Happy Birthday Warren Buffett, Grand Master of Capital Allocation

In 1957, Nikita Khrushchev, on face the nation, did predict that grandchildren of capitalists, US, will love their system. And, it is happening because of love of power and love to dominate others. I am not a behavioral expert in this field of power addiction. Anti capitalism system crowds, during the impending election, have been abusing the word, power. Do they tell us what they did with former power you gave them? no! How can they call themselves candidates for change when they have been in this system for a long time without producing any proof of their abilities of changing our capitalism system? Will you give them more power without examining their past performance? After taking power, creating political business cycles, misappropriation of capital of the hard workers (huge deficit), failing every political stress tests (CCAR!), I believe that it is time to say enough is enough. Indeed, we can not allow these dangerous minds to continue to destroy our capitalism. We should not be afraid or should not apologize for defending capitalism system. Capitalism is here to stay. Capitalism is an imperfect system but it is better than communism regardless of who designs it, American or Cuban. Capitalism is the system we did inherit from our founders and drafters of our constitution.

This capitalism system made Warren Edwards Buffett and others. He is the son of late U.S Representative who opposed FDR nationalization of gold, silver... Born on August 30, 1930 as the son of the low scale stock broker, the second decan of Virgo was initiated in investment cult by his father who transacted his first acquisition of shares. Karma was not meditated well but Warren addiction to money, hardworking, steak meat, chocolates, coca cola, he used to play banjo and others including a good entourage is helping him to age well with good memory and energy.

He still follows political events and drama with or without impact on his business. His personal campaign donations have been claimed by both parties or three ways (including independent, based on candidates, not their party affiliation). You have to make a difference between his company lobby funding (50 states) and his own money. Warren never rests since 7 investors (including 4 members of his family) helped him to form Buffett financial group (limited liability partnership). Now, the former Buffett financial group, is known as Berkshire Hathaway and it just hits $1 Trillion regardless of the fact that it is managed by a 94 years old very smart and magical man. For more than haft of the century, Warren Buffett has focused all his mystical power to allocate capital but that magic will end soon. Three problems I will help Warren to solve right now are, first, his $300 Billion cash problem because too much cash should be either invest or distribute or both but while creating value to himself and people who entrust their lifetime wealth to him (99% of Warren wealth is in his company). Second, his transition strategy problem.

Berkshire Hathaway became the first non technology company, conglomerate with real assets, to top $1 trillion market capitalization this week thanks to the knowledge, lifetime learning and hard work of its owner at his advanced age of 94. Warren Edwards Buffett used his investment partnership, Buffett financial LP to buy Berkshire Hathaway. He believes that it was his worst mistake ever because he could not revive that company from his ICU because he believed that the textile industry disease was temporary. But, when he realized that the textile industry was in vegetative stage for good, classified as other than temporary epidemy, he developed a long strategy of compounding without cash distribution. Yes, it declared quarterly cash dividend for the only time in 1967. That strategy was supposed to close all textile plants within 3 years, move the headquarter to Omaha, NE and turn the company into an investment management firm. Thanks to his patience, consistency, perseverance, diligence and discipline, today, Friday, August 30, 2024, his company, Berkshire Hathaway is unrecognizable (trans!) without any textile plan in its portfolio of 75 subsidiaries companies with almost $300 Billion of cash and cash equivalent (including T-bill).

But, why the investing public never prosecuted his strategy of anti-cash distribution for the last seven decades when its peer companies are proud to be on the list of dividend aristocrat firms (list of public companies that have increased their dividend payments consecutively for at least 25 years). How can he still fill his board of directors when they have the lowest compensation packages that can not compete against the non-profit BoD packages values (allowances for meetings attendance, liabilities and health insurance.... )? I believe it is a matter of trust and/or magic. Steve Check, co-founder of Check Capital Management describes Warren as "the most patient investor ever which is a big reason for his success' Most generations of investors including accomplished and debutantes, who study and imitate Buffett's style have not earned the same respect from the investing public if they did miraculously survive the free fall destiny of the Warren imitators.

In short, With a smile and jokes in front of 94 candles today, Warren Buffett remains the CEO and Chairman of Berkshire Hathaway when I wanted him to transit into a position of Chairman/Chief Investment Officer. Abel is still Warren designated successor in the CEO suite while his son, Howard Buffett, longtime board member with no financial education is still Warren designated successor in the Chairman suite. To give a rest to a man, Warren Buffett, who never takes a leave of absence, Abel has taken some responsibilities of the CEO while I was wishing to take some from Warren and CFO Hamburg (he plays too many roles including 8 subsidiary board seats, IR, CCO and finance/securities counsel chief...) as a newly created position of COO/President. At the end, my reading of most statements from Warren in writing and oral is that the Board of directors has the power to overrule Warren Buffett's succession plan and nominate other people for the positions of CEO and Chairman but they can not oversee the organization, still a shell company! to be led by his children (I made that proposal). Will the succession plan pass the Board test? Will market participants give the same respect to the new team like they have been giving good reputation of honesty to Warren Buffett? If not it will be a need for an adjustment to preserve Warren Buffett strategy, reputation and family wealth. It was possible with the Waltons, Morgans, Rockefellers, ... it will be possible for the Buffetts soon and 100 years from now

At some point in the near future, Warren, a super star with respect from all of us, will be recalled to either rest before his departure or depart, Howard will take over with his CEO, Abel or another corporate leader chosen by the BoD. How to give the same or close respect to his heirs and successors is not easy math because they will be called to earn the right to wear Warren shoes (born, justin, dexter...BHI is a owner of a lot of brands of shoes but no men suits....). Third, trading more than his best friend and late vice chair Charlie who had great memory at age 99 is the challenge only the future will tell. At the same token, Warren was not a good friend to another rich peer Sumner Redstone who at age 79 did get married for the second time to Paula, nearly 40 years his junior. Warren lost that fight years ago, may be Charlie did not tell him that 'you can do it, Warren, you are smart, magical, loved and strong with or without viagra'.

We, capitalist of all walks of life love you-HAPPY 94