Monday, June 02, 2008

Marginalizing Warren Buffett

One of my short financial positions is in Wells Fargo, the California-based bank.

Owners of Wells Fargo always point to Warren Buffet, a large stakeholder, as an unimpeachable argument for the company's future success. These Morons speak as though Warren Buffet has never been wrong.

Here's what Buffet said recently about Wells Fargo:

2:38 pm: Buffett says Wells Fargo (in which he has a stake) will have larger than usual losses, but that won’t be the end of the world and he’ll keep owning it over the next 5-10 years. "I would predict that Wells will be earning a lot more money ten years from now than it is now." It wouldn’t matter to him if Wells Fargo was delisted for three years and he could just watch the business. He doesn’t feel that way about every bank, of course.

"5-10 years" Warren? They'll be earning "a lot more"???

First of all, anytime someone says "you have to think long term" or "it's a long term investment" you should be on your guard. Good long term returns are built upon SOLID SHORT TERM RETURNS.

Warren needs to glance at the chart above and realize that right now, Wells Fargo hasn't appreciated one penny from May 1998. Amidst two giant consecutive bull markets, the bank still couldn't muster a gain. (Sure it had dividends, but so do less risky bonds.)

If WFC couldn't budge over the past benign decade, then what on God's overheated Earth could make him optimistic for the next one?

The Californian economy is in deep trouble. Read Mr. Mortgage's latest scathing analysis.

Here's a couple more excerpts from the 77 year-old 'old coot':

3:14 pm: Munger - "We never should have created the situation" where the holders of the first mortgages on a home have a conflict of interest on foreclosures. It was a stupid system. "There's a certain amount of tragedy in this that may be unfixable in a capitalist system." Buffett - When you get into any kind of bubble where you think tomorrow's price will bail out any decision now, there's going to be trouble. He says Berkshire bought some sub-primes, and even though it could reset the rates higher, it won't.

2:25 pm: Asked if the political situation in Italy affects his view of the market situation there, Buffett says, "No. We don't even let the political situation in the U.S. affect us."

Now why would anyone take 10 year investment advice from a guy who probably won't even be alive then?

Why should I fear taking the other side of Warren Buffett's bets when he's optimistic about a bank that couldn't appreciate in a great economy?

He says he doesn't look at the "political situation" yet he's freezing sub-prime mortgage rates - to the detriment of his investors. With that, his highly publicized charity work, and his cheerleading for a Moronic socialist (Barack Obama), I see a man who's time is long since past. I see a man who, whatever his past "accomplishments", has only dotage and crusty worldviews swirling in his brain.

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