David Rosenthal: evaluation

Transcript context

…Credit to Charlie for asking the question, but Charlie follows him into the pit too and joins the port as well. Totally, and probably regretted it every day after. They do the deal. This is September of 1987. October 19th of 1987 is Black Monday when the Dow 22.6% in essentially a flash crash. I had this confused in my mind. I thought Black Monday in ‘87 was the Long-Term Capital Management thing. No, that happened much later. This was actually a flash crash. Nobody really knows why this happened. Of course, the market was overheated, of course, there was way too much leverage in the system, but things recovered pretty quickly. That's not what triggers a meltdown. Salomon, of course, gets crushed like the rest of Wall Street. They lose $75 million in trading losses on that day, the stock gets crushed, but they're not in any better or worse shape than any other investment bank. But the stock is way down. Buffett and Munger show up to their first board meeting after this happens, which is like the next month, maybe in November. Gutfreund and management put a deal on the table to reprice all employees’ stock options because the stock is down. Buffett and Munger flipped. They're like wait a minute, you guys lost a ton of money for the firm. We as shareholders in the firm, just invested. Our $700 million is now worthless. And you guys are saying you want to take advantage of this lower stock phrase to re-praise all of your options that you're then just going to treat out of it immediately as soon as they vest and liquidate the cash. No one here wants to become bigger owners of this thing. You all just want a quick arbitrage opportunity.…

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