 million in his long positions in the crash.. Arthur Cutten purportedly lost $50 million.
August 16, 1932. Divorced his second wife. March 28, 1933, married his third wife at age 56. May 30, 1933. Security Legislation enacted. Pool operations outlawed.
March 4, 1934, Livermore filed BK again. . $2,259,212 liabilities/$184,000 assets.
Thanksgiving Eve 1935 his divorced second wife shot his first son. Non-fatal.
Summer 1937 chartered a yacht (Nina) rather than owning it outright.
Apparently from 1934 to 1940 he was an investment advisor/broker. Apparently to acquire capital for a comeback, decided to write a book (in two versions) The office that's frequently mentioned in awe appears to have been merely a facade to promote the book. The "legendary" market key, is patterned after Dow Theory confirmation, but using two companies in each of 5 leading industries. Hardly original, and basically the opposite of pairs trading.
November 28, 1940, shot himself in the head in the hat check room of the Sherry-Netherland hotel after writing an 8 page note to his wife with the recurrent theme "My life has been a failure"
On Aug 05 10:01 PM Igor Shumovich wrote:
> Forget about Buffett.
> This is technical market, there is nothing fundamental about it and
> Buffett is all about "fundamentals". If you want to make money in
> this type of market - follow Jesse Livermore. The only person Buffett's
> advise is good for is Buffett himself - it served him well so far,
> didn't it?
Estate planning 101 for those who missed it.
Suppose the taxable portion of the estate is $5M at a hypothetical 55%. Total bill due to the Feds = $5M x 0.55 = $2.75M. Now the client has a choice. Either:
1) Set up a trust, fund it and relinquish sufficient control over the funds to qualify for favorable tax treatment
or
2) Buy a life policy for $2.75M x 1.5 = $4.125M, which will pay for the taxes plus the additional tax on the insurance proceeds.
The fact is that the additional tax on insurance proceeds only serves to further the point that the insurance lobby (in which Warren is a major player) has a vested interest in keeping the status quo just as is.
If you would deign to read what you criticise before erupting, you would notice whatever moral stance you or I take on these issues is irrelevant to my point. Fiduciary duty does not require any executive to lobby for special favors from the government. If it did, one could argue that he has breached such duty by supporting a policy that will cost his shareholders millions. Such an argument would be absurd. Just as absurd as arguing that his fiduciary duties forced his politics.
The Very rich get richer, and poor have gotten much poorer. The middle class have been seriously injured in the last year buy the market scam we have been attempting to take part in, but cant quite get on the right side of the trade...
The story of the SOUL is very complex. The story of the SOUL is read only by the Soul. The mind cannot penetrate this realm. Young cultures really know very little about the Soul. It takes time, sorrow and modesty to read the Book of the Soul.
On Aug 06 09:19 AM max12345 wrote:
> Is it really possible for Buffet -or anyone else for that matter-
> to amass a huge fortune operating 100% honestly within THE SYSTEM
> (economic, political and social) that we all need to operate in?
>
>
> Maybe 100% honesty is simply incompatible with either becoming ultra-rich
> or becoming ultra-powerful politically? It's not a clean world out
> there and if one really wants to be completely clean unfortunately
> it's pretty hard. (and there will NOT be any reward up in heaven
> either for those who succeed - or even try to)
And all his insurance companies: how much money did they get from TARP?
Buffet has Obama's ear, we know that.
Yes, he has blood on his hands. The Oracle from Omaha is apparently also a member of the larger Soprano Family.
Buffet for me just epitomises Americas ridiculous obsession with celebrity and hanging on every word these people say, and everything they do, until more often than not we find out they are just complete puppet masters.
Michael Jackson, case in point.
Welcome to the real world.
Good point, Ravi. I think the truth lies somewhere in the middle. If all the bankers are getting bailout money, the Buffett will get his share. Did he lobby? Of course. I think though he did things that were to the benefit of his shareholders and stockholders.
On Aug 06 08:21 AM Ravi Nagarajan wrote:
> Let me get this straight - Warren Buffett, a man who is giving away
> almost all of his fortune built over a lifetime to charity, decided
> to manipulate the political system for his own personal enrichment
> putting 50+ years of reputation and track record on the line in doing
> so.
