I have been an avid reader of the articles on this site for over a year. I too am a Warren Buffett (Trades, Portfolio) devotee; not simply an admirer of his investment prowess, but also his moral backbone and old school ethics in an industry where money seems to be the only consideration.
I live in New Zealand so I may be a little out of touch with America's markets. However, I invest in America, I follow American companies and its economy because it appeals to me. The reason why I write my first article on this site is simply to enjoy the opinions of greater minds on this subject. Is it possible that Buffett has not always been consistent with the eithical standards he has preached?
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I am currently reading Michael Lewis' book, Liars Poker which follows the fate of former investment bank Solomon Brothers. Most of you would know that Buffett invested $700M in Solomon in 1987. Curious about the investment I did a little digging. Why would Buffett want to invest in the type of company and culture he openly deplored? Why would he praise the integrity of a man like John Gutfreund who presided over this highly speculative and sometimes illegal trading at Solomon Brothers?
Is this slightly hypocritical behaviour from Buffett simply because he was offered a good deal in purchasing 9% preferreds that were convertable at $38 (the market price of the common stock being $30 at the time of purchase? The sizeable investment that Buffett made in Solomon meant that Berkshire became its largest shareholder, holding 12% of the shares outstanding.
Indeed, after the scandal had passed and Buffett converted his preferreds, the investment turned out to be a successful one. However, this begs the question of when there is a great deal available, does Buffett set aside his well published beliefs about not working with people who make your stomach churn, or investing in companies with good honest management.
Then there was Buffett's investment in Goldman Sachs in 2008. This again, has turned out to be a successful investment for Berkshire. But what about dealing with a guy like Lloyd Blankfein - a man who could not seem to see the conflict of interest when his firm was betting against the same securities it was peddling to its customers prior to the GFC. The senate investigation into the GFC where senator Carl Levin questions Blankfein is interesting watching. To me he seems like a man who is taking no responsibility and will not admit the most basic fact that the bank owes a fiduciary duty to its client.
Do these investments strike you as Buffettesque in nature? Yes they were succesful financially but they don't seem to marry up with our perception of Buffett based on his writings.
In researching Buffett's investment in Solomon, I found this article which funnily enough is written by Michael Lewis and asks the question of whether the Buffett we see in interviews and which comes through in his writngs is consistent with his actions.
I am interested to know your thoughts.