Buffett Defends Goldman, Moody's But We Still Like Him

The Oracle of Omaha has spoken: "I haven't seen anything in Goldman's behavior that makes it any more subject to criticism than Wall Street generally." Perhaps Berkshire Hathaway shareholders thought their leader might have harsher words for bankers, but then again, why would Buffett talk trash about one of his prized holdings?

In fact, according to Buffett and his vice chairman Charlie Munger, it's not Goldman, rather "a very defective system" that's to blame for the problems on Wall Street. Munger used the predator defense saying "When the tiger gets out and starts creating damage, it's insane to blame the tiger, it's the idiot tiger keeper!" That tiger keeper in our analogy is the regulators.

AP Photo/Nati Harnik

If not Wall Street banks, what about those conflict-ridden ratings agencies that slapped AAA on just about anything that its clients cobbled together? Buffett said the ratings outfits have "incredibly wonderful businesses," and that their "pricing power is significant," which may explain why Berkshire holds nearly 20% of ratings giant Moody's.

What's less easy to understand is how Buffett can defend an industry that downgraded to junk 91% of AAA-rated sub-prime mortgage-backed securities issued in 2007 (not to mention 93% of those issued in 2006). I don't expect Buffett and Munger to dis the companies or industries that they own, but maybe saying a little less would have been preferable.

Still, I went back to find some of my favorite Buffett-isms from over the years. Despite being a tad disappointed at the 2010 Berkshire meeting, you still gotta' love a guy who says stuff like this:

• "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1?
• "Be fearful when others are greedy. Be greedy when others are fearful."
• "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
• "You only find out who is swimming naked when the tide goes out."
• "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."
• "Price is what you pay. Value is what you get."
• "I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."
• "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."
• "Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."
• "In the business world, the rear-view mirror is always clearer than the windshield."
• "The investor of today does not profit from yesterday's growth."
• "It takes 20 years to build a reputation and five minutes to lose it."

The last one may be worthy of a second reading by both Goldman and Moody's...

[crck99]

Wouldn't it be something if Buffett said that what Goldman Sachs was doing was wrong, maybe even fraud? Check out this short vid with some of his recent comments about the economy:

http://www.newsy.com/videos/buffett-bullish-on-economy/

[bsmi021]

Dose anyone get it, he will back GS for all it is worth, He wants to make money on the deal!!!!!!!!!!!All these guys are in bed with one another and will play the system for all it is worth at all the expense of everyone else standing.

[rightbehind]

Well my guess is that the credibility that Buffett had has been used up. These guys burned the housing market down to collect the insurance. They need to drag in those who sold and those who collected on the derivatives and hedge funds. I want to see who these people are.

[maistir]

At least some investors I know believe that shorting itself is unethical (and unpatriotic). I'm not 100% sure myself what to think. But if "shorts" are allowed the old uptick rule ought to be re-instated.

Buffet is ignoring the fact the Goldman Sachs didn't just simply short the mortgage-based CDO's because they believed that the stuff was "junk", they simultaneously were telling risk-averse certain clients (pension funds, universities) that these were great things (AAA rated) to buy. Caveat emptor!

[antoniof123]

So let me see the deregulation crowd is at fault and that is what many of us have been saying all along but the rich are the ones who pushed for it because they win and we lose.

Again we the people need to take back this country and turn off the talking heads.

[pensacola8-2009]

There is no doubt that when a man likes cars so much, he may find a good dealer or broker to patronize and defend....well, Warren Buffet likes money and he has found a good broker to patronize and defend.

When car dealers go out of business, we find some clients are surprised and others are not. The same goes for financial brokers.

The government still owns significant share amounts of many firms that were bailed out. The economy will improve an sales of those shares at a profit will silence many critics.

[quapawsix]

In the old days we use to hang thieves.

[rightbehind]

Need to bring that back.

[quapawsix]

No matter how unethical it is here's your sign.

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1?

As the song says Money it's the root of all evil today.

[bobnjersey]

[In fact, according to Buffett and his vice chairman Charlie Munger, it's not Goldman, rather "a very defective system" that's to blame for the problems on Wall Street. Munger used the predator defense saying "When the tiger gets out and starts creating damage, it's insane to blame the tiger, it's the idiot tiger keeper!" That tiger keeper in our analogy is the regulators.]

yes ... it's insane to blame the tiger ... maybe we should blame all those who knew that the tiger was out of the cage ... but said nothing at all.

i wonder who knew the tiger was out of the cage ... and yet said nothing?

[-SkirtLifter-]

""Buffett said the ratings outfits have "incredibly wonderful businesses," and that their "pricing power is significant," which may explain why Berkshire holds nearly 20% of ratings giant Moody's""

This is an unfair paraphrasing of what he said. Buffet was pointing out that Moody's and other rating agencies have a monopoly. You can't go to Moody's and say, "I need you guy to give me a rating, and can you do it at a discount or I'll go somewhere else."

They would laugh at you...sure, try going somewhere else! That is what Buffet was pointing out. I saw the entire interview on CNBC and this is an unfair synopsis.