Warren Buffett on virus, economy, airline error

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Follow the highlights of Berkshire HathawayThe annual meeting here. Warren Buffett is commenting on the coronavirus, the state of the American economy, and whether he sees any value in the sell-off. The 89-year-old “Oracle of Omaha” joined the virtual meeting with Vice President of Unsafe Operations Greg Abel.

Warren Buffett has not made a major acquisition in several years despite Berkshire Hathaway’s record cash pile. Buffett said it is because there has been nothing “so attractive,” “We have not done anything because we have not seen anything so attractive,” Buffett said. “We are not doing anything big, obviously. We are willing to do something very big. I mean you could come to me on Monday morning with something that involved $ 30, $ 40 billion, or $ 50 billion. And if we really like what we’re seeing, we would. ” Berkshire’s quarterly earnings revealed that the conglomerate had a record $ 137 billion in cash and cash equivalents on its balance sheet at the end of the first quarter. –Li

Buffett reveals that Berkshire abandoned all of its stake in the airlines.

“The world has changed for airlines. And I don’t know how it has changed and I hope it will be corrected reasonably quickly,” Buffett said. “I don’t know if Americans have changed their habits now or will change their habits because of the prolonged period.”

But “I think there are certain industries and, unfortunately, I think the airline industry, among others, is really affected by a forced closure by events that are beyond our control,” he added.

Asked by CNBC’s Quick to clarify whether Berkshire had sold all of its airline holdings, Buffett replied “yes.”

The previous stake, with a collective value of several billion dollars, included United, American, Southwest and Delta Airlines.

CNBC’s Becky Quick has been collecting questions from shareholders and is now asking Buffett the questions via a video link.

Warren Buffett said he made an “understandable mistake” in valuing the airline’s actions, as an almost global stoppage in travel due to the coronavirus caused prices to drop sharply. “When we buy [airlines]”We were getting an attractive amount for our money by investing in the airlines,” he said. “It turned out that I was wrong about that business because of something that was in no way the fault of four excellent CEOs.” Trust me. It is not a pleasure to be the CEO of an airline. ”

“I don’t know if in 3-4 years people will fly as many miles of passengers as last year … you have too many planes.”

–Imbert, fast

“I’ve always had Paul Volcker in a special place, a special pedestal in terms of Federal Reserve chairmen over the years … Jay Powell, in my opinion, and the Fed board, belong on that pedestal with him because he performed in mid-March. Probably somewhat educated from what they had seen in 2008 and 2009. They reacted enormously and essentially allowed what happened from then on to unfold as it has. March, when the market had essentially frozen, shortly after the middle of the month, ended on March 23; I think it was the largest month for corporate debt issuance, in history … Each of those people who issued bonds in late March and April should send a letter of thanks to the Federal Reserve because it would not have happened if they had not operated with truly unprecedented speed and determination. ” -Franck

Warren Buffett believes that average investors should buy the broad market over a long period of time rather than follow the advice of others on stock selection. “In my opinion, for most people, it is best to own the S&P 500 index fund,” Buffett said at the Berkshire annual meeting. “There are large amounts of money that people pay for advice they really don’t need. If you bet on the United States and held that position for decades, you would do much better than buying Treasury securities, or much better than following people who tell you.” what to invest, “he added. –Li

Legendary investor Warren Buffett still believes the United States is the best bet, but he noted that people should not borrow money to participate in the market given the uncertainty surrounding the coronavirus pandemic. “When something like the current pandemic occurs, it’s hard to keep that in mind. That’s why you never want to use the borrowed money, at least in my opinion, for investments,” Buffett said from the virtual Berkshire Hathaway shareholders meeting. “There is no reason to use the borrowed money to participate in the great American tailwind, but there are other reasons to do so.” -Imbert

“Maybe with a bias, I don’t think anybody knows what the market is going to do tomorrow, next week, next month, next year. I know the United States will move forward over time, but I’m not sure and we learned this on the 10th of September 2001. And we learned a few months ago in terms of the virus. Anything can happen in terms of markets. And you can bet in the United States, but you have to be careful how you bet. Simply because markets can do anything. ”

Buffett has said that investors should never buy stocks on the margin using borrowed money. –Franck

For every $ 1 invested when Warren Buffett finished college in the 1950s, the stock market produced $ 100, the “Oracle of Omaha” noted during its presentation at the Berkshire Hathaway annual meeting.

