What Buffett said at the Berkshire Annual Meeting

Berkshire Hathaway’s 2022 annual shareholders’ meeting was held on Saturday, with tens of thousands of Warren Buffett fans traveling to hear the opinion of the so-called Oracle of Omaha.

The Berkshire CEO joined the company’s three vice presidents to present to shareholders and answer questions for about five hours. Shares of Berkshire rose about 7% in 2022, against a 13% decline for the S&P 500. Here are four conclusions from the annual shareholders’ meeting and the publication of the company’s results for the first quarter.

Shares of Berkshire rose about 7% in 2022, against a 13% decline for the S&P 500. Here are four conclusions from the annual shareholders’ meeting and the publication of the company’s results for the first quarter.

Buffett likes a buyout, but Berkshire shares are becoming more expensive

Berkshire’s share repurchase rate fell to $ 3.2 billion in the first quarter, from $ 6.9 billion in the fourth quarter and $ 27 billion throughout 2021.

Buffett and his longtime friend and partner Charlie Munger bought back shares when they thought their price was below Berkshire’s intrinsic value.

Buffett is still a fan of buyouts: “If you do it at the right price, there’s nothing better than buying back part of your own business,” he said.

Berkshire has made some major stock purchases over the past two months

As Berkshire began the pandemic as a net stock seller, the company found some big enough and attractive opportunities this year. Berkshire struck a $ 11.6 billion deal to acquire insurer Alleghany (Y) in March and also added several billion dollars to shares in Chevron, Occidental Petroleum and HP – as well as new stakes in Apple and Activision Blizzard.

Berkshire bought shares for a total of $ 51.9 billion and sold for $ 10.3 billion in the quarter. The company ended the period with $ 102.7 billion in cash and US government bonds.

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Buffett is not trying to predict future inflation

“It’s amazing how much inflation we’ve seen lately,” Buffett said, referring to rising prices at Nebraska Furniture Mart and other Berkshire subsidiaries. He added that forecasting future inflation is a stupid game and that no one can really know how much inflation will be in the next 10 years, 12 months or four weeks.

Buffett said that the best protection against inflation is to be skilled at what you do and to produce a good or service that will remain in demand that people will be willing to pay for.

“The best defense against inflation is your personal ability to earn … No one can take away your talent,” Buffett said. “If you do something valuable and good for society, it doesn’t matter what the US dollar does.

Buffett and Munger view market volatility and speculative behavior as opportunities

Young investors have scoffed at what experts call “gambling” in the stock market in recent years. Buffett said short-term price fluctuations could be Berkshire’s buying opportunities: “Sometimes markets do crazy things. It’s good for Berkshire, not because we’re smart … but because we’re smart.”

Buffett and Munger also made several strikes against investment bankers, active investment managers whose portfolios closely resemble broad market indices, and other Wall Street companies.

Buffett confirmed his dislike of bitcoin

Investor Warren Buffett raised his antipathy to cryptocurrencies to new heights over the weekend. The Omaha oracle was asked about the bitcoin at Berkshire Hathaway’s annual meeting over the weekend and said it would not buy it at any price.

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“If you tell me you own all the bitcoins in the world and offer them to me for $ 25, I won’t take them because what am I going to do with them?” said Buffett. “I have to sell them back to you, one way or another. It won’t produce anything … That explains the difference between productive assets and something that depends on the next person paying you more than the last one who paid for it. “

Why doesn’t Warren Buffett like bitcoin?

The heart of Buffett’s cryptocriticism returns to the first principles. “Assets, in order to have value, they have to deliver something to someone,” he told the audience. Compare this to a slightly different point of view: in order for an asset to have value, someone must be willing to pay for it. These concepts are not the same, although financial markets often treat them as if they were.

As Mariana Mazukato, an economist at University College London, explains in her book The Value of Everything, early economists distinguished between actual “value creation”, where new, socially useful resources are created, and “value extraction”, where money they change hands, but nothing is produced. (Adam Smith had a list of industries that he thought created value and that didn’t create value.)

Buffett’s view is completely meaningful, seen through this lens: unlike an apartment or a farm, two examples he uses to contrast, bitcoin does not produce value, so he believes cryptocurrency has no value.

* The material is analytical in nature and is not advice on buying or selling assets

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