Warren Buffett Torches Corporate America, Spells Doom for Stock Market

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Warren Buffett's annual letter paints a bleak picture of corporate corruption. | Picture: REUTERS / Rick Wilking / Photo Archive

  • Warren Buffett is 89 years, but certainly has not softened with age. The "Oracle of Omaha" last annual report is full of fire.
  • His 2019 letter to Berkshire Hathaway shareholders mince words. Buffett issues scathing criticisms of corporate governance and greed.
  • In addition, the $ 128 trillion pile of cash is still unused. His snub market values ​​most epic story is terribly bearish

    2019 Berkshire Hathaway (NYSE: BRK.A) Warren Buffett. Report and letter to shareholders is a wildly bearish document. While the reference edge of the stock market to new highs out week after week, Buffett letter incendiary napalm drops all the euphoria.

    He calls out a number of, deceptive and greedy corporate practices downright wasteful in the letter of 2019. Sometimes it sounds like Bernie Sanders. While financial analysts are turning the recent measures as bullish Berkshire, Buffett still prefer to leave a fortune evaporate slowly to inflation to invest in the stock market.

    Wall Street remains bullish on the stock market

    Bulls Wall Street found a lot of plausible reasons to remain optimistic as the cap expands market into uncharted territory. Americans are more optimistic about have been since 9/11. They are also working harder than they have in half a century.

    Information Technology continues to create platforms titanic digital opening up vast reserves of courage, fueling increased production possibilities and saving money in all kinds of ways we could not have expected even years ago .

    But let American companies to take good opportunities and push them beyond their limits. Warren Buffett says a number of ways corporate greed is killing the goose that lays golden eggs. Paints a bleak corporate corruption ...

    Buffett says that corporate earnings are false

    2019 letter Buffett is steeped in his belief that most of the numbers US companies are false. It starts with the same warning in his letter 2018 against the new rule generally accepted accounting principles (GAAP) for reporting unrealized capital gains and losses. He thinks this makes companies to report defective numbers:

    The adoption of the standard by the accounting profession, in fact, was a monumental change in their own thinking ... Now, Berkshire must enshrine in the final line of each quarter ... every move up and down of the shares owned down, however these fluctuations can be capricious.

    Buffett is saying here that the corruption of the boardroom self-deception has now infected the accounting profession. This was the focus of his opening remarks at the last shareholders meeting of Berkshire Hathaway Annual

    In addition, Buffett will say many CEOs fudge the numbers of your company, and audit committees are powerless to stop them :.

    audit committees are now working much harder than they once did and often see work with appropriate seriousness. However, these committees are kept can not compete with managers who want numbers game, an offense that has been encouraged by the scourge of earnings 'guidance' and the desire of CEOs to 'hit the number.'

    Remember Warren Buffett classic advice to be fearful when others are greedy.

    Buffett Slams Corporate Corruption

    is continued by stating that executive compensation is involved in complicated payment schemes. And corporate communications to shareholders are "mind numbing" to read. To make matters worse, companies shell out massive fees of consultants to weave these networks opacity and concealment:

    compensation committees are now based much more on consultants than they used to. Consequently, compensation arrangements have become more complicated - what the member wants the committee to explain the payment of large fees year after year for a simple plan? - and reading proxy material has become a brutalizing experience

    Buffett also says mergers often Enrich executives at the expense of shareholders .. He says "do not hold your breath" waiting that this change:

    But I have yet to see a CEO who longs for an acquisition bring critical knowledgeable and articulate to argue against it ... in general, the deck is stacked in favor of the agreement that has been coveted by the CEO and his / her staff attentive ... the current system, whatever its defects for shareholders, works superbly for CEOs and many counselors and other professionals who feast on offers.

    Finally, Buffett describes how to select corporate CEOs board directors who will not test your compensation plan. Essentially bribing managers with pay exorbitantly to keep them docile:

    Think, for a moment, the director of winning $ 250,000-300,000 for board meetings consuming a nice couple of days about six times a year. Often the possession of such grants its support counselor in three to four times the average annual income of US households.

    Buffett says a CEO looking for a director's current CEO will ask the director if they are a "good" manager. And "good" is a "code word" for someone who has "seriously challenged dreams compensation or acquisition of his / her current CEO."

    Buffett meant death for the stock market

    Some analysts are spinning the position of Berkshire Hathaway and the letter of Warren Buffett as optimistic about the US economy. This could not be further from the truth.

    For example, Yahoo Finance published an analysis by GuruFocus claiming "Buffett Bets on America again." In this article the decision is interpreted unprecedented Berkshire to purchase ETFs that track of the S & P 500 as "still optimistic about the US economy." But Berkshire has just taken a big bite of index funds.

    Nowhere analysis not the amount of Vanguard S & P 500 ETF (AOV) and SPDR S & P 500 ETF (SPY) Berkshire mentioned actually bought.

    The reality is Warren Buffett stuck a finger of the foot in the water. Its 2019 report shows the $ 128 trillion pile of cash has not moved. Berkshire is still clutching his pile of cash, cash equivalents and Treasury bills of the short-term. (See page 86 of the report.)

    Warren Buffett remains terribly bearish on the stock market. He prefers to keep $ 128 billion in cash that networks zero long-term returns than investing in the stock market. That's a fortune slowly decomposing inflation as much cabbage on the shelf. Buffett prefers to keep $ 128 billion in rotting cabbage green leaf back go swimming in the stock market. "The Oracle" clearly predicts the tide is about to leave.

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