Warren Buffett's Multi-Million Dollar Lunch

Matt Welch | July 6, 2009

If, like me, you harbor an irrational dislike of stock-picking legend Warren Buffett, this story might make you smile:

A Chinese businessman named Zhao Danyang paid a record $2.1 million in a charity auction on eBay last year to win a lunch date with one of his heroes: Warren E. Buffett [...]

[A] day before the lunch, which took place on June 24 at the Smith & Wollensky steakhouse in New York City, Mr. Zhao told the media he would offer Mr. Buffett a stock tip of his own: a little-known Chinese retailer called WuMart. [...]

Even before Mr. Zhao arrived for lunch, shares of WuMart were climbing. By the time he returned to China, the shares were about 25 percent higher and Mr. Zhao's stock holdings in WuMart (which he insists will some day be China's Wal-Mart) were worth about $16 million more.

J.P. Freire wrote about "The Billionaire Apparatchik" back in 2006.

Comments

Spartacus|7.6.09 @ 9:19AM|#

Sounds like the Chinese have already mastered the art of Pump-N-Dump.

|7.6.09 @ 9:51AM|#

I wonder if China has laws like ours against stock manipulation. Of course, if Mr. Zhao is properly connected, it probably doesn't matter.

mark|7.6.09 @ 10:13AM|#

Buffett taxes full advantage of every tax loophole in the United States, and then expects the government to raise taxes on everyone in the name of "fairness". Dude needs to check himself.

|7.6.09 @ 10:13AM|#

and everybody thought he was nutty for paying so much for a lunch date with Mr. Buffett. Greedy dang buddhists. hehehe

|7.6.09 @ 10:14AM|#

I don't think this qualifies as manipulation according to what I know about the topic. He didn't spread any rumors or tips, and there are no allegations here that he attempted to sell any stock to profit from the price increase. If having the ear of warren Buffet is not worth 25mm to his companies valuation, I'm sure the market will take it back out before long. Yawn.

|7.6.09 @ 10:17AM|#

Buffett taxes full advantage of every tax loophole in the United States

Yes, not to do so would be foolish. He intends to distribute his wealth to private charities, and has long stated that he feels private charity is more effective than government programs for the same purposes. His conceit is that others are not as generous as he is, and he obviously doesn't appreciate how government crowds out private charities like the ones he supports. He is mistaken about some things, but there is no reason to think he is disingenuous.

|7.6.09 @ 10:19AM|#

"Buffett taxes full advantage of every tax loophole in the United States"

Don't we all?

|7.6.09 @ 10:31AM|#

Mr. Zhao's stock holdings in WuMart (which he insists will some day be China's Wal-Mart) were worth about $16 million more.

Not a bad return on his lunch tab.


As for Buffet and taxes:

During the campaign, he made a bunch of "aw, shucks" declamations about how he "just fills out the forms."

If Berkshire was buying a company, and the CFO said, "I don't really spend a lot of time worrying about the tax consequences of our decisions," you know goddam good and well that guy would be gone before the ink on the contract was dry.

|7.6.09 @ 10:40AM|#

He intends to distribute his wealth to private charities, and has long stated that he feels private charity is more effective than government programs for the same purposes.

Yet he is in favor of a stout estate tax. Odd.

|7.6.09 @ 10:47AM|#

Yet he is in favor of a stout estate tax. Odd.

Well, don't forget that Berkshire Hathaway's core business is insurance, including life insurance. Life insurance is an important part of most strategies to avoid estate taxes.

I'm not saying that's the entire reason, but a stout estate tax is worth a lot of money to a guy whose company makes money helping people not pay that tax.

|7.6.09 @ 10:49AM|#

There is an interesting theory that Buffet likes the estate tax because his insurance businesses sell products designed to avoid the tax.

But he feels bad because his secretary pays more taxes than he does. Or some such bullshit.

Mike M.|7.6.09 @ 10:50AM|#

Buffett taxes full advantage of every tax loophole in the United States, and then expects the government to raise taxes on everyone in the name of "fairness". Dude needs to check himself.

Bingo. I've never liked this guy, nor have I ever bought into his "aw shucks", regular midwestern guy persona he has carefully crafted for himself with assistance from the media

|7.6.09 @ 11:03AM|#

Buffett taxes full advantage of every tax loophole in the United States, and then expects the government to raise taxes on everyone in the name of "fairness". Dude needs to check himself.

Yes, because libertarians that drive on publicly owned roads, go to public schools, take federal student loans, &c. also need to check themselves too. He's a profit maximizer, of course he's going take full advantage of every tax loophole that exists. Just like a libertarian business owner is going to (or at least should) take advantage of every government subsidy that exists, while railing against them.

