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Dan Loeb Slams Warren Buffett


AzCactus
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"I love how he criticizes hedge funds, yet he really had the first hedge fund. He criticizes activist investors, yet he was the first activist," said Loeb, who's amassed a fortune of his own as founder of Third Point, an activist hedge fund.

 

Aren't these guys supposed to be smart?

 

Well, I guess they're smart enough to know that people only care about soundbytes and headlines.

 

When I hear stuff like this, I always try to imagine what Buffett might reply. I don't pretend to always know, but in some cases, the answer is obvious. ie. Buffett is not against all activists and hedge funds, he criticized certain behaviors by these groups, so obviously if someone from that group doesn't have that behavior, that's fine with Buffett. For example, 3G is not short-term oriented, Buffett's partnership had a fair fee structure that didn't reward underpeformance (and since then, he's used a vehicle that doesn't charge fees to people, so he's kept improving on that front), etc.

 

This is the same tactic used to attack Michael Lewis on HFT. They pretend he claims that all HFT is bad, while Lewis just talked about the behavior of a sub-group in the industry that basically skims money while providing no value at all.

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Click on the url below:

 

http://money.cnn.com/2015/05/07/investing/dan-loeb-slams-warren-buffett/

 

My own two cents:  I think Loeb has a good point in that Buffett says one thing and commonly does something different. The way he seems to slam activist investing is a good example.  ANy other thoughts out there?

 

My thought is that I am dumber for having read these comments by Dan Loeb. And I can't afford to get much dumber than I already am. :-)

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The more that I learn about Warren Buffett, listen to his speeches and read his letters I have come to realize that he is extremely nuanced in what he says. Coupling this with someone who is also someone who is trying to be completely rational in all situations often comes across as hypocritical when people generalize his opinions or stances.

 

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The more that I learn about Warren Buffett, listen to his speeches and read his letters I have come to realize that he is extremely nuanced in what he says. Coupling this with someone who is also someone who is trying to be completely rational in all situations often comes across as hypocritical when people generalize his opinions or stances.

 

It's nitpicking, but I would say that the problem isn't that Buffett is too nuanced, it's that the people who follow him aren't nuanced enough. Buffett says "it's bad when hedge funds do this and that" and all people remember is "wow, Buffett really dislike hedge funds".

 

It's like they dumb down what he says, and then attack that dumbed down version. That's no Buffett's fault.

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The more that I learn about Warren Buffett, listen to his speeches and read his letters I have come to realize that he is extremely nuanced in what he says. Coupling this with someone who is also someone who is trying to be completely rational in all situations often comes across as hypocritical when people generalize his opinions or stances.

 

It's nitpicking, but I would say that the problem isn't that Buffett is too nuanced, it's that the people who follow him aren't nuanced enough. Buffett says "it's bad when hedge funds do this and that" and all people remember is "wow, Buffett really dislike hedge funds".

 

It's like they dumb down what he says, and then attack that dumbed down version. That's no Buffett's fault.

 

People just can't deal with nuance, period. And they tend to hear way more or way less than what was actually said. Following the Berkshire meeting via Twitter was seriously freaky. The amount of misquotes and misinterpretations was astounding.

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Warren's crusade on taxes is intellectually dishonest

 

- Rich people who pay capital gains taxes on dividends aren't pay 15%, they are paying corporate tax first then a 15% surcharge on top

- 47% of USA pays no tax. Is that just that half the population takes w/out giving back?

 

I've long stopped listening to what he says, and focused on what he does. He dumbs down his ideas constantly and provides a parable like setting for his ideas. His deal structuring abilities are genius, if you can look beyond the hype.

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Guest longinvestor

Does anyone here know Dan Loeb's fees structure?  If Dan Loeb's fees structure is 2/20, he shouldn't be picking a fight against Buffett's old partnership fees structure.

7th year update on the WEB versus HF bet;

+19% HFOFF : VG Index fund +63%

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Warren's crusade on taxes is intellectually dishonest

 

- Rich people who pay capital gains taxes on dividends aren't pay 15%, they are paying corporate tax first then a 15% surcharge on top

- 47% of USA pays no tax. Is that just that half the population takes w/out giving back?

 

I've long stopped listening to what he says, and focused on what he does. He dumbs down his ideas constantly and provides a parable like setting for his ideas. His deal structuring abilities are genius, if you can look beyond the hype.

 

Completely agree regarding taxes. And then on the other side of the equation, he equates payroll tax to income tax, which makes his secretary's "tax rate" double his. He should also be subtracting her Social Security and Medicare benefits. What's really hypocritical here is that he includes the employer's portion of the payroll tax as a tax for the employee. Which is so incredibly dishonest, especially given that he makes no mention of the double taxation of dividends.

