On February 30, 2024, the general meeting of shareholders of Berkshire Buffett, the founder of Berkshire, was held in Berkshire, China.
The shareholders’ meeting was held offline for the first time since the outbreak of the epidemic in 2019. The highlight of the shareholders’ meeting was a five hour question and answer session. Buffett, 91, and Munger, 98, appeared together to talk about inflation, cash holdings, bitcoin, Activision Blizzard and other issues,.
At the beginning, Buffett said he was glad to meet offline for the first time in three years, and introduced Greg Abel, vice chairman of non insurance business of Berkshire, and Ajit Jain, vice chairman of insurance business.
On the table of the two “Omaha prophets”, in addition to Coca Cola, there are several boxes of beautifully packaged sees candies. Xishi candy is also the first high-quality company acquired by Berkshire after its establishment. While Buffett spoke, Munger ate candy to supplement sugar from time to time, which can be called the strongest “eat, broadcast and bring goods”.
Buffett and Munger answered more than 30 questions from global investors. These include China’s opportunities, high-quality targets under inflation, nuclear war, oil prices, bitcoin and the fate of the company after they leave.
At present, the disturbance of the epidemic is still dispersing, global inflation is high, and the Federal Reserve has entered the cycle of raising interest rates. In this turbulent environment, through the sharing of two wise old people, you may see some insights on investment, life and life.
Talk about cash: cash is like oxygen. We always have a lot of cash on hand
“One thing that won’t change is that we always have a lot of cash on hand,” Buffett said in an opening comment at the company’s shareholders’ meeting
The company began investing more than $40 billion in activities in three months, he said. As of December 31, 2021, the company had $143.9 billion in cash and U.S. Treasury bonds, which fell to $102.7 billion by March 31, 2022.
He talked about his and Charlie Munger’s cautious attitude towards shareholder funds. “The idea of permanently losing other people’s funds (those who trust us) is the future I don’t want to have.”
Berkshire’s activities in the first quarter included increasing its holdings of Western oil and Chevron and acquiring 11.4% of HP for $4.2 billion. In the first quarter, the company bought a total of $51.8 billion in shares and sold $10.3 billion at the same time. From the end of February to the middle of March, he bought $41 billion in stocks at one go. Despite the sharp decline in cash levels, Buffett said the company would keep enough safe cash, and the company has not launched a stock repurchase since April.
Criticize market speculation
Buffett and Munger denounced speculation at the shareholders’ meeting. Buffett said that in the past two years, the stock market has been difficult to figure out and there has been great turbulence. Sometimes the market is investment oriented, but others are like casinos, where everyone gambles, especially in the past two years.
Munger said that we have never been so crazy as now. Gambling crazily, buying and selling quickly look really bad. I don’t think it’s the glory of capitalism. It’s just a bunch of people throwing dice there. After throwing dice, close their eyes and see what happens. Of course, getting rich is not a bad thing, but you also need to find yourself in it. What we see now is almost some kind of speculative frenzy. Some computers with algorithms trade with other computers that also use algorithms. Subsequently, those inexperienced market participants are also accepting the advice of brokers. It is strange that these “casino activities” are legally mixed with long-term investment.
Munger said people were taking advice from “less knowledgeable stockbrokers” and said “it’s despicable”.
Buffett also added that those brokers actually know about commissions. Buffett pointed out that when the market is doing crazy things, Berkshire can invest, not because Berkshire is smart, but because of reason.
“Munger’s impeachment” against Buffett
At the shareholders’ meeting, Munger slammed the proposal to separate Berkshire’s chairman and CEO, saying, “this is the most absurd criticism I’ve ever heard. It’s like when Odysseus came back from winning the Trojan War and someone said I didn’t like the way you won the battle with a spear. Some people have never run any business company and don’t know anything. I don’t think it’s too heavy to be chairman and CEO.”.
Munger further said, “some people have never run any commercial company and don’t know anything. I don’t think it’s inappropriate to serve as chairman and CEO.”
It is reported that on April 19 local time, CalPERS, the largest public pension fund in the United States, submitted a document to the securities and Exchange Commission (SEC) that it plans to vote in support of a shareholder proposal of Berkshire Hathaway, that is, to remove Buffett’s position as chairman, on the grounds that if one person acts as CEO and chairman at the same time, the functions of these two positions will be “greatly weakened”, Leading to the weakening of corporate governance.
