For sure, Buffett is nobody's fool and the cash used for buyback will probably prove to be money well spent. I guess that I am just philsophically opposed to management(s) that has taken upon the mantle of trying to directly influence the price of its stock with its own buying programme. There's conflict of interest.
They have become so prevalent because companies have been incentivised to do so (via preferable tax treament over dividend payouts), but they do not create any economic value in the same way as released divdiend captial reallocated according to the market does.. another example of tax code destroying economic value.
And worse, it's much easier for management to deliver short term returns to shareholders via buyback rather than create long term value by using the money to invest in R&D to grow the company and improve future earnings, so it works as a form of bring forward future returns into the present.
I'm not sure I agree with your analysis:
1) How does stock repurchasing influence price any more than dividends? With dividends, the price of the stock drops equal to the dividend payout. With stock repurchasing, the number of shares decreases by the relative amount repurchased. The former allows for immediate payments, while the latter increases your rights for future payments. No conflict of interest here, because all shareholders are getting equally rich with both methods.
2) Yes, there's some preferential tax treatment going on. But that really has nothing to do with economic value. The economic value is produced by the goods and services the company produces, as well as the return on investment that the profits provide to the shareholders. Again, if people need a cash stream, they are more than welcome to sell the stock, which will have appreciated by an amount about equal to the alternative dividend payout would have been.
3) Your third point is irrelevant. The relevant question is instead: How can a company provide shareholders with the best return on investment? For many growth companies, they spend all of their profits on R&D and the like (BH was growth for many many years), and this provides the best ROI. When a company can no longer grow and becomes a value company, the best ROI is to pay shareholders, either through dividends or share buybacks. This is simply the natural progression of the life of a company. (An analogy would be the progression of the net worth of a successful individual, where it might make sense to get into some debt when young in order to grow, but payoff that debt as circumstances change.)