Buffett on David Winters.

[merkhet]

 

Hell, to me the big problem with WEB and KO is not his non-vote on the comp scheme.  Instead, the problem is what Ackman brought up the other day.  KO sells a lot of product that is terrible for most people's health.  Yet WEB is in complete denial about this, IMO.  I'm a big fan of WEB, but I can't help but turn up my nose at his public endorsements of sugar water and junk food as the food of the gods (and, yes, I'm purposefully being a bit hyperbolic).

 

That argument doesn't work.  Who should decide what is good or not for my body?  You?  The government? Bill Ackman?

 

This is a major problem today.  Most people believe they are responsible for the decisions of other adults.  When someone tries to take away another persons ability to choose they are treading on dangerous grounds for me.  Personal responsibility is a huge problem in the west.  If you don't want to hold individual responsible for their health why are you holding Coke responsible?  You can't have it both ways.  I would say a lot of harm is done to individuals when the government tells them they are not responsible either. 

 

Let me be clear.  KO doesn't hold a gun to anybody's head and force them to drink their products, yet you want to hold a gun to KO's head... and claim the moral high ground in doing so. 

 

WEB is free to make whatever endorsements he wants.  Do you want to hold the proverbial gun to his head too?  Ultimately who should decide? 

 

It is very freeing when you believe that everyone is free to make their own decision and that they are also free to face the consequences of those decision.  The government is in the business of removing consequences, for bankers to Coke.  Great discussion... Thanks.

 

Same with crack and heroin dealers, right?

[CorpRaider]

He probably really doesn't seem them as a grave health threat.

 

W/R/T the compensation/agency problem, the only solution I see is an active owner who lets the agent know his role.  We could do with a whole lot more of that if you ask me. 

[DanielGMask]

 

Hell, to me the big problem with WEB and KO is not his non-vote on the comp scheme.  Instead, the problem is what Ackman brought up the other day.  KO sells a lot of product that is terrible for most people's health.  Yet WEB is in complete denial about this, IMO.  I'm a big fan of WEB, but I can't help but turn up my nose at his public endorsements of sugar water and junk food as the food of the gods (and, yes, I'm purposefully being a bit hyperbolic).

 

That argument doesn't work.  Who should decide what is good or not for my body?  You?  The government? Bill Ackman?

 

This is a major problem today.  Most people believe they are responsible for the decisions of other adults.  When someone tries to take away another persons ability to choose they are treading on dangerous grounds for me.  Personal responsibility is a huge problem in the west.  If you don't want to hold individual responsible for their health why are you holding Coke responsible?  You can't have it both ways.  I would say a lot of harm is done to individuals when the government tells them they are not responsible either. 

 

Let me be clear.  KO doesn't hold a gun to anybody's head and force them to drink their products, yet you want to hold a gun to KO's head... and claim the moral high ground in doing so. 

 

WEB is free to make whatever endorsements he wants.  Do you want to hold the proverbial gun to his head too?  Ultimately who should decide? 

 

It is very freeing when you believe that everyone is free to make their own decision and that they are also free to face the consequences of those decision.  The government is in the business of removing consequences, for bankers to Coke.  Great discussion... Thanks.

 

Same with crack and heroin dealers, right?

 

That's not the same! Crack and heroin are illegal substances. If you think that fits in the same category of sugary drinks you are pushing the line too far. The point that "The government is in the business of removing consequences, for bankers to Coke.  Great discussion... Thanks." seems more than right to me.

[txlaw]

 

Hell, to me the big problem with WEB and KO is not his non-vote on the comp scheme.  Instead, the problem is what Ackman brought up the other day.  KO sells a lot of product that is terrible for most people's health.  Yet WEB is in complete denial about this, IMO.  I'm a big fan of WEB, but I can't help but turn up my nose at his public endorsements of sugar water and junk food as the food of the gods (and, yes, I'm purposefully being a bit hyperbolic).

 

That argument doesn't work.  Who should decide what is good or not for my body?  You?  The government? Bill Ackman?

 

This is a major problem today.  Most people believe they are responsible for the decisions of other adults.  When someone tries to take away another persons ability to choose they are treading on dangerous grounds for me.  Personal responsibility is a huge problem in the west.  If you don't want to hold individual responsible for their health why are you holding Coke responsible?  You can't have it both ways.  I would say a lot of harm is done to individuals when the government tells them they are not responsible either. 

