Warren Buffett and Charlie Munger reunited at Berkshire Hathaway's annual shareholder meeting Saturday, and the energetic duo made a wave of headlines on everything from bitcoin to Robinhood to SPACs. The meeting took place in Los Angeles instead of the usual Omaha, Nebraska, and the pair, along with Berkshire's other vice chairmen, Ajit Jain and Greg Abel, answered 3½ hours of questions from CNBC's Becky Quick.
Shareholder meeting ends, Buffett looks forward to 2022 event in Omaha
The Berkshire shareholder meeting has been adjourned with some parting words from Buffett about next year's meeting.
"I really hope, and I think the odds are very, very good, that we get to hold this next year in Omaha. I hope that we get a record turnout of Berkshire shareholders, and we really look forward to meeting you in Omaha," Buffett said.
Get Chicago local news, weather forecasts, sports and entertainment stories to your inbox. Sign up for NBC Chicago newsletters.
- Jesse Pound
Shareholder meeting begins after final question
The question and answer portion of Saturday's event has ended, and Warren Buffett and Charlie Munger have begun the shareholders meeting. Buffett will preside over shareholder votes during this section.
- Jesse Pound
Buffett and Munger issue dire warning on Robinhood gamifying trading
Warren Buffett and Charlie Munger said commission-free trading app Robinhood was feeding off the speculative trading in the stock market and contributing to it.
"It's become a very significant part of the casino group that has joined into the stock market in the last year or year and a half," Buffett said, while noting he was really looking forward to reading the company's IPO filing.
Robinhood, which is set to go public this year, attracted a record number of new retail investors over the past year amid the pandemic. Robinhood has been accused by critics of gamifying investing and enticing young and inexperienced investors through its app.
Munger's criticism toward Robinhood was even more harsh. Robinhood and other brokers rely on a controversial practice called "payment for order flow" as their profit engine in lieu of commissions.
"That is really waving the red flag at the bull. I think it's just God awful that something like that brought investments from civilized men and decent citizens," Munger said. "It's deeply wrong. We don't want to make our money selling things that are bad for people."
— Yun Li
Charlie Munger calls bitcoin 'disgusting and contrary to the interests of civilization'
Berkshire Hathaway Vice Chairman Charlie Munger took aim at bitcoin and cryptocurrencies during the conglomerate's annual meeting on Saturday.
"I think the whole damn development is disgusting and contrary to the interests of civilization," said Munger.
Buffett's right-hand man called bitcoin a "financial product invented out of thin air." "Of course I hate the bitcoin success," Munger said. "I don't welcome a currency that is so useful to kidnappers and extortionists."
Buffett avoided the question on bitcoin because he said he didn't want to get grief from everyone who is long bitcoin, relative to the few people who are short the digital asset.
— Maggie Fitzgerald
Buffett and Munger not worried about potential tax hikes
Warren Buffett and Charlie Munger said the proposed corporate tax rate hike from the Biden administration would be a negative for shareholders, but they are not particularly worried about it and the company will adapt.
Buffett noted that some companies try to fear monger by saying the tax rates will be passed through to customers.
"It's a corporate fiction when they put out statements about the fact that it will be terrible for all of you people," Buffett said.
Buffett, who is a Democrat and said he voted for Biden, said he doesn't like to get into policy specifics during Berkshire events. He did point out that the corporate tax rate was significantly higher early in his career, above 50%.
Munger defends buybacks: 'Highly moral act'
Charlie Munger defended Berkshire Hathaway's record level of share buybacks, saying the program is beneficial for existing shareholders.
"If you're repurchasing stock just to bull it higher, it's deeply immoral," Munger said. "But if you're repurchasing stock because it's a fair thing to do in the interest of existing shareholders, it's a highly moral act, and the people that are criticizing it are bonkers."
During the first quarter, the company bought back $6.6 billion of Berkshire shares, after a record $24.7 billion in buybacks in 2020. Thanks in part to the buybacks, Berkshire's "B" shares have rallied more than 18% in 2021 to a record high.
— Yun Li
Buffett says the SPAC craze won't go on forever
Warren Buffett weighed in on the white-hot SPAC market, saying that the mania won't last forever and it makes the deal-making environment more competitive.
"It's a killer. The SPACs generally have to spend their money in two years as I understand it. If you put a gun to my head to buy a business in two years, I'd buy one," Buffett said with a laugh. "There's always pressure from private equity funds."
