Berkshire Hathaway

[roadtoharvard]

Originally Posted by hayekcapitalist

My mainpoint is that Buffett has a carefully crafted personna: he wasn't raised poor, he is the son of a congressman/stockbroker, and the reason he does it is because it gets him sweetheart deals that you and I could never negotiate. So maybe h'e just a good B.S.er. He thinks you and I don't pay enough taxes, that the estate tax should not be repealed (this from the world's 2nd/3rd richest person who claims he pays less taxes than his secretary and to ensure that is going to give his billions to the Bill "Gates foundation ( how special).
My contention about his dividend payout theory is that dividends should be paid by companies who have much less astute capital allocators than Buffet: just ask him.

I used to admire Buffet. But, the more I studied him, his techniques, and his personal life, which for better or worse is on display in so many books written about him, I find him a to be one vast Cherry Coke, oh sorry Pepsi drinking, cheeseburger eating contradiction. He's dangerous, he has made his money and doesn't want you to keep yours. He is a collectivist and I would like to see how much of the cost of tonight's fundraiser for Obama is shareholder money disguised. Low blow, maybe, but...

One question: do you really accept that he doesn't split the "A" share selling north of $100 big ones because of the potentially deleterious effects of traders. Surely he can do better than that, or why not just admit that his ego needs the status that potentially accretes from such a high per share price? He runs Berkshire as his personal company and actually ignores the shareholders who are the real owners, treating them like mushrooms, and they like it...until the manure hits the rfan one day, and it will. It amy be after his death that you alluded to, but it will IMO.

Funniest thing i read all week. Thanks hayekcapitalist!

[unclemick]

Hmmm - and this gives me the inside skinny why he's buying railroad stocks.

Sooo should I add to my Union Pacific DRIP, hold em or fold em?

If I fold - I won't get the free calender anymore.

heh heh heh heh

[Nords]

Originally Posted by hayekcapitalist

I used to admire Buffet. But, the more I studied him, his techniques, and his personal life, which for better or worse is on display in so many books written about him, I find him a to be one vast Cherry Coke, oh sorry Pepsi drinking, cheeseburger eating contradiction. He's dangerous, he has made his money and doesn't want you to keep yours. He is a collectivist and I would like to see how much of the cost of tonight's fundraiser for Obama is shareholder money disguised. Low blow, maybe, but...

My goodness, this type of sentiment used to be reserved for guys like Chainsaw Al, Dennis Koslowski (who doesn't seem to rate a nickname), and Kenny Boy.

I think Buffett's always been pretty clear about "Kids, don't try this at home." He does things that work for him and says that, if others aren't willing or able to devote the same effort that he's hardwired for, then they should do things differently. Look at how actively he trades while recommending that most investors stick to index funds.

I think he feels that the rich should pay more taxes. He seems equally comfortable advising Arnold Scharzenegger's Republicans (Buffett's father's party) as with Democrats.

I don't know what money Berkshire Hathaway donates to political campaigns. I agree that they could hide it but it seems unlikely & unnecessary. He has enough personal money to buy an election right now anyway and his presence sells tickets faster than just about anyone else.

I think the reason Berkshire doesn't pay dividends is Buffett's opinion that he can deploy the capital better than just about anyone else in the world. His record over the last couple decades would seem to justify that opinion. The nice thing about the company is that he doesn't have to contend with fund bloat (like Bill Miller and other talented fund managers) and the Owner's Manual is extremely clear about how the business gets done. I'm not so sanguine about the expertise of other CEOs & fund managers, although I could point out that Tweedy, Browne used to not pay dividends on their funds either.

One of Buffett's biographers (Lowenstein? I don't remember) claimed that Buffett didn't give money to charity because he could do a better job with it by compounding it until he died, and then giving even MORE to charity. However I think Buffett's long-term friendship with Bill Gates, seeing what Melinda's been doing with the Gates Foundation, and Susie Buffett's death changed his mind. He didn't change his mind overnight.

BTW if you're going to write checks for billions of dollars then you're gonna get special deals too. Few of us get that type of cash discount.

Originally Posted by hayekcapitalist

One question: do you really accept that he doesn't split the "A" share selling north of $100 big ones because of the potentially deleterious effects of traders. Surely he can do better than that, or why not just admit that his ego needs the status that potentially accretes from such a high per share price?

Well, Berkshire has one of the lowest volumes of any other large-cap publicly traded stock, so yes, I do think that's why he doesn't split the shares.

The "B" shares were a direct response to fund companies that were buying Berkshire shares and repackaging them as cheaper investment shares. He objected to the companies charging fees to own the stock, and to some extent he's been successful. Many mutual funds own large positions in Berkshire but I'm not aware of any financiers repackaging "A" or "B" shares at lower fractional prices. Seems like he was responding to traders there too.