>
Ravi - but I agree with your central point, Warren Buffett is not a scumbag. He looks like a saint compared to others on Wallstreet
But you have his events backward, and we aren't ignoring the context of events. Selling massive put options at the peak of the stock market contradicts Warren's philosophy for taking a position with clear margin of safety, putting his entire life fortune at risk. This took place *before* the crash. Meanwhile, management of FFH knew what was coming (as well as many others), but Warren appears to have been tripped up by hubris and the same risk-free euphoria of the evil speculators he's so quick to criticize.
So its no wonder that afterward he was put in the same position as the speculators and greedy bankers who expected the world had found the nirvana of risk management, and had to scramble to convince anyone they could to pour money into the system to keep it afloat, especially taxpayers, even if an intelligent analysis reveals the poor will pay in the future for this non-capitalist solution.
I'm not saying he should have supported the demise of the American economy so we could reboot society, but it reveals he truly is a pseudo-capitalist (modern form that rests on government privileged), who puts money ahead of morals, and a human who sometimes forgets his own standards and practical advice and gets fooled into quick easy money schemes.
Yes, it's hard to do the right thing in tough times, and that's precisely what good leaders are supposed to do -- the right thing. If the consequences are devastating, the other right thing is to fess up to the errors of one's way, re-evaluate one's involvement in immoral systems, and shake off the entanglements of associations that are at the heart of the problem.
If you want Capitalist leadership, look toward Hillsdale College, not Warren Buffett. Probably the only college left in America that puts their money where their mouth is, refuses to sleep in bed with Government, and remains a viable entity that promotes by example the virtues of *real* capitalism. Buffett is a money-making leader, which is *not* the same thing as capitalist.
Either that or his purchase of a major bank in the first place reveals he doesn't realize the inherent moral bankruptcy of the most despicable insider's club ever invented, the modern private/public government-insured banking industry. Buffett is not stupid -- one must presume he fully understands the banking system, it's prostitution of capitalism, but realizes the money making potential for which it was designed. No wonder he bought a bank -- it's about making money, not providing for the common welfare.
Buffett is a money making power house - no doubt. Hopefully American's will remember the days when virtue was measured by one's beliefs and actions, not the amount of money they acquire from them.
On Aug 06 10:10 AM Houston wrote:
> When an economic system is headed for collapse, reasonable people
> do what they have to...to survive it. That often includes things
> they would not do otherwise or believe in otherwise. A lot of that
> has happened in the last year.
>
> To criticize Buffet's action's in an economic vacuum as this article
> seems to...seems self aggrandizing, self absorbed and nauseating
> to me. Sorry, but it does.
On Aug 07 09:37 AM Maxe Paul wrote:
> Welcome to the too big to fail world.
>
> Buffet for me just epitomises Americas ridiculous obsession with
> celebrity and hanging on every word these people say, and everything
> they do, until more often than not we find out they are just complete
> puppet masters.
>
> Michael Jackson, case in point.
>
> Welcome to the real world.
The insurance company gets a premium, of course, but less than that big tax bite.
And the owners of the insurance companies profit at the expense of the public purse. (Of course those profits are taxed, but for the original policy owner's family it's a great deal.)
Clever, these lawyers, aren't we?
On Aug 05 05:38 PM stev53e wrote:
> I'm curious - how did his insurance business benefit?
"Selling massive put options at the peak of the stock market contradicts Warren's philosophy for taking a position with clear margin of safety, putting his entire life fortune at risk."
I'm not trying to be a hard-a$$ here, but if you start with hyperbole like the above then you go quickly off the rails. Buffett never sold "massive put options.....putting his entire fortune at risk. In fact, if you assume the stock indexes dropped 50% over the next 10-20 years then he would owe less cash than he has on hand. I call that an pretty good margin of safety. Meanwhile he gets to invest the up front payment for 10-20 years.
@edwardlore
You almost got it right. The insurance pay-out once it is received by the heirs is used to pay the tax owed on the large estate. But it might be a taxable event if it wasn't separated from the estate by placing it in a life insurance trust and giving up control of the policy to the trustee and designating a proper beneficiary. Life insurance is always included in an estate for taxable purposes unless it is placed out of control of the owner. Life insurance proceeds free of income taxes.
And once again Berkshire doesn't really write much life insurance, so it is really a strawman argument that he would argue against the inheritance tax for this reason.
I'm with you, JP.
