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Buffett - evil genius, talks own book, in bed with capitalists/socialists...


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I frequently come across people that try to make the case that Buffett is an evil genius or just evil or a socialist commie or capitalist pig, or something. So I thought it might be fun to post links to such articles here and let people debate the points.

 

I'll start it with this one (hate to give these things clicks but what can you do):

 

 

Warren Buffett Sits On $50 Billion Cash-Hoard, Waiting For Bubbles To Pop

August 4th, 2014

http://etfdailynews.com/2014/08/04/warren-buffett-sits-on-50-billion-cash-hoard-waiting-for-bubbles-to-pop/

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I frequently come across people that try to make the case that Buffett is an evil genius or just evil or a socialist commie or capitalist pig, or something. So I thought it might be fun to post links to such articles here and let people debate the points.

 

I'll start it with this one (hate to give these things clicks but what can you do):

 

 

Warren Buffett Sits On $50 Billion Cash-Hoard, Waiting For Bubbles To Pop

August 4th, 2014

http://etfdailynews.com/2014/08/04/warren-buffett-sits-on-50-billion-cash-hoard-waiting-for-bubbles-to-pop/

 

Obviously the guy has an agenda, so it seems the debate on that one would be pretty easy.

 

I've learned enormously from Buffett's writings over the years, but don't really care what BRK invests in these days, what his political leanings are, or how he leads his personal life.

 

For most of us on the board, I think the best way to learn from Buffett are to study his early investments and try to internalize his writings over the years. He's often said he would be investing in a dramatically different manner if dealing with a smaller pool of capital (as most of us are), so I personally don't spend any time following BRK or its holdings; rather periodically revisit some of his writings and look at what led him to make substantial bets on relatively obscure situations.

 

I know most of that's sacrilegious to this board, but I'm firmly in the camp of finding an edge, and for me having a smaller pool of capital provides an edge in being able to position a concentrated portfolio of micro/small caps that larger investors can't access. I'm fairly confident Buffett would agree.

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I think that gives him too much credit, neither evil, nor a genius, just a chap pathologically obsessed with making money.

 

If Buffett doesn't qualify as genius to you, who does in the field of business/finance?

 

Can we go with dead people? Alexander Hamilton and John Maynard Keynes as a start...

 

You seem to know a thing or two about John C. Malone, would you nominate him as a genius?

 

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I did not read the crap article OP linked to (I glanced at first page, it was enough to vomit... a bit).

 

Buffett does talk his own book sometimes and he's definitely not an avuncular Santa that is his public image. In some cases he's nice (or pretends to be nice), in some cases he's ruthless. He's also sometimes weird. Sometimes wrong - about inflation for 20+ years. :) In summary, he's human and that's pretty much it. :)

 

Talking about genius: he routinely understates his IQ and overall intelligence. So his claims that investing results are not due to high IQ should be taken with a big spoon of salt.

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On Buffett's skills. In one Buffett biography the author quoted a friend of Buffett's that said one day Buffett said he was short of money and needed to learn more about options. A short while later Buffett had made a small fortune trading them. (I'd guess Buffett saw an opportunity at the time and was a quick study.)  In other places I'd read that Buffett could sum columns of numbers in his head, he'd memorized the name of every company on the NYSE, he had an encyclopedic knowledge of businesses and business, and on and on.  Even his very complex trading strategies and past complex cross-holdings seem to indicate an immense capacity to understand and track complex arrangements.

 

On being ruthless, the book Snowball highlighted his negotiating skills. One thing that was mentioned was that in negotiations if his offer was rejected and then later the other player came back saying that they now accept it, Buffett would counter with and even lower offer.  Also, Buffett in a video interview a few years ago said that he and Munger just sit back and wait until someone does something stupid and then he 'slaps them down' (or very similar words to that effect). 

 

I don't see that as particularly ruthless but maybe more evidence could be offered up.

 

On talking his book. Yes he never misses a chance to praise his companies.  However, in the 2008 financial crisis Buffett was accused of talking his book yet he had billions in cash, $600 million in cash personally, had a very opportunistic history, his investment in WFC was relatively strong and bailouts of weaker players lowered their costs to WFCs disadvantage, GEICO would do well, his bonds were doing well, etc. and Buffett spoke optimistically of the market and the economy. At the time I was thinking he was hurting his book not helping it. Further fear mongering like you heard repeatedly by many talking heads would have been the selfish response by a man in his position - but instead he took more of a statesman's like position.

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I don't know if they are dispelling myths when someone has gone from one thing to another over their lifetime.  i.e. From value investor to manager.  Someone can be more than one thing.

 

New book rewrites Buffett legacy in 3 ways

 

By: Matt Krantz June 25, 2014

 

"A new book by a long-term Buffett watcher has some gems that even devoted Buffett fans might not know.

