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All rise! The court of Warren Buffett is now in session.
People from all over the world traveled to the heartland to see the Oracle of Omaha and his partner Charlie Munger, who spent Saturday answering questions at the annual shareholders meeting for their Berkshire Hathaway conglomerate inside what was described as a “packed arena” in Nebraska, a crowd estimated to be 40,000.
And when Buffett talks there is an EF Hutton impact: People listen.
Berkshire owns a diverse group of subsidiaries, from Borsheims Fine Jewelry and sportswear Brooks Running, to Duracell, See’s Candies, Dairy Queen, apparel company Fruit of the Loom, as well as Nebraska Furniture Mart. Investors always look to Buffett for economic insights as his myriad businesses are closely tied to broader spending and overall demand.
His ownership of Fort Worth-based BNSF Railway gives him a broad view of goods being shipped around the country, and his significant energy operations can also give clues to the level of economic activity.
Buffett said he believed that the “extraordinary period” of excessive spending on the back of the Covid-pandemic stimulus is over, and now many of his businesses are faced with an inventory build-up that they’ll need to get rid of by having sales.
“It is a different climate than it was six months ago. And a number of our managers were surprised,” Buffett said. “Some of them had too much inventory on order, and then all of a sudden it got delivered, and people weren’t in the same frame of mind as earlier. Now we will start having sales when we didn’t need to have sales before.”
To avoid the biggest mistakes in life, Buffett said: “You should write your obituary and figure out how to live up to it.”
The two preeminent capitalists also spoke on the following:
- Buffett doesn’t expect the U.S. dollar to be dethroned as the world’s reserve currency anytime soon. “We are the reserve currency, I see no option for any other currency to be the reserve currency.”
- Artificial intelligence. The 99-year-old Charlie Munger said that while we are “going to see a lot more robotics in the world,” he remains “skeptical of some of the hype in AI.”
- Keep the peace with China, both men said, adding that the Communist regime and the U.S. will benefit from an open trading relationship. The stakes for the world are too high by exacerbating tensions. “Everything that increases the tension between these two countries is stupid, stupid, stupid,” Munger said.
- Buffett said bank regulators need to find a way to punish executives and board members who make risky decisions that doom a bank.
- “I don’t understand the phone at all,” Buffett said of Apple, Berkshire’s biggest stock holding. “But I do understand consumer behavior,” noting how devoted consumers are to their iPhones.
- Of magnate Elon Musk, Buffett said he is a brilliant man who has taken on impossible tasks and succeeded even if he “overestimates himself.” Buffett and Munger said Musk’s approach doesn’t appeal to the investors who look for places they can prosper without ridiculous effort. “We’re different,” Munger said. “Warren and I are looking for the easy job we can identify.”
- Berkshire isn’t a big player in commercial real estate but they predicted problems ahead. Munger said the “hollowing out of the downtowns in the United States and elsewhere in the world is going to be quite significant and quite unpleasant.”
- Regarding personal finances, avoid debt, Buffett said, and in business try to avoid taking on so much risk that a single mistake can wipe you out.
Berkshire Hathaway said Saturday morning that it made $35.5 billion, or $24,377 per Class A share, in the first quarter. That’s more than six times last year’s $5.58 billion, or $3,784 per A share.