Warren Buffett’s still alive.
That was one takeaway from Berkshire’s annual meeting, where a 94-year-old, talking pile of money regaled thousands of lost souls for whom Omaha’s Mecca.
For their travels and trouble, pilgrims learned that Warren will step away from the day-to-day particulars of Berkshire at the end of the year, when Greg Abel will take over as CEO. Fans — some of them, anyway — were surely disappointed. As though it’s normal for your CEO to be old enough to remember the Great Depression.
Buffett said he’ll “hang around” in case Greg needs advice, or wants to — I don’t know — share a two liter of high-fructose corn syrup. I suppose it doesn’t matter now — Warren having outlived the current life expectancy for American males by two decades already — but Buffett’s commitment to junk food isn’t healthy and was on full display Saturday. He had not one, but two cans of Coke placed in front of him like props during the traditional “ask your great grandad anything” session.
Regular readers know how I feel about Buffett. I don’t care a single thing about what he has to say, nor about what anyone like him has to say. The most dedicated of my small cult following’s aware of this, but I occasionally bring it up as a kind of PSA for new readers: The macro-marketsphere isn’t my natural habitat. I stumbled into it by accident a little more than a decade ago. I wasn’t taught, growing up, to idolize Buffett, and I’d never even heard of people like Stan Druckenmiller until I was in my 30s. As bizarre as this sounds to people for whom these men are paragons, they’re actually quite insignificant in the grand scheme of things. They just made some money. Lots of it, sure, but just money all the same.
Anyway, Buffett on Saturday said trade shouldn’t be a weapon, and emphasized that it’s better for us (i.e., America) that everyone does well. “The more prosperous the rest of the world becomes, the more prosperous we’ll become, and the safer we’ll feel, and your children will feel someday,” he mused. (No sh-t, Confucius.)
Personally, I prefer the framing of Adam Gopnik who wrote, for The New Yorker,
One can cite and correct particular details about [Trump’s antipathy towards Canada]: for instance, essentially the sole cause of the trade deficit is Canadian crude oil sent from Canada to fuel the United States, something that is clearly in America’s interest. But even to make this argument is to get trapped in the absurdity of the belief that trade deficits are noxious, when they are not — no more, to use a standard but helpful analogy, than the fact that I spend more at the supermarket across the street than it spends on me shows that the supermarket is exploiting my family.
That’s better put, and infinitely funnier, than Buffett’s explanation, but if it takes Warren to get the point across — i.e., that Trump’s approach is needlessly adversarial and likely to make us all worse off — then so be it. At least it got through. (I should note that whatever he said Saturday, Buffett recently expounded a somewhat more Trump-friendly view of America’s trade deficits).
Tariffs, Warren went on, can constitute “acts of war” and have in the past “led to bad things.” “We should be looking to trade with the rest of the world,” he said, before alluding to the foundational nature of specialization and comparative advantage. “We should do what we do best and they should do what they do best.”
As for Berkshire’s “earnings” (always a misnomer for too many reasons to plausibly enumerate), the big story, as it’s been for going on three years now, was the increase in Warren’s cash hoard, which rose by another $13.5 billion to a wholly cartoonish $347.68 billion.
As the figure shows, Berkshire’s filing suggests Buffett was a net seller of shares other than Berkshire’s for a 10th straight quarter.
Part of that’s the simple reality — and Buffett made this abundantly clear a while back — that there isn’t anything Berkshire could buy at this point that’d move the needle without buying something that’s grossly overpriced. If you ask me, though, it’s also a reflection of Warren getting old, cautious and running out of ideas.
I mean come on: The guy’s got $350 billion in cash and he can’t find anything worth buying? Is the only measure of worth whether a given acquisition moves the needle? If so, is Berkshire never going to buy anything again? Because the odds of getting a steal on something big enough to move that needle are nil.
Berkshire weighed in on the tariffs in its earnings release too. “Changes in macroeconomic conditions and geopolitical events, including changes in international trade policies and tariffs, may negatively affect our operating results and the values of our investments in equity securities and of our operating businesses,” Saturday’s filing said. “We are currently unable to reliably predict the nature, timing or magnitude of the potential economic consequences of any such changes.” (Join the club.)
In a sign of the times, Buffett coverage wasn’t the top trending article on CNBC’s homepage Saturday. Instead, the top slot belonged to Donald Trump for posting an AI-generated photo of himself dressed up as the Pope.
I’ve got a few cigar butt stocks he could invest in with his $350B. They’ll suddenly become blue chips, and we’ll all be happy.
Great piece
Monthly Letter tonight…..
Can’t wait. Got my Thai ginger tea bag ready to brew.
I like Warren. We can’t hold it against him that he is old. It is true, he won’t buy anything at the P/E ratios we see these days, and he has never been big on tech that he does not understand (which he readily admits is most of it). That means he hasn’t bought much lately, years actually, but he has always stayed true to his rather conservative philosophy. Fundamentals, name recognition, and bottom lines should count for something, and if you are going to buy and hold you must buy things when they are truly on sale. It just isn’t the way most people invest anymore.
I am guessing that Greg’s next move might be to short USD (maybe indirectly by buying companies based outside the USA).
Either one believes that a bigger pie benefits everyone over time, or one believes they just want a bigger slice right now.
Trump is being an idiot.
I think the $350 billion and the polite chiding on tariffs tells you all you need to know. As far as the pope meme…
Don’t tell Donnie. Donnie doesn’t know.
I’m going to suggest that there is a significant difference between Buffet’s framing and Gopnick’s. Gopnick merely suggests that a trade deficit is not evidence that the U.S. is being exploited. That is, it’s neutral. Buffet is suggesting that a trade deficit, to the extent it helps lift an impoverished nation out of poverty will improve our children’s overall safety and security. That is, it can be a positive.
It’s an idea that is out of fashion and China may be a compelling counter example, but I still believe it has value.
Thanks for the Gopnik quote. I giggled. The truth is if traditional financial theory is the guide there are two possibly conflicting rules at play. Currently, the $350 billion is invested as cash. Any alternative that when invested at the margin, could provide a larger stream of cash than that being currently earned, should be substituted for the cash. So much for genius. The alternative option for the fund manager is that the ultimate return can only be achieved if the current cash is invested at a risk-adjusted level of return higher than the current earnings rate on the fund. So, probably there is virtually nothing left for him to buy that will meet those criteria and that fact is one reason he is retiring. Charlie is gone and there is little left for him to buy that will “move the macro company needle.” There is however, much available that will beat his returns on that cash.
Not a Buffet watcher, but my general impression is that at a high level, he builds cash when valuations are high and risk-reward poor, then waits for opportunities to come to him. Does not have a fully invested mandate. And he’s known for some years of his impending retirement, planned for what situation to put successor in.
$350BN in presumably T-bills at 420 bp seems tactically reasonable right now. BRK market cap $1.1TR and I think P/B not that much above 1.0X, so “cash” around a third of total portfolio NAV – rest being about a third operating companies, and a third public company equity. Guessing that if you could calculate beta of total portfolio, might be around 0.5. And in severe stress periods, correlations go higher, so actual (realized) beta in a severe market downturn might be 0.7? Not actually that conservative.
“Not a Buffet watcher, but my general impression is that at a high level, he builds cash when valuations are high and risk-reward poor, then waits for opportunities to come to him.”
That.
#1 rule is not to lose money. Would actually prefer to have all money invested at all times, but will only buy good companies when they are cheap. Ideal situation is to hold all stocks long-term and only sell when even better opportunities become available..
Awww, shucks! Tariffs sucks.