Monday, May 07, 2007

Warren Buffett Squashes Baloney

For the second year in a row, Warren Buffett has splashed cold water on naked short selling conspiracy theorists at his annual meeting of shareholders.

Responding to a question from a shareholder, Buffett said as follows according to an unofficial transcript of the question and answer session published on the Motley Fool (registration required):

Question: What can be done to make Wall Street deliver stocks they've sold but never delivered?

Buffett: Yeah, that they've never delivered, and naked shorting is the question. I've never asked a broker to give me a stock and had them decline it. I see no problem at all with people shorting stock…I would welcome people shorting Berkshire. I have no problem with shorts. If someone wants to naked short Berkshire, we'd be happy -- we'd have a special meeting for them. The shorts have a tougher time in this world. I do not see shorts as any great threat to the world. On USG, when it got hammered after bankruptcy, one large brokerage firm came to us and wanted us to lend them millions of shares and paid us a lot of money, and we happily lent them and wished they had borrowed more. It is very easy to spot phony stocks, but it is hard to tell when they will turn around.

Charlie Munger: Those delays in delivering sometimes reflect tremendous slop in the clearance process. It is not good for a civilization to have huge slop. Sort of like how it isn't good to have a lot of slop in nuclear power plants.

WB: Now, reach back into your law practice Charlie. If I buy GM and they don't deliver, what is situation?

CM: Well, if you are a private customer, you may have to wait awhile.
"Huge slop" -- not a "stock counterfeiting conspiracy." The same phrase also describes the mindless babble of the naked-shorting conspiracy theorists.

Too bad the SEC, which has wasted resources on this issue, can't seem to figure out obvious stuff like this quite so clearly.

© 2007 Gary Weiss. All rights reserved.


Wall Street Versus America was published by Penguin USA on April 6.
Click here for its listing and here for more information on the book, from my web site,

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