Professor Glen Arnold

In opening remarks delivered to a Congress subcommittee investigating Salomon’s violations September 4 1991 Buffett spoke bluntly of the foul up at Salomon and, more significantly, the business ethos he holds dear; one which he was trying to instil in the bank.  Each May a video clip of this 2 minute speech is played (https://www.c-span.org/video/?21029-1/securities-trading-investigation...

Salomon’s board gathered at the office on Sunday 18th August 1991 in mournful mood as they expected the company to die very shortly. At 10am the US Treasury telephoned to say that in a few minutes it will announce that Salomon would no longer be allowed to bid in Treasury auction either for its own […]

At 6.45 am Friday August 16 1991 John Gutfreund phoned Buffett at home in Omaha and told him he was going to resign as chief of Salomon.  An hour or so later, once Buffett had reached his office in Kiewit Plaza, they had another conversation in which they agreed that Buffett would step into the […]

This is the story of how one financial institution nearly brought down the entire financial system like a house of cards (tomorrow’s newsletter will describe how Warren Buffett rescued it). In summer 1991 Salomon’s common stock price had almost touched the $38 level at which it made sense to convert Berkshire Hathaway’s preferred shares into common ones.   […]

The arrogance and sense of entitlement of Wall Street players is so great that they are a breed apart – and not in a good way.  There is a culture which often encourages bad behaviour and greed.  What I’m writing about today happened in the 1980s, but be warned, the culture has been perpetuated because senior […]

Buffett had a front row seat to observe the stock market crash of October 1987 following his purchase of Salomon preferred a month before.  He was told by earnest mathophiles that they had got the “science” of investment sussed.  They could see from analysing market movements and a raft of macro and company stock trading […]

Buffett and Gutfreund developed a friendship while working together on the GEICO deal. In the years that followed they regularly discussed pressing issues on the telephone and in person; even the head of an investment bank needs someone he can trust to quickly grasp an issue or dilemma and help to talk through ideas.  Buffett […]

The Salomon case study is fascinating because it is probably the most significant failure of Warren Buffett’s career.  That’s not to say he didn’t make some money on it – so the failure does not lie there.  This is a failure of analysis of the culture he bought into.  Buffett invested in a sector he […]

Ever since he was a 19 year-old student of Benjamin Graham (1950-1) Buffett knew he would have to accept long periods when it didn’t make sense to buy, years when Mr Market is full of vim and excitement.  By the same token, he knew that exuberance would eventually pass and opportunities to buy at reasonable […]

We can learn a lot from the way Warren Buffett behaved when the stock market was bounding ahead in a burst of enthusiasm.  Even though the story takes place over 30 years ago it is highly relevant for where we are today.  In the mid-1980s Berkshire’s controlled subsidiaries and security investments were bringing in hundreds of […]