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 Buffett
owns nearly 40 percent of Berkshire Hathaway, a holding company
that owns substantial portions of numerous different businesses,
most significantly the property casualty insurance business.
The sage investor was described
to be "under a cloud" recently because of investigations
by state and federal prosecutors into questionable accounting transactions
that occurred four years ago between American International Group
and Berkshire Hathaway's subsidiary General Reinsurance Corp.
Buffett himself is not at the center
of the probe. At the shareholder meeting, he expressed optimism
about the prospects for both companies, and noted the cleansing
effects that such a probe can have on an organization's bookkeeping
practices. "The publicity and the penalties will change behavior
in a dramatic way ... Sunshine can be a great disinfectant,"
he quipped, according to a recent Wall Street Journal article.
Buffett was under a "cloud" once before
-- in the late 1990s, when Wall Street pundits raised questions
about his credibility as an investor (as well as that of other value
investors). That was an era when high-tech stocks were trading at
nosebleed levels, and annual returns in excess of 200 percent were
not uncommon, even among "diversified" mutual funds. Buffett's
stubborn adherence to sound value principles seemed stodgy and outmoded
at the time. Of course, that cloud dissipated with the popping of
the tech bubble, and since then Buffett's reputation has been restored
to hero status by the grateful throngs of Berkshire shareholders.
*****
An update: FPA vs. SEC
A previous column of mine underscored the importance
of knowing the difference
between brokers and investment advisers. Both offer fee-based
investment accounts, but brokers and advisers are regulated differently
and are held to different standards.
A couple days after that column appeared, the Financial
Planning Association filed a lawsuit against the Securities and
Exchange Commission, calling for a review of the SEC's Broker-Dealer
Rule.
"The SEC erred in adopting a defective rule,"
FPA president James Barnash said at a press conference. "We
believe that redress in a court of law remains the best course of
action in preserving a consumer protection law -- the Advisers Act
-- one that is increasingly starting to look like Swiss cheese."
The FPA says that the rule as it stands harms investors.
"Financial planners, investment advisers and consumers share
a common concern -- that the rule creates a double standard for
the delivery of financial advice to the American public," said
Barnash.
Several organizations join the FPA in opposing the
SEC's recent ruling, including the AARP, American Institute of Certified
Public Accountants, Consumer Federation of America, Financial Services
Institute, Fund Democracy, Investment Counsel Association of America,
the National Association of Personal Financial Advisors, North American
Securities Administrators Association, T.D. Waterhouse Securities
and T. Rowe Price.
Those who support the SEC's ruling overwhelmingly
represent the brokerage industry -- surprise! They include American
Express, Merrill Lynch, Morgan Stanley, Smith Barney, Wachovia Securities,
the NASD, Northwestern Mutual and the Securities Industry Association.
Longtime financial journalist Barbara
Mlotek Whelehan earned a certificate of specialization in financial
planning.
*****
If you have a comment or suggestion, write to
Boomer Bucks. If you
have a particular financial problem that you would like addressed,
please send your queries to Dr.
Don, Tax Talk,
the Real Estate
Adviser or the Debt
Adviser.
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