 

Let me be clear.  KO doesn't hold a gun to anybody's head and force them to drink their products, yet you want to hold a gun to KO's head... and claim the moral high ground in doing so. 

 

WEB is free to make whatever endorsements he wants.  Do you want to hold the proverbial gun to his head too?  Ultimately who should decide? 

 

It is very freeing when you believe that everyone is free to make their own decision and that they are also free to face the consequences of those decision.  The government is in the business of removing consequences, for bankers to Coke.  Great discussion... Thanks.

 

Argument for what?  You seem to have come to the knee-jerk conclusion that I am advocating for some "gun to Coke's head" policy.

 

I did no such thing.  However, since you brought it up, there probably are many government policies that I probably would advocate for that you might be opposed to.  For example, banning soda machines from schools would be totally fine to me.  Same with banning them in public sector workplaces.  Beyond that, I haven't really thought that much about this issue and government policy.

 

Taking the government out of the picture, I am all for better information being disseminated regarding the harms of ingesting too much of KO's product.  WEB's "calories in, calories out" incantation is misguided and denies a lot of scientific controversy surrounding the detrimental effect of sucrose on public health.  I'm not holding a gun to WEB's head.  He can think whatever he wants to, but I'm "free" to criticize him on his views.   

 

As to the moral high ground, I most certainly can turn my nose up at WEB and his denial/advocacy.  Same as how I can hold with disdain the denial of climate change by some people who should know better.  Or the tobacco companies' previous campaign against the science demonstrating that smoking causes incredibly deleterious effects to health. 

[txlaw]

W/R/T the compensation/agency problem, the only solution I see is an active owner who lets the agent know his role.  We could do with a whole lot more of that if you ask me.

 

I have no problem with active owners.  I doubt WEB does either.

 

But there's a difference between being an owner that keeps the principal-agent problem in check and being an activist who's focused on forcing corporate action to get Mr. Market to recognize value to the detriment of the actual intrinsic value of the company.  For example, Jeff Ubben, an activist that I highly respect, was absolutely right to point out that Dan Loeb's push to sell off part of the Alibaba stake may have been a bad decision that primarily benefited Loeb and not the long term owners of YHOO.

 

The question is, what type of active ownership does WEB not like?  Clearly, he's cool with the 3G variety.  Not so much with the buy 'em and flip 'em mentality that's all about earning that fee.

[Jurgis]

Argument for what?  You seem to have come to the knee-jerk conclusion that I am advocating for some "gun to Coke's head" policy.

 

I did no such thing.  However, since you brought it up, there probably are many government policies that I probably would advocate for that you might be opposed to.  For example, banning soda machines from schools would be totally fine to me.  Same with banning them in public sector workplaces.  Beyond that, I haven't really thought that much about this issue and government policy.

 

Taking the government out of the picture, I am all for better information being disseminated regarding the harms of ingesting too much of KO's product.  WEB's "calories in, calories out" incantation is misguided and denies a lot of scientific controversy surrounding the detrimental effect of sucrose on public health.  I'm not holding a gun to WEB's head.  He can think whatever he wants to, but I'm "free" to criticize him on his views.   

 

As to the moral high ground, I most certainly can turn my nose up at WEB and his denial/advocacy.  Same as how I can hold with disdain the denial of climate change by some people who should know better.  Or the tobacco companies' previous campaign against the science demonstrating that smoking causes incredibly deleterious effects to health.

 

Great post. +1

[merkhet]

 

Hell, to me the big problem with WEB and KO is not his non-vote on the comp scheme.  Instead, the problem is what Ackman brought up the other day.  KO sells a lot of product that is terrible for most people's health.  Yet WEB is in complete denial about this, IMO.  I'm a big fan of WEB, but I can't help but turn up my nose at his public endorsements of sugar water and junk food as the food of the gods (and, yes, I'm purposefully being a bit hyperbolic).

 

That argument doesn't work.  Who should decide what is good or not for my body?  You?  The government? Bill Ackman?

