Friday, December 18, 2009

Ben Stein: My dinner with Warren

First, his office had changed a little bit since I was there a couple of years ago. He now has model trains everywhere, emblematic of his recent buy of Burlington Northern Santa Fe (BNI, Fortune 500) -- apt gifts, because Warren has been a model train collector since his childhood. Phil had brought him a 1930s Lionel catalog, which Warren read eagerly, Citizen Buffett with his Lionel trains Rosebud.

I asked him why he thought Burlington Northern was such a great buy and he answered in characteristic fashion...with numbers. He explained that Berkshire (BRK.A) had gotten so big that even a very successful small purchase would hardly affect earnings at all.

But a medium successful large purchase would be more helpful. (He explained this with numbers in such a rapid fashion that it was as if a computer were spitting out the analysis, which, in a way, it was. He is so astonishingly facile with numbers that it is almost eerie.)

Over dinner at the amazing Piccolo Pete's, the Italian restaurant in a working class neighborhood that seems to set aside most of the restaurant just for him, he said the economy had really been in desperate shape last fall.

The man who saved it, he said, was Ken Lewis, beleaguered head of Bank of America (BAC, Fortune 500). By buying Merrill Lynch just as everything at Lehman was falling apart, he put some confidence back into the system and stopped -- or helped mightily to stop -- a "run on the bank" which would have laid waste all of Wall Street.

If Merrill had failed, said Buffett, it would have been followed swiftly by Morgan (MS, Fortune 500) and then by Goldman. By overpaying wildly for Merrill, Lewis essentially saved the nation from financial collapse.

Read the rest.