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September 26, 2007
Buffett, Berkshire, and Bear Stearns
In all the stories today about investor Warren Buffett's possible interest in brokerage firm Bear Stearns, why haven't the Tintonologists been trotting out any of the many quotes from Berkshire-ites about the brokerage industry. My personal favorite comes via Rick Bookstaber's excellent A Demon of Our Own Design, who quotes Berkshire's Charlie Munger saying the following in a Salomon Brothers board meeting:"A spread trade is like a stick with shit on both ends."
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True that...well at least sometimes those types of trades seem like nothing but commission generators...of course the "shit" trade can even made worse in certain circumstances when traders are encourged or tempted to "lift a leg" ie take off one side of the spread and exposing the "shit" trade to even more risk-- i suppose some folks can make these trades can work once in a while ..... charlie knows....