The fall of Warren Buffet, continued

Last year I wrote, The Fall of Warren Buffett and Another look at the fall of Warren Buffet. It was a look at the municipal debt situation and its relation to insurers owned by Warren Buffett and also comments by his associate, Charlie Munger. Now, there's even more mud being flung in the direction of Munger and David Sokol, who resigned from Berkshire Hathaway over an unethical stock transaction.

ZeroHedge has the scoop in Forget David Sokol, Is The SEC About To Tell Charlie Munger To "Suck It In"?

On March 31st, David Sokol appeared on CNBC Squawk Box (to the most distraught Becky Quick we have ever seen) in an attempt to explain why his purchase of of Lubrizol Corp, prior to Berkshire Hathaway's purchase of the Company, was perfectly acceptable. In attempting to provide evidence of this“perfectly acceptable” practice David Sokol said a curious thing (17 minutes 15 seconds in):

"I don’t believe I did anything wrong. Charlie Munger owned 3% of BYD before he asked me to go look at it."

Because we all know if everyone is doing it, then it isn't illegal or unethical. Especially if everyone is a member of the Berkshire inner circle. But if the SEC as is now widely reported, is about to make a public spectacle out of David Sokol (if not actually press civil charges because, well, the SEC doesn't actually pursue large scale securities fraud), shouldn't they be looking at ole' Charlie "Suck It In" Munger?

Elliot Wave International has a just released article titled, Why "Financial Heroes" Fall from Grace, about the fall of Alan Greenspan, which is perfectly timed given this revelation.

Warren Buffett is the ultimate icon of the bull market. David Sokol was seen as a possible successor to Buffett, but now he is gone. If his comments about Munger and BYD are true, then Munger may also be in trouble.

Note that from a socionomic perspective, I'm not concerned with whether Sokol and Munger's actions rise to the level of criminality or even if they are unethical. I am only focused on the shift in social mood and how it affects the public perception of these men. In an earlier post I wrote that Buffett could go from a hero to a goat, especially if the social mood is in a major decline. He has yet to be directly hit by a scandal, but his image is taking hit after hit.

At the least, his image may slip to that of other wealthy investors, such as Kirkorian and Ichan, rather than the popular icon of the investing public. At worst, any unethical slip or slightest legal transgression could be blown up into a major scandal. A lot depends on whether Mr. Buffett has made any mistakes, but the social mood will play a big role in how much scrutiny he receives and how any mistake is perceived. At this point, he has done nothing wrong, but his image is nonetheless tarnished because of the change in social mood.