Buffet or BS?
Warren Buffet is often called the “Oracle of Omaha.” When he speaks, the world listens. When he buys, markets move. I have tremendous respect for Warren Buffet. He’s obviously a very smart man and a great investor, but could it be that his time has past?
His company, Berkshire Hathaway (BSH), didn’t do well in the stock market during the crisis. BSH crashed along with the rest of the stock market. It’s my opinion that a professional investor’s portfolio should do well in an up-trending market and even better in a down-trending market—but that’s just my opinion and philosophy.
The reasons I say his time may have past are:
- He didn’t outperform the market.
- His credit rating company, Moody’s, was at the center of the subprime crisis, and in many ways is the culprit that hasn’t been arrested.
- He’s saying the rich should pay a similar percentage in tax as his secretary
- He’s calling the ultra-rich and asking them to donate more money to the government. When he called my friend Donald Trump, Trump politely told him that he was able to make his own donations. He did not need the government to do his donating for him. 5.
- Now, Berkshire Hathaway is buying back its own shares
You may not think that buying your own shares is much news…but it is when Mr. Buffet does it.
Buying your own shares is often a red flag for professional stock investors. It can mean a number of things. Generally, when a company buys its own shares, it means, “I can’t get my share price to go up so I’ll manipulate the share price up by buying my own shares, which will make my shareholders happy and like me.” It can also mean, “I can’t find a good deal,” or, “I don’t know how to grow my company,” or, “I’ve got more money than brains,” or, “The best return for my money is to invest in my company.”
On CNBC, Buffet said he was buying back shares of Berkshire Hathaway because the value of his stock was less than the “intrinsic value of his company.” This sent the price of his stock back up. Where Warren leads, the sheep follow.
Who knows what the truth is? Only Warren knows.
There are two reasons why I don’t invest in stocks.
Reason #1: Employees play too many games, from the CEO down. Many employees use the public company as their person expense account and ATM. This is why I tend to invest in private companies, not public ones. The private companies are businesses of friends, fellow entrepreneurs who own their company and whom I know and trust.
Reason #2: I invest for cash flow, not capital gains. Most people who play the stock market invest for capital gains, wanting the price to go up. Investing for cash flow, I receive a check every month or every quarter. If I don’t like the dollar amount on my check, I call my friend to find out what’s going on.
Try calling Warren and see what happens.
Thank you for supporting COR.
Robert Kiyosaki
Jurie van Dyk has written 55 articles on this blog.