Author | Wang lin
Edit | Huang Yida
Cover source | Visual China
"It feels good to be face to face," Buffett said.
After two years, Warren Buffett and his old partner Charlie Munger once again met with investors offline.
Omaha, Nebraska, Buffett's hometown and Berkshire headquarters is once again crowded and bustling.
The CHI Convention Center, the host city, was packed with Buffett's longtime friend Bill Gates, JPMorgan Chase CEO Jamie Dimon, and Apple CEO Tim Cook.
The reason why Berkshire's shareholders' meeting has become the "Spring Festival Gala of the investment world" is also due to its unparalleled compound interest myth. From 1965 to 2021, Buffett managed Berkshire with an average annual compound return of 20.1% and a total return of 36,416 times, significantly outperforming the performance of the S&P 500 with an average annual compound return of 10.5% and a total return of 302 times in the same period.
In the more than 6-hour meeting, the 91-year-old "Omaha Prophet" is still witty, and the "Bamang Group" expresses its views on the current hot market phenomena, such as inflation, bitcoin, retail home robinhood, etc., and also warns of the current speculative atmosphere in the market.
Buffett and Munger at the venue, Source: Network
The site was packed, Source: Network
Apple CEO Tim Cook is on the scene, source: network
The following is an excerpt from the highlights of the opening and shareholders' meeting, and the main points of the more than five hours of question-and-answer session, which should not be missed!
"Others are afraid of my greed," Buffett said of a sharp increase in stocks in the first quarter
After taking a seat, Buffett first introduced Berkshire's first quarter of operations. Berkshire Hathaway's first-quarter net profit fell 53% year-over-year, impacted by investment losses and weak insurance underwriting. Earnings per share for the quarter were $3702, not only down sharply from $7638 a year ago, but also below market expectations (market estimates of $4490).
In the first quarter of this year, when the market was turbulent and downward, Berkshire spent $51 billion to start a "buy, buy, buy" model, including increasing its holdings of Chevron and betting on Western Oil and Hp. Among them, Chevron is the fourth largest heavy stock after Apple, Bank of America and American Express.
For the rare purchase of technology stocks Activision Blizzard, Buffett revealed that after Microsoft officially announced the acquisition of Activision Blizzard in mid-January this year, he took the initiative to increase Berkshire's shareholding in Activision Blizzard from about 2% to 9.5%, and if it reached 10%, it would submit a report.
Because he felt that Activision Blizzard's stock price of more than sixty dollars per share before the announcement was too different from Microsoft's acquisition price of $95 per share, it was worth investing. Buffett also acknowledged that the deal was originally scheduled to close by mid-2023, but that the review decisions of national regulators were unpredictable.
"Cash is like oxygen"
Recalling the 2008 economic crisis in his opening comments, Buffett said: "One thing that will never change is that we always have a lot of cash on 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. For him, "cash is like oxygen." ”
Buffett also revealed that Berkshire Hathaway's cash reserves are always plentiful and can be "better than banks" at providing credit lines to companies in need.
"Cash is king" is Buffett's investment credo for more than half a century, Berkshire has a large number of cash equivalents and bonds on the books every year, the position is close to 85% of the peak, the main reason is that when the opportunity comes, Buffett can take out a lot of cash to bet.
Alice Schroeder, author of The Snowball, once said, "Buffett thinks differently about cash than the average person." For Buffett, cash is not an asset with near-zero returns, but a call option that never expires and can be purchased for any asset. ”
Talk about investment opportunities in China
Q: What do you think about investing in China now?
Buffett said that there is indeed some nervousness now, which has also affected some of the prices of our Chinese stocks, especially the price of Chinese technology stocks.
Munger said that the reason for investing in China is because I think I can harvest a lot of good companies at a relatively low price in China, so I am willing to take some risks.
How do I choose the time?
Question: Berkshire seizes the moment every time it makes a decision, how did you do it?
