Larry Fink On Warren Buffett

I had the opportunity yesterday to watch the hour-long Bloomberg program I had recorded on Monday evening which featured an interview at UCLA's Anderson School of Business with graduates Bill Gross of PIMCO and Larry Fink of BlackRock. It's well worth some 40 minutes of your time- sans commercials- to view. Two of the smartest asset allocators in the world answer some pretty direct, potentially embarrassing questions. I learned a lot, if only, in many cases, that my own views are pretty close to those of these two asset management titans.

Of particular interest to me, after both veteran asset managers' generalized asset allocations for the near term future, were Larry Fink's remarks about Warren Buffett. They illustrate, for me, the continuing perception of Buffett that is so at odds with reality.

Fink told a story of meeting with Buffett on a day on which equity markets were plunging. He spoke admiringly of Buffett getting up several times during their meeting- apparently in his office- to 'buy more stocks.'

Then Fink reinforced his point by saying that 'everyone should behave more like Buffett,' lauding the Omahan's tactics of 'ignoring quarterly results and investing for the long cycle.'

Fink went on to say more glowing words concerning Buffett's track record.

Only here's the point. We don't know what Buffett's actual equity selection performance record is. We only know what Berkshire Hathaway's total returns have been. And those haven't been exactly consistently stellar in recent years. Moreover, Fink was stressing buying dividend-paying classic industrial or consumer goods stocks, while Buffett has been crowing about technology and banks. The latter, by the way, I believe both Gross and Fink said they wouldn't go near.

It seemed to me that Larry Fink was more repeating what he'd read in the fawning press regarding Buffett's long-ago equity selection results, rather than commenting on what's observable recently.

He also skipped over the part about Warren not needing to worry about short term performance. In that recent linked post, I wrote,

"I contend that if Berkshire's price charts were labeled Fund X and compared to other funds, Buffett's company would be judged inadequate, inconsistent and, at best, mediocre."

What Gross and Fink, termed by the Bloomberg host as the two men with more assets under management than anyone else in the world, both glossed over is how different management of institutional money by very large, now-reputable firms is than what individuals can accommodate.

It's simply not possible for the average retail investor of a few tens of thousands, perhaps hundreds of thousands of dollars, to emulate Buffett. Nor should they. They don't have the risk profile that Berkshire/Buffett does, nor access to the same risk management analyses, nor tools to manage risk. Buffett's corporate billions can withstand losses that individuals cannot. Individuals facing retirement and worried about market downdrafts don't have Buffett's luxury of riding out Fink's "long cycles."

Further, they can't get an inside track to lend BofA money at preferred rates, plus warrants. Or get an otherwise-illegal inside track to make a tender offer for Burlington Northern while excluding any competing bids.

I have tremendous respect for Larry Fink. He's built one of the two largest money management businesses in the world, from scratch. He clearly does good work for his clients.

But I don't think that makes him either objective or an expert about Warren Buffett's equity management style or its utility and applicability for average retail investors. And his comments illustrated how widely-accepted, without evidence, Buffett's reputation remains.