Skip to main content

Warren Buffett Is Not Infallible

Why bother writing this? I am a fan of Buffett's investing philosophy and long term returns. However, before anyone starts to deify him, its worth noting that Buffett is very human, fallible like the rest of us. To identify the "oops" by Buffett is not to shame him but to give clarity to him as a person. He is very normal and is open to make mistakes. Not a saintly investor as some might try to opine but a flawed one who is possibly the best investor for the past 50 years.

[buffett+(TNR,+June+3+09+article).jpg]

The Sokol Incident: Sokol basically bought a few million shares of Lubrizol Corp for himself, and shortly after recommended Buffett and Berkshire to buy the company. Berkshire did buy in the end. Initially Buffett insisted that Sokol did nothing wrong, although later a Berkshire committee said the opposite in "a scathing report". Now Buffet is done defending Sokol. During the meeting, he said he should have probed more deeply when Sokol first revealed in January that he owned Lubrizol stock. "I obviously made a big mistake by not saying, 'Well when did you buy it,'" said Buffett. He called the Sokol situation "inexplicable and inexcusable." Apart from openly stating that Sokol violated the rules, Buffet also said he regretted the lack of initial outrage over the matter.

Coca-Cola: Buffett was on the audit committee for Coca-Cola, and an investor, when the SEC found that the company had misled investors about its earnings through the 1990s. The buck stops with the audit committee.

Moody's Corp: This one really irked me no end. Buffett has plenty to say about the market's exuberence and ponied up many reasons for the global subprime crisis. But never did he admit anything wrong about the ratings agencies in general. Why? Because Buffett is a substantial shareholder of Moody's. We are not talking of hundreds of ratings companies here, the top 3, namely Moody's, S&P and Fitch are responsible for giving AAA to so many CDOs, which led many investors to blindly rely on the strength and integrity of those papers. The silence by Buffett on this was deafening. The CEO of Berkshire Hathaway has said very little about his 13% stake in the rating firm, which has come under heavy fire for its role in the financial crisis. You know the complaints by now: That Moody’s and rivals S&P and Fitch negligently inflated ratings on mortgage securities, as they grew ever keener to win business from Wall Street banks and other underwriters.

Deloitte & Touche Incident: Berkshire kept D&T as its outside auditors AFTER learning that Deloitte's vice chairman had been trading in and out of Berkshire shares while he was on Berkshire's audit committee. That caused D&T and Berkshire to violate SEC's auditor-independence rules.

Munger, Family & Sons: If we can criticise Singapore Inc for this kind of transgressions, Buffett and Berkshire committed the same mistakes. Berkshire's VIP investing partner and vice chairman is Charlie Munger. How the hell can Berkshire still send so much legal fees to Munger's old law firm of Munger, Tolles & Olson. Very weak transparency and corporate governance here.

Buffett's Mclean Incident: If you happen to lost bucket loads of money buying and selling Mclean or any of the Chinese footwear companies, don't worry, you are in good company. Buffett also reveals that he spent $244 million for shares of two Irish banks that "appeared cheap" to him. At the end of the year, they were written down to their market price of $27 million, for a loss of 89 percent, and they've continued to drop.

Do What I Say, Not Do What I Did: He railed against derivatives as weapons of mass destruction, and now turns out to have been sitting on a $68 billion pile of credit default swaps and exotic put options on various stock market indexes. And having vowed never again to become entangled in a big Wall Street investment bank, he has gone and sunk $10 billion into Goldman Sachs, a virtual re-enactment of his investment in Salomon Brothers--cash for reputation.

Tax Them, Don't Tax Me: Buffett's views on taxation, especially those on estate taxes, have been pathetic. There is a sordid irony if not an artificiality or phoniness about urging the continuity of high estate taxes and concomitantly avoiding the situation through setting up trusts and foundations. Evidence of avoiding income taxes is evident throughout Berkshire's life, as the company and Buffett have always used the IRS Tax Code to their advantage. There is clearly nothing wrong with that but similarly, it is somewhat disingenuous to urge higher taxes after a career of avoiding them.

Comments

clearwater said…
Warren Buffet readily admits he's not infallible. Note his self deprecating comments and wry sense of humor. He's human. Just very quirky and very good at what he does. A larger than life figure. I prefer him with discernible faults than without. A man without apparent faults must be a saint and not of this capitalist world.
lai said…
i like your picture at the top - mostly very cultural/environmental etc...

But what i'm waiting for is actually... you know what i mean :)

P/s: Buffett is no saint... So are we
clearwater said…
Warren Buffet would have avoided subscribing to XOX's IPO. Especially since XOX includes a double cross in its name. Also a nought (or zero). Not at all auspicious. Announcing a loss together with its listing today - how very uninspiring!
ronnie said…
Dali, I beg to differ on your view of Warren Buffett minimising the amount of tax paid by Berkshire H (BH). WB is a steward of BH. It is likely there will be a shareholders' revolt if he decides that BH pay more corporate tax.

WB has bequeathed a large part of his fortune to the charity managed by Bill & Melinda Gates. What else can I say about this great investor?
Mohammed said…
Washington & Wall Street think that the world is theirs to screw with as they please. Poor China & Japan are holding their soon to be worthless T-Bills by the shiploads, lol.
King said…
I think saying that Buffett is avoiding tax code isn't really that relevant. The problem is the tax code, not the people who use it.

As a judge once said, the citizens duty is to pay the least amount of tax they can.

If billionaires can legally get such huge tax breaks, there is something wrong with the system. Not the people who are using it through legitimate, legal methods.

Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.


My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.


I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.


My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.


Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with en…

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:






























p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far



http://malaysiafinance.blogspot.my/2016/12/bank-negara-may-have-switched-on-bull.html


I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has pr…