Monday, March 10, 2014

Warren Buffet: Believing His Own Con

     One of the modus operandi of a con man is to constantly reaffirm his trustworthiness. That is how he prompts his marks to keep pouring money into his rigged game. Recently, billionaire investor and con man, Warren Buffet, said he does not think the stock market is a rigged game. This statement by one of the market's richest men is analogous to Vladimir Putin denying that there are Russian troops in Crimea. I am not saying that the average person can not make money on their investments in the market, only that the market movers like Mr. Buffet have rigged the game through their political connections and influence to insure their success.
     Primary to my analysis of Warren Buffet is the image he and others have created of him as the king of the buy and hold strategy. This strategy says that if an investor buys stock in a company and holds it for many years, they will make money. This is true if the investor picks the right companies, however, Mr. Buffet does not even live by his own advice to others. Eighty percent of the stocks purchased by Mr. Buffet's Berkshire Hathaway are held six months or shorter, making Warren Buffet  a trader eighty percent of the time and a long-term investor only twenty percent of the time.
     Mr. Buffet's fraudulent persona is necessary to convince the average investor to zig when he and his cohorts are zagging. Evidence of this fact is that during the period between 2004 and 2007, when the market was hitting new highs every week, Mr. Buffet was putting very little money to work. Which in itself is not bad. But Mr. Buffet used his influence to constantly talk up the market to attract evermore new money into it. Once the market crashed in 2008-2009, Mr. Buffet started buying up the shattered dreams of average Americans who lost much of their life savings.
     Buying low and selling high in and of itself is not corrupt. But Warren Buffet used his political connections with the Obama administration to profit. For instance, Mr. Buffet was able to wrangle a deal for preferred shares in General Electric Corporation after the share price had plummeted to $6 a share. This was after he was informed by the Obama administration that GE was going to receive billions in TARP bailout funds. Talk about insider trading!
     Warren Buffet, again using his close connection to the Obama administration, was able to invest in Bank of America and essentially receive a dividend on his money, at the same time that federal regulators were denying such payouts to the average investor of BofA shares. This special treatment of the market's power brokers by government regulators is nothing new. Bernie Madoff bilked fifty billion dollars from investors, partly with the help of regulators turning a blind eye to his financial shenanigans. I am not comparing Warren Buffet to Bernie Madoff. However, the way in which government regulators lavished favorable treatment on both men because of their overwhelming statures in the financial markets, is in its process similar even if the outcomes are dissimilar.
     Warren Buffet obviously is a shrewd man who has made himself and his shareholders very wealthy. And I am sure that he considers his actions, as fraudulent as they are, to be financially perspicacious. This is, after all, the mark of a good con man, i.e., to believe his own con. 

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