Skip to comments.Just look at what Warren Buffett has decided not to invest in
Posted on 12/27/2007 8:23:25 PM PST by bruinbirdman
When Warren Buffett so much as scratches his nose, the investment world sits up and takes notice. So the Buffettologists will be all over the latest acquisition by the worlds smartest investor.
While his rivals were still digesting their sprouts, Mr Buffett announced on the evening of Christmas Day that Berkshire Hathaway was paying $4.5 billion (£2.25 billion) for majority control of Marmon Holdings, an industrial conglomerate owned by the Pritzker family of Chicago.
Outside his insurance company investments, this is Mr Buffetts biggest deal yet. Given Berkshires investment preferences, there were few surprises in the deal. Marmons products are easy to understand and low-tech. It makes stuff such as railway tankers, plumbing materials and household wiring. The company is nicely unfashionable - a sprawling conglomerate of 125 subsidiaries. And it looks cheap. Details are scant but Mr Buffett appears to be paying less than ten times after-tax profits and less than one times sales.
All very Buffett. However, the timing of the deal and the geographic market of Marmon - overwhelmingly the US make it more interesting. Berkshire is no stranger to overseas investments yet chose to snap up an asset in its own backyard just as America is threatened with a severe downturn, possibly a recession.
Of course, Berkshire is a famously long-term investor and isnt particularly bothered about getting its timing exactly right. Nevertheless, this is a vote of long-term confidence in the US economy generally and in the poleaxed housebuilding sector in particular.
The other intriguing aspect is what Mr Buffett has chosen not to invest in. Its a certainty that the investment banks seeking out rescue capital over the past few weeks would have had Omaha, Mr Buffetts home town, high on their list of places to visit. Mr Buffett has the cash ($50 billion and rising), the reputation and the appetite to do just these kinds of big, difficult deals ballsy investments conventional funds would shun. I can spend money faster than Imelda Marcos when things are right, he once said.
Rumours he was poised to invest in the troubled investment bank Bear Stearns, then in the mortgage lender Countrywide Financial, turned out to be false. Since then Citigroup, Morgan Stanley, UBS and Merrill Lynch have all gone out in search of rescue capital and have all struck deals with Middle Eastern or Asian sovereign wealth funds.
In every case, Mr Buffett has been nowhere to be seen.
The idea that Mr Buffett wants nothing to do with banks doesnt square with the facts. He was certainly bruised by his investment in Salomon Brothers in the 1990s. He joked at the time: I felt like the drama critic who wrote I would have enjoyed the play except that I had an unfortunate seat. It faced the stage. But in the end he exited Salomon with a respectable profit when it was offloaded to Travelers, later merged with Citigroup. Bank investments like American Express and Wells Fargo have also paid off handsomely.
In the latest deals, the banks were dangling seemingly enticing terms. Citigroup offered a juicy 13 per cent coupon on the convertible shares sold to Abu Dhabi while Merrill gave the Singaporeans a 12 per cent discount and a money-back guarantee. Yet Mr Buffett appears not to have been swayed.
Goldman Sachs reckons Wall Streets finest are due to confess to yet another wave of sub-prime writedowns. Mr Buffetts apparent indifference thus far to any of the approaches and blandishments from said banks suggests he might agree.
Anybody who thinks Planned Parenthood is doing a “lot of good things” is nearly evil incarnate. An old, self-obsessed coot who believes in inheritance taxes and hates the unborn. Can you think of a more Dickensian villain?
No wonder he’s such a strong supporter of it and the liberal politicians who keep it in place.
Globalist Buffet is buying American infrastructure and leaving the government-insured lenders to others.
Member companies of The Marmon Group operate independently within nine diverse business sectors, grouped within four business segments:
Electrical Components: Wire & Cable Products serving energy related markets, residential and non-residential construction and other industries.
Transportation Equipment Services: Transportation Services & Engineered Products, including railroad tank cars and intermodal tank containers; and Highway Technologies, primarily serving the heavy-duty highway transportation industry.
Construction & Industrial Components: Distribution Services for specialty pipe and tubing; Flow Products for the plumbing, HVAC/R, construction and industrial markets; Industrial Products including metal fasteners, safety products and metal fabrication; and Construction Services, providing the leasing and operation of mobile cranes primarily to the energy, mining and petrochemical markets.
Retail Solutions: Water Treatment equipment for residential, commercial and industrial applications; and Retail Services, providing store fixtures, food preparation equipment and related services.
Member businesses employ 21,500 people and operate more than 250 production facilities, primarily in North America, the United Kingdom, Europe and China. Collective revenues totaled $7 billion in 2006. Forbes magazine ranked The Marmon Group 35th on its 2006 list of the largest private companies in the United States.
