OMAHA, Neb. (
-- This Saturday will be one of the biggest days of the year in Omaha, with 35,000 or more shareholders of Warren Buffett's investment empire
flocking to Omaha. Aside from the massive migration of Sandhill cranes that stops each year on Nebraska's Platte River on its way back to Siberia, the Berkshire Hathaway annual shareholder meeting may be the single largest invasion of Nebraska to occur each year.
While the Sandhill cranes limit their interest to the bountiful Nebraska corn crop that serves as breakfast, lunch and dinner (and finding a quiet spot on the Platte River to retire to in the evening), Berkshire Hathaway shareholders are expected to be chewing on thoughts that take them far from Nebraska, with vilified Wall Street investment bank
set to be the fodder of this year's Berkshire Hathaway annual meeting.
It's fair -- and, in other respects, unfair -- to link Warren Buffett and Berkshire Hathaway to Goldman Sachs.
From a pure investment standpoint, Berkshire Hathaway shareholders should be very interested in the fate of Goldman Sachs, due to Warren Buffett's decision to invest $5 billion in the Wall Street bank's fortunes. The
Wall Street Journal
estimated on Friday that Berkshire Hathaway was earning $900 every minute by way of its investment in Goldman Sachs, and long-time Berkshire Hathaway institutional investors said on Friday that Buffett would do it all over again if he had the chance, but not everyone was so sure about that.
also reported the bigger news event on Friday: that the Justice Department was looking into criminal charges against Goldman Sachs. It was the first indications of a worst-case scenario, Arthur Andersen-style death knell of a federal indictment for the investment bank, and Goldman Sach's shares slid almost 10% to a closing price of $145.20. It was the lowest share price for Goldman Sachs since last July.
Two rating agencies downgraded Goldman Sachs on Friday -- Standard & Poor's to sell, and Bank of America to hold. Is Buffett preparing to unload Goldman Sachs shares also, or at least sell out the investment bank in terms of distancing Omaha from Wall Street even more than it is already removed in actual miles and by way of previous Buffett comments?
The past few weeks have including a litany of dents in Goldman Sachs' once-impenetrable armor. The investment bank may still retain its surface posture of confidence, but investors are having a harder time buying it, as evidenced by the big Friday selloff.
It's easy to see why Warren Buffett might be pretty miffed with Goldman Sachs, too. On top of the fraud charges brought by the SEC against Goldman, and the Friday report that the Justice Department was considering separate criminal action, a Goldman director reportedly passed on insider information to the disgraced hedge fund firm Galleon Group about Buffett's planned investment in Goldman Sachs at the height of the financial crisis.
In another Goldman Sachs-related tangent for Berkshire Hathaway, all the negative press for Goldman Sachs has spurred on the Obama administration and Congress in the effort to enact financial reform. If you think that doesn't matter to Buffett, consider that fact that it was widely reported this week that
Warren Buffett sent one of his top lieutenants to Washington D.C. this week to lobby for an exemption from pending derivatives legislation.
The more ambiguous issue tying Berkshire Hathaway to Goldman Sachs is the stellar reputation of Warren Buffett in contrast to the worsening reputation of Goldman Sachs.
Berkshire Hathaway recently beat out Johnson & Johnson for the top spot in an annual ranking of best reputations in the business world, and in an ironic twist Goldman Sachs finished in the bottom five among firms with the worst business reputation on the same list -- it was the first appearance by Goldman in the infamous annual group.
And for those Buffett faithful who think that the tarnished Goldman Sachs reputation is a canard when it comes to making arguments about Buffett's reputation taking a hit as a result, consider that Buffett has gone out of his way to back Goldman Sachs' integrity in recent weeks -- first subtly, and finally on Friday, stepping forward himself to kick the PR machine into high gear.
Buffett first sent two members of the
Berkshire Hathaway board out to defend Goldman Sachs against attacks on its integrity, before granting an interview to the
on Friday in which he spoke for the first time about Goldman Sachs.
Buffett and righthand man Charlie Munger not only defended Goldman Sachs, but challenged Berkshire Hathaway shareholders to "bring on" any and all questions about Goldman Sachs to the annual meeting. Buffett is not known for mincing words, and he told the
he will remain true to his reputation in responding to tough questions about Goldman Sachs.
In comments given to the
on Friday, the fine line that Buffett and Munger have been walking in their disdain for Wall Street and derivatives -- while also showing Berkshire Hathaway support for Goldman Sachs and Berkshire Hathaway's $63 billion in derivatives holdings -- was again apparent.
Since there are as many legitimate Berkshire Hathaway tangents starting from its relationship with the No. 1 Wall Street target as there are dead ends hyped by the press, we decided to ask
Do you think Warren Buffett's reputation has taken a hit as a result of his association with Goldman Sachs?
We have good news for Warren Buffett headed into Saturday's Berkshire Hathaway shareholder meeting:
readers overwhelmingly think that Buffett's reputational armor remains impenetrable, even as the dents in Goldman's armor deepen.
Approximately 67% of survey takers said that Buffett's reputation has not suffered as a result of the Goldman Sachs fraud charges.
Only 33% of respondents were of the opinion that Buffett's reputation had been dragged through the synthetic CDO mud alongside Goldman Sachs. Come to think of it, should we have started that last sentence with an "only"?
The 33% of survey respondents who think Buffett has been taken down a notch on the reputational totem pole by Goldman Sachs does represent one-third of all votes. Given that Buffett's reputation is considered the best in the business world, bar none, maybe 33% s actually represents a notable amount of reputational damage.
At the least, Buffett and Berkshire Hathaway top brass have some explaining to do on Saturday when it comes to Goldman Sachs. They expect it. Buffett said as much on Friday in his comments to the
. The week started with Goldman Sachs facing the firing line of the Senate, and now it looks like the week will end with an ad-hoc Goldman Sachs inquiry, in of all places, Omaha, Nebraska.
We may soon find out to what extent, if any, Warren Buffett thinks his $5 billion investment in Goldman Sachs has turned out to be a "sh**tty deal" on par with what Senator Carl Levin thinks about Goldman Sachs' Abacus series of subprime mortgage investments.
-- Reported by Eric Rosenbaum in New York.
>>Warren Buffett's Derivatives Deal Gets Nixed
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