The Oracle of Omaha is back. Warren Buffett often hailed as the greatest value investor of all time, and his right-hand man Charlie Munger held the Berkshire Hathaway annual meeting of shareholders in person for the first time since 2019.
Buffett, who is now 91 years old, discusses a variety of topics from why he is bearish on Bitcoin to investing during inflation and finding value opportunities. Munger also joins the talk with his classic wit, wisdom and humor.
“I look at Berkshire as a painting. It’s unlimited in size; it’s got an ever-expanding canvas, and I get to paint what I want,” reflected Buffett.
Here are my top six takeaways from the meeting.
1. Bitcoin doesn’t produce anything
Buffett and Munger have been notoriously bearish on Bitcoin and cryptocurrency in general. At the Berkshire Hathaway annual meeting for 2022, Buffett’s views were the same, although he framed his argument in a different way as, in his words, he “didn’t want to step on anybody’s windpipe.”
Before making his statements on this topic, Buffett caveats his words with a jokey comment regarding he “probably shouldn’t answer questions on [Bitcoin]… but I will anyway.” Buffett has never considered himself knowledgeable in the technology industry as it is “outside of his circle of competence,” despite the large investment in Apple, which he sees as a consumer goods company.
Buffett then proceeds to outline a lengthy analogy on productive vs. non-productive assets, with Bitcoin naturally falling in the non-productive category:
“If the investors in this room owned all the farmland in the United States, and you offered me the chance to buy 1% of it… I would pay… roughly $25 billion… I will write you a check now…
If you were to offer me a 1% stake in all the apartment houses in the United States… I would pay, lets say $25 billion and write you a check now, it’s that simple.
If you were to offer me ALL of the Bitcoin in the world… I wouldn’t pay $25 for it, as it doesn’t produce anything.”
Buffett then goes on to explain that if he owned all the Bitcoin, he would have to sell it to someone else in order to make any money, referring to the “greater fool theory.” Buffett states this is just “moving money around.” However, the brokers which facilitate the trades take “real commissions.” In Buffett’s usual style, he said, why not issue “Buffett Coin,” and proceeded to opine that those who believe cryptocurrency will replace the U.S. dollar are “bonkers” as that is the “only real currency” in Buffett’s eyes.
Munger then pipes up later on at the meeting and states to a young kid asking a question, “In the future when your investment manager tells you to put all your retirement money into Bitcoin, SAY NO.”
2. Investing when inflation is high
Inflation is a major topic on investors’ minds right now. Buffett started with stating the obvious, going into the main reason behind the current high inflation environment: “You print loads of money, and money is going to be worth less.” However, he also called Jerome Powel a “hero” and stated “he did what he had to do,” so it seems Buffett believes high inflation is a fair price to pay for rescuing the nation’s most highly-indebted businesses from the pandemic-fueled recession.
Buffett commented that inflation “swindles everybody,” including “the guy who keeps cash under his mattress” as well as investors. Then, referring to capital requirements for certain businesses, Buffett states things now cost “10 times more,” referring to the combo of higher input costs and higher interest rates. However, Buffett did state that companies with low capital expenditure and pricing power can just “raise prices,” though “most businesses can’t.”
A young kid then asking a question regarding the “best stock to beat inflation,” and Buffett swerved the question to instead offer some valuable life advice:
“The best thing you can do, is to be exceptionally good at something. If the best doctor in town, lawyer in town… whatever it may be. It doesn’t matter whether people are paying you with a zillion dollars, they are going to give you some of what you produce in exchange for what you deliver…
Whatever abilities you have can’t be taken away from you… they can’t be inflated away from you…
The best investment is by far, anything that develops yourself.”
3. Don’t time the market
Buffett states at one point, “We have not been good at timing.” He also said, “We haven’t the faintest idea what the stock market was gonna do when it opens on Monday.” Thus, Buffett and Munger don’t make investment decisions by guessing what the market or the economy might do, as “We don’t know.”
What Buffett also said is, “We’ve been reasonably good at figuring out when we were getting enough for our money.” Even if Buffett doesn’t know where the market is going, he knows where it is at one specific point when it comes to valuing a company. What really matters is a company’s earnings power, as that is the best inflation protection.
4. Finding opportunities
Buffett was apparently an active buyer during the volatility of the first quarter of 2022. In total, Berkshire purchased over $51 billion in stock and sold only $10 billion, a change from net selling in previous quarters. In a rare move of transparency, the Oracle revealed that the quarter’s buying included Chevron . He also mentioned HP Inc and Occidental, though investors already knew about those two from SEC filings.
Berkshire also agreed to purchase insurance conglomerate Alleghany which has been called a “mini Berkshire,” for $11.6 billion.
Buffett also said his company has increased its stake in gaming leader Activision Blizzard (ATVI), which Microsoft (MSFT) plans to acquire, in order to take advantage of the arbitrage opportunity.
Buffett noted, “We have so much trouble finding good ideas that we can’t afford to ignore any. But they do have to be sizable.”
5. Robinhood is gambling
Buffett and Munger slammed Wall Street for encouraging speculation in the stock market and turning it into a “gambling parlor.”
“They make a lot more money when people are gambling rather than investing,” Buffett noted, then went on to say large U.S. stocks became “poker chips” and criticized brokers encouraging the use of call options.
Munger, in his usual outspoken style, then slams Robinhood as “short-term gambling and big commissions and hidden kickbacks and so on… It was disgusting. Now it’s unravelling. God is getting just.”
Munger is referring to the substantial decline in Robinhood’s share price, which is down by 88% from their highs in August 2021. This has been driven by inflation, declining active users and higher first-quarter losses.
6. Investing in China
Many were hoping to hear more of Buffett and Munger’s opinions on Chinese stocks, but the leaders of Berkshire didn’t spend very long on this topic. Munger sees a better risk reward profile when compared to the U.S., stating, “I get so much better companies at so much lower prices, and I’m willing to take a little bit more risk to get into the better companies with the lower prices.”
Final thoughts
Warren Buffett is an incredibly inspiring person. At 91 years old, he is still devoting his time to speak to shareholders and the world. Buffett has inspired generations with his wisdom and educated millions more with his simple but effective investment strategy. Munger is also incredibly witty with great intelligence and humor. The pair have run this incredible double act for decades and still state they “love what they do.”
For those interested, I have made a supercut of the meeting; you can find it on my YouTube channel, Motivation2Invest.
