"It's nice to be back."
Buffett said at the opening. Hearing this, we all smile.
On April 30, Berkshire Hathaway's 2022 shareholders' meeting returned to offline again. After a long three-year period, Buffett and Munger's double-set live show returned.
In Omaha, Nebraska, this quiet Midwestern city is once again bustling.
Friends of Smart Investors filmed on location
Buffett's party boat, which was hyped up for his "cousin" Jimmy Buffett in his annual shareholder letter in February, was shown up.
The opening of this shareholders' meeting was very grand.
Along with the opening message delivered around the world is Berkshire's latest quarterly report, which feels full of vitality.
In the first quarter of this year, Berkshire not only bought Western oil, bought HP, announced the acquisition of insurance company Alleghany for $11.6 billion, but also continued to increase its holdings of Chevron, directly buying Chevron to its fourth largest position after Apple, Bank of America, and American Express.
It cost $51.8 billion to buy stocks throughout the quarter.
At the same time, $3.2 billion of shares were repurchased, down from $6.9 billion in the fourth quarter of 2021.
Since entering April, Berkshire has stopped at buybacks.
Buffett kicked off the meeting with a 45-minute video featuring ads for Berkshire-owned companies like Geico and Brooks Running, as well as major investment firms like Apple.
It also includes multiple skits. In one of them, Munger appears alongside characters from American dramas such as Desperate Housewives and Breaking Bad.
Also included is a classic clip of Buffett before Congress in 1991 during the Salomon Brothers scandal in which he utters what is now famous (at least on Wall Street): "I will understand losing money for the corporation; I will be ruthless in losing a shred of fame for the corporation." ”
By the shareholders (also actors!) The original video clip starring Bill Murray, about the last three years of the pandemic, is a nod to "Groundhog Day."
By the way, Bill Murray attended the meeting, as did Apple CEO Tim Cook and JPMorgan Chase CEO Jamie Dimon.
Accompanied by Berkshire's two vice presidents, Greg Abel and Ajit Jain, Buffett and Munger received a standing and loud and lasting ovation from the audience.
Even across the screen, it's very exciting.
"I don't think we've heard anything from index funds," Buffett quipped.
"It feels good to be face to face," Buffett said. "Charlie and I are 190 years old together, and I think we have the right to meet shareholders in person." More jokes about age and dementia followed.
The entire shareholders' meeting lasted 5 and a half hours.
Reminding you of the fact that two people are 190 years old, Buffett sometimes answers questions too long and occasionally forgets the questions themselves. There are also a lot of "memory killing" plots, and the memory is still good.
After taking a seat, Buffett first introduced Berkshire's first quarter of operations.
Operating profit was $7.04 billion, up 0.3% year-over-year, while net profit was only $5.46 billion, compared to $11.71 billion in the year-ago quarter, down 53% year-over-year.
The decline in net profit was primarily driven by investment factors, with a net loss on investments and derivatives of $1.58 billion in the first quarter, compared to a net profit of $4.69 billion in the year-ago quarter.
Buffett said the company bought a total of $51.8 billion in stock in the first quarter and sold $10.3 billion at the same time.
In response to questions about recent big deals, Buffett said he saw something more attractive than bonds.
Smart investors listen to the whole process and distill the main points:
1, Berkshire is betting more than $40 billion in the oil industry
Buffett made his first acquisition of Chevron in the third quarter of 2020. At the end of the first quarter, Berkshire's investment in Chevron was $25.9 billion, equivalent to holding about 159 million shares, much higher than the company's approximately 38 million shares held at the end of the fourth quarter of 2021.
Chevron isn't Buffett's only favorite energy stock. Together with Western oil, Berkshire's bet on the oil industry is now more than $40 billion.
Berkshire Hathaway's largest stake remains Apple, which was worth $159 billion at the end of the first quarter. Bank of America and American Express are the other two largest holdings, valued at $42.6 billion and $28.4 billion, respectively.
2, revealed that it continues to buy Activision Blizzard
At the shareholders' meeting, Buffett said they continued to buy its shares after Microsoft's official acquisition of Activision Blizzard. Berkshire currently owns 9.5 percent of Blizzard stock and will file a report if it reaches 10 percent.
