The Difference Between the Way Mainstream Media Treats Warren Buffett and Ron Paul

An annonymous comment left at the post, Oh Brother, Now The Wall Street Journal Attacks Ron Paul:

When Ron Paul ignores standard advice about a diversified portfolio (read: at least 95% stock/bond index funds), he's attacked. When Warren Buffet ignores the same advice, and concentrates his investments to highly-leveraged, TBTF companies...and then lobbies for every bailout under the sun...he's praised for being a genius. Double-standards

Chinese Suspicious of Warren Buffet and Bill Gates Road Show

I have already discussed (Gates and Buffett Fail at Humanitarian Economics) the curious Warren Buffett-Bill Gates U.S. road show where they visited with the wealthiest Americans and asked them to pledge half their wealth to philanthropy.

Now Buffet and Gates are taking their bizarre act to China. The Chinese who are just now emerging from the dark years of intense government control are rightfully suspicious.

FT reports:

Having persuaded many of their billionaire peers in the US into giving away chunks of money, Bill Gates and Warren Buffett are travelling to China to host newly minted Chinese tycoons to sell them on the value of philanthropy.


But the fear of being seduced into giving up part of their fortunes might have scared some of the tycoons away from a dinner that the crusading US billionaires are hosting in Beijing this month.

The exclusive list of attendees includes Zhang Xin, CEO of Chinese SOHO China, the real estate developer, and Wang Chuanfu, head of BYD, the car and battery maker, who counts Mr Buffett as an investor.


But according to the Chinese media, the head of the Bill and Melinda Gates Foundation in Beijing is worried that some invited guests might be reluctant to come.

“A small number of people declined the invitation to attend, while many of the invitees called to ask whether they would be required to pledge a donation at the dinner,” the director of the foundation’s China programme, Ray Yip, was quoted as saying.

“Their biggest fear is being embarrassed and put on the spot.” Mr Yip’s spokesperson did not dispute his comments, carried on a major news portal and the Economic Observer, when contacted on Friday.

Mr Yip said the dinner was intended to allow Mr Gates and Mr Buffett to get to know friends and exchange ideas about partners interested in charity, not to convince Chinese tycoons to make donations...

Rupert Hoogewerf, who compiles the Hurun Report, China’s rich list, said many Chinese remained sceptical of the motivations of people donating money.


“The most important stakeholder in all charities in China is always the government, and there is usually a suspicion that a lot of donations are not pure philanthropy but rather influence-buying by wealthy business people.”

Although it is not clear what is behind the Buffett-Gates bizarre philanthropy show, it is clear that the Gates foundation does heavy partnering with various government agencies, both domestic and international. Sadly, but not unexpectedly, as Kimberly Dennis, CEO of the Searle Freedom Trust, pointed out Gates the philanthropist has not come anywhere near the success of Gates the businessman.

What's Warren Buffett Afraid Of?

Writes Fortune's Carol Loomis, a long-time Warren Buffet friend:

When Warren Buffett testifies before the Financial Crisis Inquiry Commission next Wednesday, it will be because he was subpoenaed. If you don't know how a subpoena works, this one begins with capital letters, "YOU ARE HEREBY COMMANDED to appear and give testimony."

Buffett had turned down earlier requests by the FCIC to appear voluntarily.

With flawless timing, Lew Rockwell runs an important column that was written by Murray Rothbard on the very topic of coerced testimony, here.

With this as background, so we properly understand the coercion involved, it is very curious that Buffett turned down the first offers to testify. To my knowledge this is the first time he has done so.

Could he be afraid that the questions may head in a direction that he doesn't want them to go in? For example, questions like what was the substance of the conversations he had with then-Treasury Secretary Henry Paulson during the height of the first phase of the financial crisis? Did Paulson give Buffett any ideas about possible Fed or Treasury activities, before Buffett made his decision to buy into Goldman Sachs? Why did Buffett think, as reported by Andrew Ross Sorkin in his book Too Big To Fail, that Paulson was talking to him in code and that Paulson did not want him to come to the rescue of Lehman Brothers?

I can't imagine Buffett wanting the questions to go in these directions.

