One of the things that drives me berserk about the financial media is its tendency to be skeptical about things it oughtn't be, and its tendency to be credible about things it oughtn't be.
Maybe that's two things. Anyway, it's two sides of the same coin. As exhibit A I point you to Marketwatch.com, where David Weidner penned an article about Warren Buffett that I think is equal parts sad and stupid.
Why is Weidner writing about Warren Buffett? I mean, beyond the fact that everyone is? Well, this past week Buffett penned an article for The New York Times stating that he was buying stock in American companies, and suggesting that others do the same. (See "Buy American. I Am.")
Weidner responded to Buffett's article by making the following points/accusations:
- That because Buffett can get better terms than you, his advice does not apply to you.
- That Buffett wrote the Times article to talk up shares because his recent investments in General Electric (NYSE: GE ) and Goldman Sachs (NYSE: GS ) preferred shares were underwater, and he needed to "stir up some buying" to get their prices back up.
- That the stocks Buffett's buying for his personal account are irrelevant, since he made his fame with his gains at Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) .
The "Rich Guy" lament
It's altogether typical for some financial journalist to take a swing at Buffett. Buffett is certainly not above criticism, but usually these commentaries have the effect of highlighting the frailties of the writer, not of Buffett. David Weidner's column is one of the more pathetic examples thereof, if for no other reason than because it betrays a nearly painful ignorance of Buffett's history as an investor, his past comments about the markets, and the things that are and aren't important to him.
Buffett's Times article is the latest in a series of very rare public calls that Buffett has made over his career regarding the price of the market. In the midst of a grueling bear market in 1974, he said he felt like "an oversexed guy in a whorehouse" because shares were so cheap. He was right. In 1999, he said that the market's returns over the next decade would be disappointing. He was right.
And then there's the performance of Berkshire Hathaway shares over the past 44 years since Buffett took the helm. One need not quibble on the margins to understand that Buffett tends to be right about lots of things when it comes to valuing securities -- and occasionally, the market.
Buffett very carefully notes that he doesn't know whether we're at a market bottom, nor does he know where the market will be even a year from now. He's not timing the market -- he's just saying that it's cheap. When he's said these things in the past -- and when he's said the opposite -- he has always been right. There is no reason that Warren Buffett should comment on these things. He has little to gain -- people sneered at the "old man" in 1999 for his claim that the market was overvalued.
What makes Warren Buffett such an important, influential investor is not just his phenomenal returns, but also his willingness to talk about what he does, his willingness to teach. Is there evidence in the past of Warren Buffett making a macroeconomic call that was talking up his book? He was a stock buyer in 1999 at the same time he was calling the market overvalued. Buffett wasn't always BUFFETT. Goldman Sachs gave Buffett the deal he got specifically because the market considers a vote of confidence from Warren Buffett more important than a vote of confidence from anyone else -- including the federal government.
Warren Buffett: Suddenly freaked out about stock quotes
Where does this enormous pool of goodwill come from? Apparently it doesn't occur to Weidner that Buffett gained it by never engaging in the very behavior Weidner accuses him of.
That behavior includes trying to influence the market for some short-term quotational advantage. To suggest that Buffett cares about the fact that his Goldman and GE warrants are out of the money in the month after he entered into the deal is to ignore the fact that he hasn't used the public arena to talk up Berkshire stock, which comprises more than 95% of Buffett's total net worth (and which, Weidner conveniently forgets, he has pledged entirely to charity). Buffett has stood silently in the past -- on several occasions -- as Berkshire stock has dropped 50% or more.
Buffett never spoke up to prop up the price of any of his long-term holdings. Not McDonald's (NYSE: MCD ) , nor Coca-Cola (NYSE: KO ) , nor even tiny GATX. A few choicely placed words for the latter could have sent it into the stratosphere. And yet, nothing. Ever. Yet now we're to believe that he was so concerned about the one-month performance of Goldman and GE that he fires off an article that doesn't bother to mention them?
Really? That's your point? Are you sure?
After all, Buffett told us almost seven years ago that he'd be buying stocks today. In 2001, Buffett wrote an article in Fortune magazine stating that the U.S. stock market would be attractive when it traded at a price-to-GNP of 0.7 to 0.8. Guess where it is right now? I calculate the Wilshire 5000's total market cap at roughly $10.7 trillion, and dividing by the GNP, which is $14.4 trillion, I get 0.74. Don't you hate it when people do what they say they were going to do?
Buffett apparently used the non-famous account
The last element I just think is bizarre. Weidner notes that Buffett is buying stocks in his personal account, but that "his fame, success, and fortune ride" with Berkshire. This after Weidner has just made a point of critiquing several monster purchases that Buffett made in Berkshire Hathaway, and further failing to mention the billions he's recently invested in Wrigley, Swiss Re, Constellation Energy, and Burlington Northern (NYSE: BNI ) . Which is it?
Buffett has deployed more than $40 billion in the past 10 months, much of it in non-"sweetheart" deals using plain old common stock. He's waited years to do so, while people have screamed that he should just dividend his cash out. And now, in the midst of a market crisis, he does what he has always said he would do in a crisis of confidence. He bought, recommended that others do the same, but did not bother to specify which securities they should buy, least of all suggesting ones he himself had bought. If this were some conspiracy to keep you poor, it would be the world's stupidest.
And yet, here is hapless David Weidner, coloring it as just that. Maybe Warren Buffett really did wait more than a half-century to show the slightest bit of concern about the quotes of a couple of securities that make up a fraction of his net worth.
Yeah, maybe. That's got to be it.