3, cash is like oxygen, there will always be a lot of holding in the hand
Berkshire's cash reserves fell to $106.3 billion in the first quarter from $144 billion in late 2021, but that's still a big deal. Buffett said: "We always have a lot of cash in our hands. ”
For him, "cash is like oxygen." ”
4, slamming Wall Street for turning the stock market into a "casino"
Buffett spoke in detail at the shareholders' meeting about one of his favorite targets of criticism: investment banks and brokerages.
"Wall Street somehow makes money and grabs the crumbs that have fallen off the capitalist table," he said. ”
Buffett lamented that big American companies have "become chips in market speculation." He cited the surge in call options, saying brokers make more money from those bets than simple investments.
5. Asked what is the best stock to hold in times of inflation?
Buffett replied that the best solution is to do the best at something because people pay for good doctors, singers, or baseball players.
"The best investment so far is to develop any talent of oneself," he said, adding that it doesn't tax it.
6. How does the insurance business respond to nuclear attacks?
Buffett has bluntly said that Berkshire has no answers about potential nuclear war.
Although the company does not underwrite the risks associated with a possible nuclear attack, the costs of the company's other insurance businesses will be higher. "There will be more nuclear-related accidents – we've approached many times." "There's nothing we can do about it."
7, Buffett made it clear that a lot of the investments weren't made by him
Buffett said he wasn't the only person picking stocks at Berkshire Hathaway. "Time and time again I see headlines in the newspapers saying, 'Buffett is buying this and that kind of thing.'"
"I don't buy this or that, it's Berkshire Hathaway who is buying it."
8, why are you still investing in China?
Munger's answer is very concise, in China can harvest a lot of good companies at a relatively low price, willing to take some risks.
9, praise Fed Chairman Powell is a hero
Buffett said he didn't do nothing like a baby eating a thumb, but did something he had to do. He took measures, but other countries may be affected, such as India, China, Japan, etc.
10, Munger objected to the offer to force Warren Buffett to abandon his chairmanship
Munger stressed his opposition to a proposal that would force Warren Buffett to relinquish his position as chairman of the group. He said at Berkshire's annual meeting that proponents of the proposal "have some professors who believe that if the CEO and chairman are split in two, then the operation of American businesses will be better."
"To me, it's the most ridiculous criticism I've ever heard," Munger said. It's as if the ancient Greek hero Odysseus returned home and was told by someone that they "didn't like the way you held a spear when you won that battle."
Of course, in the end, Munger's support won.
……
A lot of questions that everyone cares about may not be answered, who cares?! It was a full 5 hours, and everyone was enjoying the teasing and witty dialogue between these two 91-year-olds and 98-year-olds, serious and relaxed, or teasing or poisonous tongues or nagging.
Just as beautiful and precious as the "bucket list".
Buffett said that without him and Munger's Berkshire, the culture of the partners will remain, no different. But one thing is certain, a shareholder meeting without Baman would never have been so wonderful and unforgettable.
Smart Investor has compiled some of the highlights of the Q&A session to share with you:
What has happened in the past month
Q: In your shareholder letter on February 26, you mentioned that "there is not much excitement in the market right now," but you then acquired Alleghany insurance company and increased your holdings in HP. So I would like to ask you, on the day you write the shareholder letter, what happened in the middle when you later spent a lot of money?
Munger: Because we've found something more attractive than bonds, it's that simple.
WARREN BUFFETT: Charlie has given you the full answer, and I don't know how to add it.
The release date of our shareholder letter was February 26th, which was a Saturday. The day before, Feb. 25, I learned by chance that a friend of mine who used to work at Berkshire had now become the CEO of Alleghany, a company that I had been following for 60 years and had some knowledge of.
At that time, this friend mentioned that this was his first annual report since he became CEO, and he wanted to send it to us. Then I replied that I would read it on the weekends and I was looking forward to it. By the way, I will go to New York on March 7th, so why not meet and talk?
And there were a few stocks that became very interesting to us during this time, and we spent a lot of money on them.
In the past two years, the entire market environment has been like a casino. Everyone is gambling inside, and this phenomenon has been particularly evident in the last two years, and it has also been driven by Wall Street, because the stock market has indeed been very bullish in the past two years.
In the past two years, people have always made money in trading rather than investing, and trading 20 times a day is sought after, just like on casino slots, but that's how they make money, and the market is dominated by this situation.