The spelling of Marmon is very close to ‘Mammon’ ... Coincidence?
; ^ )
Seems right to me...
Anybody who thinks Planned Parenthood is doing a lot of good things is nearly evil incarnate. An old, self-obsessed coot who believes in inheritance taxes and hates the unborn. Can you think of a more Dickensian villain?
I actually read his autobiography and was struck by his total disconnection at a personal level. He basically pored over investment data before noting his wife had left him. This only occurred to him after he ran out of his favorite drink and noticed that his wife had hired a personal maid to come in to take care of him as a parting gesture. Top that off with that he doesn’t believe in helping his family, but willing hands over billions of dollars of Berkshire stock to the nonprofit Gates foundation (which nicely shelters his wealth from taxes), and it is obvious that the guy owns the world but really is completely broke when it comes to people who care about him. How he has become some sort of warped folk hero is quite amazing considering the outcome of his life (disregarding his obvious financial success). His obsession with killing babies further paints him out as a very cold human being.
>>>>Rumours he was poised to invest in the troubled investment bank Bear Stearns, then in the mortgage lender Countrywide Financial, turned out to be false. Since then Citigroup, Morgan Stanley, UBS and Merrill Lynch have all gone out in search of rescue capital and have all struck deals with Middle Eastern or Asian sovereign wealth funds.
Funny how I don’t see Goldman Sachs on that list
New Jersey Could Move to Ban Iran Investments
If he were Ebeneezer Scrooge, Tiny Tim would have been snuffed out via a free abortion.
Totally agree, somehow Buffet took his mid-western roots and completely morphed into an uber-social liberal. He couldn’t wax poetically enough about the great Katherine Graham of the Washington Post when he bailed them out back in the 80’s. He seemed to buy into the zero population elitist argument of removing the peons from Earth so the upper class could better enjoy their ski vacations. While I greatly admire his financial acumen, I give him poor grades as far as what he could have done when it came to real human beings in his life. Why does a guy like him not see the abortion industry as the evil that it is? Quite perplexing, I wish he had went the other way as he just fuels the elitists to continue their social eugenics experiment.
Among living titans of industry, only George Soros springs to mind as a possible rival.
Maybe they can share the same oven in Hell for all eternity.
[Barring the miracle of Salvation.]
Buffett, Schmuffett, I’m tired of hearing about this senile old leftist fart. He’s just another nanny fascist Dhim.
Move on to the real market.
Buffett, Schmuffett, I’m tired of hearing about this senile old leftist fart. He’s just another nanny fascist Dhim.
Move on to the real market.
That was WELL worth repeating!!!
Weird as he was, I have far greater respect for Howard Hughes than for a guy like Buffett. No comparison in terms of being a man.
Thanks for the ping!
Thats OK he isn’t leaving anything to his family either from what i’ve heard there still are real scrooges and anit-capitalist capitalists !
I met this creep one time when he was the opening act for our band in Pittsburgh, Kennywood Park one time. He did draw about 2,000 people and sang Tip Toe.
Dear God, did I really go through this?
I don't recall anything else. Thankfully.
He bought a piece of a company that actually manufactures useful things - such as ones you can’t live without. Compare that to investing into irresponsible banks who loaned money (that they didn’t have) as if there is no tomorrow.
In other words, he invested into a manufacturer of inelastic demand goods:
These are products that people need no matter what, and pretty much regardless of the cost. Oil is one of them, some food, but you can see many more around.
Investing into, say, fashion industry or jewelry would result in goods with very elastic demand, and if the money supply dries out then consumers won’t be buying that and won’t feel any hardship.
To me it seems that Buffett does not expect any sudden prosperity in the country, and he is battening the hatches down for a period of limited spending. At such a time only true necessities will be bought.
There was once a maker of luxury cars called Marmon. It certainly existed in the late 20s. Perhaps went out of business in the early 30s. I wonder if this Marmon is actually a corporate descendant of the auto company.
It’s also close to Mormon.
In many ways Mr. Buffet is just folks. Most of his favorite Omaha eateries are neighborhood places, and old family-run restaurants. He took Bill Gates to “Petrows”.
His view of Planned Parenthood having done lots of good ECHOS his belief that the Catholic Church has done much Good. He never said that either of those were PERFECT.
He gave more to the Boy Scouts, after the NEA became effective in driving Scout Troops out of our Public Schools.
Heck, He even answers his own door, when a Pizza is delivered.
Yes it is
Anyone who apologizes for Planned Parenthood has the blood of the unborn on their hands—including you.
That's just libelous. Where is there one shred of evidence that any member of Buffet's family wants for anything? As I understand it, he's set them up quite comfortably -- but not so comfortable that they become spoiled and don't ever have to work for an honest wage.
