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TheStreet Open House

Warren Buffett CEO Porn Gone Wild

What Buffett is doing "is unorthodox" because "you create a distraction," a management consultant told the Deal Journal. Personally, I wonder if the distraction is intentional, to divert attention from two things, one of them being that Buffett's investment acumen has been disappointing of late.

Yes, we all know how well Berkshire has done over the long term. But over the past two years, while market indices have staged impressive gains, both classes of Berkshire stock have pretty much broken even.

Another aspect of his performance that I suspect Buffett doesn't want to highlight is that the Sage of Omaha hasn't been as right as a sage ought to be. He concedes that he was "dead wrong" when he said in 2011 that the housing market would be back on its feet in a year or two.





Now, I don't blame him for being wrong. I blame the media for giving so much attention to his statements so that this particular CEO being wrong is far more likely to hurt people than other CEOs being wrong. Anyone who relied on Buffett's prediction to make market bets would have been in for a rude awakening.

To his credit, Buffett has been vocal in opposing the inequities in the tax system that favor the 1% over the 99%, and Obama has picked up on his opposition to absurdities like the carried interest deduction, propounding what he calls the "Buffett Rule." You have to admire his outspokenness. It's terrific that a billionaire is willing to talk like a thousandaire on stuff that matters.

But I wonder if Buffett's common-man posturing is as sincere as it appears. As Bloomberg highlighted the other day, one of the stranger things in his annual shareholder letter was this:

"Large numbers of people who have 'lost' their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost. In these cases, the evicted homeowner was the winner, and the victim was the lender."





This unfortunate comment is condescending, cynical (note the scare quotes around "lost"), and demonstrates an ignorance of the behavior and motivations of hard-pressed homeowners. Sure, one can assume that many of the homeowners who lost their homes through foreclosures had previously carried out refinancings. Of course they did -- in order to keep their homes, while at the same time not destroy their credit rating. But in an economy as awful as this one, refinancing, if successful, is not always sufficient to keep a roof over one's head. So those homeowners default, and go through the humiliation of being thrown out on the street.

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