Originally Posted by hayekcapitalist

He runs Berkshire as his personal company and actually ignores the shareholders who are the real owners, treating them like mushrooms, and they like it...until the manure hits the rfan one day, and it will. It amy be after his death that you alluded to, but it will IMO.

I think he runs it as much as any other CEO would as a majority shareholder... although I can't recall any other CEOs taking just $100K/year salary and no options. I think he also entertains questions and public dissent far more than most other CEOs (let alone Nardelli & his ilk).

I think when the shareholders amass the voting power that Buffett holds then he'll give the decisions to the people with the majority vote.

Can you provide an example of the mushroom treatment?

I hope you're not currently shorting the shares. Berkshire appears to have finally broken out of its trading range a bit, up 3.7% today.

[Lancelot]

Originally Posted by Nords

I hope you're not currently shorting the shares. Berkshire appears to have finally broken out of its trading range a bit, up 3.7% today.

I know! Wasn't shorting, just converting my Etrade holdings to cash so I could transfer everything to Vanguard (Etrade's yields for cash is a paltry .25%...)

Silly me, I should have went for an "In Kind" transfer.

Besides that, (and according to V'guard) the boys at Etrade require a "bank certified" signature on the paper transfer form.

They may not honor one certified by a Thai bank

[Nords]

Ouch, Lance, talk about tough timing. Up another 4% today (Friday 17 Aug).

Clif, maybe our shameless promotion of Berkshire Hathaway carries more weight with the rest of the market than we expected! Better put together your story & documentation for the SEC's query...

[clifp]

Hey no shameless promotion on my part. I was simply making sure that wonderful readers of this forum were aware of this small obscure stock, and its virtually unknown CEO.

That fact that stock is up a more than $6,000 in a week since my innocent question is surely a coincidence.

Actually I think it professor Hayek who should be concerned with his Buffett Bashing. I think that Borg Collective (aka Barak for President committee) have been alerted to his presence. They will be using the funding, from the world's greatest socialists leaders (aka Warren, Bill G, and Bill Gates Sr.) to establish a new social order, starting by raising of the marginal tax rate back up to 70% and the estate tax at 95% and will outlaw CEOs, entrepreneurship and Linux.

Alas HayekCapitalist has been targeted for assimilation (resistance is of course futile).

I will continue skipping down the road to serfdom, blissful ignorant of Warren's threat to the American Way of Life.

[kcowan]

Originally Posted by Nords

One of Buffett's biographers (Lowenstein? I don't remember) claimed that Buffett didn't give money to charity because he could do a better job with it by compounding it until he died, and then giving even MORE to charity. However I think Buffett's long-term friendship with Bill Gates, seeing what Melinda's been doing with the Gates Foundation, and Susie Buffett's death changed his mind. He didn't change his mind overnight...

Susan was the one committed to charity and her death left an expertice hole that he filled with Melinda Gates. Even that offer is based on them drawing down cash from his portfolio as they had reason to spend. He still believes that he can manage the money better than anyone else.

He even relates that he gave $10,000 to each of his kids many years ago but recommended they leave it with him to invest for them. None took the offer and he commented that the money would be worth 100x as much (when the interview was held).

I find it hard to understand why anyone could find reasons to criticise Buffett. He seems very solid and principled to me.

[chinaco]

I have a different reason for not liking Buffet. Because I didn't get to participate in the valuation gorging that occurred over the last several years. Now the old guy is going to retire. Dang buffet heads.

Good old green-eyed envy.

[unclemick]

Originally Posted by chinaco

I have a different reason for not liking Buffet. Because I didn't get to participate in the valuation gorging that occurred over the last several years. Now the old guy is going to retire. Dang buffet heads.

Good old green-eyed envy.

Riiiight! My Union Pacific calender came yesterday - so is Warren still buying railroad stocks and why?

heh heh heh - Yup wish I would have bought Berkshire in 1966 - that would have been interesting.

[Running_Man]

There is no doubt that Warren Buffet is extremely talented in investing. I think his personal goal is not personal wealth but the eternal remebrance as the only person that ever walked the earth that is able to beat the efficient market hypothesis. He does this by consistently stating noone could do better than he, which has been true for the most part. However he is not at all interested it seems to me to helping smaller investors receive the ability to benefit from his talents. He does not as Benjamin Graham, his mentor, state that anyone with the desire to learn be able to outperform the markets.

He argues for tax hikes and uses every possible law to dodge taxes whenever possible, of course because no government could ever make better use of the money than he. In that way he reminds me of my neighbor who worked to pass a law banning yard waste in landfills and then dumped his into our local lake. When caught he pointed out there was no law against it as it was a private lake and owned by the association which had no rule against the yard waste dumping.

It seems to me he believes his shares should be hung on a wall like a fine work of art and prayed to each morning in thanksgiving to the Omaha Wizard. To sell the share(s) merely symbolizes how foolish a human being you are.