Buffett said he never figured out how to grasp the timing of the market in time. "We have no idea what to do after the market opens on Monday... Our decision to buy and sell stocks is not based on a prediction of the movement of the market or the economy, because we cannot predict it. ”
Because of this, he has also missed many opportunities. For example, in the early days of the outbreak in March 2020, the US stock market broke down several times, and the Dow fell by 12.9% in a single day, the largest one-day decline since 1987, but he did not effectively grasp it.
Rather than keeping his sights set on the stock market, Buffett adheres to the philosophy of value investing, which is to choose undervalued companies with margins of safety.
He stressed the importance of holding cash again, "We're not good at timing. What we're good at is figuring out when we're getting enough money for ourselves. We don't know when to buy what, but we've been hoping that there will be a period of downside so that we might buy more. ”
"Bitcoin does not produce any value"
Question: Have you changed your view of Bitcoin and virtual currencies? People say bitcoin is wasteful and a fraudulent speculation, but does it have some usefulness?
Buffett insists that Bitcoin does not produce any value. He said, if you own farms or apartments all over the United States and then sell me 1 percent of them, I'm happy to do it. Because the farm has production capacity, the apartment can generate rent, and Bitcoin is not such a productive asset, its value depends on how much money the next family pays.
"In my life, I've tried to avoid something that's stupid and evil and makes me look worse than others, and I think Bitcoin has all three," Munger said. "First of all, Bitcoin investment is stupid because it is likely to go to zero; secondly, Bitcoin is evil because it damages the Fed system, it hurts the national monetary system; compared to countries that have banned Bitcoin, we still make all kinds of assumptions here.
On Monetary Policy: "Powell is a Hero"
Speaking about the current high inflation problem, Buffett said that large-scale stimulus measures are a key reason for the price increase now. "The government has sent out a lot of money to people, and at some point it can't be as valuable as it used to be."
But he did not criticize the Fed's actions to increase the money supply and stabilize markets during the pandemic crisis. If the Fed doesn't stimulate the economy in the spring of 2020, everyone's situation will get worse.
"We have a furniture store, and the price of furniture is rising, but the rich people will continue to buy high-end furniture because they make more and more money. But during World War II, everyone had no money, not even sugar and coffee. ”
Buffett said Fed Chairman Jerome Powell was a hero in his view, and it was simple that he did what he had to do.
Munger argues that the scale of our current inflation and the scale of money being sent is unprecedented, which puts our country at a disadvantage, and maybe we have to do that because we're facing an unprecedented situation.
The best tool to fight inflation is your ability
Question: What do you think of inflation? How should investors resist?
Buffett cautioned against believing those 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.
Buffett called inflation "fooling almost everyone." "Inflation has also deceived bond investors. It will trick those who hide cash under mattresses. It deceives almost everyone. ”
Buffett reiterated that the best protection against inflation is to invest in your own skills. "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. ”
The stock market has been elusive over the past two years, like a casino
Buffett said the stock market environment has become elusive in the past two years, and like casinos, it may also be that the stock market has been too bullish in the past two years. This is largely driven by Wall Street institutions, whose approach is to speculate, to make more money from people's frequent trades, and the market is sometimes misled.
Some large transactions, many people only need two or three days to complete. Buffett specifically mentioned index funds, which tend to have very high stakes. "It's not an investment, Berkshire Hathaway can't do it, and the vast majority of big American companies are poker chips." He said.
However, Buffett believes that the short-term fluctuations caused by the "gambling mentality" earlier this year have allowed him to find good long-term opportunities.
Munger then named robinhood, an internet brokerage platform, and after announcing layoffs and fewer active users, the company's stock price fell below $10 per share last week, a far cry from its initial $38 peak. Robinhood, he said, was all about "short-term gambling, large commissions and hidden kickbacks" that were "despicable" and now they were about to "disintegrate."
Again affirm the insurance float
Question: 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?