 

This is a major problem today.  Most people believe they are responsible for the decisions of other adults.  When someone tries to take away another persons ability to choose they are treading on dangerous grounds for me.  Personal responsibility is a huge problem in the west.  If you don't want to hold individual responsible for their health why are you holding Coke responsible?  You can't have it both ways.  I would say a lot of harm is done to individuals when the government tells them they are not responsible either. 

 

Let me be clear.  KO doesn't hold a gun to anybody's head and force them to drink their products, yet you want to hold a gun to KO's head... and claim the moral high ground in doing so. 

 

WEB is free to make whatever endorsements he wants.  Do you want to hold the proverbial gun to his head too?  Ultimately who should decide? 

 

It is very freeing when you believe that everyone is free to make their own decision and that they are also free to face the consequences of those decision.  The government is in the business of removing consequences, for bankers to Coke.  Great discussion... Thanks.

 

Same with crack and heroin dealers, right?

 

That's not the same! Crack and heroin are illegal substances. If you think that fits in the same category of sugary drinks you are pushing the line too far. The point that "The government is in the business of removing consequences, for bankers to Coke.  Great discussion... Thanks." seems more than right to me.

 

Why do you care about the culturally imposed restrictions? The neurochemistry is pretty much the same.

 

http://www.ncbi.nlm.nih.gov/pubmed/23719144

 

And the research seems to indicate that it's pretty damaging to brain function.

 

http://newsroom.ucla.edu/releases/this-is-your-brain-on-sugar-ucla-233992

 

(As an aside, I think we are starting to derail this thread, but I'm happy to discuss this further on another thread since this is really about the Buffett smackdown of Winters.)

 

[CorpRaider]

W/R/T the compensation/agency problem, the only solution I see is an active owner who lets the agent know his role.  We could do with a whole lot more of that if you ask me.

 

I have no problem with active owners.  I doubt WEB does either.

 

But there's a difference between being an owner that keeps the principal-agent problem in check and being an activist who's focused on forcing corporate action to get Mr. Market to recognize value to the detriment of the actual intrinsic value of the company.  For example, Jeff Ubben, an activist that I highly respect, was absolutely right to point out that Dan Loeb's push to sell off part of the Alibaba stake may have been a bad decision that primarily benefited Loeb and not the long term owners of YHOO.

 

The question is, what type of active ownership does WEB not like?  Clearly, he's cool with the 3G variety.  Not so much with the buy 'em and flip 'em mentality that's all about earning that fee.

 

Yeah, as you know its just a tool, and like any other it can be used well or poorly. Obviously active investors are beset by the short-term focus that plagues the investment community, generally.  As usual, it is all about the incentives.  In that case, if I recall, I think Loeb was at least helpful in highlighting the asset and kicking off a discussion.

 

Turning to the example that kicked off the discussion, GM.  Yeah Wilson's two year options are short.  I wonder what the vesting period is for the options in GM's management compensation program.  That still doesn't mean they should be allowed to horde capital so that they are guaranteed a job in perpetuity no matter what happens with the business or the industry.  I hope Wilson can at least get them to look at buybacks rather than dividends.

[Mephistopheles]

I don't think having a soda or junk food every once in a while is a bad thing, it's about moderation. Having it from time to time means letting go of yourself and taking pleasure in life. I'd much rather drink and eat what I enjoy (without overdoing it) than eat a balanced diet every day of my life even if it means I lose 5-10 years of my life. What's the purpose of life if you can't enjoy it?

 

Having said that, obesity and cardiovascular disease are two of the biggest health problems in the country, both measured quantitatively and in dollar cost. So it does become a problem for everybody, not just unhealthy individuals. We need to create incentives as a society to keep people from over indulging. I think what Bloomberg did in NYC by banning the sale of 16 or 20oz sodas is a good thing. Helps society as a whole.

 

It's amazing how much healthcare costs would decline in this country if it wasn't for tobacco, alcoholism, and junk food. Like Ben Franklin said, an ounce of prevention is worth a pound of cure. We need to focus on preventing these diseases in the first place, and not just leave it up to the individual, because we're all paying the price.

 

Oh and Ackman, one of the largest shareholders of Burger King, is a hypocrite for saying that he wouldn't invest in Coke because it's unhealthy.