 

Some of the greatest myths about Buffett are dispelled in the soon-to-be published book, “Berkshire Beyond Buffett,” written by Lawrence Cunningham, a professor of law at George Washington University. ..."

 

 

 

http://americasmarkets.usatoday.com/2014/06/25/new-book-spills-3-shocking-buffett-secrets/

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On being ruthless, the book Snowball highlighted his negotiating skills. One thing that was mentioned was that in negotiations if his offer was rejected and then later the other player came back saying that they now accept it, Buffett would counter with and even lower offer.  Also, Buffett in a video interview a few years ago said that he and Munger just sit back and wait until someone does something stupid and then he 'slaps them down' (or very similar words to that effect). 

 

I don't see that as particularly ruthless but maybe more evidence could be offered up.

 

 

Have talked to some who have negotiated with Buffett, he is extremely ruthless.  He didn't get to where he is by being a nice grandfatherly figure.

 

Someone left a comment on a post of mine saying one of the KKR guys told them that Buffett had some skeletons in his closet like everyone else at that level.

 

Buffett is incredible at manicuring his public image.  My guess is the closet comes open at some point after his death.  Some have contended BRK doesn't pay a dividend because of some side partnerships he setup could be exposed.  I believe there was a lawsuit around this, don't remember the exact details.

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I frequently come across people that try to make the case that Buffett is an evil genius or just evil or a socialist commie or capitalist pig, or something. So I thought it might be fun to post links to such articles here and let people debate the points.

 

I'll start it with this one (hate to give these things clicks but what can you do):

 

 

Warren Buffett Sits On $50 Billion Cash-Hoard, Waiting For Bubbles To Pop

August 4th, 2014

http://etfdailynews.com/2014/08/04/warren-buffett-sits-on-50-billion-cash-hoard-waiting-for-bubbles-to-pop/

 

Obviously the guy has an agenda, so it seems the debate on that one would be pretty easy.

 

I've learned enormously from Buffett's writings over the years, but don't really care what BRK invests in these days, what his political leanings are, or how he leads his personal life.

 

For most of us on the board, I think the best way to learn from Buffett are to study his early investments and try to internalize his writings over the years. He's often said he would be investing in a dramatically different manner if dealing with a smaller pool of capital (as most of us are), so I personally don't spend any time following BRK or its holdings; rather periodically revisit some of his writings and look at what led him to make substantial bets on relatively obscure situations.

 

I know most of that's sacrilegious to this board, but I'm firmly in the camp of finding an edge, and for me having a smaller pool of capital provides an edge in being able to position a concentrated portfolio of micro/small caps that larger investors can't access. I'm fairly confident Buffett would agree.

 

This is what I feel about Buffett too. I feel he IS a genius. If we know his IQ it is probably qualifies in the technical definition. However he is not GOD. He has maybe 300 companies in the world he can invest in size. And even then he cannot put 30% of Brk's equity in it. But we little guys have 60,000 stocks to choose from and we can concentrate 30% of our net worth in any of them.

 

 

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On being ruthless, the book Snowball highlighted his negotiating skills. One thing that was mentioned was that in negotiations if his offer was rejected and then later the other player came back saying that they now accept it, Buffett would counter with and even lower offer.  Also, Buffett in a video interview a few years ago said that he and Munger just sit back and wait until someone does something stupid and then he 'slaps them down' (or very similar words to that effect). 

 

I don't see that as particularly ruthless but maybe more evidence could be offered up.

 

 

Have talked to some who have negotiated with Buffett, he is extremely ruthless.  He didn't get to where he is by being a nice grandfatherly figure.

 

Someone left a comment on a post of mine saying one of the KKR guys told them that Buffett had some skeletons in his closet like everyone else at that level.

 

Buffett is incredible at manicuring his public image.  My guess is the closet comes open at some point after his death.  Some have contended BRK doesn't pay a dividend because of some side partnerships he setup could be exposed.  I believe there was a lawsuit around this, don't remember the exact details.

 

Can you elaborate on what the KKR guys say about him being ruthless? It's interesting, because we think of all these Wall Street or Private Equity guys as ruthless but it seems like Buffett out does all of them, and that's why he's richer. Just take the Goldman, GE, and BAC deals for example. Drove an amazingly hard bargain.

 

Also, what kind of partnerships could be exposed if they pay a dividend? I don't see how the two are related.

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On being ruthless, the book Snowball highlighted his negotiating skills. One thing that was mentioned was that in negotiations if his offer was rejected and then later the other player came back saying that they now accept it, Buffett would counter with and even lower offer.  Also, Buffett in a video interview a few years ago said that he and Munger just sit back and wait until someone does something stupid and then he 'slaps them down' (or very similar words to that effect). 

