Alice Schroeder- Buffett is "Do as I Say, Not as I Do"

(Alice Schroeder, the author of “The Snowball: Warren Buffett and the Business of Life” had better access to Buffett than anybody that has written on his life.  While I’m a fan of anything about Buffett’s career and investment acumen, I thought the book was only adequate.  I’ll be the first to say that I don’t agree with Buffett in every respect but I doubt that he’d agree with every aspect of my life.  It does seem however, that Schroeder has a little bit of a bone to pick with Buffett, whom it was said did not really appreciate his characterization in the book.

In this article it is clear that Schroeder didn’t pick up much in regards to Buffett’s investment methodology.  A case in point is the following quote:

Another example of the statesman missing the mark took place on Oct. 17, 2008, when Buffett wrote a New York Times op- ed urging investors to buy American stocks, as he was. For decades, Buffett had avoided making market calls that required short-term timing of the market. This one was especially risky, coming only a month after Lehman Brothers Holdings Inc. had filed for bankruptcy and while the global economy was in a frightening tailspin.”

To say that this call was risky because it was just a month after the Lehman collapse completely disregards the Buffett, Graham, theorem of price is what you pay, and value is what you get.  The collapse of Lehman is specifically what made the stock market attractive at that period of time.  The S&P 500 was at 940 on that day.  Below is an excerpt from Buffett’s letter which directly contradicts Schroeder’s market timing premise.

“Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over. “

Here we are three and a half years later and the market is in excess of 40% higher than when Buffett made his call. Schroeder points out that it would have been far better to buy stocks in March of 2009, when the market hit rock bottom.  It”s amazing how good one be at forecasting an event that has already happened!

Schroeder also makes reference to the fact that Berkshire’s stock performance (Brk/b) has lagged the S&P 500 since March of 2009.  One reason for this is that Berkshire didn’t get as cheap as many other companies did do to the market’s knowledge of their immense financial strength, and their capacity to take advantage of lower prices.  It might be a little more helpful to show performance over 10, 20, or 30 years for a little better representation on performance.  As a Berkshire shareholder we’d love to see them buy back stock so I agree with her sentiment on that accord, but due to the obvious misstatements and omission of material facts, it seems obvious that this article is disingenuous at best.