Berkshire’s board of directors opposed the proposal at that time. The board of directors has said that Buffett should continue to serve as chairman and CEO of Berkshire Insiders said it was not easy to pass the proposal. After all, Buffett himself owns 32% of Berkshire’s voting rights.
Talk about timing: you will never guess the market timing. If the price is cheap, you will definitely buy more
When asked how to seize market opportunities, Buffett said he had never figured out how to determine the timing of the market, and insisted that “he will never guess the timing of the market”. We have no idea what the stock market will do when it opens on Monday. We will never buy stocks according to how the stock market will come. Nor can we choose the timing of the market without mistakes.
Buffett also said, for example, “in March 2020, I completely missed the market opportunity.” He said bluntly: “those who do well at the right time can come directly to work here.”
Buffett insists on the strategy of value investment and suggests not to spend time answering the question of how to beat the S & P 500 this year. “We’re not good at timing. What we’re good at is figuring out when to get enough money for ourselves. We don’t know when to buy anything, but we always hope that the market will go down for some time so that we can buy more things… I mean, this may be what you learned in the fourth grade of primary school.”
Commenting on financial advisers trying to guess the timing of the market, Buffett said that if I want to choose one of the monkeys and wall street people who choose stocks by throwing darts but do not charge management fees, I will always choose monkeys.
The best investment under high inflation is to invest in yourself
For a student’s question of “choosing a stock to fight high inflation”, Munger’s advice to young people: find what you’re not good at and avoid them. You can’t do what you’re not interested in.
Buffett responded, “you have the ability that others can’t take away. One of the best investments is to invest in yourself.
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Buffett said: “if you do what you are good at and become a useful person to society, you don’t have to worry about the depreciation of money due to high inflation. For young people, Buffett suggested:” find what you really want to do and engage in it all your life.
For the Chinese market, Munger admitted that it is indeed more difficult to invest in China than in the United States. But the reason he continues to invest in China is that “he can buy better companies in China at a lower price.”
After attacking bitcoin at last year’s shareholders’ meeting, Buffett said again this year, “I won’t buy bitcoin.” Buffett said, for example, that if he wanted to acquire a 1% stake in all American farms with an assumed total asset of $25 billion, or a 1% stake in all American apartments, he would do the deal. And if someone wants to sell all bitcoin for $25, he won’t buy it.
Buffett explained that farms and apartments are productive. They have output and rent. Bitcoin is not a productive asset. Its value depends on how much the next buyer is willing to pay the seller. Now many people participate in this gambling game, but these bitcoins change hands among different people, but the owners are different, some of them earn and others lose.
“When you have your own retirement account and your financial manager asks you to invest all your money in bitcoin, say ‘no’.” Munger added.
Munger criticized the Internet brokerage Robin Hood: it allows everyone to join short-term gambling
Munger criticized the trading app of Robin Hood, an online popular brokerage platform, saying that a good idea can easily be abused. Look at Robin Hood’s experience from peak to trough. Obviously, isn’t that an example? He said that what Robin Hood did was nothing more than “short-term gambling, large commissions and hidden rebates”. These practices are “despicable”, and now they are going to “disintegrate”.
After Munger criticized Robin Hood, Buffett asked Munger: is it totally unwise to criticize others? Munger replied, it may not be wise, but I can’t help it.
There’s nothing you can do if you suffer a nuclear attack
In response to the question “what would happen to the insurance company’s business if it suffered a nuclear attack”, Buffett said bluntly: “there is nothing we can do about it.”
Buffett said any form of nuclear attack could hit Berkshire’s insurance business. Although Berkshire does not underwrite the risks associated with a possible nuclear war, such attacks may make it more expensive for Berkshire to underwrite other types of insurance.
However, Buffett stressed that the probability of nuclear attack is very low. Ajit Jan, vice chairman of Berkshire insurance, said it was impossible to estimate the impact of the nuclear attack on the company. When it comes to the nuclear issue, I kind of want to surrender.
The investment movement regards Blizzard as Buffett’s personal decision
First of all, the media reported that he had corrected his investment in Blizzard’s shares a few months ago.
