Tuesday, May 11, 2010

How Do You Shut Warren Buffett Up?

When Warren Buffet called then-Treasury Secretary Hank Paulson, just before he made his investment in Goldman Sachs, do you think he talked to Paulson in his goofy public Mister Roger style? I didn't think so. 

If you are sick and tired of Warren Buffett's nauseating Mister Rogers act, there is a way you can shut him up. Ask him about his sale of Moody's stock the day Moody's received a Wells Notice from the SEC. Zero Hedge explains:

As Zero Hedge first pointed out on Saturday, Moody's is in very big trouble - in its 10Q, in the very last paragraph of the very last page, the company indicated that on March 18, it had received a Wells Notice and a recommendation by the SEC to pursue a Cease and Desist order against the agency's NRSRO status, in effect killing its business model. This was not lost on the market, which punished Moody's stock by 10% yesterday even as every other stock went vertical. When all is said and done the 10% could well become 100%, and as far as the market is concerned nobody would shed a tear: the conflicted rating agency model is long dead, and the independent third party vendors are the only ones that add any actual value at this point. However, far more interesting are the actions by Moody's CEO Raymond McDaniel and key shareholder and kindly grandfather, Warren Buffett, both of whom sold millions worth of Moody's share and stock, the day of, and just after, the Wells notice receipt. The New York Times has reported that Buffett, who recently has not had a problem commenting on pretty much everything, and was vociferously defending not only arch monopolist Goldman Sachs at his annual ukulele outing in Borsheims, but Moody's as well, has had "no comment" on his sales. Perhaps it is time for someone to take Mr. Buffett to task, instead of just to his word: sure, it could be just a coincidence... or three - he sold over $30 million in MCO stock on March 19, March 24 and March 26. Or it might not. However, now that it has become far too clear that nobody in the finance business has a shred of integrity and honesty left, perhaps it is time an independent and impartial jury to decide if any impropriety based on material, non-public insider information, was committed.
BTW If Buffett was trading on inside information, he was simply pushing the market price closer to where it should be. In my book there is nothing wrong with this, despite what the SEC (and Zero Hedge) might say on the matter. On the other hand, Buffett's call to Paulson in the middle of the financial crisis is very curious. What was that all about? Did Buffett outline to Paulson under what terms he would invest in Goldman stock, including what market sponsorship he expected from the Treasury?  And there is this minor bit of activity, surrounding Buffett's purchase of Goldman Sachs stock, that the SEC does not appear to have had time, during breaks from porn surfing, to investigate.


  1. Great story on Buffet. Begins to reveal that his real investment strategy is more about inside info and economic "motes" created by government legislated monopolies than about number crunching.

  2. I'm curious who informed Buffet of the Wells notice, if it occurred. Was it Moody's management or an Obama administration official?

  3. There seems to be a pattern with some of Buffett's investees not revealing material information in a timely matter. The fact that Buffett was dumping shares for months should lead many to at least investigate further...