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Wednesday, May 23, 2012

Investment Bankers - Untrustworthy. Ask Warren Buffett

Warren Buffett: “Don’t ask the barber whether you need a haircut.”

Warren Buffett does not trust Investment Bankers. I am not surprised. One of the world's savviest investor has a low opinion of Investment Bankers. So should we.
We have see what they did to investors, shareholders & the public during the housing crisis among other debacles.

The article (courtesy The Guardian) has this to say:

Goldman Sachs decided to sell nearly half its holding, while Manhattan hedge fund Tiger Global increased its sell-off from 3m to 23m shares. Those most likely to have seen the analysts' forecasts may have decided that the shares were unlikely to enjoy the customary day-one surge, seen when Google and the professional networking site LinkedIn went public. Basically, for those in the know, at $38 a share Facebook was a "sell".

As you can see GS decided to sell out while probably encouraging their clients to buy!

Of course, investor who bought at $38 or higher are to blame as well. The ratios were outrageously high.

In Kenya, we have the case of SIB benefitting from a less than savoury deal on the Kenya Airways Rights Issue. Here is some interesting reading!

The Flying Rip-off

Kenya Airways - Commissions Payment Scam

The late to the party Parliament to probe KQ Rights Issue

As outlined in this article, the perverse incentives for SIB to make sure the Rights Issue went through even if the deal hurt existing shareholders. The Board of Directors failed in it's duty to protect existing shareholders.

If I had to replace the entire Board of Directors of KQ with Warren Buffett, I would do it in a fraction of a heartbeat.


timothy said...

Ok, does it mean we dont invest or what is the best way to put your money where your sure, it will grow!

coldtusker said...

@Timothy - Investment Bankers have become leeches that cause sores on Investors' portfolios!

Anonymous said...

Not surprising. About KQ, it is more important to look at who benefits and follow the money trail. The KQ BOD is not calling the shots. Wonder why KLM was quiet on this?

Anonymous said...

(inside job) then you'll learn to be abit skeptical...

Investment Bankers said...

I agree with your blog.Investment Bankers have become leeches that cause sores on Investors' portfolios..Thanks for sharing!!

Mike Moore said...

This blog made me think how to become an investment banker not too do it but made me think twice if I should pursue it. great info in your blog and I have to say this does make a lot of sense.


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