Tuesday, May 4, 2010

Dealbook Column - From Buffett, Thought-Out Support for Goldman - NYTimes.com


Last week I wrote a piece about "Learning the Boring Stuff". I basically said that there have been numerous situations where people who took the time to actually study and understand complex documents like prospectuses and legislation seem to have an uncanny ability to succeed.

Apparently Warren Buffett said something similar last weekend at the Berkshire Hathaway annual meeting:

To {Buffett}, investors should make their investment decisions based on the quality of the securities, not on who helped put them together or who else was betting for or against them. He suggested those factors were irrelevant.

“I don’t care if John Paulson is shorting these bonds. I’m going to have no worries that he has superior knowledge,” he said, adding: “It’s our job to assess the credit.” The assets are the assets. The math either works or it doesn’t.

And then further in today's article:

Mr. Buffett, who has always approached investing as a dispassionate exercise based on his reading of the numbers, said IKB and ACA had all the relevant facts that any investor would need. They were able to see all the mortgages, which were referenced in full, and yet they made what turned out to be a very bad bet.

“It’s a little hard for me to get terribly sympathetic,” he said. When he makes his investments for Berkshire, he said, “we are in the business of making our own decisions. They do not owe us a divulgence of their position.”

To me, most of these major investment firms have large staffs of research people whose job it is to do independent research and study the deals that their firms are investing in. If they simply relied on the rating agencies, or the smooth talk of a Goldman salesman, whose fault is that?


Dealbook Column - From Buffett, Thought-Out Support for Goldman - NYTimes.com