Wednesday, November 18, 2009

Do Birds of a Feather Flock Together?

I have bitten my tongue for far too long regarding the all around good guy, smartest guy in the room (apologies to Hank Paulson) Oracle of Omaha, as his minions call him, Warren Buffett. So today I stop. I write this knowing full well I am about to criticize one who many think walks on water, but whom I feel deserves to be taken to task. The news this morning compels me to do this.

Let us put aside the fact that he will only do interviews with, the soon to be chief NASA scientist, CNBC hostess Becky Quick. Two short career advancement points for all the aspiring, make-believe financial journalists out there jockeying for position within the mainstream financial media. Your first order of business to make sure you marry your executive producer as this ensures job security and your second, no less important move, is to cozy up to an octogenarian who is wildly popular in financial circles who will only do interviews with cute blondes, but alas I digress once again.

Here we have, who many call the greatest investor of our generation, a man who via his holding company Berkshire Hathaway has amassed quite a fortune and whom yet, is directly involved with some of the integral parts of the financial crime wave that has swept our financial markets.


Moody's

Buffett has an interest in the ratings pimp, eerrr, excuse me, purveyor Moody's. You remember Moody's, it's the rating agency where Wall St. thugs like Goldman, Merrill and others went to get absolute toxic shit rated as triple A. They paid handsomely for this, which Buffett had no complaints about and did this so they could sell it to the zombie fund managers who oversee your pension fund, but not before they would simultaneously short the same piece of toxic shit they sold you pension fund of course as a hedge, right Charlie Gasparino?


Why has no one called Mr. Buffett out on this one. Could it be Buffett didn't know about what Moody's was doing? Or could it just possibly be that birds of a feather flock together.

Heck, let's not pass judgement just yet on Mr. Buffett. The Moody's debacle is just one piece of evidence and could very well just be an outlier.

Goldman Sachs

Buffett stepped up to the plate with Goldman Sachs when they were on deaths doorstep, investing money into this indispensable cog of American society. Goldman mind you was the one, whose chairman Henry Paulson undetered by being told no in 2000, succeeded in 2004 in having all manner of broker-dealer leverage limits lifted, thus allowing sky's the limit gambling in derivatives.

But wait you say, wasn't it Mr. Buffett the one who called derivatives weapons of financial mass destruction?

So why would Mr. Buffett invest in a company who did business in a product he publicly loathed and claimed could cause widespread financial harm? Further to this, why would Buffett himself buy derivatives for the Berkshire portfolio?

Good question. Maybe we send forward that to Ms. Quick.

Or maybe Mr. Buffett is just one of those do as I say not as I do types. You know the type, kinda like an Al Gore, that love to tell you and I to be green, to be environmentally friendly but then get on their private jet, but not before transiting the ride from the airport in a 4 SUV motorcade, to go to their 15,000 square foot carbon footprint minimalist home, dammit again I digress.

But heck, lets not pass judgement just yet on Mr. Buffett. The Goldman fiasco is just one piece of evidence. Or is that two now? I forget.

Fannie Mae

This is the same Warren Buffett that was aggressively trying to buy over $3 billion in tax credits from taxpayer lavished Fannie Mae with - now this might come as a shocker so you may want to sit down - Goldman Sachs! I am at a loss for words on this one, but the words that do come to mind are criminal and syndicate.

Yes I know buying tax credits from an insolvent, yet we continue to throw money down a bottomless pit GSE, is a deal only a real dyed-in-the-wool, Ivy League MBA could appreciate. Just for kick lets say you or I try to pull that one off!! Might I suggest some heavy duty lobbying to the likes of Mssrs. Dood, Frank, Conrad and Jefferson, (ooops... strike Jefferson as he got caught already but the other 3 are good to go) as a precursor.

But let's not pass judgement just yet on Mr. Buffett. The Fannie Mae scam is just one piece of evidence, or is that 3 now? Hey wait a minute! Naaah it's Warren Buffett for crying out loud. He wouldn't.....

