Buffett has not exactly been equally yoked with his shareholders of late, particularly since he tried defending Lloyd Blankfein saying he wished he could find a twin brother to hire. Berkshire Hathaway shareholders may not mind making money off of Goldman Sachs Group Inc. (NYSE: GS), but they might not want to be forced to like Goldman Sachs. Buffett also keeps using historic success and analogies of how America’s greatest days are ahead of it despite that this view is not really as widespread as it used to be.
Unless it surfaces that the next closest thing to front-running has been standard and encouraged procedure at Berkshire Hathaway, Buffett and Berkshire both have a history here that will be protected. Buffett is probably going to stay a bit out of the media for a while until this blows over, but again this is on Sokol and Buffett can claim he did not know.
The timing was awful. Buffett had been out in Asia for a week right before this. He also sat on the news of the Sokol resignation and trading incident in Lubrizol. The timing of the even actually works more to Buffett’s and Berkshire’s favor if you think about it.
The public will likely never know what happened in the end. Berkshire Hathaway seems to have a policy of being about as available with clear data as a fortune-teller. Call in for the spokesperson or better yet call in for CFO Marc Hamburg and see if you get anything more than his voicemail. Berkshire Hathaway is not very open and transparent, it only communicates what it wants to communicate, it has special filing privileges from the SEC for holdings, and the company won’t even tell you ahead of time what day most filings are going to hit the tape. Why does that help in this particular case? Simple, it means that the real answer will also be what the company wants it to be.
Using psychology on Buffett may be easier than elsewhere other than predicting what company he will land on next. Buffett generally will take the high ground. Making an extra buck is not his game because he’d rather have a reputation. Buffett will ultimately say that he is changing the policies as far as we can tell.
Lubrizol is not trading down at all. At $134.45, it is effectively at its highs. If there was real trouble, you would see it in the Lubrizol shares and you would see Lubrizol’s CEO out throwing Sokol in front of the bus. Buffett got a cheap company here and its multiples are such that Buffett would have bought it even if Sokol was an insider there.
It is always interesting to see when shareholders sue companies. Getting the best of Warren Buffett in court is not going to be an easy task. Berkshire’s shares have continued to slide, but this slide has not exactly been enough that would signal the end of the world as far as Buffett nor his long-term holders are concerned.
Disgorgement is a fairly accurate term for the Sokol funds. Chances are that he’ll either donate those proceeds to Warren’s charities or that he’ll give back a portion of those profits to Berkshire Hathaway. Take our survey below:
JON C. OGG