Streetwise
Lauren Rudd
Sunday, July 12,
2009
Redemption
Ok, I will admit that I have been a bit critical of the
auction carried out each year for a lunch with Warren Buffett. Two years ago the
lucky winner submitted a bid of $650,100. Last year’s winner, Mr. Zhao Danyang,
who dined with Buffet on June 24, paid a record $2.1 million for the privilege,
while the current winner, just announced, had a winning bid of $1,680,300.
If you contribute six or seven figures to charity, you are to
be commended. Yet, I have always had this uneasy feeling that the lunch winners
hoped to gain more than just the good feeling that comes from donating of a
substantial chunk of disposable income to a worthwhile cause.
Surely anyone successful enough to have amassed the resources
required for such generosity must realize that Buffett is not about to let slip
some tidbit of information that would put him in violation of the full
disclosure rule. Furthermore, any expectation of uncovering some previously
undisclosed key to Buffett’s prodigious investment skill would be naïve to the
point of ridiculous.
Buffett does not harbor some holy grail. He simply uses a
modicum of common sense, backed by solid fundamental analysis and a very large
piggy bank that enables him to deftly put in place a desired investment with
little fanfare and no need of financing.
Every year in his annual letter to shareholders, Buffett
reports his holdings, discusses their merits and shortcomings, and details why
they were selected. A number of web sites offer stock screens using Buffett’s
investment criteria. And his investment methodology and selection criteria have
been the subject of countless books and articles.
Yet, I have been taken to task repeatedly for being narrow
minded and directing supposedly humorous wit to cast disparaging annotations
upon those “good hearted philanthropists.” The implication being that I was too
dense to see unadulterated idolatry at its finest. Isn’t there a phrase
somewhere that refers to “worshiping false idols?”
Some readers struck a really low blow, stating that nobody
would pay a dollar to have lunch with me. Actually, I am not sure I would pay a
dollar to have lunch with me. However, in self-defense I have raised thousands
of dollars for various charities and other non-profit organizations through
countless talks and appearances pro bono publico.
So was I overly cynical? After 40 years on Wall Street, I
find it difficult to believe in altruism. Egos and puffery run rampant and there
is an insatiable desire for personal profit. That is the Wall Street I know.
Remember Sanford Weill, the former CEO of the now infamous
Citigroup? He lined the walls leading to his office with self-adulating copies
of articles, each heralding his genius. Barron’s, a respected business weekly,
once wrote that on Wall Street success or failure is measured only by how much
money you make or lose. Does any of this have a familiar ring?
All of which brings us to Mr. Zhao Danyang and my redemption.
It seems that a day before the lunch, Mr. Zhao told the media he would offer Mr.
Buffett a stock tip of his own: a little-known Chinese retailer called WuMart.
“I didn’t want to influence the market,” Mr. Zhao, told the
New York Times. “It was just a tip from a friend.”
Of course it was. And it was simply a coincidence that even
before Mr. Zhao arrived for lunch, shares of WuMart were climbing. By the time
he returned to China, the shares were up 25 percent and Danyang’s holdings in
WuMart (which he insists will someday be China’s Wal-Mart) were worth an
additional $16 million.
So let’s do the math: a $16 million gain in the price of his stock less the
lunch bid plus plane tickets and hotel rooms for family and associates (somebody
had to carry all those annual reports he distributed), produces a net profit of
just under $13.9 million. Lao Pi, a blogger who follows Danyang put it well when
he wrote, “Mr. Danyang is very smart at manipulating the media.” Mea Culpa.
