Warren Buffett shocks shareholders by announcing his intention to retire at the end of the year

OMAHA, NEBRASKA:  Billionaire Warren Buffett shocked an arena full of shareholders on Saturday by announcing that he will retire at the end of the year, bringing the curtain down on a six-decade tenure leading Berkshire Hathaway that made him the most influential investor in the world.  

Buffett said he will recommend to Berkshire Hathaway’s board on Sunday that Vice Chairman Greg Abel should replace him.

"I think the time has arrived where Greg should become the chief executive officer of the company at year-end," Buffett said.  

Abel has been Buffett’s designated successor for years and already manages all of Berkshire’s non-insurance businesses. However, it was always assumed that he would not take over until after Buffett’s death. Previously, the 94-year-old Buffett consistently stated that he had no plans to retire.  

Buffett announced the news at the end of a five-hour question-and-answer session without taking any questions about it. He said that only two board members—his children, Howard and Susie Buffett—knew this was coming. Abel, who was seated next to Buffett on stage, had no prior warning.  

An hour later, Abel returned without Buffett to conduct the company’s formal business meeting and responded to the news.  

"I just want to say I couldn’t be more humbled and honoured to be part of Berkshire as we move forward," Abel said.  

Many investors believe Abel will be effective in running Berkshire, but it remains to be seen how successful he will be in investing the company’s cash. Buffett endorsed him on Saturday by pledging to keep his fortune invested in the company.  

"I have no intention—zero—of selling one share of Berkshire Hathaway. I will give it away eventually," Buffett said. "The decision to keep every share is an economic one because I think the prospects of Berkshire will be better under Greg’s management than mine."  

Thousands of investors in the Omaha arena gave Buffett a prolonged standing ovation after his announcement, recognising his 60 years of leadership.  

During that period, Berkshire nearly doubled the returns of the S&P 500, achieving a 19.9 per cent compounded annual growth rate compared with the index’s 10.4 per cent gain.  

Buffett had such a devoted following among investors that markets would shift when his investments were disclosed, as many people mimicked his moves.  

CFRA research analyst Cathy Seifert said it must have been a difficult decision for Buffett to step down.  

"This was probably a very tough decision for him, but better to leave on your own terms," Seifert said. "I think there will be an effort to maintain a ‘business as usual’ environment at Berkshire. That remains to be seen."  

Abel expected to perform well  

In many respects, Abel has already been managing much of the company for years. However, he has not overseen Berkshire’s insurance operations or decided where to invest its cash. He will now take on these responsibilities, although Vice Chairman Ajit Jain will continue to help oversee the insurance companies.  

Investment manager Omar Malik of Hosking Partners in London said before Buffett’s announcement that he had no concerns about Berkshire’s future under Abel.  

"Not really (worried). He’s had such a long time alongside Warren and a chance to know the businesses," Malik said of Abel. "The question is, will he allocate capital as dynamically as Warren? And the answer is no. But I think he’ll do a fine job with the support of others."  

Cole Smead of Smead Capital Management said he was not surprised Buffett was stepping down after watching him on Saturday, as the 94-year-old did not seem as sharp as in past years. At one point, Buffett made a basic mathematical error in one of his answers. At other times, he became sidetracked while recounting stories about Berkshire and his investing, failing to answer the question posed to him.  

Abel is well regarded by Berkshire’s managers, and Buffett has praised his business acumen for years. However, Abel will struggle to match Buffett’s legendary performance, and since he does not control 30 per cent of Berkshire’s stock as Buffett does, he will not have as much flexibility.  

"I think the challenge he’s going to face is whether anyone will give him Buffett’s or (former Vice Chairman Charlie) Munger’s pass card? Not a chance in God’s name," Smead said. Buffett has always enjoyed a loyal following among shareholders.  

Buffett has said that Abel might even be a more hands-on manager than himself and could extract more value from Berkshire’s companies. Managers within the company say they must be well-prepared before speaking with Abel, as he is known for asking tough questions.  

Steven Check, president of Check Capital Management, said he never expected to see Buffett retire.  

"I didn’t think he would retire while his mind was still functioning so well, nor did I think it would happen at the annual meeting," Check said. "But overall, I’m very happy for him."  

Buffett earlier warned that Trump’s tariffs were harmful  

Earlier on Saturday, Buffett warned of dire global consequences arising from President Donald Trump’s tariffs, telling thousands of investors at his annual meeting that "trade should not be a weapon," but that "there’s no question that trade can be an act of war."  

Buffett said Trump’s trade policies had heightened the risk of global instability by angering other nations.  

"It’s a big mistake, in my view, when you have 7.5 billion people who don’t like you very much, and you have 300 million who are crowing about how well they have done," Buffett said during the opening segment of the Berkshire Hathaway shareholders meeting.  

While Buffett believes trade should be balanced between countries, he does not think Trump’s widespread tariffs are the right approach. He stated that global prosperity would contribute to a safer world.  

Market turmoil does not create major opportunities  

Buffett said he does not currently see many attractively priced investments that he understands, which is why Berkshire is holding onto 347.7 billion dollars in cash. However, he predicted that "one day Berkshire will be bombarded with opportunities that we will be glad we have the cash for."  

Buffett dismissed the recent market fluctuations following Trump’s tariff announcement, calling the downturn "really nothing." He noted that a truly dramatic decline occurred when the Dow Jones Industrial Average fell from 240 to 41 during the Great Depression—far greater than current market movements.  

Buffett also revealed that he had not bought back any of Berkshire’s shares this year, as they did not appear to be a bargain.

Investor Chris Bloomstran, president of Semper Augustus Investments Group, told the Gabelli investment conference on Friday that a financial crisis might benefit Berkshire by creating opportunities to invest at attractive prices.  

Berkshire meeting attracts thousands  

The annual Berkshire Hathaway meeting draws some 40,000 attendees, including celebrities and prominent investors. This year, Hillary Rodham Clinton attended. Clinton was the last candidate Buffett publicly backed, as he has refrained from politics and controversial topics in recent years to avoid impacting Berkshire’s business.  

One investor even camped outside the arena overnight to be first in line.  

Devan Bisher, 72, said he has confidence in Berkshire’s future and has no plans to sell the stock he began purchasing in the 1980s.  

"It’s been a good train to ride," Bisher said, "and I’m going to stay with it."

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