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.

Fear At Berkshire Hathaway?

A trader friend reports that Berkshire Hathaway's cost for credit default swaps (CDS) has soared to $475,000 per $10 million which was higher than Citicorp’s at it's peak fear period, which was about $380,000 per $10 million.

This is still isn't red light danger level for Warren Buffett's holding company, but is indicative of nervousness, and awareness that he may be holding some toxic derivatives.

Berkshire Hathaway Stock Down 25%

Warren Buffett's Berkshire Hathaway class A shares closed exactly 25 percent below the all-time high set last December.

Today's closing price of $111,900 per share is the lowest for the stock since August 15.

Berkshire is down 21.0 percent in 2008, underperforming the benchmark S&P 500 stock index, which has dropped 15.9 percent this year.

Buffett's Berkshire Has Worst First Half Since 1990

Warren Buffett's Berkshire Hathaway Inc. has slumped almost 20% since December. The decline exceeds the drop of the Standard & Poor's 500 Index, which is down 15%.

Buffett holds significant positions in banking stocks that are down substantially. As of the end of March, Wells Fargo & Co., American Express Co. and U.S. Bancorp, were three of the Berkshire's 10 biggest equity holdings.

Margins are declining in the insurance industry where Berkshiire also has major holdings. "That party is over," Buffett wrote in his annual letter to shareholders in February. "It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008."