Buffett said our float is very appropriate, and our judgment is still OK, better than other companies. We like floats the most. When we invested in GEICO, a car insurance company, in the 1980s, we didn't expect GEICO to do so well. This is a business opportunity. At that time, the time was favorable, and no one on the board said it was bad. There's no bureaucracy in Berkshire, which makes the company richer, and I've always had a pleasure in that. "When the opportunity comes, you can act."
Background: Berkshire has long developed into a diversified investment insurance kingdom, with more than a dozen insurance companies including GEICO Auto Insurance Company and General Re Insurance Company. One of the main sources of money needed for Buffett's investment is the large amount of float generated by its insurance subsidiaries, that is, the huge funding difference between "insurance fees charged" and "compensation costs to be paid".
If you choose only one stock to fight high inflation
Buffett says the best thing you can do is do something particularly well. With or without financial benefits, people will give you something they produce in exchange for what you can offer/skills, and one of the best investments is to invest in yourself. By doing what you are good at and being useful to society, you don't have to worry about your money devaluing due to high inflation. Munger said to say "no" when you have your own retirement account and your financial manager asks you to invest all your money in Bitcoin.
Don't worry about nuclear war, it's useless to worry
Question: If a nuclear attack does happen today, what will happen to Berkshire Insurance?
Buffett said that from August 1945 until now, we actually think about this 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.
Any form of nuclear attack could hit Berkshire's insurance business. While Berkshire does not cover the risks associated with a possible nuclear war, such an attack could make it more expensive for Berkshire to underwrite other types of insurance. "For certain things, we don't sell this insurance because we can't do those things well anyway. And everyone knows we can't do it. So there is this risk. Berkshire has no way to protect you. ”
Munger strongly slammed shareholder proposals to remove Buffett from his chairmanship
Munger slammed shareholder proposals to remove Buffett from his chairmanship. Munger said: "This is the most ridiculous criticism I have ever heard. ”
Citing an allusion to the ancient Greek poem Odyssey, "It's like when Odysseus returned triumphantly from the Battle of Troy, when someone criticized it, 'Although you won the war, I don't like the way you hold the spear'".
Earlier this month, the California Public Employees Retirement System (CalPERS), the nation's largest public pension fund, said it would vote for a shareholder proposal to remove Buffett from chairman while retaining the ceo position, stemming from concerns about corporate governance over a one-person multi-role. Munger said: "There are people who have never run any business, don't know anything, and I don't take this kind of proposal very seriously. ”
Baman's advice to young people
Question: You knew early on that you wanted to be an investor, but if you didn't know what you wanted to do, did you have any advice?
WARREN BUFFETT: I wanted to be an investor, and it just so happened that my father was in the job and liked it, and there were enough books at home for me to read. It was a coincidence. But I do think that finding what you really want to do and then engaging in it for the rest of your life, finding out what the world you want to live in is like, working for someone you really respect, that's what I did after I graduated. I think Benjamin Graham (founder of Value Investing) became my boss, and then he did hire me, and then I didn't look for anyone and have been working for myself.
Munger: My advice is to find the ones you're really not good at and then circumvent them. Even if you're smart, you can't do things you're not interested in.
Cherish life's epiphany moments
Buffett said that I started buying stocks when I was 11 years old and spent a lot of time every day to conduct various technical analysis studies and attempts.
After reading a passage in a chapter of Smart Investor around the age of 19, I experienced a life-changing epiphany.
At that time, I just thought I had summed up a methodology for investing in stocks, hoping to do a big job, and it turned out to be such a passage that made me think that everything I had done before was stupid.
Buffett showed two PPTs on the spot, intended to show that different people can see different things from these two pictures (two faces or vases, rabbits or ducks).
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.
Berkshire will live forever
Question: Will the new people still have the same philosophy as you when the management changes?
Buffett said that 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 we were very clear at the time that we were running a listed company, and we wanted everyone to follow in line with 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.