Here's a slide about Occidental Oil to show you how we bought it.
In the first two weeks of March, we bought a 14 percent stake in it, worth more than $7 billion.
Some institutions such as index fund providers hold 40% of their shares, and it also has 60% of its outstanding shares. So if you look at it now, if you say that in two weeks you bought 14% of the 60% of it, it's a very surprising thing.
It is also this short-term volatility, driven by a "gambling mentality", that allows us to acquire a 14% stake in a company that has been around for decades in two weeks.
Imagine if you were trying to buy things like 14 percent of the farms, 14 percent of the apartments, 14 percent of the car dealerships and the like in this country (in two weeks) and still 40 percent of them locked up elsewhere, which goes against everything Charlie and I have seen, and we've seen a lot of that.
All the major companies in the U.S. now add up to about 40 trillion, and a lot of these businesses already have their own systems, you can buy and sell a stock in three days, but farm trading should not be like this, which is why the stock market is so turbulent, people sometimes do crazy things.
And Berkshire can play its part in this, not because we are smarter, but because we are rational enough, and I think this is a trait that the industry needs to have.
Where is the future of BNSF and Geico
Q: BNSF Railroad and Geico Insurance are facing some challenges today, what are their approaches?
Abel: For BNSF, we operate rail companies based on customer needs, hoping to be able to provide the best service to our customers, and then we can give the most profit contribution to shareholders. We have also deployed differently at different operational levels.
Now, BNSF's leadership, management, and employees are a very good group of people.
In the long run, we have very precise goals with long-term value, which is the most important part of our team now that we want to focus on. We still have a long way to go, but we will continue to work hard to do well.
BNSF's management and staff are good, we will have long-term improvements, even if the competitors are good, I will not jump ship.
WARREN BUFFETT: Our world has changed dramatically over the past hundred years, but these railroads don't mean they can change. So Berkshire shareholders, sometimes we repeat certain things that are done in the interest of our country or locally, no matter who we are in power today.
I think in 100 years, the current rail system will be better, of course I can't fully promise you can do it, but that's our goal. These railways can be subversively transformed in some different areas, such as being able to do freight transportation, and so on, and can have magical results.
Jian: Progressive and Geico are two companies with pros and cons, but having said that, Progressive has really done a lot better than Geico in terms of margins and growth lately.
There are many reasons for this, but I think in the case of Geico, the biggest problem is telematics (referring to the installation of devices that track driving patterns on cars in exchange for lower insurance rates).
For more than a decade, Progressive has been catching up with the telematics trend. Only recently did Geico dabble in telematics. It's been a long journey, but the journey has already begun and the initial results are promising. It's going to take a while, but I hope that in the next year or two, Geico will be able to catch up with Progressive.
Hopefully the downside will last a little longer...
Q: In 1969, 70 years you grasped the trend of the stock market, when the stock market was cheap in 74 and 75, you also made a lot of investments, 87, 99, 2000, and now you have a lot of cash in hand, but the market is in a downward stage, I want to know how you grasped the timing of the market so well?
WARREN BUFFETT: Actually, we don't have any idea what the stock market looks like on Monday, and Charlie and I never buy and sell based on the market or the state of the economy.
At that time, when the stock market fell sharply in 2008, we were still optimistic and made a lot of investments during the recession, but when the stock market fell sharply in March 2020, we missed such an investment opportunity, so we did not particularly grasp the timing, we can only say that we mastered it well.
But to be honest, we didn't deliberately try to seize the moment, nor did we have so-called unique market insights. We hope that the downside will last a little longer, because then we can make more investments and buy more when they are cheap.
I remember in March 1942, I bought a stock, that day the Dow Jones index opened at 90, when it closed it was 99, but now it is 34,000, which is the advantage that the American environment has given us.
As long as you stick to the United States for a long time, many speculative people will disappear, because of human nature, many things they do are not really worth much.
Be more hopeful for the rest of your life
Munger: If you ask your investment advisor what he's going to do, what's going to happen in the future, he'll say you're giving me $50,000 now, and that's my contribution to your future. [Laughs]
WARREN BUFFETT: I'd say wealth management is really an interesting industry, getting rich here is a great option, and if your kid wants to make money and he has enough IQ and energy, go work on Wall Street.
