Buffett
Page 57
25. Geoffrey Cowan.
26. Dorr, “Buffetts Fund Population Control.” The quote is from the elder Susan Buffett, who was speaking about Warren.
27. Warren Buffett, 1993 annual meeting of Berkshire Hathaway.
28. Allen Greenberg. Aside from Warren and Susie, the foundation board included Carol Loomis, Tom Murphy, and the Buffetts’ daughter. Their son Peter was added to the board in 1994.
29. William Ury.
30. Allen Greenberg; Jeannie Rosoff [Alan Guttmacher Institute].
31. Susan Buffett Greenberg.
32. Keith Russell.
33. Eunice Denenberg.
34. Buffett, “How Inflation Swindles the Equity Investor.”
35. Warren E. Buffett, “How to Solve Our Trade Mess Without Ruining Our Economy,” Washington Post, May 3, 1987. Other Post op-eds include “The Age-Old Lesson of Static Island,” September 28, 1982; “How to Tame the Casino Society,” December 4, 1986; “Depositors’ Insurance: A Little Help for the Feds,” September 25, 1990; and “The 3 Percent Solution,” September 14, 1993.
36. Buffett, “Static Island.”
37. Kathleen Rutledge, “Franklin More Than Financial Story,” Lincoln Journal-Star, March 19, 1989; Howard Buffett; Tom Rogers.
38. James Traub, “Other People’s Money,” GQ, December 1991.
39. Bill Bradley; Bob Kerrey.
40. Buffett, “How to Solve Our Trade Mess.”
41. Charles T. Munger, letter to United States League of Savings Institutions, May 30, 1989.
42. Warren Buffett, 1989 Capital Cities/ABC management conference.
43. Ibid.
44. Lenzner, “Buffett’s Idea of Heaven.”
45. Ibid.
Chapter 20. RHINOPHOBIA
1. Jay Higgins; Michael Zimmerman.
2. Berkshire Hathaway Inc., 1988 Annual Report, 17.
3. Michael Zimmerman; Jay Higgins. See also the Bryan Burrough and John Helyar page-turner Barbarians at the Gate: The Fall of RJR Nabisco (New York: Harper & Row, 1990), 218.
4. Anders, Merchants of Debt, 216.
5. Michael Zimmerman; Burrough and Helyar, Barbarians, 493–99.
6. Buffett, as an insider, was prevented from buying stock while Salomon was bidding. As Buffett disclosed (1988 Annual Report, 17), his board seat “cost Berkshire significant money.”
7. Tatiana Pouschine and Carolyn Torcellini, “Will the Real Warren Buffett Please Stand Up?” Forbes, March 19, 1990.
8. Berkshire Hathaway Inc., 1988 Annual Report, 17.
9. Ibid.
10. Berkshire Hathaway Inc., 1989 Annual Report, 5.
11. Fred Schwed, Jr., Where Are the Customers’ Yachts? or A Good Hard Look at Wall Street, (1st ed. 1940; Burlington, Vt.: Fraser, 1985), 81.
12. 1990 Capital Cities/ABC management conference. See also Buffett’s talks at Harvard (1991) and Columbia (1993).
13. Larry Tisch.
14. Berkshire Hathaway Inc., 1989 Annual Report, 17.
15. Davis, “Buffett Takes Stock.”
16. Martha M. Hamilton, “Billionaire Buffett Puts $358 Million into USAir; Preferred Stock Can Become 12% Stake,” Washington Post, August 8, 1989.
17. Linda Sandler, “Heard on the Street: Buffett’s Savior Role Lands Him Deals Other Holders Can’t Get,” Wall Street Journal, August 14, 1989.
18. Pouschine and Torcellini, “Will Buffett Stand Up?”
19. Berkshire Hathaway Inc., 1989 Annual Report, 17.
20. Linda Sandler, “Heard on the Street: Knightly Warren Buffett Trips Up ‘Rescued’ Champion Shareholders,” Wall Street Journal, December 15, 1989.
21. Berkshire Hathaway Inc., 1985 Annual Report, 12.
22. Richard Nelson, a convertible specialist at Lehman Brothers, examined the deals for the author. Nelson said Berkshire’s dividends were a point or two higher than those on market-priced issues. Also, its conversion premiums were a tad lower (and thus more attractive) than the usual 20 to 24 percent. Premiums on Buffett’s deals were as follows: Salomon, 19 percent; Gillette, 20 percent; USAir, 15 percent; Champion, 20 percent.
23. Berkshire Hathaway Inc., 1989 Annual Report, 24.
24. Lee Seemann.
25. 1990 Capital Cities/ABC management conference.