Thus, he must have been quite pleased when the private interview conducted by the investigators went in another boring, unfruitfil direction, and then bizarre fashion. Here's Loomis again:

The subpoena and the accompanying May 25 letter made it clear that the topics Buffett was originally asked to speak about had narrowed. The announced subject of the June 2 hearing is "Credibility of Credit Ratings, the Investment Decisions Made Based on Those Ratings, and the Financial Crisis."

The connection between Buffett and credit ratings is Berkshire's longtime ownership of stock in that industry's biggest independent company, Moody's. Sitting at the witness table with Buffett will be Moody's CEO, Raymond McDaniel.

The only other scheduled witnesses that day are five additional people from Moody's.

The very last part of the June 2 hearings title is echoed in the letter to Buffett, in which he is told he will be asked to give his views on "the most significant causes of the financial crisis."

Indeed, yesterday three men from the commission, including Cohen, came to Omaha and did the "private interview" with Buffett. They began by asking him about credit rating companies and then verged into all of the other subjects mentioned in the first letter to him.

Buffett told this writer -- a longtime friend of his and a Berkshire shareholder -- that he liked the men and enjoyed talking to them. Two (not including Cohen) brought books for him to autograph and also indicated they might come to next year's Berkshire annual meeting.

This entire leak by Buffett about his upcoming testimony, through this Fortune article,  is quite interesting in and of itself. Remember, Buffett is very media savvy. He used to hang, afterall, with the late Kay Graham. This story is out for a reason.

He has to be nervous about something and the leak looks to me like an attempt to nudge the questioning in a certain direction, and also perhaps to clue others in that he is not voluntarily testifying against them.

In the article, Loomis at one point gives her opinion, which I'm sure is also Buffett's opinion, but it sure sounds less threatening coming from Loomis and it still gets the point across:

Provided that the commission members ask intelligent questions and don't try to grandstand, this writer predicts that Buffett will enjoy the hearings as well

I wonder if Buffett would consider the questions I have asked above as "grandstanding." I think if the FCIC truly wants to be thorough about its investigation it must ask them.

But I'm not holding my breath that they are going to be asked.

What's up, for example, with FCIC investigators acting like a bunch of groupies and asking for autographs from a witness that had to be subpoena?  Sounds to me like Buffett has them right where he wants them, in deep brain freeze, with little chance of any questions going in the direction I propose.

Warren Buffett is Goldman Sachs

New York Magazine's Duff McDonald makes the case:

Consider Buffett’s $5 billion investment in Goldman Sachs in September 2008. On the surface, it made a lot of sense. First, the news of such an investment could help put an end to the post-Lehman carnage on Wall Street. It did. And second, he had the storied firm over a barrel, extracting a juicy 10 percent coupon on the preferred shares they created for him in their moment of need.

He’d made this play before: He invested in Salomon Brothers in 1987 when the firm was on the run from Ron Perelman (things later got so hairy that Buffett had to step in and run the Salomon temporarily, an experience he termed “far from fun”). But with Goldman, it’s pretty clear who got the better of whom. Buffett got his 10 percent, sure. But Goldman rented the credibility of the world’s most reputable investor for a relative song—what’s $500 million a year in exchange for one’s continued existence? He even defended of the firm’s practices earlier last month, when the Goldman pile-on was in full force. (Perhaps it was mere respect. They got him; therefore they must be good. If you can dunk on LeBron …) But let’s not get too complicated. Untie it all, and it’s pretty simple: As one of Goldman’s largest investors, Buffett is, de facto, Goldman.

The Wall Street Journal reported on April 26 that Buffett was lobbying Nebraska senator Ben Nelson to grandfather Berkshire and its $63 billion derivatives portfolio from any new rules, specifically those that might force the company to reserve collateral to cover potential losses. Recall that this is the guy who called derivatives “financial weapons of mass destruction.” But they’re only dangerous, apparently, in lesser people’s hands. (The great Buffett? Posting collateral? How dare they.) Some of Buffett’s derivatives positions are outright bets on the direction of the market, the kind that can suddenly be worth nothing if he’s wrong. In other words, gambling. With shareholder money. Now where have we heard of that before?