Special purpose acquisition companies are formed to raise capital to merge with a private company, which will be taken public in the process, usually within two years. More than 500 blank-check deals with over $138 billion funds are seeking their target companies, according to SPAC Research.
"That won't go on forever, but it's where the money is now, and Wall Street goes where the money is," Buffett said. "SPACs have been working for a while and if you secure a famous name on it, you could sell almost anything."
— Yun Li
Munger says unchecked federal spending will 'end in disaster'
Warren Buffett and his long-time business partner Charlie Munger addressed the combination of high government spending and rock-bottom interest rates, with Munger saying that he didn't think the extreme scenario was sustainable forever.
Munger said that professional economists had been too confident in their analysis and had been proven wrong about many things, but he said that Modern Monetary Theory, which calls for greater fiscal spending with less regard for budget deficits, was not necessarily the answer.
"The Modern Monetary Theorists are more confident than they ought to be, too. I don't think any of us know what's going to happen with this stuff," Munger said. "I do think there's a good chance that this extreme conduct is more feasible than everybody thought. But I do know that if you just keep doing it without any limit it will end in disaster."
— Jesse Pound
Buffett's favorite Keynes quote
Buffett and Munger warned about the rampant speculation going on in the stock market, particularly with SPACs, and said it is a byproduct of the rush of new investors into the market. Buffett warned that no one tells you when the mania is going to end.
Buffett put up a slide of one of his favorite quotes from John Maynard Keynes:
"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."
Buffett added: "We're not going to have much luck on acquisitions while this sort of a period continues."
-John Melloy, Maggie Fitzgerald
Buffett said selling some Apple stock last year was 'probably a mistake'
Berkshire Hathaway Chairman Warren Buffett admitted selling a small part of its Apple stock in 2020 was a misstep. In the fourth quarter of 2020, Berkshire trimmed its Apple stake by just 3.7% to about 944 million shares.
"We got a chance to buy it and I sold some stock last year...that was probably a mistake," said Buffett.
The "Oracle of Ohama" went on to to say that Apple's stock is a "huge, huge bargain." "It is indispensable to people," Buffett said.
"The part it plays in their lives is huge," he said. "A car costs $35,000 and I'm sure with some people if you asked them whether they wanted to give up, had to give up, their Apple, they'd give up their car."
Apple is the largest position in Berkshire's investment portfolio, in a bet worth nearly $111 billion.
— Maggie Fitzgerald
Buffett and Munger never had an argument over the past 62 years
Asked about the different views Buffett and Munger have on certain stocks like Costco and Wells Fargo, the duo said they don't strive to be on the same page with everything and that they never had an argument over the six decades they've worked together.
"Warren and I don't have to agree on every damn little thing we do. We get along pretty well," the 97-year-old Munger said.
"We have never had an argument in 62 years. Not that we agree on everything but we've never gotten mad at each other," Buffett said.
— Yun Li
Buffett says he has no issue owning Chevron, other fossil fuel companies
Responding to a question about growing criticism of fossil fuel companies, Warren Buffett said he had no issue owning Chevron and expected the company to be a benefit to society in the future even as the world moves toward more renewable energy.
"People who are on the extreme of both sides are a little nuts. I would hate to have all hydrocarbons banned in three years. It wouldn't work. And on the other hand, what's happening will be adapted to over time," he said.
Buffett pointed out that, while he and Munger have sworn off tobacco stocks, they have owned retailers who sell cigarettes.
"There's something about every business that, if you knew it, you wouldn't like ... if you expect perfection in your spouse or in your friends or in companies, you're not going to find it," he said.
— Jesse Pound
Buffett still doesn't want to own airlines
Buffett is addressing his newsmaking sale of airlines, which he revealed at last year's meeting. The airline stocks subsequently rallied following his sale and critics said it was a bad move by the legendary investor even though the long-term outlook for airlines, especially business travel, is still shaky. The government helped provide support to airlines in the pandemic and Buffett said he had no problem with that move and said the fact that he wasn't a large shareholder in the industry may have made it more palatable for the government to help it.
"An industry that was really selling for less than $100 billion lost a significant amount of money, they lost prospective earnings power...international travel's not come back...I do not consider it a great moment in Berkshire's history but also we've got more net worth than any company in the United States...I think the airline business has done better because we sold and I wish them well but I still wouldn't want to buy the airline business."
Buffett: There's a lot more to investing than picking a budding industry
Buffett warned newbie investors that picking great companies is more complicated than just selecting a promising industry.