26. Edward Devera [Zegna salesman, New York].
27. Ron Gutman.
28. Felsenthal, Power, Privilege, and the Post, 412–13.
29. Agnes Nixon.
30. Robin Wood.
31. Howard Buffett understood from talking to his father that Warren hadn’t done a formal interview. Also, Liz Smith reported in Newsday (“Mr. Buffett Does TV,” November 4, 1992) that Buffett was telling friends, “I don’t give interviews, but they made it look as if I did.” Leellen Childers, the show’s producer, said that, in fact, Buffett had donned a microphone and been interviewed at Borsheim’s jewelry store “in a room with lights and cameras.” Donald Yale, CEO of Borsheim’s, confirmed that.
32. Rogers Worthington, “Granny, 95, Takes On Grandsons; Buffett Neutral,” Chicago Tribune, October 24, 1989; Robert Dorr, “Mrs. B: ‘I Got Mad and Quit,’ ” Omaha World-Herald, May 12, 1989.
33. Dorr, “Mrs. B: ‘I Got Mad and Quit.’ ”
34. Berkshire Hathaway Inc., 1989 Annual Report, 10.
35. 1990 Capital Cities/ABC management conference.
36. Berkshire Hathaway Inc., 1989 Annual Report, 19.
37. Berkshire Hathaway Inc., 1989 Annual Report, 18–21.
38. Ibid.
39. Warren Buffett, letter to Benjamin Graham, M.D., April 8, 1991.
40. Robert Wilmers.
41. Berkshire Hathaway Inc., 1990 Annual Report, 16.
42. Fred R. Bleakley, “Paper Losses: Some Savvy Investors Bought Bank Stocks, Now Look Less Savvy,” Wall Street Journal, December 5, 1990.
43. Charles Biderman, “California’s Real Estate Woes Pose Risk to Wells Fargo,” Banon’s, June 10, 1991.
44. Journalists have since made a subspecialty of cataloguing Robinson’s failures, e.g., Linda Sandler, “Heard on the Street: American Express Dismantles Its Eighties Superstore,” Wall Street Journal, January 9, 1990; Robert Teitelman, “Image vs. reality at American Express,” Institutional Investor, February 1992; Brett D. Fromson, “American Express: Anatomy of a Coup,” Washington Post, February 11, 1993.
45. Louis Lowenstein, Sense and Nonsense in Corporate Finance (Reading, Mass.: Addison-Wesley, 1991), 164; Jack Byrne.
46. David Greising, “For Buffett, Amex Is a Great Place to Stash Cash,” Business Week, August 19, 1991.
47. Ibid.
48. Berkshire Hathaway Inc., 1990 Annual Report, 18.
49. An estimate. In March 1991 (1990 Annual Report, p. 17) the market value of Berkshire Hathaway’s investment in RJR Nabisco was up by more than $150 million.
50. Donald Graham.
Chapter 21. THE KING
1. Sobel, Salomon Brothers, 1–17.
2. Ibid, 169.
3. Ibid, 21, 36–37, 46–50.
4. Brooks, Go-Go Years, 264.
5. William Salomon.
6. Chernow, House of Morgan, 626.
7. William Salomon.
8. Stephen Bell.
9. Roland Machold.
10. David Tendier.
11. Anthony Bianco, “The King of Wall Street,” Business Week, December 9, 1985.
12. Michael Frinquelli; William Jennings.
13. Sterngold, “Too Far, Too Fast.”
14. John Taylor, “Hard to Be Rich,” New York, January 11, 1988.
15. Gilbert Kaplan, “True Confessions,” Institutional Investor, February 1991.
16. Grant, “$4-Billion Regular Guy.”
17. Donald Howard.
18. Jay Higgins; Warren Buffett, testimony, September 11, 1991, in “The Activities of Salomon Brothers, Inc., in Treasury Bond Auctions,” Subcommittee on Securities of the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, p. 68.
19. Warren Buffett, talk at Ha
rvard, 1991.
20. Eric Rosenfeld.
21. Daniel Hertzberg and Laurie P. Cohen, “Scandal Is Fading Away for Salomon, but Not for Trader Paul Mozer,” Wall Street Journal, August 7, 1992.
22. U.S. House of Representatives, Subcommittee on Telecommunications and Finance of the Committee on Energy and Commerce, “Salomon Brothers and Government Securities,” Hearing, September 4, 1991, p. 70.
23. John McDonough.
24. David Wessel, “Treasury and the Fed Have Long Caved In to ‘Primary Dealers,’ ” Wall Street Journal, September 25, 1991.
25. Chernow, House of Morgan, 540.
26. Michael Basham.
27. Robert Glauber.
28. The public record is extensive. See SEC v. Salomon Inc. and Salomon Brothers Inc., 92 Civ. No. 3691, Complaint for permanent injunction and other relief, May 20, 1992. For a summary of the SEC’s allegations against Mozer, see SEC v. Paul W. Mozer and Thomas F. Murphy, 92 Civ. No. 8694, December 2, 1992.
