How to make two billion in nine months

The Old Master's still got it

It must be downright embarrassing, if you’re a strapping trader in the prime of youth, MBA in hand, to be trounced by a 78 year-old man.

This is what precisely Warren Buffett has again done to Wall Street’s finest. Every time cynical pundits like Nassim Taleb argue that the old master investor is merely lucky, the hoary fox proves again that his market-beating returns have less to do with luck than balls of burnished brass.

“Be fearful when others are greedy, and greedy when others are fearful” is his simple mantra. This approach to investing gives the lie to the popular notion that the best investors are somehow ‘smarter’ than average.

Back in the heady, lunatic days of the dotcom bubble, Warren Buffett shunned the mad buying of stocks with no hope of generating profit. The word was, the old fuddy-duddy didn’t get this Internet thing. He’d lost his touch. We know how that ended.

They said the same thing when he struck a deal, at the depth of the financial crises, to purchase cheap warrants for Goldman Sachs’ undervalued stock. Others could have made the same bet, but amid the panic, following the herd felt safer.

Pundits like this chap speculated that Buffett had lost his touch, as Goldman’s share price fell further after the deal. They’re not saying that now. After record profits announced last week, Buffett has pocketed a cool $2 billion or 44% return on the warrants- excluding the guaranteed 10% preferred dividend. Fortune, indeed, favours the bold.