The Warren Buffett Story You Did NOT Hear About 8/15/2003 3:46:32 PM
Thin volume due to the blackout saw stock prices stay in a trading range on Friday (Aug. 15), with the major indexes up on the week.
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California's political follies have broken up the boredom that can typify the news in August, and the story this week actually took a semi-sober turn as politics crossed paths with finance: Mr. Warren Buffett will give counsel to Mr. Arnold Schwarzenegger.
This move by Schwarzenegger already looks shrewd. Page one of The Wall Street Journal covered the story, yet with the headline angle that Buffett "Hints Property Tax Is Too Low."
If Schwarzenegger wins the recall election and in turn DOES raise property taxes, he can plausibly say the idea was blessed by the Sage of Omaha, the man most investors believe to be an authentic financial genius.
Still, in my humble opinion, the story above was NOT the most interesting Warren Buffett news of the past week. I'll wager that for every 10,000 investors who heard about Buffett-Schwarzenegger, fewer than one of them read about the contents of Berkshire Hathaway's (Buffett's company) August 8 press release, which detailed its Q2 and first half of 2003 earnings.
Those earnings were pretty good, mostly because of one particular decision on Buffett's part: The sale of "virtually all of the long-term U.S. Government securities held in Berkshire's actively managed, fixed-income portfolio," to the tune of about $9.1 billion, with an after-tax investment gains of some $1.5 billion.
Warren Buffett sold Treasuries at or near their price high, for a massive profit. Prices for 10 and 30-year Treasuries have been in free-fall since mid-June.
But wait -- isn't this market timing, the very type of trade you expect from a trend follower? And isn't Mr. Buffett best known for his "buy & hold" approach? Separating myth from reality is often difficult when you examine a legend, but the facts speak for themselves.
