On May 1, the annual Berkshire Hathaway’s shareholder meeting was held in Los Angeles by the chairman and legendary investor Warren Buffett, his long-time business partner Charlie Munger and Berkshire's heads of insurance and non-insurance operations, Ajit Jain and Greg Abel. Like every year, during the over five-hour-long meeting, Buffett and Munger answered many questions on a vast range of subjects, from Bitcoin and Robinhood to market speculation and the US economy. The event is a must-watch for those who know Buffett’s and Munger’s foresight when it comes to the stock market and the economy, which is at the base of Berkshire’s success. In case you missed it, here are the six best takeaways from Berkshire Hathaway’s annual shareholder meeting:
The two legendary investors, Warren Buffett and Charlie Munger at Berkshire's 2021 shareholder meeting
"We are seeing substantial inflation". Warren Buffett, among many other investors and economists, also started sounding the alarm on inflation, adding that “We are raising prices. People are raising prices to us, and it's being accepted." After calling out much higher steel costs impacting Berkshire's housing and furniture businesses, he also said "People have money in their pocket, and they pay higher prices... it's almost a buying frenzy", stating that the economy is “red hot”. While the Federal Reserve has recently confirmed its low-interest rates policy and monthly bond-buying program, it’s becoming clearer every day that it can’t last forever, and that Powell may have to lift interest rates sooner than expected.
Regarding the success of many trading apps like Robinhood, Buffett stated “Robinhood has become a very significant part of the casino aspect of the casino group that has joined into the stock market in the last year or year and a half”. "There's nothing illegal about it. There's nothing immoral, but I don't think you'd build a society around people doing it". He also added, “I think the degree to which a very rich society can reward people who know how to take advantage, essentially, of the gambling instincts of the American public, the worldwide public — it's not the most admirable part of the accomplishment."
Munger also expressed his displeasure, saying that it’s “God-awful that something like that would draw investment from civilized men and decent citizens. It's deeply wrong. We don't want to make our money selling things that are bad for people.”
3)On Oil Companies and Climate change
About Berkshire's decision to invest in the oil and gas industry and asked whether we might have "built our own unrealistic consensus on the pace of change" to clean energy solutions, Buffett defended Berkshire’s investment in Chevron and in the industry, stating that “Chevron is not an evil company in the least, and I have no compunction about owning it in the least, about owning Chevron. And if we owned the entire business, I would not feel uncomfortable about being in that business."
Generally speaking, on the outlook for the Oil and Gas industry Buffett said “I would say that people that are on the extremes of both sides are a little nuts. ... I would hate to have all the hydrocarbons banned in three years... and on the other hand, what's happening [with climate change] will be adapted to over time just as we've adapted to all kinds of things.”
When asked about the rising number of Special purpose acquisition companies in the last few years, Buffett said “The SPACs generally have to spend their money in two years, as I understand it. If you have to buy a business in two years, you put a gun to my head and said, 'You've got to buy a business in two years,' I'd buy one but it wouldn't be much of one.” He also added “If you're running money from somebody else and you get a fee and you get the upside and you don't have the downside, you're going to buy something. And frankly, we're not competitive with that. It's an exaggerated version of what we've seen in kind of a gambling-type market”.
5) On Bitcoin
When asked about his thoughts on Bitcoin, Buffett surprisingly dodged the question, jokingly comparing himself to a politician. But Charlie Munger did not hold back and stated “Those who know me well are just waving the red flag to the bull. Of course, I hate the Bitcoin success. I don't welcome a currency that's so useful to kidnappers and extortionists and so forth. Nor do I like just shuffling out a few extra billions and billions and billions of dollars to someone who just invented a new financial product out of thin air. I think I should say modestly that I think the whole damned development is disgusting and contrary to the interests of civilization, and I'll leave the criticism to others.”
6)On Big Tech Growth Stocks
When asked about the crazy valuations of Big Tech Growth stocks, that skyrocketed during the last 12 months, Buffett simply answered with “We don’t think they’re crazy”, stating that “Interest rates are to the value of assets what gravity is to matter”. The Oracle of Omaha sees loose monetary policy as the main force responsible for inflated asset prices, implying that the stock market is overvalued.
The 2021 Berkshire Hathaway’s shareholder meeting confirmed the fears of many investors. It has become evident to every rational investor that recent monetary policies are the true reason behind inflated asset prices and a rise in inflationary pressures. This is being accompanied by hysterically speculative behavior, which is behind the recent incredible success of cryptocurrencies, SPACs, and big tech growth stocks. But the party won’t last forever, as interest rates will probably need to be raised sooner than the Federal Reserve expected, bringing “gravity” back to the stock market.
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