I remember those get-togethers he and Gates would hold and some of his ideas...and I remember thinking at the time, "Warren, buddy, you can't be serious!".
The capper for me came when he was traveling around California with Arnold Schwartzenegger during the recall campaign for Governor a few years back. At a couple campaign stops that were well covered by the press, he said, refering to how to bolster the State's economy: ( and this is an exact quote...I wrote it down)
"I would strongly advise that California repeal Proposition 13. If one cannot afford to pay a fair tax on their property, then they should have to give it up....." (Prop 13 was put in place by an overwhelming public vote at a time when property values were rising at an alarming pace, along with property taxes, and forcing longtime homeowners (especially those on fixed incomes ) out of their homes because of their inability to pay the ever increasing taxes.)
The next day the Schwartzenegger campaign bannished Buffet back to Omaha and spent the rest of their campaign trying to distance themselves from his comments.
Like you, JP, I have little respect for the 'Oracle'.
On Aug 05 04:01 PM JPSmith wrote:
> I lost all respect for Buffet several years ago when he and Bill
> Gates started arguing for higher inheritance tax rates, trying to
> frame this as a "moral issue" when it was a transparent effort to
> boost his insurance businesses.
The basic premise of investing is buy low, sell high. It is not a margin of safety to sell puts (an obligation to buy) at the top of a secular or cyclical bear market. It also contradicts his patience theory.
If he was patient, he would have waited to sell those puts at the proper point of the secular or cyclical cycle, and had the margin of safety from both the timing of the entry point and the time to expiration.
Having enough cash to cover a loss from a bad trade is not how I interpret his margin of safety theory. Instead it appears he bought into the same euphoria as real-estate investors and stock market speculators -- specifically, that global risk had been conquered and the boom-bust business cycle permanently destroyed. I can't see any other explanation for not having waited for the inevitable correction of an over-bought over-valued stock market.
On Aug 08 11:43 AM Dave Shafer wrote:
> In fact, if you assume the stock indexes dropped 50% over the next
> 10-20 years then he would owe less cash than he has on hand. I call
> that an pretty good margin of safety. Meanwhile he gets to invest
> the up front payment for 10-20 years.
On Aug 05 10:11 PM PenName Dave wrote:
> You're all haters.
>
> If you don't like and admire Warren Buffet, who would you put ahead
> of him in terms of integrity, principles and humility?
>
> I don't think any other business leader comes close.
On Aug 06 07:53 PM effiiciency wrote:
> Tongue-in-cheek, was Babe Ruth a great athlete?
On Aug 07 08:30 AM Dave Shafer wrote:
> Sven, point taken on using life insurance for estate planning. Show
> me the facts on how much life insurance Buffett's companies sell?
> How much market share in life insurance do they have?
Buffett's course of action is epidemic and it is the face of "dog eat dog" finance sure to precipitate collapse.
On Aug 05 04:05 PM noblepaladin wrote:
> Buffett has always been about making money. Activists complained
> when he invested in PetroChina because PetroChina had some connections
> to genocide, Buffett didn't care, it was vastly undervalued when
> he brought and he sold when he felt it was overvalued. As CEO, it
> is his responsibility to protect and increase shareholder value.
> Buffett was and is a supporter of the bailouts, but he didn't cause
> them to happen.
>
> If Buffett knew the bailouts were going to happen, I'd fully expect
> him to take advantage of it. I wouldn't invest with a money manager
> who does not. Take a look at Ken Lewis, he "did the right thing"
> by saving Merrill Lynch to stabilize the financial system and destroyed
> a lot of shareholder value at the same time. If you are a BAC shareholder
> who brought at $50, how would you feel? If Ken Lewis goes up to your
> doorstep and says "I destroyed 70% of your retirement to help stabilize
> the economy", you'd beat the crap out of him. I don't see a lot of
> people cheering on Ken Lewis. You do not put your morals ahead of
> someone else's money if you manage money.
On Aug 11 05:05 PM 19709 wrote:
> GEICO is the 3rd largest insurance company and it's owned by WB.
>
On Aug 11 05:05 PM 19709 wrote:
> GEICO is the 3rd largest insurance company and it's owned by WB.
>
On Aug 11 05:05 PM 19709 wrote:
> GEICO is the 3rd largest insurance company and it's owned by WB.
>