The Berkshire Hathaway AGM is known as the Woodstock for capitalists. A look back at the highlights of the star investor’s moody performance.
For the first time in three years, investor legend Warren Buffett physically appeared in front of his shareholders.
There are few good reasons to travel to the American state of Nebraska as a foreigner. Unless the 91-year-old investor legend Warren Buffett invites you to the annual general meeting of your investment company Berkshire Hathaway in the city of Omaha. Even 80 years after Buffett bought his first shares at the age of 11, millions of investors are interested in his assessment of what is happening on the global financial markets.
For several hours over the past weekend, he answered the questions of several thousand analysts and shareholders who had traveled there. He spoke about monetary policy, cryptocurrencies and the danger of nuclear war, but also gave insights into his early days as an investor.
The casino mentality on Wall Street
After the outbreak of the pandemic, according to Buffett, what happened in the financial markets was more like a casino than a capital market as it should work according to textbooks. Buffett, who built his reputation and fortune as a buy-and-hold investor, isn’t a fan of the trend.
Wall Street, the banks, and the brokerage houses encouraged this casino mentality by encouraging the masses to hold stocks for the short term. Of course, it’s wonderful when people rave about how rich they would be today if they bought Berkshire stock in 1965. “But the broker would have starved.”
Wall Street makes a lot more money when people speculate than when they invest for the long term. “It is [für Broker] better to have an investor trading twenty times a day.” The more often people pull the lever of the proverbial slot machine, the more sales are achieved.
At the same time, Buffett is positive about Jerome Powell, the head of the US Federal Reserve, and his long-term, very expansive monetary policy, although this was an important reason for the extreme development of the financial markets after the outbreak of the corona pandemic.
For him, Powell is a hero, says Buffett. ‘I mean, it’s very simple. He did what he had to do, you know?” It would have been easier for Powell, according to Buffett, to do nothing, “suck your thumbs” and blame others, as he believes many of his predecessors would have done. “And the world would have collapsed around her. And nobody would have blamed them, but the virus, the Chinese and all sorts of other things.”
To market timing
Buffett is used to being showered with praise from his supporters. This year, a New Jersey analyst highlighted Buffett’s amazing track record of timing his investments over the past several decades. A compliment that Buffett politely declined: “We have [bei Berkshire] not the faintest idea where the stock market is going to go next Monday when trading resumes.” He has also never made a purchase or sale decision in anticipation of future price developments.
It happens time and again that he is right with the timing of his investments and is praised for it. But it also happened in the past that he got in at a “stupid time”. Buffett said sarcastically in Omaha, “Go out there and tell everyone how smart we are – but we’re not. We’ve never timed anything.”
In doing so, Buffett is in line with financial economics, which believes it is impossible to systematically beat the market with active market timing of investments. Instead, he relies on fundamental analysis to identify attractively valued acquisition targets.
However, Buffett also revealed during his performance that he had a burning interest in technical chart analysis from a young age. It was a section in a finance textbook, which then made it clear to him that he would not get anywhere with it. “If I hadn’t read this book, I don’t know how much longer I would have been looking for head and shoulders patterns, 200-day moving averages and tons of other things.”
On companies as political actors
At the latest, the Ukraine war has shown that there are situations in which companies have to position themselves politically. But Buffett thinks political positions are risky from a business perspective. Of course, he also has an opinion on many subjects. “I’m not putting my citizenship in a blind trust by accepting the job of CEO of Berkshire.”
But he also learned that you can make many more people angry in the long term than you can make temporarily happy by speaking out on a political issue. Because with appropriate position references, his company becomes a target for activists.
The victims are his employees, who in extreme cases will lose their jobs – and he wants to prevent that. And even if he made explicit personal statements on political issues, his statements would ultimately be attributed to the company. So he tries to avoid that.
The danger of nuclear war
Buffett has a sober, if not very optimistic, view of the Ukraine conflict and the threat of nuclear weapons being used by Russian President Vladimir Putin.
A nuclear war is a “very, very small risk”, which, however, can still occur over a longer period of time, said Buffett and illustrated it with a random experiment: If you throw a die [oder eine Münze] throw enough times, anything can happen. “If you flip 330 million Americans tomorrow and they do it every day, in ten days you’ll have 330,000 who get it right ten times in a row,” he said.
In this way, the Earth tosses a coin every day to the question of whether anyone with access to weapons of mass destruction could literally destroy the planet. In addition, the risk of a nuclear strike cannot be insured.
About bitcoin and cryptocurrencies
Buffett not only takes a critical view of cryptocurrencies, as he has often pointed out, he actually considers them worthless, as he bluntly emphasized in Omaha. Even if you were offered him all the bitcoins in the world for $25, he would politely decline, he says. He wouldn’t know what to do with it.
There’s a difference between productive assets and things that depend on the ‘next guy’ paying more for them than the one that went before. With a painting by a famous artist, there is at least a certain probability that it can later be sold at a profit. Bitcoin is also not suitable as a currency. Anyone who believes that cryptocurrency will one day replace the dollar has “lost their minds”.