Tue. Jan 28th, 2020

The Informer

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Warren Buffett is not retiring — and other big takeaways from the Berkshire shareholder weekend

6 min read

Warren Buffett chaired Berkshire Hathaway’s annual meeting over the weekend, and 40,000-plus faithful shareholders gathered in Omaha to hear the Oracle’s pronouncements.

Buffett, 87, and his vice chair and sidekick of six decades, Charlie Munger, 94, followed up Saturday’s daylong meeting with an  appearance on CNBC’s “Squawk Box” with host Becky Quick on Monday morning — just in case you missed some of their thoughts from the Saturday marathon.

Buffett has built Berkshire Hathaway from a dying manufacturer of suit linings into a nearly $500 billion conglomerate — measured by market cap — that is one of the most formidable economic enterprises in the world.

Here are some of the big takeaways — in our humble view — of the weekend’s proceedings:

1. Stocks are the best long-term investment on the planet and are not in a bubble at this time.

In a change of pace, Buffett began his remarks at the annual meeting, held at the CenturyLink Center in downtown Omaha, by turning back the clock to March of 1942.

Buffett pulled out some old New York Times front-page headlines from the depths of World War II to make a point: Even at one of the darkest hours in U.S. history, it was smart to buy stocks.

An 11-year-old Buffett made his first stock purchase (actually, his father did it for the youngster) at that time, buying $114 in an oil-and-gas utility called Cities Service Preferred.

Buffett put a show-and-tell on the giant screen in the auditorium to illustrate the price of the Cities Service shares and how he made a few bucks after selling them a while later.

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He bemoaned his impatience at the time. If he held on to those shares, through their various iterations, the $114 would be worth many times that amount.

To drive home the point even further, if he — or anyone — had invested $10,000 in the Standard & Poor’s 500-stock index in 1942 and never did anything else, it would now be worth $51 million.

The eternal optimist said Americans knew at the time that they would win the war but that those months following the attack on Pearl Harbor and the uncertainty that followed was scary nevertheless.

“All you had to do was figure that America was going to do well over time,” he said. “You basically had to make one investment decision.”

2. Buffett is not retiring.

“I’ve been semi-retired for decades,” said Buffett when asked whether he plans to give up the Berkshire Hathaway chairman’s position anytime soon.

Berkshire announced in January that the company was promoting its longtime insurance guru Ajit Jain and former Berkshire Hathaway Energy chief Greg Abel to share the day-to-day supervision of  the conglomerate’s businesses.

The appointments had Berkshire-watchers wagging their tongues about the long-awaited succession plan. But Buffett said over the weekend that he isn’t going anywhere.

“Nothing’s really changed that much,” Buffett said, adding that he still oversees the deployment of hundreds of billions of dollars.

He obviously has a high regard for his investment team of Ted Weschler and Todd Combs, who oversee $25 billion of Berkshire’s massive equity stockpile of almost $200 billion.

Buffett said he feels fine and wants to continue doing what he does. In the Monday session with CNBC, he said that running Berkshire Hathaway is not strenuous and that he loves doing it.

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3. Wells Fargo is staying in the Berkshire family.

Buffett has no intention of unloading Berkshire’s $24 billion worth of shares in the bank, which has come under fire in recent years for creating millions of savings and checking accounts for its customers without informing them.

Damage control is nothing new to Buffett. He had to step forward to clean up another Wall Street scandal three decades ago at Salomon Brothers, in which Berkshire had a large investment. Financial services giant American Express has also been through the scandal wringer several decades ago, and Buffett extolled the company as a great long-term investment for him.

He said that Wells Fargo has and will continue to take steps to correct errors and that it will become a better bank in the long run. Ten years from now, Buffett said, Wells Fargo will turn out to have been a very good investment.

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“All the big banks have had troubles of one sort or another,” he said.

Even as he spoke on Saturday, Buffett said people are making mistakes at Berkshire Hathaway companies everywhere. The important thing, he said, is to take action and fix the problems as you learn about them.

4. Weapons of mass destruction pose the greatest threat to humankind.

He has said the same thing in previous years and reiterated his fear of nuclear threats and, now, cyberattacks wreaking havoc on the world.

“We have learned since 1945 how somebody with bad intent or some organization with bad intent or occasionally some government with bad intent” can threaten the world with nuclear weapons. “The knowledge is there of how to kill millions of people, and in some cases the intent might be there. The materials have been hard in the case of nuclear to some extent. And now you’ve added cyber to the equation.”

“I consider that the number one problem of mankind,” Buffett said. “I don’t know how to use money to fight it.”

5. China and the United States will figure it out.

When it comes to the world’s two biggest economic powers duking it out on a tit-for-tat trade war, the leaders at Berkshire Hathaway are not alarmed.

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It’s this simple: The United States and China are not dumb enough to ruin their economies by engaging in an all-out trade war.

“It’s just too big and too obvious,” Buffett said Saturday. “The benefits [of trade] are huge, and the world’s dependent on it in a major way for its progress.”

“Two intelligent countries” would not “do something extremely foolish,” he said.

6. Warren loves Apple, even though he’s never had an iPhone.

The notoriously non-digital Berkshire chairman said the company owns 5 percent of Apple — and would buy it all if he could.

“I’d love to own 100 percent of it,” he told Quick. “We like very much the economics of their activities. We like very much the management and the way they think.”

The Berkshire chairman said he was happy with Apple’s announcement last week that it was buying back another $100 billion share of its stock.

“When I buy Apple, I know that Apple is going to repurchase a lot of shares,” he said. “We own about 5 percent. But I know I don’t have to do a thing and probably in a couple of years we’ll own 6 percent without laying out another dollar. Well, I love the idea of having 5 percent go to 6 percent. The cheaper the stock is the more they will get for their money. There is no reason at all for me to encourage other people to buy Apple.”

Neither Buffett nor Munger use the iPhone, but someone recently sent one to Buffett.

“A fellow sent me a ‘10’ the other day, but I’m not using it yet,” Buffett told CNBC. “I’m kind of screwing up my courage here, and one of these days, I’ll move.”