This article does not disappoint. It connects a few (mostly correct) facts with a great deal of emotion and inference. Bread did a nice job of dissecting the details.
-- Doug
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I see media reports from early 2007 noting the lack of transparency in banks reporting exposure to subprime mortgages. No one (except maybe insiders of each bank) could say which bank had the most exposure. Choosing banks in which to invest then becomes capricious. Buffett IIRC spoke about the real estate bubble and tranching mortgages, that these were insanity. Is the current pricing of BAC based merely in hysteria? Or is it based in little factoids like it has had huge writedowns and has a dividend payout ratio that shot up to over 100% recently? I do not think so. It is hard for me to believe that Buffett would not proceed with more caution when purchasing banks last summer, unless he made a mistake. I would have thought someone like him would hope for a dive in the BAC price rather than buying near a high in a precarious time for mortgages and housing and so banks.
Still, for the long term, we laypeople might extrapolate what happened c. 1991 and the following five years. Many banks recovered and restored their dividends.
To be revisited in five years or so. Or it would sure make sense if Buffett bought more BAC right now, wouldn't it? If he does not, well I think he knows he got burnt at least a little.
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On Buffett's support of the estate tax and claims it is self-interest: Sure, maybe... uh... come on... hogwash. In his testimony to the Senate, he said the estate tax revenues need to go back to the poor, and he elaborated on exactly how. Media reports say he has been a long time proponent of wealth re-distribution. He's been a supporter of both Senators Obama and Clinton (and no GOPers). He's known as the biggest Democrat in the country. The clincher: He's leaving the bulk of his fortune to charity, and very little to his kids. Self-interest, hooey, unless the guy wants to be remembered for getting money for himself so he can give it away to others.
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I'll bet the old time rich folks like the Rockefellers, the Vanderbilts, the Carnegies, the Hunts, and any others that may still be around, hate Buffett with a passion (along with the internet, USNET newsgroups, U-tube, Myspace, and all the other places where voices of criticism arise nowadays and cannot be silenced). Buffett actually put some of his own money into the Bill and Melinda Gates foundation, instead of starting a new foundation in his own name! That would be like the Vanderbilts turning money over to a Rockefeller foundation. What is the world coming to? And, just think of it, giving the bulk to charity instead of heirs. Buffett money surely should go to Buffett kids, or else someone might get the idea Rockefeller money should not go to Rockefeller kids! And I'll bet the Titans of finance are fed up with financial planning newsgroups on the internet that actually advise working-class commoners how to invest responsibly and avoid ripoffs and make profits for themselves.
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Again, too broad a brush. From the Wikipedia article on Andrew Carnegie:
"By the time he died, Carnegie had given away $350,695,653 (approximately $4.3 billion, adjusted to 2005 figures). At his death, his last $30,000,000 was likewise given away to foundations, charities, and to pensioners."
-- Doug
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Buffett's, and other successful investors, do not rely on "special ability to make accurate prediction about the future" for their success. Other than a reliance on the long term benefits of publicly traded equities, there is no need to predict the future. In fact, it is not possible to predict the short term direction of the market with any rate of success. The long term growth of the market is known to everyone for a long time so there is no need to make any predictions.
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Wow, that's what I would call a very loose connection.
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Strike Carnegie from my list. I forgot about all those great libraries he created. Come to think of it, all those people, or most of them, made extensive charitable contributions.
Somehow, I still believe they would look askance at Buffett and his strange ideas.
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Anyone who speculates that one stock will do better than another over any time frame in a sense is predicting the future. The real question is: What accounts for Buffett's spectacular results when other equally talented and hard-working investors had good, but not spectacular results? My suspicion is that chance played a large role. In the uncertainties of financial markets the player who comes in first does not always have any special ability not possessed by the runners-up.
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Giving his money to a foundation set up by someone else, passing on a relatively small part of his wealth to heirs, supporting Democrats in national elections, living in a rather modest dwelling in Omaha, advocating redistribution of wealth. ( I thought these ideas to be "strange" only from the point of view of what I called "old time rich folks." Nowadays they are becoming less and less strange.)
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But Buffet isn't "old time rich". He's from what sounds like upper-middle-class background.
Brian
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I know; he definitely is not "old time rich." What I was trying to say is that those old time rich folks and any of that ilk who are still around today would disapprove of Buffett's methods of managing wealth.
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