
Warren Buffett’s Berkshire dumps most of Goldman Sachs stake - yarapavan
https://www.ft.com/content/bc7816bb-fbff-4b68-89f5-b186ad2e7ee8
======
JumpCrisscross
Speaking somewhat anecdotally, Goldman Sachs in 2020 does not resemble Goldman
circa 1998 or even 2008. A lot of brain trust was lost following the post-
crisis de-risking and vilification. The move into retail finance, to me,
solidifies its mystique shedding.

~~~
drawkbox
> _move into retail finance_

Whistleblower: Wall Street Has Engaged in Widespread Manipulation of Mortgage
Funds [1].

Commercial real-estate was already going to absolutely hammered.

> _Some of the world’s biggest banks — including Wells Fargo and Deutsche Bank
> — as well as other lenders have engaged in a systematic fraud that allowed
> them to award borrowers bigger loans than were supported by their true
> financials, according to a previously unreported whistleblower complaint
> submitted to the Securities and Exchange Commission last year._

> _Whereas the fraud during the last crisis was in residential mortgages, the
> complaint claims this time it’s happening in commercial properties like
> office buildings, apartment complexes and retail centers. The complaint
> focuses on the loans that are gathered into pools whose worth can exceed $1
> billion and turned into bonds sold to investors, known as CMBS (for
> commercial mortgage-backed securities)._

> _Lenders and securities issuers have regularly altered financial data for
> commercial properties “without justification,” the complaint asserts, in
> ways that make the properties appear more valuable, and borrowers more
> creditworthy, than they actually are. As a result, it alleges, borrowers
> have qualified for commercial loans they normally would not have, with the
> investors who bought securities birthed from those loans none the wiser._

> _ProPublica closely examined six loans that were part of CMBS in recent
> years to see if their data resembles the pattern described by the
> whistleblower. What we found matched the allegations: The historical profits
> reported for some buildings were listed as much as 30% higher than the
> profits previously reported for the same buildings and same years when the
> property was part of an earlier CMBS. As a rough analogy, imagine a
> homeowner having stated in a mortgage application that his 2017 income was
> $100,000 only to claim during a later refinancing that his 2017 income was
> $130,000 — without acknowledging or explaining the change._

> _It’s “highly questionable” to alter past profits with no apparent
> explanation, said John Coffee, a professor at Columbia Law School and an
> expert in securities regulation. “I don’t understand why you can do that.”_

Exact same trick as last time, just last time residential and this time
commercial.

Time to start anti-trust breaking up the 'too big to fail' banks, they are a
national security issue and ultimately a bad actor in fair markets.

Commercial mortgage backed securities are severely overvalued since
deregulation after the Great Recession largely because people weren't watching
commercial as much and there was a hypernormalization of the idea that the
economy was somehow good. All it was was over leveraging, opportunities zones
that have less tax revenues if any, that led to stagnation in other areas, so
other loans were taken out on future good economic conditions that will not
exist for years if not a decade now.

The carnage is going to be immense with the attack vectors of less retail,
restaurants going under, less consumers buying physical places, less people
and retail/restaurants able to pay rents to landlords that then owe these
commercial real estate entities, less office need with more remote, etc etc.

Retail was already on a downtrend but valuations and loans were going up in
commercial real estate. This is going to be a problem.

The only area that might be possible is more commercial real estate that is
more about moving products back to the US but that really is a fantasy in many
areas.

[1] [https://www.propublica.org/article/whistleblower-wall-
street...](https://www.propublica.org/article/whistleblower-wall-street-has-
engaged-in-widespread-manipulation-of-mortgage-funds)

~~~
arcticbull
So this was a solved problem with the Glass–Steagall Act (1933) brought in
after the, you guessed it, great depression [1]. It was of course repealed (by
Bill Clinton), as we'd learned our lesson thoroughly and completely. This led
to 2008. And 2020.

So naturally, given the broad-based success of the repeal, there's no interest
in reviving it.

[1]
[https://en.wikipedia.org/wiki/Glass–Steagall_legislation](https://en.wikipedia.org/wiki/Glass–Steagall_legislation)

~~~
lonelappde
Congress passes laws, not the President.

The repeal passed the Senate on a near party line vote (R over D), sponsored
by 3 Republicans, and passed the House will nearly all R and 2/3 of D.

Clinton could have vetoed it, though, since the Senate didn't have a two-
thirds majority.

[https://en.m.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93...](https://en.m.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act)

Of course, looking to the future from the future, a veto would likely be
irrelevant since Bush took over a year and a half later.

~~~
GeekyBear
Clinton did not oppose the repeal at all. He was a cheerleader for the
process.

Here's a snippet from his signing speech.

>You heard Senator Gramm characterize this bill as a victory for freedom and
free markets. And Congressman LaFalce characterized this bill as a victory for
consumer protection. And both of them are right. And I have always believed
that one required the other. It is true that the Glass-Steagall law is no
longer appropriate for the economy in which we live.

