- The best thing that happens to us is when a great company gets into temporary trouble... We want to buy them when they're on the operating table. - Warren Buffett
A quick history lesson...
In 1963, the world's largest credit card company, American Express, was involved in the 'salad oil scandal'.
AmEx had just created a warehousing division to make loans to businesses using inventory as collateral.
A commodities trader (and known swindler) named Anthony 'Tino' De Angelis saw an opening for a massive fraud.
He began stockpiling his warehouses with tanks of soybean oil. He then used warehouse certificates from American Express as collateral to borrow heavily from American Express and as many as fifty other lenders.
When American Express sent inspectors to check De Angelis' inventory, they did not notice that - except for the thin layer of oil floating on top - the tanks were filled with water.
When the fraud was finally exposed, AmEx stock crashed more than 40%. The eventual damage to the company would be US$175 million.