Friday, June 26, 2009

Did Zhao Danyang Get His Money's Worth During His Lunch with Warren Buffett?

Janet Tavakoli answers the question and explains what it is like to have lunch with Warren Buffett. BTW Tavakoli didn't pay $2.11 million to have lunch with Buffett. Superior knowledge of markets, especially derivatives will get you lunch with Buffett, and as Tavakoli says, he will pick up the tab:

$2.1 million lunch with Berkshire Hathaway chief: 'Warren will give him his money's worth'
Examiner - June 26, 2009

By William Freehling -

$2.1 million is a lot to pay for lunch with anyone, even if it is with the world's second-richest man -- Berkshire Hathaway's Warren Buffett -- and even if it is for charity.

But Janet Tavakoli says Zhao Danyang of Hong Kong will get his money's worth from the charity lunch he had with Buffett this week at the Smith and Wollensky restaurant in New York City. Proceeds from the lunch went to the Glide Foundation, which helps the underprivileged in San Francisco.

Tavakoli should know a thing or two about the value of lunch with Buffett. She dined with the Berkshire chief in 2005 and wrote a book, "Dear Mr. Buffett," partly about the experience. Tavakoli, who still communicates with Buffett periodically and was in Omaha, Neb., for this year's annual meeting, is founder and president of Chicago-based Tavakoli Structured Finance, a financial consulting firm.

As the bidding for this year's charity lunch auction wound down (it was at about $500,000 as of this writing but is expected to shoot higher in the next several hours as the deadline approaches), Tavakoli agreed to answer our questions about her lunch and experiences with Warren Buffett.

Examiner: When and where did the luncheon occur?

JT: Warren and I had lunch on a hot summer day--August 25, 2005, five days before his 75th birthday, and on the eve of the global financial meltdown. We had roast beef and mashed potatoes at Gorat's in Omaha. Warren asked me to lunch, and he picked up the check.

Examiner: How did it come about?

JT: Years before, I had sent Warren a copy of Credit Derivatives, one of the technical finance books I had written. Warren had called derivatives "financial weapons of mass destruction" in his 2002 shareholder letter after an accounting restatement shows losses -- chiefly in his GenRe Securities credit derivatives unit -- of around $173 million.

I had tucked a forgotten note between the pages of the book. Warren wrote me a letter saying he had been looking at the book again and found the note. He invited me to stop in to talk about credit derivatives the next time I came to Omaha. When I responded, Warren invited me to lunch.


  1. Wenzel,

    What's the good word on Buffett these days?

    Is he just an extremely lucky political entrepreneur? Is he in fact the world's most savvy investor? Is it a mixture? Would he have done as well with his "timeless" strategy outside the context of perpetual central bank inflation?

    Tavakoli seems very impressed with the man (and spent much too much time talking about how he was dressed... something articles about or involving women for whatever reason seem to focus on), and she has sharp words for people who would be critical of him and invest in "black swan funds" (wow, she really has it out for Taleb, this is the 2nd time she's taken a jab at him in the press), but could it be that Buffett isn't a god of finance and investing like he's supposed to be?

    I mean, for god's sake, the man voted for Obama!

    What do you think?

    btw, I am reading GM Loeb's "The Battle for Investment Survival" which was written shortly after Graham's "Security Analysis" and is in some ways considered the anti-thesis of it, and it's raised in my mind some skepticism of the long-term buy and hold, value investing strategy praised by Graham and supposedly followed religiously by Buffett.

    At root, as simple as the Grahamite investment strategy is, there seems to be something else that must explain Buffett's phenomenal individual success besides just Buffett being that unique of a person. There's a lot of other smart, disciplined people out there... why didn't they follow Graham and get massively rich like Buffett? And why didn't GRAHAM get massively rich like Buffett?

    Furthermore, for every Buffett/Zhao Danyang doing well with this strategy, there seems to be another who has flopped, but we don't hear much about the failures.

  2. I guess Buffett wanted an explanation of what he had gotten himself into- I doubt he knew what a CDS is begore that lunch. And AIG had a lot of 'em. Good luck Warren.

  3. ...she has sharp words for people who would be critical of him...but could it be that Buffett isn't a god of finance and investing like he's supposed to be?

    I mean, for god's sake, the man voted for Obama!

    What do you think?

    Is this your way of trying to get me to provoke Janet:)

    A few facts:

    Buffett has one of the greatest investment records of all time. His method is far from just a Benjamin Graham method, especially after he met Charlie Munger. That said, there are many Graham followers that have become
    massively rich. Graham himself made a lot of money, but in his later years decided to take up studying the charms of the femake sex, rather than study more stocks.

    I do not think Buffett holds to the economic principles of his father who had it right about economics. I think this probably has somethinmg to do with Buffett's first wife.

    That said, I do note that Buffett is of late warning of future inflation, a macro comment I do not think he would have made 10 years ago.

    Some of his comments, about the necessity of the government to come in and save the economy, do help his portolio of bank stocks, which means that he has a conflict of interest when he talks on the subject. I wonder.

    He also at times contradicts himself, calling derivatives weapons of financial destruction and then buying some himself.

    As for your Gerald Loeb book. Loeb is actually one of my favorite financial writers, his concept of a "ruling reason" is the best I have seen on when to buy and sell a stock. I am a bit confused why they publish the "Investment Survival" book. I think his best work is "The Battle for Stock Market Profits".

    As for Janet, you are going to stay away fom a lot of mistakes by paying attention to what she says. Including what she says about Taleb.