Buffett Defends Berkshire’s Pandemic Moves

Buffett Defends Berkshire’s Pandemic Moves

While taking questions for four hours during the Berkshire Hathaway annual shareholder’s meeting last Saturday (held in Los Angeles), CEO Warren Buffett and his partner Charlie Munger harshly criticized SPACs, day traders that have driven up valuations, and discussed exiting the airline sector. This according to an article in The Wall Street Journal.

The article reports, “The two men said some special purpose acquisition companies, day traders and private-equity funds that have driven valuations in both private and public companies to record levels were more gamblers than investors.”

The straight-talking Munger put it this way:” I don’t mind the poor fish that gamble. I don’t like the professionals that take the suckers.” Of SPACs, he was particularly unforgiving: “It’s a moral failing. It’s not just stupid, it’s shameful.”

Other highlights from the meeting include:

  • Buffett defended Berkshire’s investment record over the past year to shareholders, some of which questioned whether he was active enough during a “potentially opportunistic time.” Specifically, Buffett noted that as the pandemic emerged, he sold all of his holdings in major airlines, reduced his bank holdings, and didn’t make any large acquisitions. “I don’t consider it a great moment in Berkshire’s history,” Buffett said, “but we have more net worth than any company on Earth.” He added, “And I still don’t want to own the airline business.”
  • Of his move to sell some of Berkshire’s Apple Inc. holdings, Buffett noted he agreed with Munger’s response that it was “probably a mistake.” The article states that Apple remains Berkshire’s largest single stock investment.
  • Regarding Robinhood and other trading apps that have become popular over the past year, Buffett said they are “taking advantage of the gambling instincts of society, and it isn’t admirable. He added, “It creates its own reality for a while, and nobody tells you when the clock is going to strike 12 and it all turns to pumpkin and mice.”
  • Buffett offered advice to those who traded stocks for the first time in the past year: “There is a lot more to picking stocks than figuring out what is going to be a wonderful industry in the future.”
  • On Biden’s proposed tax reforms: Buffett said the tax increases wouldn’t be difficult for Berkshire to absorb. He noted that corporate tax rates, in particular, have been much higher in other times during the company’s history.