"There's a lot more to picking stocks than figuring out what's going to be a wonderful industry in the future," said Buffett.
Buffett put up a slide of all the auto companies from years go that started with the letter "M;" however, the list was so long it didn't fit on one slide. The "Oracle of Omaha" had to narrow the list to automobile manufactures that started with "Ma" to fit the names on one page.
Buffett said there were about 2,000 companies that entered the auto business in the 1900's because investors and entrepreneurs expected the industry to have an amazing future. In 2009, there were three automakers left and two went bankrupt, said Buffett.
— Maggie Fitzgerald
Buffett says the world can change in drastic ways so invest in index funds
Warren Buffett started his presentation with a list of today's 20 biggest companies in the world and he asked how many of them would still be on the list 30 years from now. These powerhouses include Apple, Saudi Aramco, Microsoft, Amazon, Alphabet and Facebook.
The "Oracle of Omaha" reminded the audience that none of the top 20 companies from 1989 were on today's list. More than 30 years ago, over half of the largest companies globally were Japanese firms, including banks and industrials. The only U.S. companies on the list were Exxon, GE, Merck, IBM, American Tel & Tel and Philip Morris.
"It tells you that capitalism has worked incredibly well, especially for the capitalists ... The world can change in very, very dramatic ways," Buffett said, adding that the best way to invest is via index funds.
— Yun Li
The annual meeting begins
Warren Buffett begins the meeting with Charlie Munger by his side, along with a box of peanut brittle and some Coca-Cola products. Buffett says that at the start of meeting after introductions and discussing Berkshire's earnings he will have some "lessons" to show the record number of new investors that have entered the market.
Buffett made big news at last year's meeting with airline sale
Buffett announced at last year's meeting that Berkshire dumped its large stake in the four largest U.S. airlines: American, Delta, Southwest and United, valued at about $4 billion in December 2019, as the sector was reeling from the pandemic with traffic down about 90% from a year earlier.
U.S. carriers lost $35 billion last year and passenger levels fell more than 60% to the fewest travelers since 1984.
But airline stocks have rallied, since Buffett's announcement last year, buoyed by $54 billion in federal payroll support, investor euphoria about Covid-19 vaccines and a bounce back in demand. American, Delta and United are each up more than 80% from a year ago, and Southwest's share price has doubled.
Buffett had eschewed airline investments before returning to the sector in 2016. He told shareholders in a 2007 note that "if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down."
Berkshire’s operating earnings jump 20%, buybacks continue
Berkshire Hathaway just released its first-quarter results ahead of the annual meeting. Here's a recap:
- The conglomerate's operating income came in at $7.018 billion in the first quarter, up 20% from $5.871 billion in the same period a year ago as many of its businesses from insurance to railroads recovered from the pandemic damage.
- Warren Buffett bought back another $6.6 billion of Berkshire shares during the first quarter after a record $24.7 billion in buybacks last year in lieu of deal-making. The pace was slightly slower than the fourth quarter where $9 billion in share buybacks were recorded.
- Berkshire's cash pile grew about 5% during the quarter to more than $145.4 billion, just slightly below the record level seen at the end of the third quarter last year.
— Yun Li
What to expect from the annual meeting
Investors have been eagerly waiting to hear from Warren Buffett and Berkshire Vice Chairman Charlie Munger, who missed the 2020 annual meeting due to travel restrictions. There will be a plethora of topics for the duo to discuss during the 3½-hour event.
One of the burning questions shareholders may want an answer on is Buffett's view on the airline industry after he dumped the entire stake worth more than $4 billion last year, missing the stocks' fierce comeback.
Investors will also want to know how Buffett plans to deploy Berkshire's massive cash pile, which stood at more than $145.4 billion. That's near a record despite the company's aggressive buyback program. He basically said a year ago that he hadn't encountered anything attractive, and now that the overall market has become even more expensive, what's his plan going forward?
It will also be a chance for Buffett and Munger to offer their fresh outlook on the market after such an unprecedented year. Investors will be watching for Buffett's thoughts on the market's valuation following a historic rebound from pandemic lows. Meanwhile, they might also weigh in on certain pockets of the market that are displaying speculative behavior, such as cryptocurrencies and SPACs.
Berkshire's succession plan will also be in focus. Ajit Jain and Greg Abel, Berkshire's other vice chairmen, will be on hand to field questions, a move that many believe offers a hint at what leadership will look like after Buffett and Munger.
— Yun Li