Berkshire Hathaway’s annual meeting has just concluded. Warren Buffett (92) and Charlie Munger (99) joined by Ajit Jain and Greg Abel on stage took questions from shareholders during a live event in Omaha. Berkshire Hathaway reported a $35.5 billion quarterly profit. Berkshire’s shareholder meeting always attracts throngs of people who admire Buffett and his longtime investing partner Charlie Munger.
Warren Buffett warned a banking crisis is possible, AI may be dangerous, and government overspending will end badly. The important points he discussed –
Buffett criticised the handling of recent tumult in the US banking sector. He said the debt ceiling showdown could bring “turmoil” to the financial system. He criticised how politicians and regulators have handled the recent failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, saying their “very poor” messaging has unnecessarily frightened depositors. Buffett said the U.S. banking system had become overly complicated — and that he was not surprised that the banks had failed. He said he’d been selling bank stocks, first at the start of the pandemic and more recently over the past six months as banks increasingly face mismanagement and respond to bad incentives. “The American ublic doesn’t understand their banking system — and some people in Congress don’t understand it any more than I understand it,” Buffett said. As of the end of 2022, Buffett’s investments included a 13% stake in Bank of America, 3.2% stake in Bank of New York Mellon, 2.8% stake in Citigroup and 0.5% stake in U.S. Bancorp. Buffett said that if people think deposits aren’t sticky anymore, you’re living in a different era. A new poll from Gallup found that nearly half of Americans say they are now worried about the safety of their deposits, the highest share since the global financial crisis of 2008.
Buffett defended the size of Berkshire’s $151 billion Apple investment, saying consumers are less likely to shed their $1,500 iPhones than, for example, their $35,000-second cars. “Apple is different than the other businesses we own,” Buffett said. “It just happens to be a better business.” Berkshire has recently held a 5.6% stake in Apple, and Buffett said it could buy more.
Buffett named Greg Abel as heir apparent in 2021. The Oracle of Omaha reaffirmed he was 100% comfortable with the decision and even indicated a largely business-as-usual transition, for whenever that could be.
Here are Buffett and Munger’s important quotes
- Warren Buffett: “When I woke up this morning, I realized we had a competitive broadcast going out somewhere in the UK, and they were celebrating King Charles. We’ve got our own King Charles here today.”
- WB: “A lit match can turn into a conflagration, or it can be blown out. We want to be there if the banking system, temporarily even, gets stalled in some way. It shouldn’t, I don’t think it will, but I think it could.” He said, “It would have been catastrophic, and that’s why they were covered. Even though the FDIC limit is $250,000, that is not the way the US is going to behave, any more than they’re going to let the debt ceiling cause the world to go into turmoil.” (He was discussing Silicon Valley Bank’s collapse. He warned that enforcing the FDIC’s cap on deposit insurance would “start a run on every bank in the country and disrupt the world financial system.”)
- Charlie Munger: “The hollowing out of the downtowns in the United States and elsewhere in the world is going to be quite significant and quite unpleasant.”
- CM: “Elon Musk would not have achieved what he has in life if he hadn’t tried for unreasonably extreme objectives. He likes taking on the impossible job and doing it. We’re different — Warren and I are looking for the easy job. We don’t want that much failure.”
- WB: “I see no option for any other currency to be the reserve currency. But we should be very careful. It’s madness to just keep printing money. It’s very hard to see how you recover once you let the genie out of the bottle, and people lose faith in the currency.” (Buffett was assessing the risk of de-dollarization and underscoring the dangers of excessive government spending.)
- 6: CM: “The man who’s jumped off a tall building is all right until he hits the ground.” (Munger was sounding the alarm on the US government’s carefree fiscal policy.)
- CM: “I am personally skeptical of some of the hype that’s gone into artificial intelligence. I think old-fashioned intelligence works pretty well.”
- WB: “When something can do all kinds of things, I get a little bit worried. We won’t be able to uninvent it. AI can change everything in the world, except how men think and behave.” (Buffett drew a parallel between AI and the atomic bomb in terms of unknown, long-term consequences.)
- WB: “What gives you opportunities is other people doing dumb things. In the 58 years we’ve been running Berkshire, there’s been a great increase in the number of people doing dumb things.”
- WB: “If you’re paying 12% or 14% on a credit card, you’re saying, ‘I’m going to earn more than 14% on money.’ If you can do that, come to Berkshire Hathaway.”
- CM: “It’s so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, and do a lot of deferred gratification. If you do all those things, you are almost certain to succeed. If you don’t, you’re going to need a lot of luck.”
- WB: “If you make the right decision on a spouse, you’ve won the game. Keep trying to think things through, not do too many stupid things, and sooner or later you have a lollapalooza, as Charlie would say.”
- CM: “At Berkshire, we have a simple approach to estate planning. Just hold the goddamn stock.”
- WB: “You should write your obituary and try and figure out how to live up to it.” (This was Buffett’s advice to anyone trying to work out how they want to live their life.)
Inflation and the Dollar
Buffett praised Federal Reserve Chairman Jay Powell, saying no one understood the current economic environment better than him. But he also warned that there was a limit to how much control the Fed had, and worried about having let “the genie out of the bottle” when it came to price growth and money printing eroding faith in the U.S. dollar. “We are not as well off in relation to curbing inflation expectations — which become self-fulfilling — we are not as well off as we were earlier,” Buffett said. Yet even as Buffett acknowledged uncertainty about the course of the erosion of purchasing power, he rejected the idea that the U.S. dollar was in danger of losing its global-reserve status. “I see no option for any other currency to be the reserve currency,” Buffett said.
Concerns about AI
As Wall Street weighs the use of tech like ChatGPT in forecasting stock prices, Buffett said “the tech doesn’t make any difference” in finding investable opportunities. He added that “what gives you opportunities is other people doing dumb things.” Broadly, Buffett expressed concern that society can’t “un-invent” technology that changes the future, but adamantly said humans remain in the driver’s seat. “With AI, it can change everything in the world except how men think and behave,” Buffett said, loosely quoting Albert Einstein’s commentary on the invention of the atom bomb. Munger quipped that “old fashioned intelligence works pretty well.”
