After reading an article by Alice Schroeder (author of ‘The Snowball’) Warren Buffett, CEO of Berkshire Hathaway Inc. (NYSE:BRK.A), (NYSE:BRK.B) it made me think about the investing legend and how he is perceived today compared to the years past. What I got was that although a few individuals have attacked the legendary investor over his billionaire tax plan, lack of clarity on his successor and investments, Warren Buffett is still an investment icon and always will be.
In Schroeder’s article, she highlights a variety of Berkshire Hathaway’s problems as a result of Buffett’s lack of successful investments in recent years and how he presents himself as a public figure. She also goes on to say that Berkshire investors are now more concerned about Buffett’s extended stay with his firm.
However, that is not the case. People invest in Berkshire Hathaway because of Buffett’s leadership and investment successes. Investors are not all of the sudden going to stop supporting him just because his investments have not produced on the levels that we are used to seeing. If you think this about Buffett, what do you think of John Paulson?
John Paulson is also a legendary investor with a cult following after his brilliant short of the subprime mortgage mess; however his hedge fund has fallen on tough times and has not lately been producing attractive results. Are we all of the sudden just going to say that John Paulson does not know what he is doing and should step down from his hedge fund? No! The point here is that all investors go through slumps; it doesn’t matter whether you are a small retail investor or a legend like Warren Buffett or John Paulson, and slumps are part of the game.
When you are a legendary investor, people want to know what you think about the economy and current economic conditions. Schroeder says that Warren Buffett’s stature has diminished because of his criticisms of Wall Street but then defends his holdings in Goldman Sachs and Moody’s, criticism of foreclosed homes, praising banks that made bad mortgage bets, etc.
As a man with high stature and respect within the financial community, he was right to criticize Wall Street and foreclosed homes. Both are responsible for 2008. A person who makes little to no money should not be signing for a mortgage that they know they can’t pay and banks should not be offering mortgages to people they know can’t pay them. As for his investments in
Goldman Sachs Inc. (GS) and Moody’s Corporation (MCO), investments are investments. Just because he criticized Wall Street but has investments in certain banks there doesn’t make Warren Buffett a hypocrite. Investors criticize companies all of the time when they are shareholders. They do this to send a message to the management that they are unsatisfied with their performance. It has nothing to do with hypocrisy.
The critical analysis of Buffett continues on with how he should not be commenting on politics but rather focusing on Berkshire. Although this is a good point brought up by Schroeder, shouldn’t he using his influence and respectability to get things done? I mean sometimes it takes someone popular to help get things done. Warren Buffett is not trying to be some celebrity by just giving his own opinion and such. He is trying to help a divided government get things done such as reducing the deficit with his billionaire tax plan.
Overall, no one is perfect. Buffett has made a few errors and they have cost him and Berkshire but that does not mean people want him gone. He is still a great investor and leader. So what if Buffett is going through a slump right now? He has already proven himself as a business leader and an investor. Buffett’s public figure and Berkshire position are not diminished and never will be because Warren Buffett has already proven himself but that doesn’t mean he will not make mistakes, we all make mistakes. It is those who can be right more often than being wrong that are the true leaders.