[Jurgis]

Guys, let's create a new thread for the food/drink/coke discussion. merkhet, can you do it?  8)

[innerscorecard]

David Winters appeared on Wealthtrack, and I couldn't believe how he twisted the truth. Everyone should listen to the whole interview themselves (http://wealthtrack.com/recent-programs/premium-winters-2/), but I also wrote an article about some of my thoughts on it on my site (http://www.innerscorecard.co/blog/2015/7/3/david-winters-is-digustingly-disingenuous).

 

It's interesting that Mack didn't ask him a question on the Buffett/Coke dispute directly, despite that being her teaser on Winters last week. Perhaps Winters required her to not ask him about that directly as a precondition for having him on this time?

[EliG]

David Winters appeared on Wealthtrack, and I couldn't believe how he twisted the truth. Everyone should listen to the whole interview themselves (http://wealthtrack.com/recent-programs/premium-winters-2/), but I also wrote an article about some of my thoughts on it on my site (http://www.innerscorecard.co/blog/2015/7/3/david-winters-is-digustingly-disingenuous).

 

Great blog post. I pretty much agree with everything you wrote. Winters is a disgrace.

[peter1234]

I think Wintergreen is a Wealthtrack sponsor.

[innerscorecard]

I think Wintergreen is a Wealthtrack sponsor.

 

Yes, I hear their sponsorship message on the podcast a lot. I also frequently hear the sponsor message for New York Life Mainstay Investments (the sponsor of the Wealthtrack site as well), which is responsible for scams like this: http://blog.alphaarchitect.com/2015/04/14/the-impossible-sale-an-sp-500-index-funds-at-60bps-with-a-3-sales-load/.

[Guest]

Inner,

 

thanks for the post. I can't disagree. He even grinned slightly when she said his fund took a 1/3 of an investor's returns!

 

It's also funny that his fund has trailed Morningstar's "Word stock" peers since inception (though only recently - with some outperformance before the recent past).

[KinAlberta]

Overall, it sounds very typical of many interviews except for the self-promotion and bashing other fund managers.  The issue of closet indexing has been around for a couple decade now - and it might be a smart investment strategy actually benefitting the mutual fund unit holders! (It likely would have benefitted Wintergreen unit holders.)  Still, there's been an extraordinary growth in indexing so its understandable that the mutual fund floggers are ramping up their hyperbole.  They are competing in a smaller and smaller pool and may be looking to consolidate their own offerings or sell out, to get out. There will also be some desperation on their part because, like Hussman's recent doom and gloom letters, the market continues to 'prove' them wrong - for now.

 

In my view on the issue of chasing cap skywards, nothing has changed much with indexing.  In the 1970s you had the nifty fifty, then gold. In the 80s, 90s emerging markets.  I'm sure that for decades that large institutional funds have chased the same investments, the same sectors and pushed up their valuations as well - long before indexing arrived. Then in the 1990s tech boom we saw mutual funds and banks do the very same thing - the tech boom wasn't all self-directed retail investor driven.

 

Now, ignoring the hyperbole on investing and ETFs, if Winters is eventually correct time will prove him so, and he will come out looking like an all-star. The more the pile-on effect pushes indexed stocks higher, the more they will tumble.  Mut-funds will then get a temporary boost and of course, return to losing investors money over the long term.

 

As for his comments about boring railroad companies that everyone is ignoring - what is he talking about?  Gates/Cascadia, Allegheny and later mostly Buffett have served to push railroads into the limelight.  Everyone is looking at them!

 

Winters is saying that there are load of cheap stocks today and the indexes are overvalued.  Hmmm, that may be the case but we all know that when the indexes tumble, cheap non-indexed companies rarely rise, they usually tumble too. Everything drops. A flight to quality doesn't take people out of indexed companies and into non-indexed companies. People may shift to other countries but Winters seems to be implying that indexes everywhere are overvalued.

[bargainman]

David Winters appeared on Wealthtrack, and I couldn't believe how he twisted the truth. Everyone should listen to the whole interview themselves (http://wealthtrack.com/recent-programs/premium-winters-2/), but I also wrote an article about some of my thoughts on it on my site (http://www.innerscorecard.co/blog/2015/7/3/david-winters-is-digustingly-disingenuous).

 

wow..  just watched this..  He seems desperate given his recent outflows.

 

amazing the hypocrisy..  don't pay the managers, they take the shareholders for a ride.  but pay him 2% annually cause he's worth it!

 

6% vs 15% for the index...