Mr. Buffett has no qualms feasting on the leftovers of congressional generosity and this is whom we laud as a leading light in all things finance. Think of how many companies Buffett has a stake in who have been the beneficiary of taxpayer funded bailouts. Hmmmm let me count;

Goldman Sachs
Wells Fargo
General Electric
American Express
Bank America
US Bankcorp

to name just a few.

So given all this, the Moody's debacle, the Goldman fiasco, the Fannie Mae scam, the bail my stock out portfolio, what does the congenial, ever likeable, benevolent one do? He does want any self-respecting public citizen of the year does, you join hands with your partners in crime in a public relations campaign of generosity called the 10,000 Small Businesses Initiative. I would simply call it a 'Feed them Cake' campaign, but I can be a little harsh at times.


Quick side note, anyone know the over/under on how many times CNBC will run this Buffet, Goldman humanitarian story today? Just curious.


Yes, dear reader we now get to witness the Buy your Salvation trade. Let this be a lesson to all that one cannot loot the land without making a small token of charitable appreciation to the masses. Steal 10's upon 10's of billions of dollars and you simply buy your salvation with $500 million. I have said it before and will say it again, when you steal a million and the fine is $10k or even a $100k, even a 2 bit city college undergrad can be as smart as a Harvard Endowment Fund MBA and figure out it's a fantastic trade, conscience be damned.

So Buffett worshippers will undoubtedly find fault with much of this article. They will point to his goodwill, his track record, his good nature. They will most assuredly point to my conclusion that his investments in enterprises like Goldman and Moody's does not make him a criminal. To which I would counter, if I invest in an business that I think is legitimate but then I discover it is illegitimate am I guilty if I reap the benefits of such. If I finance a fraudulent enterprise am I then fraudulent.

In the least, how much of an investor am I if as the most visible market player on the planet, who can get any CEO to tremble in his boots when I call, I don't know the duplicity, corruption and outright fraud that is taking place at and within my investments.

If Buffett is so lily white. so esteemed why is he keeping the company he is keeping via these investments?

In closing I would humbly counsel the small businesses of this great country who do most of the employing, to hang tough. I would also counsel them to politely tell the Oracle and Goldman to shove their $500 million up their collective asses. That way Ms. Quick would have yet another reason to go visit Howard Marshall, eeeerrr, excuse me Warren Buffett once again for another "exclusive".

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".


Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $12.06
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $6.05
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 1 unit Ultrashort Xinhua China ticker FXP @ $8.32
Long 1 unit Ultrashort Real Estate ticker SRS @ $9.82
Long 1 unit Direxion Tech 3X Bear ticker TYP @ $10.68
Long 1 unit US Dollar Bull ticker UUP @ $22.52 stop @ $21.97
Short 1 unit i-shares Russell 2K ticker IWM @ $61.70 stop @ $63.80
Short 1 unit Vornado ticker VNO @ $68.30 stop @ $70.71
Short 1 unit Bed Bath ticker BBBY @ $37.75 stop @ $38.41

2 comments:

Anonymous said...

I have a question regarding your investment selection. I understand you bearish bias. I am wondering why you continue to invest in leveraged ETFs? The leveraged ETFs (especially 3x) suffer from extreme time decay and their correlation to the underlying indexes falls apart after 1 day. I was trading the hell out of them in 2008, and even holding them for swings, but that is not a good strategy anymore with the VIX as low as it is. There are other, more efficient methods, to implement your trading strategy. Best of luck.

Harleydog said...

Anon,

thx for the post, yes I am sure there are more efficient strategies. One might expect this situation to reverse once the VIX does.

There are lots who oppose the 2X and 3X etf's. Unfortunately I am not one of them. I sat with them and enjoyed nice gains over multi month periods which I should expect will happen once again.

continued success to you.
HD