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Gartman on the Buffett Bubble

We have commented on Buffett’s new bond issue. The Gartman Letter offers an even more blunt critique:

The more we ponder the circumstances surrounding the incredible less-than-zero interest rate convertible bond that Berkshire Hathaway is selling to institutional clients, we need to consider what sort of environment hatches such a preposterous entity. Clearly it is not a bearish environment; that is, clearly the psychology of those who are buying such a contraption must be overtly, long term bullish of equities for such an entity to be sold [in other words, Berkshire has sold debt with an annual negative interest rate of .75%…retaining the right to sell shares at a substantive premium to today’s price!]. The enormous leap-of-faith required by buyers of this debt issue is stunning…more stunning even than the leap of hubris needed to sell it! We do not blame Mr. Buffett for trying (and apparently succeeding) in selling this thing to investors… even to institutional investors. It is his duty under capitalism’s rules to try to gain every advantage that he can. However, while there is demand for this sort of blind man’s bluff issuance, there is not an end in sight to the bear market. As long as optimism reigns, share prices will fall. Only when Buffet’s Bubble Breaks Badly can we say with some sense of certitude that the bear market has ended. This, we fear, is some very long while away. CAVEAT EMPTOR, AD ABSURDEM!

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