Warren Buffett – the Greatest PR Machine of American History

Why is it that people trust Warren Buffett so much? Why is it that millions of Americans listen intently to every word the Oracle of Omaha says? I don’t know. Here’s what I think of Warren Buffett. And I think very lowly of him. But first, let’s examine why people trust him.

Why do people trust him?

Warren has consistently produced above average returns. That’s the most important reason why people trust him.  That’s an irreversible fact that is written in pure black and white. But many other, lesser known investors have consistently beat his investment returns. What makes Warren so well known and popular? If you want to hear the truth, read on.

1 – He’s a PR machine. In his biographies, Warren has repeatedly stated that he cares deeply about his public image. That is why Buffett is so well known and admired – because he keeps churning up sh** from his PR machine. While many other spectacular investors keep a low profile, Warren loves the public attention he gets.

2 – He tells the public what they want to hear, but not what they need to hear. The public loves the “buy and hold” investment strategy. “Buy today, hold until retirement, and watch your portfolio grow!” This is exactly what Mr. Buffett preaches, but no longer does, because he knows that buy and hold no longer works (I’ll explain more later). But since the public loves the notion of passive investing, he keeps ranting on and on about it anyways like he’s some kind of Buy & Hold God (which gives him great PR and respect from the millions of adoring Americans).

Does the man talk the talk and walk the walk?

Warren Buffett is a well known figure among contrarian and buy and hold investors. He constantly preaches the “buy great companies, and hold them forever” and the “be greedy when others are fearful, and fearful when others are greedy” lines.

It’s true that Buffett buys used to great companies. He no longer does that. He no longer “buys great companies and holds them forever”. You may be wondering “why doesn’t he do that?”

1 – Buy and hold no longer works. Eventually, all great companies will go bankrupt. That’s a fact. If you hold onto a stock “forever” like Warren preaches, you’ve got a high possibility that the stock price is going to zero. Also, these are dark days for America. We have entered into a secular bear market. Buy and hold doesn’t work in a secular bear market, because you can be holding for a decade and not get any investment returns (while real inflation erodes away at your portfolio’s value). Market volatility will be greater in the future than in the past, because the world is revolving at a faster pace, and investors are getting ever so short minded. Buy and hold works best in periods of steady uptrends, but due to foreseeable market volatility (at least in the medium term), buy and hold isn’t the strategy you should be using.

2 – Warren Buffett prefers to buy entire companies. Currently, there are no great companies up for sale. All the great companies have either been snapped up by other corporations, or are refusing to sell themselves. Sorry Mr. Buffett, no great companies for sale. Please wait in line.

So if Warren Buffett no longer walks his talk, what does he do?

He’s a typical Wall Street money man.

1 – He reaches out a hand to companies in need, grabs the company by the throat, and milks it for all it’s worth. You may have heard of the recent Warren Buffett – Bank of America deal. To hell with the “he’s buying BAC stock because he thinks its a great company. Those who are now buying BAC stock are getting a different deal than Buffett is getting. Buffett is getting a 6% dividend on preferred shares, with options to buy more in the future at a set price. Ordinary investors aren’t getting that kind of a sweetened deal. BAC is obviously a horrible company. Any sane investor would know that. But as long as BAC doesn’t go bankrupt, Warren is getting a sure-fire money making opportunity with this $5 billion investment in BAC, because he’s getting a huge dividend, and options. And he knows that the government will bail out BAC if need be. That’s the real Warren Buffett for you. Reaches out to BAC (who’s in need of help), grabs it by the throat, and squeezes all the money out of BAC by giving himself the best deal possible. Warren Buffett did a similar thing with his 2008 $5 billion investment in Goldman Sachs.

2 – He’s an inside trader. The only difference between Buffett and other insider traders is that Warren hasn’t been caught yet. Don’t believe me? Remember the deal between Goldman Saches and Mr. Buffett in 2008, when Warren invested $5 billion in GS? How did Warren know that he wasn’t investing in a future Lehman? How did he know that he wasn’t investing in the next Bear Stearns? Goldman’s finances were as much of a disaster as Lehman’s. But Warren went ahead anyways and invested in Goldman Sachs for one simple, obvious reason that serious thinkers realized – Warren knew before hand that the federal government would bailout Goldman.

The serious thinkers like Barry Ritholtz and Michael Steindhart turn a blind eye to what Warren preaches. Warren doesn’t put his money where his mouth is. So next time the “Oracle” of Omaha opens his mouth, think twice before you tell your friend “I heard a great speech by Warren Buffet last night. He was saying blah blah blah blah.”

First of all, he’s a fraud, along with his “buy great companies” line. He’s not doing that. He bought Goldman Sachs. He only bought it because he knew the governement would bail out GS.

Also, he’s a typical Wall Street financier. Help those in need, steps on the throats of those in need, and then squeezes the money out of those in need.

If I offended anyone here who loves Buffett, I’m sincerely sorry. Now I ask you. Do you trust the man? Also, thank you to Invest It Wisely for a pure 101% awesome comment, and to Kellen for pointing out a wonderful fact that I should have included in this post.

33 thoughts on “Warren Buffett – the Greatest PR Machine of American History”

  1. On a selfish note, I have reason to believe my company is in the process of being gobbled up by one of Berkshire Hathaway’s subsidiaries, what does a Buffett buy-out “typically” look like with regards to the target companies management team? Off-topic I know but sounds like this forum may have some insight!!

    1. I personally don’t really know, but I’ve read a lot of books on Buffett. The man typically just looks at the balance sheet. That’s all he cares about. He’s not a really hands on kind of guy (he owns a lot of companies, so he can’t micromanage each of them). As long as you perform as you’re doing right now, you should be ok.