Perhaps most damning to his cultivated image of being above it all is the fact that until last year, Berkshire Hathaway was the largest shareholder of rating agency Moody’s Investors Service, with a full 20 percent stake. It’s hard to think of any market participant that fell down harder on the job during the late housing bubble than the rating agencies, all in pursuit of the growing stream of fees from investment banks demanding that they put lipstick on their subprime pigs. Moody’s surpassed $73 a share in early 2007; it’s around $21 now. And yet, Buffett’s reputation took no similar hit.

The question is if it should have. Look beyond Buffett’s old-timey outsider shtick, the circus of an annual meeting, the notion that all he does is drink Cherry Coke and play online bridge with Bill Gates, and he’s just another Wall Streeter. Like any rational being, Buffett went where the money was (Moody’s), bought on the cheap (Goldman), and tried to protect his own interests (lobbying against derivatives reform.) Just like the rest of them. Only he’s better at it than they are.

Buffett was a lot straighter guy before he started hanging around with the Washington Post's Kay Graham. She's the one that introduced him to the Washington crowd, and brought out the D.C. type opportunism buried in his personality.

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.

Warren Buffett on Lloyd Blankfein and Goldman Sachs

At this year's annual meeting of Berkshire Hathaway, the top question put to Warren Buffett by shareholders was about Goldman Sachs. Berkshire made a $5 billion investment in Goldman preferred during the height of the financial crisis. NYT reported details from the shareholder meeting:

Warren E. Buffett became the highest-profile defender of Goldman Sachs on Saturday, offering staunch support of the firm as it combats fraud charges from the Securities and Exchange Commission.

Mr. Buffett also strongly defended the firm’s chief executive, Lloyd C. Blankfein, saying he did not think Mr. Blankfein needed to be replaced...His support for Goldman came in a question-and-answer session at the annual meeting in Omaha of Berkshire Hathaway...what drew the most attention was Mr. Buffett’s full-throated support for Goldman. He drew upon some of the same points that Goldman has used in its own defense, including the sophistication of the investors the S.E.C. says were defrauded by Goldman’s lack of adequate disclosure in the deal. He said those investors should have conducted better due diligence. Of one investor, he said, “It’s hard for me to get terribly sympathetic when a bank makes a dumb credit bet.”

He also stood behind Mr. Blankfein. When asked whom he would select if Goldman needed to find a new leader, Mr. Buffett replied, “If Lloyd had a twin brother, I would vote for him.”

Warren Buffett Pressing Hard to Get Current Derivatives Contracts Exempt from Financial Reform Bill

As I continue to state, the big problem with creating new financial regulations is that it creates power centers where the big boys can play to create legislation that is to their advantage.

None other than Warren Buffett has waded into the current regulation reform pool to move things in a direction that will benefit his firm, Berkshire Hathaway. WSJ reports:

A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett's Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say...

The fate of Berkshire's effort to influence the legislation remains uncertain. Senate officials said Sunday night that most of the details of the agreement haven't yet been finalized.

The provision, sought by Berkshire and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire put aside large sums to cover potential losses. The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.

Mr. Buffett's push is especially notable because he has warned of the potential dangers of derivatives, famously branding them "financial weapons of mass destruction."

Buffett actually has a legitimate point here, but the further point is that it takes a problem for a whale like Buffett to get legislation like this changed. If this kind of legislation simply impacted you instead of Buffett, there is no chance you would be able to get it changed.

Whales rule when power centers are created.

Goldman Director Tipped Raj About Buffett's Plan to Buy Goldman Stock

A Goldman Sachs director, Rajat Gupta, tipped off a hedge-fund billionaire, Raj Rajaratnam, about a $5 billion investment in Goldman by Warren Buffett's Berkshire Hathaway Inc. before a public announcement of the deal at the height of the 2008 financial crisis, a person close to the situation says, WSJ is reporting.

A few things to note about this report. It appears to be typical government trial by leaks to the press. Further, this is the same time frame that some other unusual trading was taking place in the stock of Berkshire Hathaway Does the SEC have the balls to investigate this peculiar trading?