The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [188]
All kinds of businesses had float. Deposits in banks were also float. Customers often thought of banks as doing them a kind of favor by holding their cash in a safe place. But the bank invested the deposits in loans at the highest interest rates they could charge. They made a profit. That was “float.”
Buffett, Munger, and Guerin understood how to invert every financial situation. If someone offered them trading stamps, they upended the situation and thought, “Hmm, it’s probably better to own the trading-stamp company,” then figured out why. They would no more spend time saving trading stamps to get a hibachi or a croquet set than they would wear their great-aunt Betsy’s petticoats to the office. Even Buffett—a boyhood stamp collector who still dreamed occasionally about counting stamps, and had a sentimental stash of Blue Eagle stamps in his basement—would rather own Blue Chip stock than collect Blue Chip stamps.
In 1968, Blue Chip began settling the lawsuits filed against it by competitors.18 It entered into a “consent decree” with the Justice Department, under which the grocery chains that owned it would sell forty-five percent of the company to the retailers who gave away the stamps.19 To remove even more control from the grocers who had given Blue Chip its less-than-immaculate conception, the Justice Department required the company to find another buyer for one-third of its stamp business. Still, it looked as though Blue Chip had survived this part of the legal fight.20
Munger’s partnership had bought 20,000 shares, and Guerin bought a similar amount. In the process, Munger developed the proprietary attitude about Blue Chip that Buffett displayed about Berkshire Hathaway. He warned others away from it. “We don’t want anyone buying Blue Chip,” he told people. “We don’t want anyone buying this.”21
As the market rose, Buffett increased the partnership’s temporary cash position to the tens of millions, even though he was still buying stocks in huge chunks. His partnership also took over large blocks of Blue Chip stock from Lucky Stores, Market Basket, and shares owned by Alexander’s Markets, however, and would continue to buy for the next few months until the partnership had acquired more than 70,000 shares. For National Indemnity and Diversified, he also bought five percent of the stock of Thriftimart Stores, one of Blue Chip’s largest shareholders. Buffett figured he could eventually get Thriftimart to swap the Blue Chip it owned for its own stock. Fortunately they were betting mainly on the S&H lawsuit settling—otherwise, the timing would have been awful.
Just as he and Munger and Guerin were making large commitments to Blue Chip, its steadily growing sales apexed. Women had started to lose interest in sitting at home, sticking trading stamps in a book. The burgeoning women’s liberation movement meant that they had better things to do with their time, more money, and with that a sense of entitlement that meant that if they wanted an electric blender or a fondue set, they went out and bought it, rather than fussing over books of stamps to trade in for it. Social roles and conventions had gone topsy-turvy, the Establishment culture so reviled that young people said categorically, “Don’t trust anyone over thirty.” Buffett, at thirty-eight, did not feel old personally—he would never feel old personally—but “I am in the geriatric ward, philosophically,” he wrote to the partners.22 He was out of step with modern culture and finance.
In 1968, the prospect of Vietnam peace talks in Paris set off another boisterous rally in the market. Though proud of having husbanded, tended, and compounded his partnership, with minimal risk, from seven investors and $105,000