Tuesday, July 04, 2006
Teflon Buffet
Somehow, one of the great capitalist investors escapes criticism. Warren Buffet is the Sage of Omaha, and his ethics and behavior seem to be beyond reproach, if one reads the media coverage superficially. Those of us who have followed his career a little more closely wonder how he escapes the criticism routinely handed out to his rival CEO's and free enterprise oriented politicians.
Here is a man who, though he long remained married to the same woman till she died, lived apart from her and carried on a longstanding relationship with another woman. Here is a guy whose reinsurance companies that he acquired were right in the middle of the AIG mess, in fact, aided and abetted it. Somehow, he got a pass since their transgressions predated Warren's purchase of the companies, but the violations did not stop with Warren's purchase, only with Eliot Spitzer's investigations. What kind of due diligence is that for such a principled company? Here is a guy who has campaigned against estate tax relief while setting up his own estate plan to avoid taxes, through the charitable foundation route, giving his Berkshire stock to his family foundations and the Gates foundation. It's nice that the money has gone to charity, but make no mistake, the family trustees retain control of their money. Meanwhile, those moderately wealthy folks who have family businesses and farms, or who have good (taxable) estates but not big enough to go the foundation route, are opposed by the ultra-wealthy Buffet when it comes to estate tax relief. By the way, Buffet naturally favors estate taxes coupled with basis step - up for capital gains relief on death for stock and other assets. Some of the estate tax abolition proposals also did away with the step-up in basis, restoring most of the "lost" estate taxes through the capital gains income tax. I am not saying that I favor that, only that I would have expected the media to point out the self-serving hypocrisy in Buffet's position, but they haven't.
I could go on and on. In fact, Buffet has shown individual investors, as Graham did before, that long term value investing is the way to get rich, and for that, he deserves some credit. The fact that Buffet plays with a stacked deck is not something I would hold against him, since so many others with the same advantage fail. But his down home common sense, and holier than thou approach to public policy make me a little queasy. This is another guy whose skirts are less than clean, but for whatever reason, the business and general interest media have given him a permanent pass.
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On Monday, I sold 200 shares out of my BAMM position in my IRA at 16.80. These were shares I bought on 1/2/01 at 1.4375. Life can be good. Still have 1700 shares of BAMM left between my IRA and taxable accounts.
Here is a man who, though he long remained married to the same woman till she died, lived apart from her and carried on a longstanding relationship with another woman. Here is a guy whose reinsurance companies that he acquired were right in the middle of the AIG mess, in fact, aided and abetted it. Somehow, he got a pass since their transgressions predated Warren's purchase of the companies, but the violations did not stop with Warren's purchase, only with Eliot Spitzer's investigations. What kind of due diligence is that for such a principled company? Here is a guy who has campaigned against estate tax relief while setting up his own estate plan to avoid taxes, through the charitable foundation route, giving his Berkshire stock to his family foundations and the Gates foundation. It's nice that the money has gone to charity, but make no mistake, the family trustees retain control of their money. Meanwhile, those moderately wealthy folks who have family businesses and farms, or who have good (taxable) estates but not big enough to go the foundation route, are opposed by the ultra-wealthy Buffet when it comes to estate tax relief. By the way, Buffet naturally favors estate taxes coupled with basis step - up for capital gains relief on death for stock and other assets. Some of the estate tax abolition proposals also did away with the step-up in basis, restoring most of the "lost" estate taxes through the capital gains income tax. I am not saying that I favor that, only that I would have expected the media to point out the self-serving hypocrisy in Buffet's position, but they haven't.
I could go on and on. In fact, Buffet has shown individual investors, as Graham did before, that long term value investing is the way to get rich, and for that, he deserves some credit. The fact that Buffet plays with a stacked deck is not something I would hold against him, since so many others with the same advantage fail. But his down home common sense, and holier than thou approach to public policy make me a little queasy. This is another guy whose skirts are less than clean, but for whatever reason, the business and general interest media have given him a permanent pass.
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On Monday, I sold 200 shares out of my BAMM position in my IRA at 16.80. These were shares I bought on 1/2/01 at 1.4375. Life can be good. Still have 1700 shares of BAMM left between my IRA and taxable accounts.