That does not diminish his investment prowess in the least but great wealth does not make a great individual.

[Hamlet]

This seems a little unfair. I don't know that he has argued for net tax hikes. He's argued against removing the estate tax, and he's argued for more rational property taxes in California.

He's pointed out that his secretary pays a higher percentage than him because of the 15% rate on dividends and capital gains that he pays (as well as the regressive nature of Social Security).

I don't get the impression that he has expended any extreme effort towards dodging taxes. Berkshire hasn't moved offshore or anything. He figures out his bill and pays it just like anyone else. He's just noted that the tax laws have been slanted in his favor by the recent changes.

Originally Posted by Running_Man

He argues for tax hikes and uses every possible law to dodge taxes whenever possible, of course because no government could ever make better use of the money than he. In that way he reminds me of my neighbor who worked to pass a law banning yard waste in landfills and then dumped his into our local lake. When caught he pointed out there was no law against it as it was a private lake and owned by the association which had no rule against the yard waste dumping.

[Sam]

WB is no doubt the greatest investor. But the company stock performance in the last 5 years is at best ok, definitely nothing to write home about.

I wonder if it's wise to keep 40B cash in a company with a market cap of 190B. That 40B cash could do a lot of good in another form.

[Running_Man]

http://http://www.capmag.com/article.asp?ID=2813
A 2003 article that summarizes pretty well the lies Warren Buffet continues to spew. Prime among them is the reason that Bershire Hathaway does not pay a dividend because it would expose Buffet to taxes even if he were to reinvest in Berkshire Hathaway. Since he does not want to pay taxes he issues no dividends nor sells anything and pays himself little and well... I think it is obvious. If the tax laws were that dividends were taxfree and capital gains 35% Berkshire Hathaway would immediately begin paying dividends.

As for the estate tax question how does that tax increase or remaining on books ever going to effect him in his life? It will not, he pushes it because it will not.

Perhaps he should push for a net worth tax of 3% annually - think he'd be for that?

[Hamlet]

It may be that Berkshire has reached a size that makes market outperformance nearly impossible. Certainly, the last 5 years of performance for BRKa is actually a little lower than the S&P500.

Of course, the person with 40B in cash may be the one that benefits from a major liquidity crisis.

Originally Posted by Sam

WB is no doubt the greatest investor. But the company stock performance in the last 5 years is at best ok, definitely nothing to write home about.

I wonder if it's wise to keep 40B cash in a company with a market cap of 190B. That 40B cash could do a lot of good in another form.

[Running_Man]

The only problem with that analysis is that the market is presently valuing evey dollar BH holds at $2.00.

[Sam]

Originally Posted by Running_Man

The only problem with that analysis is that the market is presently valuing evey dollar BH holds at $2.00.

That's interesting. Do you have a link?

[clifp]

Running Man, I am trying to understand your logic here. Are you saying that because Warren Buffet advocates for higher taxes on wealthy Americans he should voluntarily pay more himself? All he is doing is saying that the system is highly biased in favor of the investment class (i.e. rich people) and using his tax rate vs his secretary as an example.

Looking at my own situation, I have to agree with Warren. Last year I paid no payroll tax, no federal income tax, nor any state income tax. I expect to not to pay any of those taxes for at least the next three years. So the only taxes I pay are property taxes (and I am appealing my assessment to lower those taxes), sales taxes, gas taxes, and misc. telecommunications taxes, (and last year I got a refund on the telephone taxes). I

Now I am not doing anything illegal just taking advantage of a system that seems to want to tax my income from investments at far lower rate than when I was a working stiff. I look at my standard of living, and I realize that I very fortunate and am in a much better position to pay more taxes than people around me.

Like Warren, I am not going pay more taxes than I need to and I'd rather leave my money to charity than Uncle Sam. However, looking at my situation I can't help but wonder if the Democrats (I'm not) charges that tax cuts were for the rich aren't mostly true.

[Nords]

Originally Posted by Running_Man

It seems to me he believes his shares should be hung on a wall like a fine work of art and prayed to each morning in thanksgiving to the Omaha Wizard.

Whoa, waitaminnit. Am I working too hard here? Doesn't everyone already do that?!?

Originally Posted by Running_Man

If the tax laws were that dividends were taxfree and capital gains 35% Berkshire Hathaway would immediately begin paying dividends.

I've always thought that Berkshire retains the money (instead of paying a dividend) because Buffett believes that he can invest it better than we shareholders can. And now that my cap gains are taxed at lower rates than dividends I'm even happier to let him hold the money. I haven't found anyone better at it.

It's interesting that the most Buffett-bashing article you could find was over four years old. After more than six decades of investing you'd think that he'd be almost as unpopular as Leona Helmsley.

BTW Buffett will be celebrating his 77th birthday on Thursday...