  2. Awesome Post!

    It’s nice to see someone take on the Buffett mythos and not simply buying into the PR campaign. I’ve been discussing his recent PR blitz on taxes with my readers… it’s in keeping with his desire to be well liked, because his call for higher taxes on the rich is nothing but a PR stunt and he knows it wouldn’t mean considerably higher taxes on him if it ever went through. That’s made me lose a fair amount of respect I had for the man.

    1. Thanks for commenting! The funny thing about his call for taxes is, Buffett never sells. If he never sells, he’ll never need to pay capital gain taxes (which he doesn’t).

  3. Whatever you say but you cannot deny the fact that he is one of the best investor. It’s not just about returns that you make on a deal. It’s about how much you make in long run (10+ years). I am sure you must have seen a better return than Buffet, I had too. But do we richer than him, I guess no.

    I am not saying to blindfolded following him but there no harm in taking wisdom from most successful peoples. Hope you understand my point.

    1. I completely understand. Although I think he’s a fraud, the fact that he’s a successful investor (and been doing it longer than almost everyone else) is written in pure black and white.

        1. Maybe….. 99.5% fraud. Like I said, his record of great investment returns is there. But he doesn’t do what he preaches.

  4. of course buy and hold works, providing you dollar cost your way into it. i agree that buy and hold on a static basis doesn’t work IMO . . . markets have wiped out years’ worth of gains over night. in addition, inflation sets you back even more so…

  5. I like that you were willing to go against popular opinion with this post. The one thing I would say about him is that, at least he isn’t telling average people to follow his every move if they want to be rich.

    There are a number of people out there who think that following the transactions that are revealed in Berkshire’s financial reports will make them rich. So, even though I don’t agree with some of the public perceptions about him, I will give him credit for not taking advantage of everyday people – in that way.

    1. Agreed. But I somehow get the feeling that Buffett implies that people should be listening to what he’s saying (if not following his example).

    1. Lol. Thanks. At first I tried making the post sound less harsh, but that didn’t work out too well, so I said “oh, to hell with it. Let’s just say it as it is.” 🙂

  6. I was taken aback at your comment that buy and hold no longer works. That’s just flat out not true. The numbers support a buy and hold strategy. Over time, any gain you think you have will be erased due to market efficiency. no matter what the market is doing, you should be buying and dollar cost averaging your way to retirement. As a boglehead, I’m a little concerned with you telling people that buy and hold does not work. The numbers support a buy and hold strategy. Numbers never lie.

    1. How come some people consistently beat the markets? Market efficiency does not exist, because the market is played by often times irrational investors.

      Buy and hold may work, but 99% of those who believe in buy and hold can’t hold when the going gets tough, and get sucked in by the europhia when bubbles are being inflated.

      1. That’s why buy and hold isn’t for the faint of heart. It doesn’t mean that it is not successful, just that those weak in the knees can’t cope with it.

  7. Couldn’t agree more on the BAC and Goldman story. But when they give out millions to presidential campaigns, you can be sure to see favoritism. If only we all got bailouts when our investments went bust.

  8. I imagine he invests in companies that he thinks will bring long-term profits, and that most people care about their public image. As far as trusting him goes, if he gave me investment advice personally I’d sure consider it 🙂

    1. I take into consideration Buffett’s advice too, but not as he says it. I use Buffett as a short term contrarian indicator. XD

    1. I used to have a sharing button. But I realized that the sharing buttons added time to my page load time, so I deleted it. Instead, I installed the meebo toolbar, which does offer facebook likes and stumbleupon.

      1. I added the meebo toolbar, hope that helps. 🙂 I thought the sharing buttons made my design look “uncool”.

      2. And yes, you can share! In the meebo toolbar, there’s a “Share Page” button. Click on that, and you can tweet my post! Thanks!

      3. The problem is, we typical americans like buy and hold because we have other, full-time jobs. I don’t want to run financial analysis on potential investments in the 1 hour I have between getting home and going to bed. If we’re going to invest “better” we still need a method that doesn’t take as much time as an investment analyst spends figuring out what to invest in.

        @Tony: I respect that you took the buttons off to increase load time – do you find that the meebo toolbar doesn’t also increase the load time?

        1. Exactly. I wrote on another blog a few months ago that although buy and hold doesn’t work too well, it’s the only strategy that most people got, because their full time jobs are hindering them from their true investment potential. (Sigh) There really is nothing we can do about this, unless one trusts his or her money to a fund manager that they REALLY trust.

          I found that that meebo bar doesn’t add to the load time at all. I find it quite convenient, because it’s there all the time (and it’s small, so doesn’t take up too much space).

  9. It takes guys to go against the mainstream opinion when someone is golden, like Warren Buffett. I think he’s a great investor but I also like to look a little more closely, and when I read about things like his recent investment in BoA, it really does make you go “hmm…”.

    This is actually why some libertarians believe that insider trading should be legal — because the current situation means that some people can take advantage of privileged information while others can’t, while if it was legal, nobody would be penalized and thus prices would reach an accurate value more quickly. A controversial standpoint, I know, but an interesting one.

    Interesting stuff! Edgy and controversial… I’m going to be subscribing and look forward to your future posts.

    1. I don’t go against all great investors. There are some like Jim Rogers and Michael Steindhardt who I deeply trust (but not blindly), because they are not afraid to speak their mind and tell the truth (even if what they’re saying insults others).

      As for the inside trading, it’s hard to prevent, but if it weren’t prevented at all, the only one to get nailed by the insiders would be the average American. I’m not so sure the government wants that, because the current retirement model lies on investment returns.

  10. The reason Buffett is investing in Goldman or Bank of America is simple! He can make money doing it. Does he have insider information? He may be circumvent it because he is buying preferred. shares.

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