Losing My Integrity - Warren Buffet's Next Book?

Losing my Virginity is Richard Branson's (auto?)biography... for those who didn't understand where the title of this post was coming from.

I have been seriously questioning (and asking myself) the reasoning of Warren Buffett for the past several weeks as I believe that he is making less and less sense. I have respected Warren Buffett and as many, consider him as being the voice of wisdom and have read everything I can about him and watched all his interviews. But he simply doesn't make sense anymore. What has happened? I still don't know. I questioned his statements and thought that I had found the light from London Banker, with whom I exchanged a couple of messages.

So what's going on?
  • First, Warren Buffet publicly states that the Paulson (non-)Plan is a great one and is necessary, while ALL the people (investors/economists) who foresaw the crisis coming think this is madness, and a strategic error. Warren Buffet is no idiot, so why does he backs this? Of course, it does help his own purpose, but... would he put his personal gain above the US one? He said in 2003 that "Derivatives are financial weapons of mass destruction " but he then wrote PUTs for a notional value in billions of USD on the market. So he is probably now in deep trouble and is wishing for the market to rally up?
  • He invests $5 billion in Goldman Sachs on the 24th of September while the smart money knows that GS is not going to survive in its current state. He manages to get preferred shares yielding 10% and warrants for more equity. These shares are not available to the general public or common investors. But he nonetheless knows that his actions will lead a "sucker's rally" on the market by sending the wrong signal. I am sure he is clever enough to have obtained protection for his money by the Fed or the Treasury on top of that, meaning that the US Citizens will pay in case something goes wrong. Finally, sending wrong signals to the market is the best way to lead to a crash further down the road (the crash already occurred, just a couple of weeks further down the road!).
  • He does it again with General Electric: $3 billion on the 1st of October. Again, the smart money knows that GE is in deep deep trouble... but he uses his reputation to send the wrong signal to the lemmings.
  • Finally, on the 18th of October, he tells the American people that it is the time to buy American stocks and sends the lemmings against the wall at full speed. He does this while perfectly knowing that the market is still (very) expensive, that the earnings forecast are way too optimist and the deleveraging that is currently going on will be pushing the stocks down a lot further. Indeed, the stock market is already down 6-10% just the week following his statement!
So what is going on here? Has Warren Buffet lost his integrity? Does he have his arms twisted by someone? Should you have more information/opinion/ideas, please email me or comment on this post.


Tyler said...

The fact that he was early is undeniable, given that the market has dumped since these announcements.

But other than failing to time the exact bottom, perhaps this is actually what he thinks. Perhaps he is actually correct.

pej said...

There is a very little chance that he his correct on his market call only, but even that has been proven wrong by the next few days and by was is currently happening.

His statement about the Paulson Plan is not forgivable though :-(

In anyway, my opinion is that he shouldn't put the savings of his fellow citizens at risk.

pej said...

Bill Fleckenstein, one of the people I highly regard, has written about Warren Buffet today as well.

You get his point from the title, but it's still might be worth reading the whole article if you are not familiar with Bill:

Leave Stocks to Buffett (for now)