[https://www.treasury.gov/press-center/press-
releases/Pages/l...](https://www.treasury.gov/press-center/press-
releases/Pages/ls241.aspx)

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voldacar
Fun fact: The CEO of Goldman also makes pretty bad EDM music

[https://soundcloud.com/djdsolmusic](https://soundcloud.com/djdsolmusic)

~~~
puranjay
Maybe it's because I'm an amateur musician and hear some truly awful music,
but by EDM standards, that's at least mediocre, not "bad".

~~~
koheripbal
The only thing you're missing is the requirement to hate anything a banking
CEO produces, no matter the quality.

He could cure cancer, and angry people online will complain he contributed to
overpopulation.

~~~
voldacar
Oh I have nothing against the fact that he's a bank CEO, I just thought his
music was pretty bland and generic. Maybe I was too harsh. You would think
that bank CEOs would be the kind of person to not really have any hobbies or
interests outside of work, so I guess it's kind of cool that he's putting
himself out there like this

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dilandau
Many in finance think we're headed for deflation. If that's the case, dumping
equities for cash is a sensible move. He may be expecting chaos in the banking
sector as bankruptcies roll in, and these mortgage fund fraud allegations gain
traction.

It's going to be a wild decade. Watch the government use this to vastly expand
surveillance powers, too. Not going to be good for the average American.

~~~
mxschumacher
The positions in GS and WFC have been reduced over the last few quarters,
these sales should not be interpreted as "dumping equity" \- besides the large
private holdings (insurance, rail, energy, lots of manufacturing, retail etc),
Berkshire still holds $200bn worth of equity.

~~~
valuearb
Wasn’t the WFC reduction you keep BRK under the 10% limit for banks?

------
blackrock
What does he know that we don’t?

He just dumped most of his airline holdings, after losing some $5 billion
dollars.

It seems he might be going into cash, and sitting things out, until a true
correction hits, and then he’ll go back in and pick up companies for pennies
on the dollar.

~~~
Slartie
He lost a huge pile on Kraft Heinz, and that was pre-Corona. Didn't yet
realize those losses AFAIK.

He lost a pile on the airlines and even decided to realize those losses.

He lost a pile on that petroleum company that I forgot the name of, but which
crashed and burned recently due to oil prices plunging.

He hesitated a long time with tech stocks and lost a lot of money in the last
decade due to opportunity cost. His only good bet in that area was Apple, and
admittedly that paid off nicely, but even his big stake doesn't compensate for
missing out on basically all other tech stocks. Especially since the size of
his Apple investment suggests that he played a significant part in raising the
Apple stock value, which means that he probably can't pull that out again
without depressing the stock price.

Bottom line: I think Warren Buffett is overrated. He fails, just like anyone
else.

~~~
tguedes
Warren Buffet is currently overrated because he doesn't invest in a lot of
tech stocks because he claims to not have a complete understanding of the
business.If you look at his record from the 70s-90s, you will realize he is
the greatest investor ever. We all have our strengths and weaknesses, don't
judge a fish on its ability to fly.

I think its great that he doesn't invest that much into tech and is very
public about it. It influences other people to not invest in every little
thing that is popular if they don't understand the business mechanics behind
it.

~~~
mrscottson
> Warren Buffet is currently overrated because he doesn't invest in a lot of
> tech stocks...

He's also overrated because of all the insider trading he engages in....he
would be a lot poorer if the SEC had the resources/will to investigate his
moves.

~~~
valuearb
Lol, that’s clearly untrue. There is zero evidence he has done any insider
trading ever.

~~~
mrscottson
>Lol, that’s clearly untrue

I don't think you know Buffetts track record.

~~~
valuearb
I know more than you. Have you read both his biographies, his annual investor
letters back to mid 70s, and have copies of all his Buffett Partnership
letters from the 50s and 60s?

His track record and methods are an open book. And have never included insider
trading.

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ineedasername
He doesn't seem to be picking up stakes elsewhere, which makes these moves
seem like a flight to safety, seeing few investments worth the risk. Of course
he could have deals in the works: he hasn't personally told me anything yet.

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dredmorbius
[http://archive.is/b7h3A](http://archive.is/b7h3A)

(fo, li, md, vn, ph, and today are alt TLDs:
[https://en.m.wikipedia.org/wiki/Archive.today](https://en.m.wikipedia.org/wiki/Archive.today))

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raincom
Buffett's Berkshire Hathaway owns a range of companies, giving him an insight
into the fundamentals of economy. However, retail investors and many hedge
funds just focus on the market psychology, and hence, momentum. So, Buffett
knows something that other don't know.

~~~
valuearb
His returns were far better before he owned any companies.

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lonelappde
That's 5% of GS shares. Did it push the price down?

