Buffett’s Correspondence with Cooperman: Stock Buybacks, Taxation, and More

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Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, engaged in a series of thought-provoking exchanges with Leon Cooperman, a prominent figure in the finance world. Their discussions encompassed a wide range of topics, from the intricacies of stock buybacks to the challenges of taxing the wealthy, offering unique insights into the world of finance. These exchanges have recently come to light as Cooperman shared them in his memoir, “From the Bronx to Wall Street: My Fifty Years in Finance and Philanthropy.”

1. The Praise for Henry Singleton:

In the year 1982, Leon Cooperman took it upon himself to defend Henry Singleton, the co-founder and CEO of Teledyne, through an open letter addressed to the editor of Business Week. The publication had featured a critical profile of Singleton. Cooperman’s letter extolled Singleton’s remarkable skills in expanding his conglomerate through strategic acquisitions and his ability to enhance the performance of Teledyne’s subsidiaries. He also lauded Singleton’s practice of repurchasing company shares at opportune moments, effectively utilizing the excess funds generated by Teledyne’s insurance business to invest in stocks and fortify the company’s cash reserves. After reading this letter, Warren Buffett penned a note to Cooperman, commending both his writing style and the substance of his arguments. Buffett wholeheartedly agreed with Cooperman’s assessment of Singleton’s achievements.

2. The Discussion on Stock Buybacks:

Fast forward to 2007 when Leon Cooperman delivered a speech at a value-investing event. During his presentation, he once again turned the spotlight on Henry Singleton, this time as an exemplar of a CEO who executed stock buybacks in a prudent and value-driven manner. Cooperman emphasized that Singleton’s approach involved repurchasing company shares only when they traded below their intrinsic value, a strategy that he deemed sound and rational. Cooperman’s remarks caught the attention of Warren Buffett, who subsequently corresponded with him. In his letter, Buffett shared his own perspective on stock buybacks, underscoring the critical importance of acquiring shares only when they are significantly undervalued. He emphasized the simplicity of the concept—akin to purchasing dollar bills at a clear and substantial discount—and cautioned against companies that engage in buybacks for reasons other than this fundamental principle.

3. Cooperman’s Presidential Run Consideration:

In the year 2011, Leon Cooperman contemplated a potential presidential run and drafted a comprehensive nine-point platform outlining his proposed policies. These policies spanned a wide spectrum, including plans to withdraw American troops from Iraq and Afghanistan, revamp the nation’s infrastructure, deregulate the domestic energy sector, and rein in government spending. Among his proposals was a call for individuals earning over $500,000 annually to face a 10% income surcharge for a three-year period. Cooperman shared his platform with Warren Buffett and sought his opinion on the maximum tax rate that should apply to the highest-earning individuals in the United States. Buffett responded with enthusiasm for Cooperman’s potential presidential candidacy, even offering to rally support in Nebraska. He discussed two possible approaches to tax reform, suggesting an increase in rates for those earning $1 million or more and outlining a minimum tax that would encompass both income tax and payroll taxes. Buffett leaned toward the latter option, viewing it as a more equitable solution.

These messages reveal a fascinating dialogue between two influential figures in the financial world, offering valuable insights into topics that hold significant relevance for the stock market and the broader economy.

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