Is Buffett’s Teflon Finally Wearing Off ?

With a key Buffett lieutenant resigning, some investors are no longer willing to overlook the obvious

Aside from maybe the odd cheeseburger stain on his tie, nothing much sticks to Warren Buffett.
Whether his underlings are convicted of helping insurance companies inflate results or a major company he helps oversee is sanctioned for accounting shenanigans, his admirers don't seem to care. Or at least, they haven't historically.
But with a key Buffett lieutenant resigning under a cloud recently, some sophisticated investors are no longer willing to overlook the obvious. For all the shareholders who still consider Buffett the epitome of American capitalism, there are others who wonder whether the time may be near for Buffett to take a graceful bow and exit the stage. Some will clamour for that this weekend, when 40,000 of his shareholders prepare to descend on Nebraska for the annual meeting of Berkshire Hathaway. "I want to hear more about Sokol, I want to hear more about how they're going to outperform the markets. I want to hear about what (Buffett's recent) trip to India leads us to believe about how the money is going to be invested in the future," said Michael Yoshikami, CEO of YCMNET Advisors and a widely quoted Berkshire shareholder. Investor disappointment reflects not just the revelation that David Sokol, once Buffett's presumed successor as chief executive, bought stock in a company he then pushed Buffett to acquire. It is also because of Berkshire's lackluster performance recently, and questions about the firm's ability to thrive after its octogenarian chairman and chief executive moves on.
Berkshire Hathaway has grown exponentially over decades, but many investors question how it can possibly do as well in the future. With the dozens of companies that Berkshire Hathaway owns having had relatively little oversight for years, some wonder how much earnings power Berkshire actually has and whether future earnings can be as strong as past.
SOKOL AFFAIR
By now the details of Sokol affair have been told many times. Citigroup bankers pitched a long list of companies to Buffett's presumed successor, and he told them he thought Lubrizol Corp, which makes lubricants and other chemicals, might make a good acquisition target.
He started buying up shares for his own account, and after building up a $10 mil-lion position he pushed Buffett to buy the company. As Buffett put it, Sokol made only a "passing" mention that he owned some Lubrizol shares.
Some of Buffett's biggest investors also say he should have chastised Sokol or told him to sell his stock. What is murkier, however, is the question of whether Buffett actually did anything wrong from a legal standpoint.
It wasn't the first time that Buffett has been close to people behaving questionably. But few of his investors have cared, and the damage to his reputation seemed slight if at all. In 2008, for example, the government won convictions of four executives from his reinsurance business for helping other insurers inflate their results. The nearly uniform reaction from legions of Buffett fans around the world: yawn.
'THAT'S MY GUY'
Buffett, of course, benefits mightily from his folksy image. After all, it's tough to imagine how someone who drives himself to work and stops at McDonald's for a bite on the way home can also be guilty of high crimes of finance.
The audience at the meeting is one of the tools he uses to burnish his reputation. There is no better financial television than footage of Buffett having an ice cream at Dairy Queen, with hordes of investors thronging him and hoping he might drop a stock tip on the floor with the crumbs of his vanilla cone. It is hard to interrupt that storyline. — Reuters

Warren Buffett