Buffett said that at present, Berkshire’s position in Activision Blizzard is about 9.5% of the latter’s tradable shares, of which a large part is his main investment after seeing the news of Microsoft’s acquisition, because the acquisition price of $95 per share announced by Microsoft in mid January is too different from the share price of Activision Blizzard of more than $60 before the news, so it is worth investing. If more than 10% of the position red line needs to be reported to the SEC, they may hold more than this red line. Activision Blizzard closed at $75.60 on Friday, lower than the $95 per share purchase price announced by Microsoft in mid January.
Buffett pointed out that after Microsoft announced the acquisition of Activision Blizzard, the price of the stock rose from more than $60 to more than $80. He also knew that Microsoft had enough money to complete the acquisition. If the deal is completed, Berkshire will make a lot of money.
According to the regulatory documents of the securities and Exchange Commission (SEC), Berkshire spent about $1 billion to buy the shares of Activision Blizzard in the fourth quarter of last year, just before Microsoft announced its acquisition plan. By the end of 2021, Berkshire held 14.66 million shares of Activision Blizzard.
“If the two leave, will it affect the operation of the company?” Buffett responded positively
Buffett insists there is no reason to worry about where the company will go after he leaves office, because Berkshire will always retain the culture of putting shareholders first. He stressed the importance of corporate culture, saying that you must understand that corporate culture accounts for 99% of the company. “If we have the same culture, we will exist for a hundred years from now.” Berkshire has established a better and unshakable relationship with shareholders and hopes that shareholders can keep pace with the company. Berkshire will hand over the company to the people it believes in.
Buffett said that it is impossible for anyone to buy Berkshire for a long time in the future. Even if I am gone, the corporate culture will not change much, and the shareholder relationship will not change much. Berkshire will not end. Berkshire’s path is a step-by-step one, not a grand plan from the beginning. We hope everyone agrees and their thinking is synchronized. Shareholders are Berkshire partners. If we want to modify the corporate culture, we should put discipline and law-abiding first.
Buffett said, I hope you trust me. Don’t ask about the performance comparison between long and short positions and the market. It is because people trust me that they give me money to help them invest. We will abide by the law, but we will not be exactly the same as other companies.
Buffett recalled that he was inspired by his visit to the New York Stock Exchange at the age of 9. Started investing at the age of 11. He used to be very interested in technical analysis and stock charts. He spent a lot of time on them and tried to short in order to save money by buying stocks. Later, after reading a book, his investment method changed completely between the ages of 19 and 20. This book is generally believed to be the intelligent investor written by Benjamin Graham. “I saw a passage in the book that told me that I was wrong before. My whole way was wrong,” Buffett said
On inflation: tribute to US Federal Reserve Chairman Powell
Buffett said that people’s attitude determines the activity. The inflation we see this time is extraordinary. Massive stimulus measures are a key reason for the current rise in prices. “The government has sent a lot of money to people. At some time, it can’t be as valuable as before.” Given the large amount of money injected into the U.S. economy, Buffett said: “we have experienced a lot of inflation, and it is almost impossible not to have inflation.”
However, he pointed out that if the Fed did not stimulate the economy in the spring of 2020, everyone would be worse off. He did not criticize the Fed’s actions to increase the money supply and stabilize the market during the epidemic crisis.
Buffett said that in his opinion, Fed chairman Powell is a hero, which is very simple. He did what he had to do. “It happened on a scale we’ve never seen before. They flooded the country with money for some time,” Munger said
Buffett pointed out that it is too early to predict the demise of cash, because the amount of dollars in circulation has soared to more than $2 trillion in recent years, which is equivalent to $7000 per capita in the United States.
On life: to be a better person in the second half of life
Buffett joked that Munger told him not to go there as long as he knew where to die, and said it had worked so far. Buffett also said that it is a great honor for everyone to choose themselves as partners and thank you for your trust. Over the past 40 years, human and all animal behavior will become better and better. Therefore, the second half of your life may be different from the previous one. We should consider how to make a better present, forget everything you choose in front, and be sure to enjoy the second half of your life.
Buffett talked about his outlook on life. He took marriage as an example. People tend to hide their weaknesses and show themselves better before marriage, while Munger added that “it doesn’t matter, people will make progress”. Buffett believes that more important than showing off wealth is to become a better person in the second half of his life.
