Folks love to point fingers.
When it comes time to pin the blame for the country's economic woes, there is no shortage of answers. Aggressive mortgage brokers may have been the early scapegoats, but now the net is cast ambitiously wide.
Liberals blame conservatives for lax regulatory oversight. Conservatives blame liberals for fears of nationalization. Turn on the TV, and talking heads will trash talk Wall Street greed, fraudulent money managers, and outlandish compensation models. Turn off the TV, and everybody else faults the media for fear mongering.
Let me pin the tail on the person you would least likely expect to be the fall guy. My modest proposal? Let's blame it all on Warren Buffett.
Say it ain't so, WB
Berkshire Hathaway's (NYSE: BRK-A ) (NYSE: BRK-B ) charismatic leader has no problem absorbing criticism. He's humble. He's endearing. He's so easy to root for.
However, he's also not perfect. As an investor, Buffett is coming off his worst performance -- in absolute terms -- during his 44 years at the helm of Berkshire Hathaway. Sure, he beat the market, but only because he bled less.
He owns up to his mistakes. In discussing his unfortunate decision to buy into ConocoPhillips (NYSE: COP ) when he did, Buffett concedes that "the terrible timing of my purchase has cost Berkshire several billion dollars" in his latest annual shareholder letter.
It's more than that, though. Berkshire Hathaway's book value fell by 9.6% in 2008. There are 14 stocks in which Berkshire Hathaway has stakes worth at least $500 million, but positions that make up less than 20% of the respective companies. Half of those closed out the year worth less than the amount of money that Buffett has put in. If Buffett can't win in this market, and he's arguably the greatest investor of our generation, how do we stand a chance?
Curses to you, Buffett. Your mortality is a sharp pin, piercing the poorly inflated balloon we call confidence.
Calling bottom moves your name to the top
The Oracle of Omaha isn't perfect. No one is. However, his actions in September and October of last year may be interpreted as either signs of calling a market bottom or igniting premature optimism. He did a lot of things at the time:
- With most of the country rallying against government bailouts, Buffett became one of their more vocal supporters.
- Berkshire Hathaway purchased a $5 billion stake in Goldman Sachs (NYSE: GS ) , and followed with a $3 billion chunk of General Electric (NYSE: GE ) . Buffett's no dummy. His investment came in the form of high-yielding preferred stock, with warrants to cash in any potential common stock gains. However, the investors that followed him into these blue chips didn't have the same kind of low-risk luxury. They bid up the common stocks, which trade lower -- and in GE's case, considerably lower -- today.
- On Oct. 16, The New York Times ran an op-ed piece by Buffett -- entitled "Buy American. I Am" -- urging readers to snap up shares of stateside companies. The market rallied, with the S&P 500 closing at 946.43 that day. It has gone on to shed 28% of its value.
"Let me be clear on one point: I can't predict the short-term movements of the stock market," he wrote, giving himself a little wiggle room. However, beating the "long-term investing" drum doesn't excuse him from arriving unfashionably early with his buy advice. The S&P 500 now has to climb 38% just to make up for the 28% slide (and, no, that's not a typo -- do the math).
The Buffett list
One can argue that Buffett isn't enough to save the market. It's not as if he can take GEICO or Dairy Queen public, priming the dry well of IPOs that pad investment banking coffers and get investors excited about the market. It's not as if he can write another influential op-ed column, because investors are still stinging from the last one.
He is the antithesis of the greed that corrupted bankers and the abusive power that defines the media. Buffett, by all accounts, is a pretty amazing guy. However, when the market needed a cleanup hitter to step up to the plate and clear the bases last fall, he whiffed.
Instead of buying stakes in dependable bellwethers, Berkshire Hathaway appears to be positioning itself as a loan shark of last resort to desperate companies like Tiffany (NYSE: TIF ) and Harley-Davidson (NYSE: HOG ) . Those are two of his more recent investments, yet they too hit fresh lows last week. Again, Buffett's investments are secured by chunky yields that won't blow up in his face unless the companies go under. The problem is that investors who initially bid up these companies once they see the Nebraskan wave his wand are seeing their faith in our country's greatest stock picker erode with every downtick.
So am I really blaming Buffett for the market's doldrums, or was this all just a Jonathan Swift send-up to show that Buffett is still the greatest? At this point, I fear that I may have even confused myself. I guess my expectations of Buffett were so high when he was Mr. October, pointing at the fences.
Why did he have to be so mortal?
Some of Buffett's other greatest hits:
RSS Headlines
Fool UK