Debunking the Buffett Debunkers

Every time I write something about Warren Buffett or Berkshire Hathaway – positive or negative – at least one dude comes out of the woodwork with a snide remark or comment along the lines of “the float from Buffett’s insurance business is merely leverage in disguise,” implying that there’s no genius involved, just a cash-flow parlor trick that’s enabled him to earn excess returns.

Others will chime in to remind us that Buffett’s stock picks aren’t the engine driving book value at Berkshire, its his wholly-owned subsidiary businesses – in other words, he’s not such an Oracle after all, just a good acquirer of companies with no need to time anything well. Still others will bring up his political influence and clout which allows him to simultaneously invest in Goldman Sachs while working on Congresspeople and Obama to back the bailout thus earning him instant profits.

And there are certainly kernels of truth in those criticisms  – but admitting that does not mean agreeing that Berkshire’s success has somehow been “debunked”.

It has not been debunked – if anything, his head-and-shoulders above all other investors stature has only been cemented during this last five years. He came into the crisis as sanguine as the rest of us, then gradually figured out what was going on, took his time, waited for his pitch – and then struck, just at the perfect moment at the perfect targets. Warren is now up $3 billion on his Bank of America warrants, to say nothing of the income he’s earned thanks to the preferred shares that were packaged just for him. To say nothing of his loansharking masterstroke when Goldman and GE came a-calling.

Buffett’s singular exceptionalism has not been debunked at all, only solidified.

Very simply put – if it were so easy to do what Warren and Charlie have done, someone else already would have. Perhaps several people.

To wit:

Why has no one else bought a defunct textile company with huge tax-free carry-forward net operating losses?

Why has no one else parleyed that advantage into a conglomerate structure replete with a fantastic insurance asset that allows for massive internal cash flows?

Why has no one else used the wealth derived from this endeavor to make powerful and influential friends throughout Corporate America and the US government?

How is it possible, in fifty years, that tens of thousands of investors haven’t come along and attempted to do exactly what Buffet has done? Surely, if that’s all there is to it there would be at least a few dozen imitators to have found some aplomb in his footsteps….no?

Until this dearth of Mini-Buffetts can be explained to me, I maintain that he is special and truly the Mozart of Investing (as Dougie calls him). What he’s built cannot simply be explained away as an insurance-related gimmick or the result of some Most Favored Nation status among the lapdog politicians who supposedly kowtow to him. Nonsense, if it were that simple you’d be doing the same thing as would I.

Don’t hate the player…

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. bitcoin era review commented on Sep 22

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2013/01/14/debunking-the-buffett-debunkers/ […]

  2. que es el bitcoin evolution commented on Sep 29

    … [Trackback]

    […] There you can find 35519 additional Info to that Topic: thereformedbroker.com/2013/01/14/debunking-the-buffett-debunkers/ […]

  3. 토토사이트 commented on Oct 18

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2013/01/14/debunking-the-buffett-debunkers/ […]

  4. Automation and Performance Testing commented on Nov 12

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2013/01/14/debunking-the-buffett-debunkers/ […]

  5. Functional Testing Solutions commented on Dec 19

    … [Trackback]

    […] Here you will find 69775 additional Information to that Topic: thereformedbroker.com/2013/01/14/debunking-the-buffett-debunkers/ […]

  6. Regression Testing commented on Dec 21

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2013/01/14/debunking-the-buffett-debunkers/ […]