The annual meeting of Berkshire Hathaway, the company that controls all of Buffett’s investments, is considered a ‘mini-MBA’ class thanks to the collective wisdom imparted by Buffett and company. This year’s event on Saturday was no different.
Buffett once again decried Bitcoin, talked about how today’s market is ‘almost a mania of speculation’ and also revealed how he has used a big chunk of $147 billion cash he held in February this year.
Here are few key takeaways from the annual meeting:
When the market world over was figuring out the implication of the war in Ukraine, Buffett found the best time to employ the cash he held. This was in contrast to how he complained in his annual letter to shareholders that there were no good investment opportunities available. Berkshire bought more than $51 billion worth of stocks during the period, including sizable investments in Chevron, HP and Occidental.
Buffett bought 14 per cent of oil giant Occidental Petroleum, worth more than $7 billion, in two weeks during March. He also increased his stake in gaming company Activision Blizzard which is being taken over by Microsoft and purchased Alleghany insurance conglomerate for $11.6 billion. There were many other undisclosed investments during the period.
The buying at the start of the current year marks a sharp reversal from 2021 when he sold $7.4 billion worth of stocks.
One reason Buffett attributed to why he was able to find investment opportunities was because of the reason that the market has become highly speculative, according to him.
Saying that people are now behaving somewhat more tribal than they have for a long time, Buffett lamented that in the current market, even big companies have become poker chips, and apparently that is helping him find good long-term opportunities.
Munger, who is 98, said the stock market has become “almost a mania of speculation.” He alluded to the fact that more people are trading today than ever. Even computers are trading against other computers, he emphasized.
“We have computers with algorithms trading against other computers,” Munger said. “We’ve got people who know nothing about stocks, being advised by stockbrokers who know even less.”
He said it was more of a game of commissions that the brokers get. They tend to earn more when traders make speculative bets than when investors buy for the long term.
Bitcoin remains a Big NO
Buffett reiterated his stance on Bitcoin, which he has said in the past was rat poison. He said he will never buy the cryptocurrency because it doesn’t produce anything, unlike farms that get us food or housing apartments that generate rent.
“Assets, to have value, have to deliver something to somebody,” he said.
Buffett’s right-hand man Munger also said he is against the idea of putting Bitcoin in one’s retirement fund. “When you have your own retirement account, and your friendly adviser suggests you put all the money into Bitcoin, just say no,” he said.
This comes amid news that Fidelity Investments was offering investors the option to put Bitcoin in their 401(k)—a popular retirement saving plan in the US. With $11.3 trillion in assets under administration, Fidelity is the largest retirement plan provider in the US.
Buffett recognized the rising inflation as a big concern for almost everyone. He suggested that the damage from inflation will be broader, and it will ‘swindle’ companies, equity investors, bond investors and even those who keep their money under mattresses.
Companies cannot just solve this problem by raising prices of commodities they sell, they will need to have more cash in their hands as well, Buffett said. The best protection against inflation was investing in your own skills, Buffett remarked.
Inflation have breached record levels in many countries that is likely the fallout from money that central banks printed to battle the pandemic induced slowdown. But Buffett was all praise for Jerome Powell who he said was a “hero” who did what he had to do.
Fall of Robinhood
Berkshire executives also lamented the fall of Robinhood. The shares of the company traded below $10 last week, just months after debuting on the stock market at $38 per share.
Charlie Munger took a dim view of the app and said its business model was “disgusting”. Robinhood generates revenue receiving some of the spread on trades the company forwards to larger trading houses.
“It’s so easy to overdo a good idea. … Look what happened to Robinhood from its peak to its trough. Wasn’t that pretty obvious that something like that was going to happen?” Munger said. “It’s unraveling. God is getting just.”