When the Sage of Omaha talks, his in-vestors listen, although they don't always like what they hear. The most striking feature of the mea culpa sent by Warren Buffett, Berkshire Hathaway's chairman, to the diversified investment company's shareholders on March 5th was not his apology for failing to produce returns commensurate with those on the S&P 500 stockmarket index. It was his wistful admission that he is having trouble finding any company worth investing in. In that, he is not alone. Most companies do not even want to invest in themselves these days, and instead are returning cash to shareholders by the shovelful. In 2004, estimates J.P. Morgan, companies in the S&P 500 index paid $181 billion in cash dividends and spent $150 billion on share buybacks, handing a record sum back to their owners. There are many reasons for this phenomenon, including changes in dividend taxation in America and huge corporate profits in most places. But one thing is clear: companies do not think they can earn much by retaining earnings. So it is better to hand the money back, or buy other firms.
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