“All he had to do was believe in America. I just had to believe that the American miracle was intact, “Buffett said.” I didn’t have to read the Wall Street Journal. He did not have to look at the price of his shares. I didn’t have to pay a lot of money in fees than anyone … Nothing can stop the United States when it comes to the end. “There was a trial period after the stock market crash of 1929 where many people” really lost faith ” Buffett said. ” In the end, the answer is never to bet against the United States. “

Buffett gave a cautious tone when discussing the US economy at the beginning of the meeting, warning that the possibilities “are still extraordinarily wide” given the coronavirus crisis. But then he reiterated his long-held belief that the United States will overcome even the most daunting challenges, including the current global pandemic.

“In 2008 and 2009 our economy train went off the tracks, and there were some reasons why the road was weak in terms of banks. This time we just pulled the train off the tracks and put it on a liner. I know of no parallels, in terms of a very, very well the most important country in the world, the most productive and enormous population, which in effect neglects its economy and its workforce. “

“But even in the face of that, I would like to talk to you about the economic future of the country. Because I am still convinced, as I have been, I was convinced of this in the Second World War, I was convinced of it during the Cuban Crisis missile, September 11, September, the financial crisis: that nothing can basically stop the United States. ” – Franck

Warren Buffett thanked White House health adviser Dr. Anthony Fauci for educating him and informing him and the country about coronavirus developments, saying he owes him a “huge debt of gratitude.” Buffett said the country is “very, very lucky” to have Fauci communicate in a “very direct way” about the global health crisis. Fauci is the director of the National Institute of Allergy and Infectious Diseases and the lead public health expert on President Donald Trump’s coronavirus task force. – Li

Buffett starts talking to Abel at another table next to him. Buffett has his beloved Coca-Cola by his side in a glass.

Joining Buffett on stage answering shareholder questions will be Greg Abel, Berkshire Vice President of Non-Insurance Operations. Abel, who joined the conglomerate in 1992, was promoted to his position in 2018. Prior to that, he served as President and CEO of Berkshire Hathaway Energy. Abel, now 57, is seen as one of the top contenders to succeed Buffett, who is 89 years old. At Berkshire’s annual meeting last year, Buffett hinted that Abel and Ajit Jain, who handles all insurance-related operations, could be possible successors. Both Abel and Ajit answered some questions from shareholders last year. –Li

Despite short-term fluctuations, Warren Buffett’s long-term record is the reason this meeting is such a great annual event for investors. Berkshire Hathaway A shares have returned nearly 21% annually since 1976, more than double the S&P 500’s 10% return over the same time, according to FactSet. Over the past year, Berkshire lost 15%, compared to the S&P 500’s 1% loss. Berkshire’s heavy investments in banking and insurance have hurt it during this dramatic economic slowdown. -Melloy

This year’s Berkshire Hathaway shareholder meeting, which will take place virtually for the first time, comes at a critical time for the conglomerate. Shareholders want more clarity on the company’s leadership, as Greg Abel shares the stage with Warren Buffett. They also want to get an idea of ​​Buffett’s plans regarding the company’s large amount of cash. Berkshire Hathaway has more than $ 137 billion in cash through the end of the first quarter and shareholders wonder if the “Oracle of Omaha” has found attractive investments since the coronavirus pandemic caused a massive sell-off in the global market. –Imbert

Berkshire Hathaway reported a net loss of nearly $ 50 billion during the first quarter of the previous Saturday as the conglomerate’s equity investments suffered a massive blow amid the coronavirus outbreak. But this quarterly result is misleading as Berkshire owns more equity investments than other fluctuating companies. Accounting rules require the company to report unrealized losses on shares, so this loss is a reflection of the crash of the coronavirus stock market. Berkshire’s operating profit actually increased to $ 5.9 billion from $ 5.6 billion in the same period a year ago. –Imbert

Based on the company’s presentation in the first quarter of 10-Q, it appears that Buffett was not trying to buy more stocks or companies directly during the crash of the coronavirus market. The presentation revealed that Berkshire had a record $ 137 billion in cash and cash equivalents on its balance sheet at the end of the first quarter, up from $ 127 billion at the end of the year. Additionally, the company spent just $ 1.8 billion buying shares and just $ 1.7 billion buying back Berkshire Hathaway shares. It will be interesting to see if Buffett is indeed expecting more clarity that the economy is not going through a more lasting pullback due to the pandemic. —Melloy

–With reports from John Melloy

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