Wall Street is the survival of the fittest, and human nature will make people act according to self-interest, which may not be the long term, but at least in the short term, because people want to make money.
But we've been through a lot of development, Wall Street has changed a lot, and now a lot of things seem to be reversed, not the same as before.
The whole thing may seem crazy to everyone, but the way it works is still very clever, because some people will be able to seize better opportunities in the moment of system change, which does not mean that you don't need to change at all, you just need to know where your bottom line is.
Munger: A lot of people are investing and they're worried about losing some consulting fees, which I think's kind of ridiculous.
WARREN BUFFETT: It's like when we were getting married, we thought the girls we liked were very beautiful, but she had weaknesses in marriage, but she didn't show them when she was dating.
If luck comes to us, we can't resist it, of course, we can't ask too much, especially not too much for people.
For the second half of life, I would say that you can learn when you interact with other people, and you may not be able to learn much at the age of two, but from the perspective of human behavior and all animal behavior, you will definitely get better and better in the future.
The second half of your life is different from the front, forget everything you chose in front of you, and enjoy the second half of your life. I mean, since we've lived in the world for so long and seen a lot of hope, there's a reason to be more hopeful about the second half of our lives and respect the consequences of everything that happens.
I hope that when people evaluate me, they will say that the second half of my life will be much better than the first half of my life.
Don't worry about nuclear war, it's useless to worry
Q: If a nuclear attack does happen today, what will happen to Berkshire?
WARREN BUFFETT: From August 1945 until now, we actually think about it every day. Nuclear risks exist on a daily basis, but the probabilities are very small.
If you throw the dice in a casino in Las Vegas today, the odds of winning the lottery are calculatable, maybe 1 in 8 million, and all in all I mean our planet could be destroyed, but the odds are slim to none.
Unfortunately, now a lot of people have bought shares in nuclear weapons, such as ICBMs, and a lot of people have started to develop technological weapons, which is dangerous for our society and the world.
Munger: There's no way to predict that, and I know some people are still playing these dangerous games, and if the danger does happen, then I'll go under the table and do nothing. [Laughs]
WARREN BUFFETT: Like Charlie said, we can't find any solution, it's a very big problem.
What happened in August 1939 was seen on the news, and I saw some of the situation in Germany and Poland at that time, and every day a lot of Jews were slaughtered, and I really felt very sympathetic.
Then there was the atomic bomb incident, when the geese flying in the sky felt like bullets were flying, the wind was roaring, the grass and trees were all soldiers, in short, I would like to say that if the atomic bomb or nuclear war appeared, we would be helpless.
For Berkshire and for everyone in the world, we don't want that to happen, but now these big countries in the world, if there are some calculation or comprehension mistakes, we will be very close to this situation.
This has been the case several times in the past, almost playing the edge ball, such as the Cuban Missile Crisis. There's a good chance that these anti-social people will take us back to the cave times overnight.
So for this question, Berkshire has no answer, we have no way to write an insurance policy for you in such a situation, if this really happens, we are helpless, this risk is shared by everyone, Berkshire has no way to protect you, but so far, we are still relatively lucky.
Jahn: If a real nuclear war breaks out, we don't have the ability to assess how big the risk exposure is, and we really have to raise our hands and surrender, so all of our contracts try to rule out situations like nuclear weapons.
I think our regulators will have policies that allow us to re-establish policies under these conditions, rather than paying for losses as required, to eliminate the risk of nuclear war.
WARREN BUFFETT: But if nuclear war does break out, and I think the regulators are dead, we're going to have to rebuild for hundreds of years to bring order to the planet.
Albert Einstein also said that I don't know what the weapons of the Third World War are, but I know that the weapons of the Fourth World War are branches, because the Third World War has destroyed the whole world.
So compared to nuclear war, I think there are a lot of things worth worrying about, such as Berkshire's market capitalization may be the first thing you should worry about.
What if you only choose one stock to invest in in this life?
Q: If you could only invest in one stock to hold for a long time, and at the same time have to resist inflation, what would you choose? What's so special about this stock that it can perform well in a potentially bad market environment?
WARREN BUFFETT: My answer may be more than just how to pick a stock, but I think the best thing you can do in this case is to be able to excel in a certain area.