But he feels bad because his secretary pays more taxes than he does. Or some such bullshit.

He finds it odd that his tax rate, as a billionaire is lower than that of his secretary's. The tax system is f'ed up.

|7.6.09 @ 11:04AM|#

nor have I ever bought into his "aw shucks", regular midwestern guy persona

I'm pretty sure he does lines of blow off Becky Quick's ass in his private jet...

mark|7.6.09 @ 11:04AM|#

He is mistaken about some things, but there is no reason to think he is disingenuous.

I didn't mean to say one shouldn't take advantage of tax loopholes if possible, but that he might very well have a different opinion on taxes if he did in fact have to pay the same rate as his secretary.

Let me put it another way. Buffett's "buy and hold" strategy, accumulating the retained earnings of Berkshire Hathaway and its subsidiaries and reinvesting them, is based in part on the tax situation. If he were to realize his investments as a capital gain, there would be an additional tax and less money to invest. So he keeps his money in Berkshire and avoids the taxman. His entire strategy for gaining wealth is based on avoiding taxes, in a way that you might call a competitive advantage over other investors, who have to raise money from multiple sources and then pay out profits after capital gains.

So Buffett's opinions on taxes as they relate to fairness strike me as little more than rich man moralizing.

|7.6.09 @ 11:14AM|#

Yes, not to do so would be foolish. He intends to distribute his wealth to private charities, and has long stated that he feels private charity is more effective than government programs for the same purposes. His conceit is that others are not as generous as he.

Others aren't as generous as he??? What an asshole.

mark|7.6.09 @ 11:18AM|#

Let me take that back; I've read Buffett's annual reports, he doesn't seem like the type to need to moralize.

It's a nice applause line to talk about his secretary's tax rate, but the reality is that even bringing his personal income tax in line with that of his secretary wouldn't change Buffett's investment strategy at all but it would definitely affect the investment strategies of others, possibly to his advantage.

|7.6.09 @ 11:19AM|#

The tax system is f'ed up.

Yes,it is. Because the Congress listens to self-interested special pleaders like Buffet.

Mike T|7.6.09 @ 11:27AM|#

Yes, not to do so would be foolish. He intends to distribute his wealth to private charities, and has long stated that he feels private charity is more effective than government programs for the same purposes. His conceit is that others are not as generous as he is, and he obviously doesn't appreciate how government crowds out private charities like the ones he supports. He is mistaken about some things, but there is no reason to think he is disingenuous.

No, he's a jackass who won't practice what he preaches. He moans incessantly about how he pays less taxes than his secretary (15% versus 30%), and could just as easily write a big check to the federal government each year making up the difference.

There is a word for people who freely don't live up to their claimed values or who interpret them so narrowly so as to not apply to THEM: hypocrites.

Mike T|7.6.09 @ 11:33AM|#

When you get right down to it, Warren Buffet is like a preacher who piously preaches against drunkenness and premarital sex, and then goes to a bar and hooks up every weekend with a new woman and has drunken sex with her. It may be ok in society's eyes for him to do that, but he's still a pathetic hypocrite.

hmm|7.6.09 @ 12:45PM|#

I'm not a huge fan of Buffet or his strategies. I find the manipulation by the Chinese investor hilarious. I'm sure Buffet appreciates it even if he won't comment. He does the same thing with the media, just not as well or in such a short time. Hats off to crazy Chinese guy for turning a buck on Buffet's back. Too bad it wasn't a zero sum gain.

|7.6.09 @ 1:30PM|#

all I can say is "Wu Wu!!!"

Judge Learned Hand|7.6.09 @ 1:50PM|#

Over and over again courts have said that there is nothing sinister in so arranging one's affairs so as to make taxes as low as possible.

Everybody does so, rich or poor, and do right, for nobody owes any public duty to pay more taxes than the law demands.

Taxes are enforced exactions, not voluntary contributions.

dg|7.6.09 @ 6:46PM|#

It is not hypocrisy to use available loopholes while advocating that they be closed. Were he not to take advantage of them for the company and its shareholders, he would be remiss in his fiduciary responsibility. But he feels that it would benefit more people to close these loopholes altogether.

Isn't that leadership? Persuading people to act against their own individual interests in order to further the greater collective good.

Robert Wenzel|7.7.09 @ 7:10AM|#

The NYT story is very unfair to Mr. Zhao Danyang. I interviewed Mr. Zhao the day after his lunch with Buffett. Pumping Walmut stuck was the farthest thing frm his mind:

http://tinyurl.com/n33c2m