Monday, April 26, 2010

Don't Ever Buy Into the Warren Buffett Myth

He's not a down-home simple guy who lives in the original home he had before he made his fortune.  It's well-known that he has at least one mistress and he has expensive real estate in several glamour locations, including Sun Valley and Santa Fe.

Follow his money and sphere of influence. Don't forget he has a big stake in Goldman Sachs and he recently expressed full support for the Company and it's antics. He also controls Nebraska Senator Ben Nelson: 
Anyway, WSJ reports that while the Democrats are making real progress on derivatives reform, the bill could contain a big pro-Berkshire loophole. And of course, the loophole was placed by Nebraska Senator Ben Nelson. Here's the nut of it: The provision, sought by Berkshire and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire put aside large sums to cover potential losses. The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.
Here's the link from  The Buffett Rule

If this provision remains intact, it will enable Buffett's Berkshire Hathaway to escape expensing up front the massive cost of potential derivatives losses embedded throughout the Berkshire empire. Kick the can down the road at the expense of shareholders who might otherwise sell the stock in anticipation of lower reported earnings OR new buyers of the stock who get lured in by GAAP earnings that are essentially fictitious.

Lest we forget, Buffett also owns 10% of Wells Fargo, which is defiantly overstating the value of its toxic real estate-related assets, is sitting on a powder keg of subprime pay-option ARM mortgages (which currently have a 45% default rate, but you wouldn't know that from looking at WFC's balance sheet valuations) and has not even come close addressing the reality of the commercial real estate to which its exposed.

Just remember, there's rules for Warren Buffett and then there's rules for the rest of us. Just like in a Banana Republic. Buffett said it himself a couple years ago: the U.S. will become a country of serfs (and he'll be King). Oh ya, his frumpy "sack suits" designed to look inexpensive are actually very expensive Italian suits tailored to give the look he's known for.


  1. LOL. Thanks. Was up very early in the morning trading gold and silver so I'm a bit sluggish right now!

  2. Amen. At other times and in other places I've said the same thing about the sage of Omaha. See the link. Buffet is the Bernard Baruch of our time. Every epoch has to have a humbug or two to keep the restless many ever hopeful.

  3. Man finds gold coins worth $20,000

    Lucky guy.

  4. About link for man finding $20,000....

    I am a conservative gold-bug and while I can't jump on the band-wagon that gold is money per se, it's stories like this and one of a man finding old Saxon gold ( that reminds me that precious metals will always retain some value even after decades or longer. Better than most stock or bond options I can name.

    Keep posting Dave, I enjoy your blog daily.

  5. Thanks for the link and the feedback.

  6. agreed Dave, Buffet in nothing more than a piece offering by the money masters... why doesnt the media EVER show how the Rockefeller, or the Rothschilds live?!

    There was a picture on MW of the queen of England lecturing the surfs about fiscal prudence while she was covered from head to toe with diamonds, rubies, etc and sitting on a chair made of gold... un-f'ing believable.

  7. Thanks Dave. Years ago, I was happy to hear Buffett correctly label derivatives as weapons of mass destruction. I guess it's more of 'do as i say, not do as i do.'

    Buffett...just another plutocrat SOB.


  8. the Rockefellers and Rothschilds are old money. By design, they take great pains to stay out of public light.

  9. up early trading gold and silver paper ,.

    whats this trading gold and silver , you were trading paper

  10. LOL - i look at it as a substitute for having a bookie and betting sports (which I used to do when I lived in NYC).

    Actually, being involved in a small way trading gold/silver paper helps give me a better "feel" for the strength/weakness of the market and helps me manage the fund. You really can't be fully involved in a market unless you have money on the line.