Assuming you're the best doctor or the best lawyer in town, people will probably be willing to pay a lot of money for your services, and they'll be happy to trade their output for your output.
If you are the best person in a certain field, singing, playing baseball, or a lawyer, in short, you have the ability that others can't take away, and it is impossible to depreciate because of inflation, and others will always value your skills and exchange them with their own products.
The best investment is to invest in yourself, and of course it's not taxable, if I can only make one investment.
MUNGER: I can give you some advice as well. When you have your own pension account, if your financial planner advises you to invest all your money in Bitcoin, firmly say "no", that's it.
WARREN BUFFETT: No one can take away your talents, in fact, people will always be willing to give something in exchange for your talents. Those who do not have specialized skills will receive fewer social outputs.
Sometimes people think that the acquisition of skills is related to education, but in my opinion, it doesn't really have that much to do with it. It's important that you figure out what you want to be, and then turn what you want to be into what you're best at.
To your question, of course I can also say "I'll spend 10,000 hours doing this and doing that", as Malcolm Gladwell put it, "You practice 10,000 hours before success". If that's the case, it took me 10,000 hours to become a heavyweight boxer. But in fact, no matter how much time you make me spend, I can't become a boxing king.
Sometimes you just suddenly come across things that you like to do, that you're particularly good at doing, and that's good for society. In this case, it doesn't matter so much whether or not the purchasing power of paper money depreciates. If you're the best doctor in town, people will naturally trade the best for you, and they won't be able to take away the talents you have.
For another example, suppose you are a very good person with a good future, then if you are willing to sell a part of your future, we are also happy to invest in it, maybe this will be our best investment, we can pay a part of the money to get 10% of your future income, but you can have 100% of your future income, if you really succeed in the future, wouldn't it be good?
Berkshire will live forever
Q: Will the new people still have the same philosophy as you when the management changes?
BUFFETT: Berkshire's corporate culture is that, first of all, we work very hard, and secondly, we have a group of long-held shareholders. To invest in a company, we need to fully understand the culture of this company, our company exists for those who trust us, and of course we will not live up to everyone's trust. Our employees are competent and also have the resources to get things done.
We have a special relationship with our shareholders, and that relationship doesn't change, the shareholding structure doesn't change much, and no one will be able to shake that for a long time. We want our superior company culture to be better understood by the world.
I can also tell you here that in the next 100 years, our company culture will continue to be unswerving. If you don't consider extreme situations like nuclear war, Berkshire will survive forever, with no end in sight. Nobody here wants to retire, nobody wants to change jobs.
Of course, I'm not sure if we get back to square one, we'll be able to build another company that's exactly the same.
When Charlie and I first started our business, we didn't have a clear plan, we didn't envision running in the textile industry for 20 years and then doing something else.
But what we were very clear at the time was that we were running a publicly traded company, and we wanted everyone to follow us, trust us, and grow with us. We don't want to work with people who often compare Berkshire's performance to S&P's.
Our new management will continue to uphold the company culture and beliefs we believe in, and we will definitely put these responsibilities into the hands of those we trust.
In the early days of the textile business, our management really understood all aspects of the textile industry, so I felt that there was no doubt that he was looking for management, and there was no concern. However, we weren't so lucky at that time and stepped on the thunder. Luckily, we found something better, the insurance industry.
But then we bought a textile company, and now look at how many stupid decisions we've really made before. At that time, we also had very good management staff, but everyone's opinions were a bit inconsistent. At that time, we wanted to cry about expanding new stores, but it failed, but it was also because of the failure that we had the later Berkshire, which made so much money today.
This is life, all you can do is keep moving forward and keep learning to improve.
Cherish the moment of epiphany that changed your life
WARREN BUFFETT: People may be wondering, why does it take so long to grow and progress?
I share a story. I started buying stocks when I was 11 years old, when I read a lot of books about it and really enjoyed investing. At that time, I was fascinated by technical analysis, and I spent a lot of time every day to conduct various technical analysis research and experimentation.
At that time (19, 20 years old), after reading a passage in a chapter of "Smart Investor", I experienced such an epiphany moment, which changed my life.
At the time, I just thought I had put together a methodology for investing in stocks, hoping to do a big job, and it turned out to be a passage that made me think that everything I had done before was stupid.
