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 world’s 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 Buffett’s biggest deal yet. Given Berkshire’s investment preferences, there were few surprises in the deal. Marmon’s 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 isn’t 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. It’s a certainty that the investment banks seeking out rescue capital over the past few weeks would have had Omaha, Mr Buffett’s 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 doesn’t 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 Street’s finest are due to confess to yet another wave of sub-prime writedowns. Mr Buffett’s apparent indifference thus far to any of the approaches and blandishments from said banks suggests he might agree.
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:
http://en.wikipedia.org/wiki/Elasticity_%28economics%29
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.
Even one who believes in justification by law should not want to stand before his Creator with the blood of innocents on his hands.
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.
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