Discuss Warren Buffett’s views.

DISCUSSION TOPIC 9 (2 pages)

• ANSWER THE QUESTION IN ONE PAGE
• ON THE SECOND PAGE MAKE 2 GENERAL COMENTS ON THE WORK YOU DID ON THE FIRST PAGE, DO NOT USE REFERECES FOR THE COMMENTS.

19 December 2000 an article appeared in The Wall Street Journal discussing stock price declines that followed share repurchases made by AT&T, Intel, Microsoft, and Hewlett-Packard.  The article mentions that Warren Buffett, chairman of Berkshire Hathaway, criticized firms that engaged in share repurchases. In a letter to shareholders, Buffett noted that share repurchases made sense during the mid-1970s, when many stocks traded below their intrinsic value. However, he argued that conditions changed during the bull market of the 1990s, even though share repurchases had become much more frequent. He also suggested that the motivation for share repurchases had also changed, and that during the 1990s firms bought back their shares in order to pump up their stock prices. Discuss Warren Buffett’s views.