On the same picture, some people can see two faces, and some people can only see one face. You find that thinking can be transformed, and everyone calls this phenomenon "fuzzy illusion". A lot of times, you'll have this moment of epiphany, and all of a sudden you'll be able to see something you haven't seen before.
Many times, because you have too much information in your mind, you are in a state of disorientation and confusion for many years, but suddenly at some point, you can see something different. You may be wondering, how come I didn't think of such an important thing before? How come I haven't seen it in the last ten years? I've been through investing, I've watched a company for ten years, but all of a sudden, some epiphany made my thinking reassemble.
When Charlie was a lawyer before, there was a saying that "every smart person has a time to make mistakes." That's what I'm trying to say, the confusion of your thinking leads to your loss, but suddenly at some point, you may have an epiphany and generate some new insights. I've been through this, Charlie has been through it, and I'm sure everyone goes through it a few times in their lives.
Munger: That's how the brain works, sometimes it's easy to get things wrong, but it can also make you automatically correct mistakes, and we do a lot of these things, make mistakes, correct mistakes, but sometimes we get a little too late, a little too late.
WARREN BUFFETT: We're at least doing a good job of correcting errors, right?
Munger: Yes. This is especially true now, and sometimes there are some good ideas that you may be pursuing too much.
Robinhood is short-term speculation
WARREN BUFFETT: Can you give me a slightly better example?
Munger: If you look at the Robinhood platform, it jumped so high all of a sudden. You see after it goes public, let all the people join in the short-term gambling to speculate, I think this is a very disgusting behavior.
WARREN BUFFETT: Yeah, they made a lot of money selling stocks through speculation last year.
MUNGER: So I think now justice is coming.
WARREN BUFFETT: We can't act like we're going around making enemies, can we? Why do we always criticize others here?
MUNGER: I don't think we should criticize, but I really can't help it.
WARREN BUFFETT: You see the 98-year-old wise old man next to me, and he still can't do this kind of being able to bear with his own words, well, we all gave up.
The best tool to fight inflation is your ability
Q: What do you think of inflation? How should investors resist?
WARREN BUFFETT: Listen to people who claim to be able to predict the path of inflation. No one is entirely clear about how bad inflation really is and what it will look like in 10 years, but everyone is talking about it.
The tool to fight inflation is your ability to make money. You think, your ability is strong enough, for example, you play the violin well enough, you will not run in any situation, will protect you. So your ability is not affected by inflationary pressures, your money may be, your talent will never be.
Powell was a hero
Q: How is inflation today different from inflation of the last century? What are the implications?
WARREN BUFFETT: It's you who affects you first.
We have a furniture store, the price of furniture is rising, but the rich people will continue to buy high-end furniture, because they earn more and more. But during World War II, everyone had no money, not even sugar and coffee.
Now people still have a lot of money in their hands, even if the price of the product has risen, or you tell him not to buy, now it is inflation, but it is useless, because these two inflations are not the same, the second time directly changed people's purchase behavior.
There are now 130 million households in the U.S., and assuming each family has $1 million in hand, if you talk about it in 30 days, that money will disappear, or you can spend it after 30 days.
In this case, the wealth of American households has directly doubled, 130 trillion yuan, but it will take a month to spend, and then it is very likely that commodity prices will rise, but not immediately, only when the topic of doubling the wealth of each household spreads.
But as wealth goes up, the value of cash goes down, and you can't buy what you want today tomorrow, so we're in a very strange period now, with a lot of money going to people, but people aren't spending as much as they used to.
However, after the epidemic, everyone is beginning to release their spending power.
Inflation is hard to avoid after giving money to everyone, but I don't think it's a bad thing to send money, because if you don't send money, the situation may be worse now.
Munger: The scale of inflation and the scale of money we're sending at the moment is unprecedented, which puts our country at a disadvantage, and maybe we have to do that, because we're facing an unprecedented situation.
WARREN BUFFETT: Including the pandemic, so I'm going to say that Fed Chairman Jerome Powell is really a hero, he didn't do anything like a baby eating a thumb, but doing what he had to do.
He took steps, but other countries could collapse, such as India, China, Japan, and so on.
Now there is hope in China and willingness to continue to invest
Q: What do you think about investing in China now?