And criticizing him for giving his wealth to charity instead of turning his offspring into spoiled Paris Hilton clones? That's just ridiculous.
Reading this thread, it seems like far too many people have Free Republic disease: they don't like a man's politics (I don't like Buffet's politics either) so they feel the need to denigrate and attack him for everything he's done, including things that are totally non-political, or even sensible (the Gates Foundation does tremendous, mostly politically unobjectionable work).
There’s a difference between not wanting your children to be Paris Hilton and arguing for an estate tax that effectively keeps small businesses from transfering ownership generation to generation. Warren Buffet is an evil, Clinton-cheering, baby-killing monster, and you should be ashamed for defending him.
Yeah, and the ACLU actually once took a case advocating that a person could display a Cross on her front porch. Great, calculated PR for them.
But finding a glimpse of good among a preponderance of societal evil...
...is like trying to find a needle in a haystack.
Mussolini probably took buddies to favorite local eateries, too.
Oh, I think if someone made the same thing cheaper and could deliver it on time, one might find out that there is some stretch to that inelasticity. Its called competition.
Inelasticity might be if I have food on a desert island and no money and you have a thousand dollars and no food.
Now if I have twice as much food as you on that island and we both have $1000, I might be willing to test elasticity if I know a boat will arrive tomorrow and you don't.
In any event, Buffets wire and water processing equipment are not inelastic.
"Price elasticity, for example, is the sensitivity of quantity demanded or supplied to changes in prices. "
he is a typical greedy corporate egotist as well....talks big about donating his money....an amount that I am sure offsets his tax obligations....but then he buys most of his furniture that he sells in his stores from China, not the USA....how many Americans are poorer because the North Carolina furniture business is a shadow of its former self.
... the weird thing about Buffet, and the conservatives who see him as a folksy tycoon, is that he embodies everything that is wrong with our country, and very few can see past their portfolios long enough to see it. He’s a stock-picker without a heart; anyone who can describe Planned Parenthood as a worthwhile charity is a Malthusian misfit, a menace to anyone who actually cares about law and order. Among the Devil’s servants, he stands as a kind of field marshal for evil.
they can save money AND send their money to whatever they want.....
and besides, what else do either of them need?.....Gates has a zillion dollar hugmongous mansion on Lake Washington....he doesn't live deprived nor frugally....
The important things in life are utterly non-political.
I agree with you. Wasn’t it Buffet that built the park for the little league world series in omaha? I can see where that would po a lot of people...lol.
Howard Hughes made vast contributions to or redefined several industries in his lifetime - movies, airlines, airplane building, marine submersion, satellites, casinos and real estate, financing of medical research - and lost and made fortunes in the process.
Buffett was only concerned about making a fortune, and sheltering it from government taxes while preaching to all that same taxes must be paid by them.
While I admire Buffett’s “value investing” acumen, Hughes was not a hypocrite, Buffett is a hypocrite of the first order.
That also explains his reluctance to invest in high technology, an internally and externally essentially deflationary industry, aside from his explanation that he "doesn't understand it".
Thank you for your kind reply.
Yes, it’s funny how some billionaires (Howard Hughes, Richard Branson) go off on adventures and try to positively effect the world around them while others, like Buffett, are bores who seem to do nothing but see how much wealth they can stockpile for themselves.
For people like Howard Hughes money is a just reward for lifetime of inventions and trying to improve things around them, for society’s sake or just because they can.
For Warren Buffett, hypocrisy and callousness is his just reward for thinking of and making nothing but money.
With respect to Buffet and Soros, there is an historical template being replicated. They are Twenty-First Century counterparts to Cecil Rhodes and J.P. Morgan. Neither of them really owns their wealth, they merely manage it. Unfortunately, there seem to be few left around here who will understand the reference... /grin
Good point. My dad always said get a job in an industry that deals with something everyone needs. He is an engineer; was in natural gas.
I was in grocery distribution and warehousing.
Along those lines I always thought of toilet paper.
Commodities are a different category. While I was in food distribution, the company had an absolute rule that the buyers could not speculate on commodities, not even as a hedge. We bought finished product not raw material.
I don't see Berkshire Hathaway in speculative assets. Strictly long term investments. Hmm. It does own insurance companies.
Please: NO profanity, NO personal attacks, NO racism or violence in posts.
He’s investing against inflation. Producers will raise cost of goods to cover inflation whereas banks will not. The banks’ 13% and 20% rates offered to Dubai and Singapore offer insight into the anticipated real inflation rate over the life of those loans.
I understand the reference and raise you one. Go back and read the 4 categories of investments in #6 and see if that doesn’t remind you of something about to be built, something very wide, incredibly long and lined with motels, restaurants and gas stations not to mention rail lines.