 

amazing

 

Morningstar went from  ranking him a silver fund to not covering him at all!

 

one more thing...  He comes up with the refrain that index funds are low fee but high cost!  really?

[jawn619]

"Sometimes underperformance is a good thing"

 

also I like how he says Consuelo almost every time he speaks. I know people like the sound of their own names but it sounds like he got it from sleezy salesman 101.

[RadMan24]

I have to admit...that was great, Buffett really did point out the irony in Winter's accusation on "pay and performance" disconnect with Coke.

[Guest longinvestor]

The punch line for me was how he, David Winters, all by himself, called for and forced the hand of Coke management to change the compensation plan. With the full might of his 0.0000018% ownership stake in KO. Now, that KO saw their mistake and fixed it, Winters should return to his investors his egregious 1.9% fund fees he collected per year since inception in 2005. That would keep intact the high fiduciary responsibility he so valiantly stood and fought for.

[KinAlberta]

The punch line for me was how he, David Winters, all by himself, called for and forced the hand of Coke management to change the compensation plan. With the full might of his 0.0000018% ownership stake in KO. Now, that KO saw their mistake and fixed it, Winters should return to his investors his egregious 1.9% fund fees he collected per year since inception in 2005. That would keep intact the high fiduciary responsibility he so valiantly stood and fought for.

 

It takes a thief to know one.

 

So, few discuss the merits (or lack of them) in Winters' concerns about KO. Was he potentially right or not?  It seems that Buffett and everyone else attacked the messenger - in the end successfully so.

[bargainman]

The punch line for me was how he, David Winters, all by himself, called for and forced the hand of Coke management to change the compensation plan. With the full might of his 0.0000018% ownership stake in KO. Now, that KO saw their mistake and fixed it, Winters should return to his investors his egregious 1.9% fund fees he collected per year since inception in 2005. That would keep intact the high fiduciary responsibility he so valiantly stood and fought for.

 

It takes a thief to know one.

 

So, few discuss the merits (or lack of them) in Winters' concerns about KO. Was he potentially right or not?  It seems that Buffett and everyone else attacked the messenger - in the end successfully so.

 

what do u mean?  there was plenty of discussion at the time..  basically he took the number of shares the options were on and claimed that as the percentage dilution, which was wrong since he didn't account for the strike price!  basically it was an obvious publicity stunt.  plus it didn't make his fund perform any better!  the only reason to go all activist is to perform!  It's not a goal to be activist in and of itself!

[KinAlberta]

The punch line for me was how he, David Winters, all by himself, called for and forced the hand of Coke management to change the compensation plan. With the full might of his 0.0000018% ownership stake in KO. Now, that KO saw their mistake and fixed it, Winters should return to his investors his egregious 1.9% fund fees he collected per year since inception in 2005. That would keep intact the high fiduciary responsibility he so valiantly stood and fought for.

 

It takes a thief to know one.

 

So, few discuss the merits (or lack of them) in Winters' concerns about KO. Was he potentially right or not?  It seems that Buffett and everyone else attacked the messenger - in the end successfully so.

 

what do u mean?  there was plenty of discussion at the time..  basically he took the number of shares the options were on and claimed that as the percentage dilution, which was wrong since he didn't account for the strike price!  basically it was an obvious publicity stunt.  plus it didn't make his fund perform any better!  the only reason to go all activist is to perform!  It's not a goal to be activist in and of itself!

That was last year.  Isn't this year about disclosure of bonus shares?

[captkerosene]

There is a new standard now: What would KO look like if 3G was running it? Maybe current management is doing great in a difficult environment. Or, maybe not. I suspect they're making too many one sided color copies. :)  I appreciate it when a shareholder stands up and says "Does this management really deserve what we're paying 'em?" ..... even if his math was way off.

[VersaillesinNY]

It seems that Wintergreen fund is facing some redemptions, AUM are sinking by 1/3 in just 6 months.

 

Fund's exposure:

Tobacco companies 20.7%

Real estate 11.5%

Oil & Gas 9.6%

Richemont 6.6%

Nestlé 5.3%

Google 3.3%

Coke 2.5%

Railroads 3.2%

BRK 0%

 

http://www.wintergreenfund.com/downloads/wintergreen_fund_semi_annual_report_20150630.pdf