WARREN BUFFETT: There is some nervousness right now, and it has also affected some of the prices of our Chinese stocks, especially the price of Chinese technology stocks.
In fact, in the past day or two, China's leaders have also said that they may have gone a little too far in this regard, hoping to have some retraction, and we have also seen some hope.
Dealing with the Chinese government is completely different from dealing with the U.S. government, they have their own culture and their own beliefs.
The reason why I invest in China is because I think I can harvest a lot of good companies at a relatively low price in China, and I am willing to take some risks for this.
Insurance float is the right decision
Q: In this year's shareholder letter, you mentioned the float of insurance, what is your expectation for float, and will its cost be relatively stable for some time to come? What if your competitors are trying to do the same thing?
WARREN BUFFETT: I'm not going to keep it in the business, but float is very useful, so so far, the float proposal is still very appropriate, and we're doing better than other companies so far.
Just like no one could have predicted the occurrence of 9/11 at the time, because it wasn't a black-and-white thing or something that could be easily determined.
Munger: If common stocks can provide 8% tax, then float is definitely well worth it.
WARREN BUFFETT: I really, really like our float, and we've used our float at the most appropriate moment.
Who would have thought that in 1986, someone would come up to my office and ask me if this thing was selling to you? I didn't expect to buy it right. A lot of things have contributed to today's successful results, and it's both an opportunity and a business opportunity.
The most fortunate thing is that in the process of operation, we have the right time and place, and there are many so-called luck, and we are ready to put it into action at any time.
It's also very important to note that there's no bureaucracy in Berkshire, and I've been very happy all my life to have such a rapport, and it's made me a lot of money.
Finally, I would say that our positioning is fantastic, we know what to do with float, and we've never been in a crisis or in a situation where promises can't be delivered.
In a way, Berkshire is managing the company in a crazy way, with no limits to the rules.
It's like a painting that allows us to reach our full potential on the canvas.
The view of Bitcoin has not changed at all
Q: Have you changed your view of Bitcoin and virtual currencies? I'm struggling, everyone says that Bitcoin is wasteful, a fraudulent speculation, but does it have some usefulness?
WARREN BUFFETT: If you own farms or apartments all over the United States and then sell me 1 percent of them, I'm happy; but if you own the world's bitcoins and then sell me a portion, I won't want them. Because farms have productive capacity, apartments can generate rent, and Bitcoin is not such a productive asset, its value depends on how much the next person pays the previous person.
Bitcoin's trading commissions move between different people, only changing the owner, with some gaining and some losing.
Munger: I've always avoided doing stupid, evil, or things that make me seem terrible compared to others, and Bitcoin accounts for all three.
First of all, Bitcoin investment is stupid because it is likely to go to zero; bitcoin is evil because it damages the Fed system, it hurts the national monetary system; and secondly, it makes us look bad compared to The Chinese leaders, who have very wisely banned Bitcoin, and yet we are still making assumptions here.
What affects our buyback strategy is the price itself
Q: According to my calculations, when Berkshire's stock price is discounted by 20% from its intrinsic value, your buyback rate is $3 billion per month; when the stock price is 10% discount, you buy back $2 billion per month; when the discount is within 10%, you buy back $1 billion per month. Is my calculation correct? If correct, are there any other factors that can affect your strategy for buying back shares?
WARREN BUFFETT: Actually, you misunderstood, if someone bid $5 billion to buy our stock at some point, we'll do the same business. We now have more stock to repo, and if we have the ability to do it, and when the time comes, we will do it.
The opportunity for buybacks is still great, but it also depends on the valuation of the stock, as well as our own investment plans. All along, we are trying to promote the interests of shareholders, if the timing is right, we will buy back, and if the timing is not right, we will not buy back.
If there is a suitable opportunity to invest in other companies, then we will be more inclined to buy these companies than to buy back shares.
There are a lot of truths that are actually very simple, but many people still want to go to a Doctorate, write a lot of articles, read a lot of books. But it's actually quite simple, either you have to buy out your partner's equity at an attractive price, or you don't buy it, the focus is on what the opportunity is.
We want to be able to increase the earnings of these long-held shareholders, and what we do, whether it's buying back shares or other investments, is not a fixed strategy.
I think my successors will have the same considerations, and I believe they will be able to act rationally and dedicate their lives to Berkshire, thank you again for coming.
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