He’s bluffing. Period! The man is a master of contrarian logic and knows how to call a spade an ox and even gets away with it. Warren has no intentions to give away his position in Berkshire and all talk about a successor should be relegated to the bin. Steven Philip Warner in a delightful analysis...
THE ORACLE IS NUMBING
Let’s talk numbers now. Since February 2008, due to his own accepted thumb-sucking wrong investment decisions, Buffett’s personal wealth has plummeted by a ghost-summoning 45.7% to just $38.34 billion today! Berkshire Hathaway’s Class A shares have not been spared the hot iron rod either, having fallen by a neat 30% in just the past 2 years to touch $75,000 per share as on March 5, 2009. And what to talk about the recent bloopers (and big ones at that) in his investment decisions. As B&E had reported much before, not many would have realised that the company had already begun 2008 with an unrealised $1.67 billion loss on its derivative contracts, and further lost on the same. These derivatives, which are directly linked to overall markets and the credit health of companies, worsened further in the third quarter of 2008 and spelled disaster for Berkshire, thus leaving behind a mammoth loss of $2.21 billion.
His largest investments fell not only in the critically-hit financial industry (for example, American Express, plunged 51% ), but also in the relatively booming FMCG industry that has not seen happier times of late too (for examples, Coca-Cola dropped 25% and P&G declined 12% in the same period). If 2007 saw a seat-of-the-pants investment in TTI Inc. [a private, electronic components distributor] and VF Corp’s ‘intimate apparel’ business for a huge $1.6 billion, 2008 has seen mammoth Buffett acquisitions in Marmon Holdings [a trust running 125 manufacturing and service businesses], 63.6% of which was bought by him for a steep $5 billion. Beyond all this, he had also committed $6.5 billion more in April 2008 to help Mars buy chewing gum-maker Wrigley.
Buffett is surely panicking with respect to his investment calls; and much of it can be attributed to the fact that modern day capital theory is getting more complicated and technical than can be summed up in just one line (as is usually done by Warren to justify his investments – “I’m looking for businesses I can understand,” is how Buffett explains his logic of buying Wrigley).
Worse, during the last quarter of 2008, Warren assigned another $5 billion of Berkshire’s cash for a stake in Goldman Sachs, a company which later even gave up its primary investment banking business. No wonder, the opening line in his letter to the shareholders runs as: “Our decrease in net worth during 2008 was $11.5 billion, which reduced the per-share book value of both our Class A & Class B stock by 9.6%.”
you can’t take the call!
Conclusively speaking, Buffett is still the man calling all the shots, and one who still owns 32.68% of Class A shares at Berkshire (with super-voting rights); and he’s also the Chairman of Berkshire. Buffett could very well choose to give away his throne to any of the three we mentioned earlier; or to 82 year old Charlie Munger (his right hand man and billionaire partner), or to David Sokol (Chairman, MidAmerican Energy Holdings Company; a multi-billion dollar Berkshire company). Or even to his eldest son Howard Graham Buffet (who serves currently on Berkshire’s board of directors) or to his younger son Peter (well, a musician). But you know what, he won’t! If even a line of what he told Daily Telegraph has to be believed, Warren will hold on steadfastly to the reins of Berkshire till the day he dies. And then guess what, it’ll be the Berkshire board that’ll decide the successor, irrespective of Warren’s letter.
But hey, really, if Ajit Jain can be the one, why can’t it be me? Think about it, why not? Well, I have insurance experience (auto industry; especially motorcycles; in fact, one motorcycle, mine); I too lead 30 odd people (at least, I’ve found them really odd); and even my godforsaken boss calls me every night for Chrissake! Warren, I’m calling your bluff here and now... I’m your guy, not Ajit... If you really have to choose him, choose me.
Warren... Warren, can you hear me?!?!
Let’s talk numbers now. Since February 2008, due to his own accepted thumb-sucking wrong investment decisions, Buffett’s personal wealth has plummeted by a ghost-summoning 45.7% to just $38.34 billion today! Berkshire Hathaway’s Class A shares have not been spared the hot iron rod either, having fallen by a neat 30% in just the past 2 years to touch $75,000 per share as on March 5, 2009. And what to talk about the recent bloopers (and big ones at that) in his investment decisions. As B&E had reported much before, not many would have realised that the company had already begun 2008 with an unrealised $1.67 billion loss on its derivative contracts, and further lost on the same. These derivatives, which are directly linked to overall markets and the credit health of companies, worsened further in the third quarter of 2008 and spelled disaster for Berkshire, thus leaving behind a mammoth loss of $2.21 billion.
His largest investments fell not only in the critically-hit financial industry (for example, American Express, plunged 51% ), but also in the relatively booming FMCG industry that has not seen happier times of late too (for examples, Coca-Cola dropped 25% and P&G declined 12% in the same period). If 2007 saw a seat-of-the-pants investment in TTI Inc. [a private, electronic components distributor] and VF Corp’s ‘intimate apparel’ business for a huge $1.6 billion, 2008 has seen mammoth Buffett acquisitions in Marmon Holdings [a trust running 125 manufacturing and service businesses], 63.6% of which was bought by him for a steep $5 billion. Beyond all this, he had also committed $6.5 billion more in April 2008 to help Mars buy chewing gum-maker Wrigley.
Buffett is surely panicking with respect to his investment calls; and much of it can be attributed to the fact that modern day capital theory is getting more complicated and technical than can be summed up in just one line (as is usually done by Warren to justify his investments – “I’m looking for businesses I can understand,” is how Buffett explains his logic of buying Wrigley).
Worse, during the last quarter of 2008, Warren assigned another $5 billion of Berkshire’s cash for a stake in Goldman Sachs, a company which later even gave up its primary investment banking business. No wonder, the opening line in his letter to the shareholders runs as: “Our decrease in net worth during 2008 was $11.5 billion, which reduced the per-share book value of both our Class A & Class B stock by 9.6%.”
you can’t take the call!
Conclusively speaking, Buffett is still the man calling all the shots, and one who still owns 32.68% of Class A shares at Berkshire (with super-voting rights); and he’s also the Chairman of Berkshire. Buffett could very well choose to give away his throne to any of the three we mentioned earlier; or to 82 year old Charlie Munger (his right hand man and billionaire partner), or to David Sokol (Chairman, MidAmerican Energy Holdings Company; a multi-billion dollar Berkshire company). Or even to his eldest son Howard Graham Buffet (who serves currently on Berkshire’s board of directors) or to his younger son Peter (well, a musician). But you know what, he won’t! If even a line of what he told Daily Telegraph has to be believed, Warren will hold on steadfastly to the reins of Berkshire till the day he dies. And then guess what, it’ll be the Berkshire board that’ll decide the successor, irrespective of Warren’s letter.
But hey, really, if Ajit Jain can be the one, why can’t it be me? Think about it, why not? Well, I have insurance experience (auto industry; especially motorcycles; in fact, one motorcycle, mine); I too lead 30 odd people (at least, I’ve found them really odd); and even my godforsaken boss calls me every night for Chrissake! Warren, I’m calling your bluff here and now... I’m your guy, not Ajit... If you really have to choose him, choose me.
Warren... Warren, can you hear me?!?!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
