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More Buffett And The Pigman
The Market Ticker ^ | 8/7/09 | Karl Denninger

Posted on 08/07/2009 9:06:27 AM PDT by FromLori

It seems my previous article has garnered a bit of criticism from someone I hold in rather high regard, indicating that perhaps I have been less than clear in my criticism.

Let me be clear: There is nothing wrong with making a lot of money, and leveraging your wealth into making even more money!

It doesn't surprise me that those with lots of money get "special dispensation" in the form of conversations with Treasury Secretaries and other members of the government. The "little people" - that is you and I - will never get that sort of treatment, simply because we don't swing that sort of political weight, measured by money, around.

This sort of asymmetrical information flow is neither new nor is it, with few exceptions, illegal. Except in cases of stock trading and a few other places it is perfectly legitimate to profit from asymmetrical information flow. Indeed, asymmetrical information flow is what every businessperson seeks to acquire, because that is how one tattoos their competitors.

My argument rests solely with the "public persona" that Warren Buffett has presented for him by the media. The idea that he is some sort of "darling", different than, for example, Lloyd Blankfein (Goldman's CEO) in terms of how he seems to gain advantage (and profit), is where my objection rests.

The purpose of my article was simple: it was intended to point out that in fact Berkshire's enterprises have garnered great benefit from "Bailout Nation" and indeed absent the arm-twisting of the financial industry several of those investments would have been literal zeros and Berkshire itself might have even failed!

Indeed, a huge percentage of Berkshire's holdings are in firms that are at the very center of the financial crisis and contributed to a great degree to its formation and the explosion in 2008. Wells Fargo and its second line writing in California, a huge component of the housing bubble in that part of the country, is just one of the most egregious examples. The banking, insurance and ratings industry, indeed, has turned regulation on its ear and co-opted the government since the repeal of Glass-Steagall.

As just one example this, along with preferential choice of domicile to get around state usury laws, is why you have 30% credit card interest rates, as close of a statement as you will ever find that someone really isn't credit-worthy (that is, they're unlikely to ever pay back the loan granted) but "we'll do it anyway to squeeze every last penny out of the poor sucker, er, consumer, we can before they go bankrupt." Yet Warren seems to have no problem with the banks he owns writing such "credit" to consumers, never mind the obvious - these sorts of "terms" are almost impossible to escape from absent bankruptcy.

As yet another example Warren Buffett is a strong proponent of the estate tax - that is, he actually supports the government stealing as much of your wealth as possible after your death, and has said so on multiple occasions. This would seem to make no sense, but in fact it makes plenty of sense - Buffett owns firms that are in the business of selling people various investment and management strategies to avoid that tax, for which he collects a fee. If the "death tax" were to disappear, so would the need for those products and this very profitable line of business for Berkshire's many insurance-related concerns.

There is nothing particularly wrong with ruthless capitalism. Go ask anyone who found themselves on the wrong side of a deal with me when I ran MCSNet. Many of them will still, more than a decade later, insert a profanity-laced expletive between my first and last name. I still occasionally get hate emails from some of them.

But I've never claimed to be anything different than a ruthless bastard when it comes to my view of business, nor do I countenance any other "public persona" - by the media or anyone else.

It is the hypocrisy that bothers me and was the reason for my post, not Warren's general approach to business. Indeed the premise that one somehow "does better" when one is not a hard-nosed bastard in their business dealings is simply false - especially when the guy on the other side of the table doesn't see things the same way!

If you're going to be a hard-nosed bastard capitalist (and Buffett certainly is) then wear your badge with pride - there's nothing wrong with it, and indeed, such behavior, within the limits of the law (across the board) is how wealth truly is generated in America.

TOPICS: Business/Economy; News/Current Events
KEYWORDS: bailouts; berkshire; berkshirehathaway; buffet; buffett; economy; goldman; goldmansachs; warrenbuffett

1 posted on 08/07/2009 9:06:27 AM PDT by FromLori
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To: FromLori

More Buffett...I don't know anything about the Pigman.

2 posted on 08/07/2009 9:10:20 AM PDT by Wardenclyffe
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To: FromLori

“asymmetrical information” specialists like asymmetrical warfare specialists can be very destructive and no “law” can defend against them.

3 posted on 08/07/2009 9:41:39 AM PDT by PGalt
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To: Wardenclyffe

“A pig-man! Half pig, half man!”

4 posted on 08/07/2009 9:56:28 AM PDT by MotorCityBuck (Page 73, Johnson, Navin)
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To: PGalt

5 posted on 08/07/2009 10:01:49 AM PDT by FromLori (FromLori)
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To: FromLori

War-on Buffett? Thanks for the link, Lori. More evidence?


6 posted on 08/07/2009 10:35:25 AM PDT by PGalt
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