The worst investment decision Warren Buffet ever made

Or: On Outperforming Warren Buffet

Warren Buffet is hailed as the best investor in the world. His net worth as an investor is generally regarded as proof.  I started 100% DIY investing in March 2006 when we transferred our remaining holdings from our full-service investment adviser to our discount brokerage. We are currently standing at 31% over book value. In the same period, BRK-A, Buffet’s holding company has gone from trading at US $90,625 to yesterday’s close at $103,000. That is a 14% gain. Does that make me twice as good an investor as Warren Buffet?

An article in Canada’s Globe and Mail recommends that individuals invest like Buffet. There are many articles of this kind floating around; Buffet is considered a prophet of investing, the Oracle of Omaha. I’ve also shared here some of my tips of investing and there is some overlap between the way the Buffet invests and my style.  Yet in the commentary section of the Globe and Mail article I wrote:

I cannot invest like Warren Buffet. He breathes and the market reacts. It is harder for him to buy shares on the open market too, since if he were to let it be known that he wanted a billion dollars of shares of something, the price would go up uncontrollably. That’s why he often buys preferred shares which aren’t available to guys like me. He can’t invest like me either. Unlike Buffet, whenever I buy something the price seems to go down immediately. I buy very small stakes in companies that I think have promise or which have good yield. But it’s too small for anyone to pay much attention. I like it that way.

So perhaps comparing myself to Warren Buffet is a bit of bravado on my part, a testosterone-filled pissing match. It’s not comparable at all because Buffet is investing billions and I’m like an ant crawling around the big toe of an elephant. And to be fair, there have been times when Buffet’s done much better. I’ve been lucky during this recession, I’ll admit it.

But there is a fundamental difference between Buffet style and mine. He is buying America whereas I’m shorting the US dollar and buying Canada–a strategy that may back fire according to Roubini; but I don’t think it will because all the trends in the US government until the 2010 election are inflationary. Ken Boessenkool in the Globe and Mail writes about Canada’s dollar, the loonie:

… perceptions of future investment returns on a country-to-country basis are often affected by large shifts in fiscal policy. Bad fiscal policy – in the form of unsustainable deficits and debts – will cause investors to expect increases in future taxes and lower rates of return. In that case, the relative attractiveness of that country as a place to work and invest will fall, driving down economic growth. In response to poor fiscal policy, a falling currency can provide the automatic stabilizer to lower growth rates resulting from rising deficits and unsustainable debts.

And this is exactly the picture we are seeing south of the border. Barack Obama has put the United States on a debt and deficit path that is far worse than Canada experienced in the early 1990s, when The Wall Street Journal called Canada an “honorary member of the Third World” and our dollar was flirting with historic lows.

Moveover, our world-view is informed by biblical conservatism. The Bible is a good guide to investing; it affirms risk taking, generosity, unselfishness and not allowing money take hold of you (I am of the opinion that selfish people make bad investors).  It also warns about indebtedness. In my view, the US government’s profligate debt-based spending is a path towards poverty that is immoral and self-destructive. This kind of behavior is not affirmed in the Bible at all.

Warren Buffet knows it is bad in the US. But perhaps he is in denial about the single worst investment decision that he ever made:  his ill-informed endorsement of Barack Obama for President. Ill-informed because had he paid attention to Obama, he would have known that he was a radical leftist–perhaps it is not too far to say that BHO is a Marxist given his background. He would have known also that BHO knows nothing about economics and has never been an executive of a company or any other entity which would have qualified him for becoming the CEO of the United States. The man who is famous for researching companies before risking billions failed to do his research into BHO and it is literally costing Berkshire Hathaway billions in market capitalization.

3 thoughts on “The worst investment decision Warren Buffet ever made

  1. “Ill-informed because had he paid attention to Obama, he would have known that he was a radical leftist–perhaps it is not too far to say that BHO is a Marxist given his background.”

    Mr Obama is a moderate conservative. He is not radically left wing.

    “We are currently standing at 31% over book value. ”


  2. Last year, Mr. Obama made fiscal restraint a constant theme of his presidential campaign. “Washington will have to tighten its belt and put off spending,” he said back then, while pledging to “go through the federal budget, line by line, ending programs that we don’t need.” Voters found this fiscal conservatism reassuring.

    However, since taking office Mr. Obama pushed through a $787 billion stimulus, a $33 billion expansion of the child health program known as S-chip, a $410 billion omnibus appropriations spending bill, and an $80 billion car company bailout. He also pushed a $821 billion cap-and-trade bill through the House and is now urging Congress to pass a nearly $1 trillion health-care bill.

    Karl Rove, Wall Street Journal

    Obama may have run as a moderate. He’s spending us to bankruptcy as a nation.

  3. Pingback: Warren Buffet redux « The Righteous Investor

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s