Tuesday, March 31, 2009

Final Day: Submit Questions for the Buffett Top Ten List!

As John Lennon might have written, Warren Buffett was in the news today, oh boy.

Two weeks ago came the first ratings downgrade in Berkshire’s modern era, with Fitch unceremoniously replacing Buffett’s cherished Triple-A with a mere Double-A.

Buffett’s fans immediately came to The Oracle’s defense, naturally, pointing out that it was Fitch doing the downgrading, as opposed to Moody’s and S&P—you know, the geniuses who gave us all those Triple-A CDOs still smoldering beneath the wreckage of our financial house.

Still, the bad news didn’t end with the ratings downgrade.

Ever since the automakers were crucified for flying private jets to Washington to beg for a public bailout, America’s CEOs have been under enormous pressure to make like Regular Joes.

So much so that this morning’s Wall Street Journal carries a rather sad full page ad from NetJets, the Berkshire-owned jet timeshare business that must certainly be one of the worst-performing assets in the Berkshire pantheon—Shaw’s carpets and Acme bricks included—at the moment.

“Recently,” the ad begins, “much has been made of corporations and their private jet fleets,” as if we didn’t know. The copy then argues plaintively that private jets are “an important business tool,” and then pulls out all the stops: Buffett himself not only called NetJets “indispensable,” but he actually “bought the whole company.”

Not only does the ad come at the worst possible time in the relatively brief history of the private jet business, it happens to be in the same section of the Wall Street Journal that carries the story of Rick Wagoner’s unceremonious dumping from his CEO perch at GM—which story notes that Wagoner no longer flies in and out of GM’s own private jet terminal at the Detroit airport: he flies Northwest (first class, but, still, Northwest).

As full page ads go it’s probably the worst money Berkshire—and Buffett—ever spent, from a return-on-investment point of view.

Finally, even Buffett’s 9%-owned Coca-Cola is suffering the slings and arrows of outrageous economies today, with the same Journal reporting “Soda-Pop Sales Fall at Faster Rate” in a brief article in the B-Section, which notes that Coke is trying to arrest the slide with “new advertising and new packaging”—like that’s never been tried before.

Regardless of the bleak current news flow, Berkshire investors around the world are looking forward to the approach of the Berkshire shareholder meeting, the first weekend in May.

Approaching even faster is the April 1st deadline of our “Ten Questions for Warren Buffett” competition, in which we’ve asked readers to submit questions they’d like to see Buffett asked at the meeting.

And if our virtual mail is any indication, Buffett is going get some doozies—provided, of course, the Top Ten Questions that we submit to Andrew Ross Sorkin at the New York Times, who will be one of three reporters asking questions of The Oracle—make that reporter’s own high standards and get asked at the meeting.

The most popular topic by far has, thus far, been Buffett’s eyebrow-singing sale of index puts at market peaks. Other topics include:

1. That dreadful Conoco investment Buffett himself bemoaned in his recent letter;

2. Obama and the new administration’s economic and fiscal policies;

3. Whether owning Wells Fargo or any other large, opaque financial can be considered within one’s “circle of competence.”

Missing almost entirely—a surprise, we think—are questions about General Re’s dealings with AIG, and questions about Berkshire’s non-insurance businesses.

So take another look at the annual report that just hit your mailboxes last week, and submit your questions by tomorrow.

Jeff Matthews
I Am Not Making This Up

© 2009 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.


Desiderata said...

I'm surprised at the venom level within these questions.

Anonymous said...

Warren Buffett, why is it that it is so hard for people like you to help people like me. All i need is 2 million dollars to build my own store. I pay 100,000 a year to lease the building i'm in. I can not afford to bolrrow money i have never asked for anything but how i wish you could help me i know that you would be rewarded by the lord up above. thank you Fran

invstmnt said...


I think you are picking up on something.

Over the time of reading Jeff's blog, I have noticed the same venom from him regarding Buffett.

I can only surmise that it is one of two things:
(1) an envy toward Buffett's long term record, which likely Jeff has not matched.
(2) a defensiveness regarding Buffett's past targeting of the outrageous fees charged to clients by the hedge fund industry

Jeff Matthews said...

"Invstmnt": Venom? Really? Which blogs?

The ones where we call Warren Buffett greatest investor who ever lived?

Or was it our book, "Pilgrimage to Warren Buffett's Omaha," where where we point out how truly staggering Buffett's record is--having had only 1 down year in 51 years of investing [that was before he had his second down year, in 2008]?

More likely you're confusing some of the comments posted by readers--some of whom just don't like the guy--with the blogs you've supposedly read "over time".

Or perhaps you're upset that we consider all the facts when looking at Buffett--not just the great stuff.

This includes, certainly, the fact that Buffett ran a hedge fund for 13 years (before taking over at Berkshire) and had the same kind of "outrageous" fee structure he now likes to criticize.

And the fact that his hedge fund fee structure made Buffett very rich, along with his investors (which is exactly the point of the hedge fund structure: when it works, it works great for everyone).

And the fact that while running his hedge fund, Buffett got the same, favorable, capital gains tax treatment he now likes to criticize, which shielded him and his investors from what was then a stifling 90% maximum income tax rate.

Now, if you're worried about Buffett being somehow besmerched by rational discussion of the facts, you really needn't: Buffett's track record will stand alone, likely well beyond his own stay here on earth, and certainly far above anybody else now in this business. That includes me and, I imagine, you.

Instead, I would suggest maintaining a strong focus on all facets of reality--"the good, the great, and the gruesome," as Buffett once wrote--rather than on only those things that make you feel good.

It never pays to mix emotion with investing.