29. For a complete account of the meeting, see SEC File No. 3–7930, In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether, Release No. 34–31554, December 3, 1992.
30. Peter Grant and Marcia Parker, “Hurtling Toward Scandal,” Crain’s New York Business, June 1, 1992.
31. Constance Mitchell, “Precise Roles of Salomon, Others in May Sale Probed,” Wall Street Journal, August 19, 1991.
32. Michael Basham.
33. “Salomon Brothers,” House Subcommittee, especially pp. 131–35 and 166–74. See also Michael Siconolfi and Laurie P. Cohen, “Sullied Solly: How Salomon’s Hubris and a U.S. Trap Led to Leaders’ Downfall,” Wall Street Journal, August 19, 1991.
34. Stephen Bell.
35. SEC File No. 3–7930, Gutfreund, Strauss, and Meriwether.
36. Robert Glauber.
37. SEC File No. 3–7930, Gutfreund, Strauss, and Meriwether.
38. Ibid.
39. Laurie P. Cohen, “Benched and Blue: Gone from Salomon 16 Months, Gutfreund Finds Life Frustrating,” Wall Street Journal, December 4, 1992.
40. Laurie P. Cohen, “Buffett Shows Tough Side to Salomon—and Gutfreund,” Wall Street Journal, November 8, 1991.
41. Buffett in “Activities of Salomon,” Senate Subcommittee, p. 64.
42. Events of August 8–18 were recounted by participants, supplemented by “Salomon Brothers,” House Subcommittee; and “Activities of Salomon,” Senate Subcommittee.
43. Michael Siconolfi, Constance Mitchell, Tom Herman, Michael R. Sesit, and David Wessel, “The Big Squeeze: Salomon’s Admission of T-Note Infractions Gives Market a Jolt,” Wall Street Journal, August 12, 1991.
44. John Macfarlane.
45. William McIntosh.
46. Deryck Maughan.
47. Gerald Corrigan.
48. William McIntosh.
49. Ibid.
50. Gerald Corrigan.
51. At a press conference two days later, Buffett said he “volunteered” for the job, a version he would repeat to associates. Gutfreund insisted that he asked Buffett. See, for example, his letter to the New York Times, June 8, 1992.
52. Buffett recounted the morning in talks at Harvard (1991) and Columbia (1993) and also in a family chat shortly afterward.
53. Ron Olson.
54. Charlie Munger.
55. Jay Higgins.
56. Leo Higdon; Deryck Maughan; William McIntosh.
57. Siconolfi and Cohen, “Sullied Solly.”
58. Kurt Eichenwald, “Salomon’s 2 Top Officers to Resign Amid Scandal,” New York Times, August 17, 1991.
Chapter 22. SALOMON’S COURT
1. Gerald Corrigan.
2. Jay Higgins; Deryck Maughan; William McIntosh.
3. Cohen, “Buffett Shows Tough Side.”
4. “Salomon Brothers,” House Subcommittee, p. 174; Salomon directors; Gerald Corrigan; Jerome Powell.
5. John Macfarlane.
6. Wachtell Lipton attorney.
7. James Massey [Salomon executive and director].
8. Dwayne Andreas; James Massey; William May; Robert Zeller.
9. Salomon transcript of August 18, 1991, press conference.
10. Stephen Bell; Nicholas Brady; Charlie Munger; Jerome Powell; Salomon attorneys.
11. Nicholas Brady.
12. Ibid.
13. Transcript of August 18 press conference.
14. Jay Higgins; Deryck Maughan.
15. Siconolfi and Cohen, “Sullied Solly.”
16. Richard Breeden.
17. John Macfarlane.
18. Deryck Maughan.
19. Told to Gary Naftalis by a Wachtell Lipton attorney.
20. Kurt Eichenwald, “Salomon Expects to Continue Finding Bidding Violations,” New York Times, September 21, 1991.
21. “Salomon Brothers,” House Subcommittee, p. 131. Breeden told the author that he considered the Drexel and Salomon cases to be “quite comparable.”
22. Interviews with congressional staff; Stephen Bell.
23. “Salomon Brothers,” House Subcommittee, pp. 2, 3, 5–6, 9, 11–13, 67–68, 98–99, 164.
24. David C. Beeder, “Buffett Treated Like a Hero,” Omaha World-Herald, September 5, 1991.
25. James Massey.
26. Robert Denham; Charlie Munger.
27. Susan Buffett Greenberg.
28. Faith Stewart-Gordon.
29. Jim Burke; Charlie Munger; Tom Murphy.
30. “Activities of Salomon,” Senate Subcommittee, p. 73.
31. Eric Rosenfeld.
32. Thomas Hanley.
33. Eric Rosenfeld.
34. Warren Buffett, talk to Salomon employees, October 2, 1991.
35. Randall Smith and Michael Siconolfi, “Salomon Is Scolded by AT&T Chairman, Who Calls Bid Scandal ‘Unforgivable,’ ” Wall Street Journal, September 24, 1991.
