Tuesday, May 4, 2010

Common Sense on Goldman Sachs

Warren Buffett has provided a throated common sense defense of Goldman Sachs behavior in the Abacus deal. According to the NYTimes, Buffett commented:

“I don’t have a problem with the Abacus transaction at all, and I think I understand it better than most...”

His comments echoed the strong view he had offered just the day before: “For the life of me, I don’t see whether it makes any difference whether it was John Paulson on the other side of the deal, or whether it was Goldman Sachs on the other side of the deal, or whether it was Berkshire Hathaway on the other side of the deal,” Mr. Buffett said.

Buffett argues that the quality of an investment depends on the facts involved, not the identity of who is on the other side:
“I don’t care if John Paulson is shorting these bonds. I’m going to have no worries that he has superior knowledge,” he said, adding: “It’s our job to assess the credit.” The assets are the assets. The math either works or it doesn’t.
I guess it is not surprising that the world's most successful investor would not want to support the view that if an investment proves successful it must be illegal. Since market trades must reflect a divergence of views somebody is going to end up losing on a deal.