 

I don't see that as particularly ruthless but maybe more evidence could be offered up.

 

 

Have talked to some who have negotiated with Buffett, he is extremely ruthless.  He didn't get to where he is by being a nice grandfatherly figure.

 

Someone left a comment on a post of mine saying one of the KKR guys told them that Buffett had some skeletons in his closet like everyone else at that level.

 

Buffett is incredible at manicuring his public image.  My guess is the closet comes open at some point after his death.  Some have contended BRK doesn't pay a dividend because of some side partnerships he setup could be exposed.  I believe there was a lawsuit around this, don't remember the exact details.

 

Can you elaborate on what the KKR guys say about him being ruthless? It's interesting, because we think of all these Wall Street or Private Equity guys as ruthless but it seems like Buffett out does all of them, and that's why he's richer. Just take the Goldman, GE, and BAC deals for example. Drove an amazingly hard bargain.

 

Also, what kind of partnerships could be exposed if they pay a dividend? I don't see how the two are related.

 

I'd rather not elaborate, the point was the KKR guy said that Buffett isn't exactly clean either.  None of these guys are saints, Buffett is at the top for a reason.  In some ways his genius is how he's perfected his image while getting to the top.

 

In terms of the tax deals.  The allegation is that Buffett helped some of his early partners set up illegal tax shelters and side partnerships that skirted the law.  If you dig hard enough you can find a lawsuit related to this from 10-15 years ago.  I've heard some chatter that some of the Buffett tax push could be part of a behind the scenes agreement to make some of these problems go away.  These partnerships own BRK, and if BRK ever paid a dividend the partnership would have to declare income.

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I'd rather not elaborate, the point was the KKR guy said that Buffett isn't exactly clean either.  None of these guys are saints, Buffett is at the top for a reason.  In some ways his genius is how he's perfected his image while getting to the top.

 

In terms of the tax deals.  The allegation is that Buffett helped some of his early partners set up illegal tax shelters and side partnerships that skirted the law.  If you dig hard enough you can find a lawsuit related to this from 10-15 years ago.  I've heard some chatter that some of the Buffett tax push could be part of a behind the scenes agreement to make some of these problems go away.  These partnerships own BRK, and if BRK ever paid a dividend the partnership would have to declare income.

 

Oops, I meant if you can elaborate on what the person you talked to said about him being ruthless, but I think you'd rather not.

 

I completely agree that his true genius is in giving people a certain perception of himself. I pointed this out when he abstained from the Coke vote - which I think was very deliberate; it kept his image clean while at the same time he was able to influence them to reconsider by going public after the vote.

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I dont know if "ruthless" is the right word, but we are talking about a guy who started BRK bc he got into an argument with mgmt and then took over the company. Of course he's not a nice folksy grandfather.

 

Yea...he bought an entire company over a 1% difference in payout from what he'd been told to expect on a tender offer so he could fire the CEO. He certainly had a chip on his shoulder at the time. That story always amazes me and doesn't necessarily leave one with warm fuzzies.

 

I think Buffett is a genius. He extended the concepts of value investing beyond the original template that Graham had provided. He pioneered the use of leveraged, captive funds in using the insurance business to fund his investment portfolio. His contributions to the field may be less appreciate by the "little guys" who can't necessarily mimic his strategy, but it's a brilliant view on investments, captive capital, and leverage that should definitely be recognized. Warren is probably cleaner than most, but he's not the nice guy you see on television. He's obsessed with making money and being liked - and when the two conflict he seems to choose the money.

 

 

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His contributions to the field may be less appreciate by the "little guys" who can't necessarily mimic his strategy, but it's a brilliant view on investments, captive capital, and leverage that should definitely be recognized.

 

Wouldn't the "little guy" be able to mimic his strategy perfectly by buying BRK stock?

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His contributions to the field may be less appreciate by the "little guys" who can't necessarily mimic his strategy, but it's a brilliant view on investments, captive capital, and leverage that should definitely be recognized.

 

Wouldn't the "little guy" be able to mimic his strategy perfectly by buying BRK stock?

 

Haha, well I think the point he was making was for those looking to learn from Buffett on running their own investment portfolios, Buffett's success w/ Berkshire is not necessarily as relevant as studying his partnership days, as many of the contributors to BRK returns (leverage, buyouts, special deals) are not available to small investors. I think it's the same point as what others have said - it's remarkable the vehicle Buffett has created through Berkshire, in particular its ability to earn high returns despite tons of capital, and within the very limited opportunity set he now has, he is doing great things - but for those of us managing tiny sums, the possibilities are so much wider that it's best to marvel at rather than try to copy what Buffett has done within his much smaller opportunity set.

