I would never buy shares of Warren Buffett's Berkshire Hathaway

I'm writing this article for 3 reasons: it may be immediately useful for someone; it entitles me to say "I told you so" in the future; and if anyone else thinks like me, it may help us find each other and connect.

In 1962, Warren Buffett bought out the textile company Berkshire Hathaway, which he converted into a holding company within which he built a diversified corporate empire. That's how Warren Buffet a.k.a the Oracle of Omaha became the third richest person in the World.

I'm not going to analyze the accounts of Berkshire Hathaway because I see no point in analyzing the accounts prepared by the company. You see, the complexity of a company with $700B in assets implies that we - as any financial analyst in the world - have no chance of verifying any number provided by the company. It's a black box.

So, here's what we really know about the Oracle of Omaha and its black box:

• Berkshire Hathaway is a holding company for a multitude of businesses and, with a market cap of almost $500B, is one of the largest publicly traded companies worldwide.
• One can only imagine the intense work conducted daily with auditors, bankers, politicians, regulators, the SEC, the USA Government and even Presidents and Prime Ministers of foreign countries - the leaders of Berkshire Hathaway having meetings back-to-back with people coming from New York and Washington. And occasionally having to meet the tech billionaires from Seattle and California. So with infinite resources it would make sense to locate the Berkshire Hathaway headquarters in the East Coast (New York or Washington) maybe with a secondary office at the West Coast (Seattle or Los Angeles) of the USA. Unless Warren Buffet values privacy more than convenience and access. Then... Omaha is perfect.

• The leaders of this huge holding company are Warren Buffet 88 years old and his partner Charlie Munger 95 years old. They don't retire. Probably because they know what other people don't know - making them irreplaceable.
• By now some of you may be ready to comment "yeah, they are old but a huge company has a big talented team to support the CEO". Because a picture is worth more than a thousand words, see the full Berkshire Hathaway team in 2015. Yep, that's 25 team members. Look at them, one by one, it's not everyday that you can see the people actually managing a $500B market cap holding company.

• At this age, and understaffed, Warren Buffet's children should be eager and ready to help their old father. Right? Well, apparently not. Buffet has three children - Susie, Peter and Howard. All 3 are philanthropists. Susie is mostly "only" that. Peter is also a musician. Howard has more business inclination but no hands-on business executive role and dedicates a lot of time to diversified interests like photography and acting as the wealthiest local sheriff in America, in Macon County, Illinois. Yes, sheriff. For real.

• But given that Warren Buffett made a philanthropic pledge to give away 99% of his wealth we may understand that his children are not that motivated to work on preserving and growing their father empire. This philanthropic altruistic generosity is mind blowing particularly because the money - i.e the Berkshire Hathaway stock - is being given to foundations e.g. the Bill & Melinda Gates Foundation that doesn't even carry the Buffet name. Looks like he truly gave it all away just for the benefit of humanity not even preserving his own name for eternity. Well, unless Warren Buffet thinks that both Berkshire Hathaway stock and the Buffet name have no future value and therefore it's better to trade trash for prestige to enjoy while he's alive. And at the same time save his children from having to put out the trash once he dies (those foundations, with other people's name, may have to do that).
• So, what's inside Berkshire Hathaway? The company declares to have the following assets (very simplified) valued at ~$700B: Almost $130B in cash (read this again); almost $173B in equity securities (shares of Amex; Apple; Bank of America; Coca-Cola; Wells Fargo; and other stock any of us can buy directly on the stock market). So, for cash and stock we don't need Berkshire Hathaway - we can keep our cash and buy our stock, even copying Warren Buffet stock choices, with the advantage that if we buy directly we're sure to own the cash and the stock. That's $300B in assets out of the $700B total assets. The other $400B are the core of the black box.
• Despite having these $300B in cash and equity securities, Berkshire Hathaway doesn't pay a dividend. Berkshire Hathaway shareholders can only make money by selling shares to other people!

"Only when the tide goes out do you discover who's been swimming naked" Warren Buffet

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