36. Floyd Norris, “Forcing Salomon into Buffett’s Conservative Mold,” New York Times, September 29, 1991.
37. Buffett, talk to Salomon employees, October 2, 1991.
38. Leah Nathans Spiro, “How Bad Will It Get?” Business Week, October 7, 1991.
39. Larry Tisch.
40. Deryck Maughan.
41. Donald Howard.
42. From 1987 to 1990, the average of compensation divided by compensation plus pretax income was 72.5 percent.
43. Salomon Inc., 1991 third-quarter report to shareholders.
44. Ibid.
45. Deryck Maughan.
46. Ibid.
47. Salomon Inc.
48. Warren Buffett, meeting with analysts, February 14, 1992.
49. Nicholas Brady.
50. Gary Weiss and David Greising, “Poof! Wall Street’s Sorcerers Lose Their Magic,” Business Week, January 27, 1992.
51. Leah Nathans Spiro and Richard A. Melcher, “Rescuing Salomon Was One Thing, but Running It …” Business Week, February 17, 1992.
52. Suskind, “Legend Revisited.”
53. Michael Lewis, “The Temptation of St. Warren,” New Republic, February 17, 1992.
54. Bernstein described the Lewis article as “a piece of s———” in a November 20, 1992, letter to Richard Lowenstein, the author’s uncle, and copied to the author. He added that he also wrote to Buffett about the Lewis piece, and attached Buffett’s response.
55. Michael Lewis, Liar’s Poker: Rising Through the Wreckage on Wall Street (1st ed. 1989; New York: Penguin, 1990), 180–84.
56. Salomon Inc., 1991 third-quarter report to shareholders.
57. The figures refer to professionals in the United States and Europe.
58. Jerome Powell.
59. Gary Naftalis.
60. Stephen Labaton, “Salomon to Pay Phony-Bid Fine of $290 Million,” New York Times, May 21, 1992.
61. Jerome Powell.
62. Charlie Munger.
63. Berkshire Hathaway Inc., 1992 Annual Report, 6.
64. Berkshire Hathaway Inc., 1991 Annual Report, 6.
Chapter 23. BUFFETT’S TROL
LEY
1. Buffett paid $36 a share, but $25 was returned in special distributions in a partial liquidation.
2. Robert Dorr, “Mrs. B Gets $4.9 Million for Building,” Omaha World-Herald, January 22, 1993.
3. Berkshire Hathaway Inc., 1992 Annual Report, 19.
4. Lenzner, “Buffett’s Idea of Heaven.”
5. Lipper Analytical Securities; Salomon Brothers. Figures are calculated from May 10, 1965 (Buffett’s first day at Berkshire), through December 31, 1995.
6. There have been years in which Berkshire’s share price has fallen. But its book value, which Buffett has consistently used as a proxy for intrinsic value, has risen every year.
7. “Fortune 500,” Fortune, April 18, 1994.
8. Buffett, “The Security I Like Best,” Commercial and Financial Chronicle, December 6, 1951.
9. This account is from the GEICO proxy, December 20, 1995, and various interviews. See also Roger Lowenstein, “To Read Buffett, Examine What He Bought,” Wall Street Journal, January 18, 1996.
10. Berkshire Hathaway Inc., 1993 Annual Report, 13.
11. Buffett, talk at Columbia, 1993.
12. Berkshire Hathaway Inc., 1992 Annual Report, 11.
13. Berkshire Hathaway Inc., 1992 Annual Report, 12; see also 1993 Annual Report, 12–13.
14. Ira Marshall.
15. Doris Buffett Bryant.
16. Barbara Morrow.
17. 1994 annual meeting of Berkshire Hathaway.
18. Louis Lowenstein.
19. Berkshire Hathaway Inc., 1992 Annual Report, 13.
20. Train, Money Masters, 176.
21. Berkshire Hathaway Inc., 1992 Annual Report, 14.
22. Ibid.
23. Lenzner, “Buffett’s Idea of Heaven.”
24. Ibid.
25. Berkshire Hathaway Inc., 1993 Annual Report, 18.
26. Warren Buffett, 1989 annual meeting of Berkshire Hathaway; Alan Gersten, “Berkshire Chief Leads Annual Meeting: 1, 000 Come to Hear Buffett,” Omaha World-Herald, April 25, 1989. Berkshire Hathaway Inc., 1995 Annual Report, 10.
27. Berkshire Hathaway Inc., 1993 Annual Report, 18.
28. Tom Murphy.
29. Barbara Morrow.
30. Peter Buffett.
31. Thomas Winship.
32. Jim Rasmussen, “Buffett to Tap ‘Personal Funds’ for Royals Deal,” Omaha World-Herald, July 16, 1991.