 

It's true that we have budget deficits, and it's true that we must increase taxes and cut spending to compensate for them. But I would expect someone of his stature and integrity to not dive into the mud by using misleading tactics like D.C. politicians to try to bring awareness to the issue.

 

It would be greatly beneficial if he used his business/economic acumen to propose a detailed taxation/spending policy instead of only ever saying "increase capital gains and dividend taxes on the ultra rich". We all know that even if that were to happen, it would only be a drop in the bucket. But sadly he offers no other advice, and on top of that he manipulates the numbers to help his argument.

 

Regarding the criticism of private equity/activism: while 3G is definitely longer termed than most, they are still "active" in the sense that they go in and implement massive layoffs and shut down factories. I have no problem with that, but Loeb is correct to point out that Buffett does tend to criticize this sort of approach often - with the way he says that activists should leave management alone to run their business. Well, 3G is not exactly a passive shareholder either. Of course, private equity and activists are competitors to Berkshire's model of holding businesses permanently and not interfering with management. This is just a marketing maneuver to attract business. I don't think there's anything immoral or unethical about what he does; he's just an extremely competitive businessman, and I admire that.

 

I have a theory, that all of this he says and does in the public eye, whether it be his tax argument, or slamming private equity/activism, his constant praising by name of many business leaders and politicians, or even his lighthearted, self deprecating humor - it helps create this warm grandfatherly image of himself while doing wonders for his reputation, and he knows it too, and takes advantage of it. This helps him get away with steals such as the BAC deal, for instance. Just all speculation, I could be completely wrong here.

 

I should also say that I don't agree with Loeb for the hedge fund fee, and investing in financial services companies matters. Loeb himself is manipulating what Warren says to advance his argument. Why can't people just be honest and straightforward? I guess that doesn't win headlines, votes, or applause!

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Guest longinvestor

Longinvestor,

 

I take it that you were in Omaha this past weekend then.  :D :D

 

7th year update on the WEB versus HF bet;

+19% HFOFF : VG Index fund +63%

 

I guess you got the main point about Loeb's fees.  ;)

 

Yes, was in Omaha!

 

Not my main point but WEB's as he put that slide up: "Investors in the HF's would have been better off simply investing in an index fund. Of course, the only ones that still made money anyway are the HF managers"

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In addition to an incomparably fairer "hedge fund" fee structure, Buffett's partnership days' activism was in controlled companies, not like today's green-mail sabre rattlers with their minuscule percentage ownerships. And in terms of taxes, Buffett is not saying one thing and doing another: he follows the rules. He says it is the rules that need changing. Nuanced? Hardly.

 

Finally, Buffett has made the vast majority of his fortune with his investors, not off them (the standard for hedge fund managers). 

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Guest longinvestor

Today's WSJ has an item covering the Las Vegas event where Loeb held the cheer in his pack. Clearly the item seeks to malign and discredit Buffett, it's pure spin. About two weeks before the Omaha weekend,  WSJ preempted Buffett by interviewing the guy who took the bet w Buffett.

 

In neither of these pieces was there a mention of the numbers / status of the wager. WSJ is clearly engaging in obfuscation. Munger, at last years meeting, implied that true financial reform is likely to hurt real estate prices in NYC. Helpers w expensive tastes indeed.

 

I cancelled my WSJ subscription today.

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Today's WSJ has an item covering the Las Vegas event where Loeb held the cheer in his pack. Clearly the item seeks to malign and discredit Buffett, it's pure spin. About two weeks before the Omaha weekend,  WSJ preempted Buffett by interviewing the guy who took the bet w Buffett.

 

In neither of these pieces was there a mention of the numbers / status of the wager. WSJ is clearly engaging in obfuscation. Munger, at last years meeting, implied that true financial reform is likely to hurt real estate prices in NYC. Helpers w expensive tastes indeed.

 

I cancelled my WSJ subscription today.

 

I am too cheap to subscribe to anything but I used to read the WSJ from time to time.  You could see a change in tone when Murdoch acquired it.  I guess it is still valuable if you want to use it for news and ignore the editorial part though.

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OT: I never understood attraction of WSJ. Luckily I was not at the DJCO meeting when Munger asked who doesn't read WSJ. :) Maybe it's the internet time / generation, but WSJ looked half boring, half wasted space for me. :)

 

I read Barron's and find it worth the time though I skip some parts. I'd read Economist if I had time - now I glance through it before recycling. No dailies.

 

Considering online sites of newspapers, I probably read NYT most, some FT, some Economist. Of course WSJ is heavily paywalled as is Barron's, so it's tough to compare. I might have read WSJ more if it was not completely paywalled. ;)

 

Anyway, perhaps I should spin this off into separate thread if there's interest.  8)

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