Warren Buffett slams critics of stock buybacks as economically 'illiterate'

• Billionaire investor Warren Buffett calls stock buyback critics economically '"illiterate".
• He pushed back against criticism against share repurchases his widely read letter to shareholders released Saturday.

Don't listen to critics of corporate share buybacks, says investing legend Warren Buffett.

"When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive)," the head of Berkshire Hathaway told investors in the company's latest annual report.

His scathing pushback on Saturday was aimed toward opponents of stock buybacks, which include high-profile critics such as fellow Democrat President Joe Biden.

Companies reduce the number of shares available in the market when they repurchase them and companies tend to tout such a move a creating value for investors.

"The math isn't complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices," Buffett said in his letter to shareholders. "Just as surely, when a company overpays for repurchases, the continuing shareholders lose. At such times, gains flow only to the selling shareholders and to the friendly, but expensive, investment banker who recommended the foolish purchases."

Buffett's words land just weeks after Biden during his State of the Union address called on lawmakers to quadruple a 1% tax on stock buybacks to encourage long-term investment. Biden and other Democratic lawmakers say stock buybacks benefit corporations and their executives at the cost of shareholders.

"Corporations ought to do the right thing," Biden said at his address to the nation earlier this month. "They'll still make considerable profit."

Among this year's announcements, Chevron said it would initiate a $75 billion stock buyback program and it raised its quarterly dividend 6% to $1.51 per share. The move came as the White House had asked for domestic oil companies to increase oil output to ease supply pressures.

Earlier this month, Democratic Senators Elizabeth Warren and Ed Markey and Independent Senator Bernie Sanders were among lawmakers calling for rules to prevent companies that receive subsidies for for chip manufacturing to use the funds for stock buybacks.

As for Berkshire, it cut its share repurchases this year to $8 billion, but its cash stockpile still declined. Meanwhile, the Oracle of Omaha's firm spent a record $68 billion on stocks, as bargains popped up.