 

 

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And on a slightly different topic. I read in the other thread that he has been able to use Brk and its insurance arm as a vehicle to invest in common stocks with favourable tax treatment. Is that so? so it means as an insurance company the capital gains tax is lower than for a normal C corporation?

 

 

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Randomep, if you google "harney investment trust" there are some articles written about it.

 

Nate, Mephistopheles, if either of you are able to dig up details on the lawsuit Nate is referencing I would love to see it. I haven't been able to discover anything on Google and I don't have access to Pacer.

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Harney Investment Trust is a disclosure vehicle, not a tax vehicle.  If anyone has hard information to the opposite please share.  By putting insurance assets in HIT, Berkshire only has to disclose their stake in HIT, where-by normal holding, in insurance company filings (NAIC filings in the US), insurance companies would have to disclose line-item investments in both bonds, stocks, and derivatives.  David Merkel wrote a stupid article on this back in the day basically saying how Berkshire is not being "transparent" even though very few people follow NAIC filings seriously, and the only reason he cares is the same reason Buffett hides this... because everyone would ape Buffett's picks, whereas few of us are tracking AIG NAIC filings to check their transparency.

 

HIT has nothing (again, I believe) to do with tax reduction.  Owning equities with insurance float via a corporation does of course have some benefits that a straight equity investor doesn't have (it also has some complications)... but none of this has to do with HIT.

 

Nate, I would second the request for any link on your commentary around partnership assets and tax stuff.  Buffett isn't a saint, and I'm all for digging up little details on him... but given the nature of the board, I'd like to see some clear links as opposed to third party quotes "some guy who I can't share his name from KKR said ABC..." as if we should care more because he works for KKR ;-)... or some lawsuit that I can google that maybe implies something, but can't find easily... a link would be good. 

 

Just giving you a hard time, but more explicit info would be good.

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Whoops that was my fault. Ben is right, there should be no favorable tax treatment. Harney is where Buffett places his confidential trades.

 

But insurance companies do gain favorable tax treatment of dividends, and Buffett does do a variety of things to reduce his capital gains (the Graham Holdings swap for instance)

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Nate, I would second the request for any link on your commentary around partnership assets and tax stuff.  Buffett isn't a saint, and I'm all for digging up little details on him... but given the nature of the board, I'd like to see some clear links as opposed to third party quotes "some guy who I can't share his name from KKR said ABC..." as if we should care more because he works for KKR ;-)... or some lawsuit that I can google that maybe implies something, but can't find easily... a link would be good. 

 

Just giving you a hard time, but more explicit info would be good.

 

It was one of the KKR guys, as in his last name is one of the initials, don't remember which one.

 

Look, the nature of this board is that Buffett could commit some egregious crime and everyone on here would come up with a way to justify it.  I get that, this is his cheering section.  Whatever bad things he's done aren't really bad, if someone else did them they'd be terrible, but Buffett makes them good.

 

I spent maybe 30m trying to find the links I'd read without luck.  This was probably two years ago when I found this.  I seem to remember someone mentioned something in a comment on my blog that tipped me off.  At this point though I'm not going to trawl through a few thousand comments looking for it.

 

This is just a general comment (not directed at you Ben, but you mentioned this).  I've found in the investing world there is a lot of great information that is passed around via emails and phone calls that never makes it online.  Just because there isn't a link doesn't necessarily make something untrue.  In the situation I referenced above I read it online, so somewhere out there links exist.  But not all information is documented as such.

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And on a slightly different topic. I read in the other thread that he has been able to use Brk and its insurance arm as a vehicle to invest in common stocks with favourable tax treatment. Is that so? so it means as an insurance company the capital gains tax is lower than for a normal C corporation?

 

All corporations get favorable tax treatment on dividends. IIRC, corporations can deduct 70% of the dividend from the taxable amount and if they own 20% or more they can deduct 80% from the taxable amount. If you want to compare apples to oranges (a corporation receiving a dividend vs an individual receiving a dividend) the corporation receives massively better terms on the tax bill due to this. If you want to compare apples to apples (end investors vs end investors) the owners of the corporation that receive the dividend are still paying triple taxes on the income as it flows through from corp. to corp as opposed to double taxation, but this deduction severely limits the impact of the "triple" taxation they get hit with.

 

I think the other tax benefit is inherent in his strategy - Buffet receives a no-cost loan to leverage investments that he never has to sell to repay the loan so taxes are never incurred. Not only does he receive the benefit of leverage without having to pay for it - he also gets the benefit of 4 decades worth of unrealized gains accruing further gains/income without being taxed. The whole thing comes apart when an investment is sold, but if you "buy and hold forever" you never have to pay taxes and Berkshire is in the position of never having to sell.

 

 

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