By T Patrick Murray
In a move that stunned even the most casual market analysts and whose repercussions will most certainly be felt when markets open after the Memorial Day Massacre (as it’s already being called in Omaha, Chicago and Manhattan), the board of Berkshire Hathaway convened an emergency meeting by Zoom (delayed by 45 minutes as most board members scrambled to locate their grandchildren to actually set up the popular video conferencing app) where they voted to remove the Oracle from his Chairmanship but retain him as CEO.
From where did such a historic decision come from? When the Street asks “why”, what will the board tell investors to calm the inevitable storm that Berkshire has brewed?
It’s not breaking news that Buffett has been in a slump this past year, appearing less like a prophet and more like a pedestrian fixed income money manager. His recent comments regarding his belief that an S&P index fund was a better bet than Berkshire itself shocked many and challenged Buffet’s reputation for divine perception of value.
But the straw the broke the camels back apparently came over the weekend, when Buffet, without consulting the board, spent $323 million on Saturday closing on the acquisition (and reacquisition) of seven major regional newspapers who all share one thing in common: they have all failed to produce a profit in a decade and they all belong to an industry that is as dead as the dinosaurs. So what could have possibly motivated such a major bet that offers absolutely no upside other than possibly a half billion in tax deductions for next year alone?
Reached at his modest motel room at the EconoLodge in Minneapolis where the deal was consummated, The Wall Street Journal inquired about his thought process, and his answer, quoted by the Journal, is widely believed to be the sole reason for his sudden fall from grace.
Asked why acquire newspapers, especially now in this digital age, Buffett remarked that “no one is seeing the hidden value in the product, and I’m simply taking advantage of that lack of vision, like I always have”. When pressed for specificity regarding the precise nature of that hidden value, Buffett gleefully revealed what he undoubtedly believed was his ingenious insight and explained that newspapers still held the promise of profitability because “puppies will always need newspapers as a place to go poopy and pee pee inside for the many months required during the intensive house breaking process for all breeds of dogs”.
While this fact was conceded as admittedly true by the Journal reporter, it was quickly pointed out that only the actual paper was required for this purpose, and that no actual words, articles or even a single ounce of ink was needed to address the needs of the incontinent puppy, rendering the millions of dollars currently spent on reporters, editors and the entire system of legacy machinery that is required to print and produce newspapers on a daily basis is entirely obsolete if newspapers are remarketed by Buffett as purely unprinted puppy poop & pee paper.
After a long pause, Buffett admitted to the Journal that he hadn’t thought of that, and conceded that he could have just only purchased the supplier of the paper itself and saved Berkshire approximately $319 million of the $323 million he spent in his ill fated attempt to reengineer the cultural and economic demand and relevance of newspapers.
Asked what he will do next to remedy this rare lapse in judgment, Buffett sheepishly conceded that, considering the size of his life insurance policy, the best investment he could make next would be a Smith & Wesson to blow his brains against the dated wallpaper in his room at the EconoLodge.